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Chocolate category proving winner for Nestlé in India

By Jane Byrne , 12-Aug-2010

Nestlé chocolate products recorded double-digit growth in emerging markets, driven partly by the performance of the lowest priced products in its portfolio, said the group as it posted gains of 7.5 per cent in net profit for the first six months of the year.

The company said revenue climbed 5.9 per cent to CHF55.34bn from CHF52.27bn on the same period a year ago, noting strong performances for the group in the South Asia region, including India, Vietnam and Thailand, in Indonesia and China as well as gains in the Central/West Africa region. But growth in Oceania and Japan was flat, it added.

In its trading statement released yesterday, Nestlé pointed to the success of its éclairs brand in India in particular but Jonathan Thomas, principal market analyst at Leatherhead Food Research, told ConfectioneryNews.com that the Swiss group’s growth figures are unsurprising, given the recognized buoyancy of the chocolate markets in certain markets within the developing world:

“The Indian market has been growing by up to 18 per cent per annum in recent years, while growth of up to 12 per cent is being observed in China.”

Other markets

According to the Nestlé results, its chocolate products also had a strong start to the year and a successful Easter season in Latin America, particularly in Brazil and Mexico, as well as in smaller markets.

In Europe, its KitKat brand performed well across the region but the Swiss food giant said that in Russia, while it had good performances in many categories, ice cream and confectionery remained soft.

The company stated that in terms of its North American confectionery sales, the Wonka extension into chocolate continued to drive growth.

Cadbury reigns in India

But Thomas said that Nestlé still trails Cadbury by some margin in India – the latter remains the market leader with a 70 per cent share.

According to the analyst, Cadbury’s Indian business has grown by around 20 per cent per annum in recent years, and this remains one of its key growth markets - a situation, he maintains, is likely to remain following its acquisition by Kraft.

And the confectioner with the leading position in the developing Chinese chocolate market is Mars, continued Thomas, which has a share of 15 per cent.

“The company remains strong as a result of the success of its Dove brand, although some feel the sugar content should be lowered to adapt to the local palate. Other multinationals – such as Hershey – have been less successful in China,” he added.

The road ahead

Nestlé commented that organic growth and EBIT margin in the first half, combined with the positive effect of its continued investment in the business, enables the group to reconfirm its earlier full-year guidance for the food and beverages category, for which it predicts organic growth of around five per cent and an EBIT margin improvement in constant currencies over last year.

Andrew Wood, senior research analyst at US based Bernstein Research, looking ahead said that expectations were for another strong quarter for Nestlé, which would lead to excellent year end financial results for the company, and he said the Swiss group again showed “its ability to deliver strong and balanced operating performance.”

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