Nestlé feels the brunt of the Swiss franc and Noodlegate

Expensive Swiss franc

Over the past six months, the world’s largest food product manufacturer managed a 42.8 billion Swiss francs turnover, some 39 billion euro. That is 4.5 % up compared to a year ago, ignoring the averse exchange rate fluctuations.

Nearly 3 % of that growth is thanks to higher prices, but the Swiss franc has had a nearly 6 % negative effect on the total turnover over the past 6 months. Just like every other Swiss multinational, Nestlé is struggling with the consequences of the steady climb of the Swiss franc.

‘Noodlegate’ crashes Asian sales

Nestlé’s growth is mainly focused on the American markets (6.6 % organic growth) and in Europe (+ 3.4 %), proving that its strategy to position its products as more exclusive items is working. “Despite deflation, France, the Benelux and Scandinavia performed well”, the Vevey-based company said.

With a 2.2 % organic growth, the Asia-Oceania-Africa region trailed the aforementioned regions. Nestlé is facing the consequences of a huge noodle call-back operation of its Maggi brand in India. The so-called ‘Noodlegate’ not only lowered turnover 20 %, but also resulted in a 100 million dollar claim from the Indian government. The company is recovering in China, where the sale of ready-made Nescafé drinks is becoming increasingly popular.

Belgian CEO Paul Bulcke confirms the company’s earlier forecast of a 5 % turnover growth, after exchange rates and acquisitions are taken out of the equation.