Nestlé and Adidas hit by low eurozone demand
Two of the world's biggest consumer brands struck a warning about a slowdown in spending as Nestlé and Adidas yesterday admitted they are being hit by price-conscious shoppers in the eurozone.
The stream of good economic news coming from the UK has boosted our consumption: Nestlé said the UK was a "highlight" in its faltering western Europe division.
But shoppers cutting back in the rest of Europe saw the maker of KitKat, Nescafé, Nesquik, Shredded Wheat and other products that see it named the world's biggest food company report the slowest first-half revenue growth in four years.
It warned: "in Europe consumers are extremely sensitive to price and we have been responsive."
First-half organic sales growth in Europe was up just 0.5 per cent to Sfr7.5bn (£5.3 bn), compared with 5 per cent in the Americas and in Asia.
Overall, Nestlé's underlying sales rose just 4.1 per cent in the first half, missing analysts' forecasts, and forcing the food conglomerate to lower its full-year target to around 5 per cent sales growth, from between 5 per cent and 6 per cent.
Paul Bulcke, Nestlé's chief executive, said: "Organic growth was somewhat muted, reflecting lower pricing by our markets, as we leveraged softer input costs to meet the expectations of today's more value-conscious consumers."
It was a similar story at Adidas: the sportswear giant cut its 2013 forecast because of "lacklustre" sales in Europe. For the second quarter, sales fell 4 per cent to €3.38bn (£2.92bn), and operating profit dropped 2 per cent to €252m, compared with expectations for €261m.
They were led lower by poor sales in western Europe, which fell 11 per cent when the effects of currency movements were stripped out. Adidas blamed "the ongoing macroeconomic challenges in the region" for its sales slump but also added that comparisons were tough as the same period last year benefited from sales of merchandise for UEFA European championships and the London 2012 Olympics.
The Olympics hit was evident in the UK, as Adidas added: "growth in France and Poland was more than offset by double-digit sales declines in the UK, Italy and Spain."
Herbert Hainer, the chief executive, claimed Adidas's results were "impressive, considering the material challenges we faced from currency headwinds, the difficult prior year comparisons related to major sporting events, and the continued soft trading environment in much of Europe".
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