Nestlé SA is aiming to triple sales in Asia, Oceania and Africa to about $53-billion (U.S.) in constant currencies over the next decade as the world’s biggest food company by sales ramps up operations in emerging markets.
Manufacturers of consumer goods are increasingly turning to poorer but fast-growing countries to offset stagnant sales in the developed world, in many parts of which disposable income is shrinking rather than growing.
Unilever has traditionally led the sector in emerging markets, from where it derives more than half its revenues. The maker of Flora margarine and Dove shampoo is aiming to double total turnover to about €80-billion in a time frame most analysts put at about a decade.
Nestlé, which unveiled its targets at an investor seminar in Shanghai this week, now looks like “a very credible challenger for Unilever’s self-imposed emerging market crown,” wrote Warren Ackerman, analyst at Société Générale.
Companies slice the globe differently – Nestlé keeps Latin America in the Americas rather than its Asia, Oceania and Africa division, for example – but the Swiss-based food group is estimated to derive roughly 40 per cent of revenues from emerging markets.
The growth targets imply a potential compound annual growth rate in organic sales of 11 per cent, calculates Eddy Hargreaves, an analyst at Canaccord Genuity. The Asia, Oceania and Africa region contributed a quarter of sales last year and he estimates this figure will rise to about 28 per cent this year.
He adds that population growth, inflation, distribution gains and innovation should drive growth closer to 14 per cent, “but management builds in provisions for unforeseen crises in the region.”
In outlining its new targets, Nestlé recognizes the varied challenges that emerging markets present, including strong local players in China, aggressive competition across Asia and the availability of resources in Africa.
The strength of competition from local players is illustrated by data from Euromonitor that show just four of the Top 10 food companies in the zone are multinationals. Two, including the third-biggest, Nissin, are from Japan and four are from China and Taiwan.
Nestlé is also aiming to pilot the way in areas such as aging and obesity, pointing out that the zone has the fastest greying population: China has 12 million people aged over 80 today, compared with 9 million in the U.S.; it is projected to have 99 million in this age group in 2050 when India will have 48 million.Report Typo/Error