Overview of 2006 & outlook for 2007

All press releasesMar 6, 2007

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· Growth rate consistently outperforms that of the market
· Increase in world market share in value terms, climbing to 19.1%
· Profitable growth: operating margin increases more than sales
· Nestlé Waters aims to become an expert in water, “water +” and more added value beverages

Paris, Tuesday 6th March 2007

    Carlo Donati, Chairman and Chief Executive Officer of Nestlé Waters, the world leader in bottled water, commented today on 2006 results. Sales grew by 9.4% in 2006 to reach a record level of CHF 9.6 billion (around €6.1 billion), compared to CHF 8.8 billion in 2005 (around €5.7 billion).
On a like-for-like basis, i.e. with a constant exchange rate and consolidation scope, sales rose by 8.2%. The growth in sales outperformed that of the market, which allowed Nestlé Waters to consolidate its worldwide leadership by 50 basis points, with a market share that now stands at 19.1%.
Nestlé Waters’ operating margin (EBIT) increased by 17.5% in 2006 to CHF 834 million. It represented 8.7% of sales, up 60 basis points compared to 2005. Despite downward pressure on prices in North America and a slowdown in consumption in Europe, Nestlé Waters achieved this result by continuously improving its operational efficiency and keeping a tight control on industrial costs.

    North America was the main driving factor behind Nestlé Waters’ growth. In a highly competitive market strongly influenced by heavy promotional activity and pressure on prices for small formats, Nestlé Waters North America succeeded in maintaining profitable growth. It consolidated its leadership on the market by more than 150 basis points, rising from a market share of 37% in 2005 to 38.5% in 2006. This performance also reflects a stronger position held by Nestlé Waters in the Home & Office Delivery (HOD) sector, where Nestlé Waters’ market share stands at 25.8% in a sector experiencing a marked slowdown.
    In Europe, the situation was more uneven. Nestlé Aquarel boosted its market share in every country where the brand is sold, thanks to its repositioning with a median price aimed at encouraging family consumption. Its organic growth was therefore maintained at 28.6%. In France, in a market still sluggish compared to past performances, Nestlé Waters consolidated its leadership, reaping the benefits of an active innovation policy for its international brands, Perrier and Vittel. This was enhanced by a healthy rise in exports of Perrier, Vittel and Contrex to the United States and Japan in particular. In Italy, the Group strengthened its local leadership through a sharp increase in the sales of Nestlé Vera. On the export side, S. Pellegrino and Acqua Panna continued to see dynamic growth. Spain, Hungary and Greece also made positive contributions.
    The Middle-East & Africa, Latin America and Asia regions also posted good results and continued to record double-digit growth that far outperformed that of the market. In Turkey, the Group notably strengthened its positions substantially in the HOD and Retail sectors in August through a joint venture with Erikli, the domestic market leader. Furthermore in Mexico, one of the three biggest markets worldwide in terms of volume, Nestlé Waters confirmed in January 2007 the signing of a strategic alliance with the group Modelo, a major player in beverage distribution. Finally, in Asia, the Group is pursuing its development by expanding the presence of Nestlé Pure Life, while also keeping a close eye on potential acquisitions.

Outlook for 2007

    Ideally placed at the centre of evolving consumer trends in terms of health, nutrition and wellness beverages, Nestlé Waters aims to align itself with the market trend and has stated its ambition to become an expert in water, “water +” and more added value beverages. Naturally, bottled water will remain Nestlé Waters’ core business. But the Group now wants to play a leading role in the peripheral segments of the water market such as flavoured water, functional drinks and other healthy beverages.
    To achieve this, Nestlé Waters can currently draw on two major assets: Nestlé’s scientific expertise and R&D capabilities in nutrition, health and wellness, and a unique portfolio of brands that combine a solid local presence with strong international brands. Nestlé Waters is therefore well placed to accelerate and adapt its innovation and renovation cycles to these new ambitions, so as to achieve rapid consumer take-up of its products via its brands. This new approach should result in the doubling of the contribution of innovative products to Nestlé Waters’ sales by 2010.

    Remarks by Carlo Donati, Chairman and Chief Executive Officer of Nestlé Waters:

2006 was a good year for Nestlé Waters. It confirmed that our business model is performing well and sustainably. This is reflected both by the increase in our operating margin of more than 60 basis points and by the growth in our market share, despite the particularly difficult environment. 2007 marks a new stage in the development of Nestlé Waters. To maintain profitable growth, which since 1992 has enabled us regularly to consolidate and secure our positions around the world, we will now expand our presence in the sector of “water +” and more added value healthy beverages. In this way, we will contribute to the Group policy of making Nestlé a major global player in nutrition, health and wellness.

Nestlé Waters accounts for nearly 10% of the Nestlé Group’s consolidated sales, manages a portfolio of 72 brands bottled at 105 production sites, and employs a workforce of 32,000.

For further information :
Media contact:
Hubert Genieys
Corporate Communications
Nestlé Waters
Tel: +33 (0)1 41 23 68 46
Email: press-contact@waters.nestle.com

Press site: www.press.nestle-waters.com

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