All press releasesMar 8, 2005
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OVERVIEW OF 2004 – OUTLOOK FOR 2005
"Nestlé Waters is consolidating its worldwide leadership and accelerating the development of the Nestlé brands"
• Highly disparate results for 2004:
o Growth in sales greater than market growth in North America
o Drop in sales in terms of value in Europe as a result of unfavourable weather conditions and negative trends in household consumption
• Consolidation of leadership in terms of value at 17.3%
• Acceleration of the development of the Nestlé brands
Paris, Tuesday, 8th March 2005
Nestlé Waters commented today its sales for 2004.
Despite a negative exchange rate impact of –3.3%, partly counterbalanced by a positive impact from acquisitions of +2.4%, turnover amounted to 8.04 billion Swiss francs (which represents almost 5.2 billion euros) and has remained at a virtually stable level in comparison with 2003.
On a like-for-like basis with a constant exchange rate, sales rose by + 0.6%. This progression takes account of internal growth of + 2.4% and a negative price effect of -1.8%.
These results are due to extremely contrasting performances in the two regions of the world that account for over 90% of Nestlé Waters’ sales: North America and Europe.
In North America:
Performances were exceptional in this region, which generates almost 45% of Nestlé Waters’ sales, despite unfavourable factors such as heightened competition with the soft drinks giants, a general reduction in prices and sluggish growth in HOD activity (delivery of water in large formats to homes and offices).
In 2004 Nestlé Waters achieved – on a like-for-like basis – an almost double-digit growth rate of +9.7%, clearly above the market growth, which is estimated at 7.5%.
In addition, Nestlé Waters recorded a notable gain in market share.
Thus, in the United States, in the lucrative small format segment, with almost 15% growth this year, Nestlé Waters gained two points and is the uncontested leader with 33.7% of market share.
In HOD distribution, despite a slight dip in the market, Nestlé Waters reinforced its leadership position with 35.6% market share, while improving its profitability. This growth and increased market share were accompanied in general terms by an increase in profitability.
Unfavourable weather conditions following the heat wave in 2003 were amplified by profound changes in the consumption habits of households. Traditionally a mineral water market, Europe has become a real market for bottled water, where the price factor has emerged as one of the prime consumer purchase motivations. This trend, which is reflected in the growth of low-cost and private label brands, as well as by the development of hard and soft discount distribution chains, has hit the entire industry.
Consequently, Nestlé Waters saw its sales decrease by -8.4% in 2004.
In 2004, Nestlé Waters also continued the integration of its HOD activities. The sector leader in Europe since the acquisition of the Powwow Group in 2003, Nestlé Waters is currently present in 12 European countries and is aiming to introduce the European multi-site brand, Nestlé Aquarel, into these markets.
At an industrial level, Nestlé Waters has been continuing its various projects with regard to corporate transformation and production methods, especially in France, its leading market in Europe. 2004 thus saw in France: the signature of reorganisation and early retirement agreements; the adoption of a measure enabling a single site to be established in the east of the country, incorporating the Contrex and Vittel plants and constituting the world’s leading bottling site; the implementation of tests for the new organisations and the beginning of the implementation of the subsidiary creation project.
In the rest of the world:
In other regions of the world, results were satisfactory overall.
In Africa/the Middle East, Nestlé Waters maintained a double-digit growth rate of +17.7%, thanks to solid local partnerships and the development of Nestlé Pure Life.
In Asia, problems in connection with parallel imports and prices, affecting our international brands in Japan, actively contributed to a drop in sales for the region of –2.2%. If Japan is excluded from calculations of performance for the region, the growth of Nestlé Waters’ sales, on a like-for-like basis, amounts to +19.2%
Finally, in Latin America,Nestlé Waters’ activities – although affected by an unfavourable global economic climate – posted encouraging double-digit growth of +14.2%, exceeding even +30% mark in certain countries.
The Nestlé brand in water achieved quite a remarkable performance in 2004. It now represents 2.3 billion litres, putting it among the top 5 international brands in terms of volume. It accounts for 7.9% of sales, is present in 35 countries in every continent and, in particular, has become a powerful growth driver this year for Nestlé Waters, with a rate of growth on a like-for-like basis of +45.4%.
In terms of operational contribution, Nestlé Waters’ EBITA for 2004 amounted to 669 million Swiss francs, representing 8.3% of sales.
It was particularly affected by poor economic and weather conditions in Europe, a substantial price hike in raw materials, especially for PET resins, and by an unfavourable exchange rate.
In the final analysis, within a difficult context in 2004, Nestlé Waters was able to consolidate its position as world leader in terms of value, increasing its market share from 16,9% to 17.3%.
One of Nestlé Waters’ top priorities will be to complete the integration of its HOD activities in Europe, along with seeing through to a successful conclusion its various projects aimed at improving its industrial performance over the long term.
Nestlé Waters also presented several new projects today as part of its innovation and renovation policy:
The dynamic flavoured water segment has just been expanded with a number of new flavours, without sugar: Lime/Grapefruit and White Peach/Apricot for Contrex, Raspberry Cranberry, Lemon and Lime for Vittel and Raspberry for Perrier.
The Contrex brand now includes, for the first time, a slightly carbonated water, known as Contrex Fines Bulles, that comes in modern, feminine packaging, in line with the traditional values of the brand. Vittel is proposing a range of four products aimed at children under the name Vitalitos, comprising a packaging in the form of a flask adapted to the small hands of these young consumers and featuring a "sports" cap that makes it easier to consume the product while on the move.
Other major innovations/renovations for 2005 include the arrival of a flavoured, calorie-free drink from Nestlé Pure Life on the North American market, available in four flavours – Orange, Lemon, Strawberry and Raspberry – and most notably the European price repositioning of Nestlé Aquarel.
Launched in 2000, this pan-European, multi-site spring water represents Nestlé Waters’ tailored response to new market trends. Marking growth, in 2004, of +40% on a like-for-like basis, and already present in 17 countries, Nestlé Aquarel is adjusting its price downwards in the majority of countries where it is distributed in order to accelerate its growth and accomplish, before 2010, its aim of becoming the leading bottled water brand in Europe.
Introduced in several countries at the end of 2004, this price repositioning has already given rise to extremely positive results. In the long term it should make Nestlé Aquarel the spearhead of the conquest strategy, the aim of which is to bring Nestlé Waters into the value brand sector, providing customers with optimal value for money.
This repositioning will supplement Nestlé Waters’ European sales strategy in response to market changes. In concrete terms, this strategy will mean developing Nestlé Waters’ activities across all of its distribution circuits, including hard and soft discount outlets, which have today become key players on the European market, with tailored responses that take account of the specific nature of each circuit and new consumer expectations.
In addition to these changes with regard to the Nestlé brands, the range is being expanded in the world’s leading market in terms of bottled water consumption per inhabitant – Italy, which saw the launch of Nestlé Vera at the beginning of March 2005.
Mr Carlo Donati, the new Chairman and CEO of Nestlé Waters announced:
"Our excellent performance in North America illustrates the breadth of expertise in the bottled water market that Nestlé Waters has to offer. It shows how we have been able to adapt in a difficult economic climate to achieve continued growth. In Europe – along with the rest of the industry – we are having to confront fundamentaltrends that are accompanying changes in household consumption habits. Nevertheless, I have continuing confidence in our reaction capacity and am especially convinced that the price repositioning of Nestlé Aquarel is the way forward for accelerated development. It is now clear that, after establishing a strong presence in Europe and North America, we must work on consolidaing our position as worldwideleader, matching it with an overall improvement in our performance in terms of bothgrowth and profitability, in line with Nestlé’s expectations."
Nestlé Waters accounts for almost 10% of the Nestlé Group’s consolidated sales and manages a portfolio of 77 brands covering 109 production sites and employs a workforce of 27,600.
For further information:
Media contact: Hubert Genieys
Nestlé Waters External Communications
Tel: +33 (0)1 41 23 38 00
Press room: www.press.nestle-waters.com
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