Nestlé SA and Unilever gave predators targeting the consumer-goods business more ammunition, reporting weak sales for a summer in which North American hurricanes and European rains further undermined already-tepid consumer demand for big brands.
The Swiss owner of Nespresso coffee and Poland Spring water reported its weakest nine-month sales since at least 1999, while the Anglo-Dutch maker of Magnum and Ben & Jerry’s ice cream posted third-quarter revenue growth that fell well short of estimates. Both companies said bad weather curbed demand for refreshments, compounding Big Food’s struggle to revive growth.
“The weather has been extremely cold in the US, and to a large extent in Europe,” Nestlé CFO Francois-Xavier Roger told reporters on a call. Referring to the company’s water brands, he added, “it’s a business that can be seasonal, especially in the summer, so it certainly didn’t help us.”
Unilever’s shares fell as much as 4.5 percent early Thursday in Amsterdam, while Nestlé was down as much as 1 percent in Zurich.
The setbacks come as activist investors and potential acquirers take aim at the sector, with Dan Loeb’s hedge fund Third Point building a stake in Nestlé after Unilever fended off an unwanted approach from Kraft Heinz Co. Along with Nelson Peltz, recently rebuffed in a bid for a board seat at Procter & Gamble Co., they’re pressuring food and personal-care giants to lift profit margins and revamp slow-growing portfolios as consumers seek niche brands and fresh food rather than packaged products.
Durex, Air Wick
Reckitt Benckiser Group Plc., which sells Durex condoms and Air Wick fresheners, set the downbeat tone earlier this week, cutting its sales forecast for the second time this year.
For both Nestlé and Unilever, the Achilles’s heel has been North America, where the Swiss company’s sales were flat in the first nine months of 2017, held back by declines at the Crunch maker’s chocolate business, which it intends to sell, and ice cream. Sales of bottled water in North America and Europe dropped in the third quarter due to cold weather and “intense” competition.
In addition to storms and gloomy skies, competition hurt Unilever in ice cream. The company lost market share to a new entrant, Halo Top, CFO Graeme Pitkethly said on a call, though US ice-cream sales should be back in growth next year.
“The developed markets were extremely challenging,” with retailers canceling orders after hurricanes hit Florida and Texas, Unilever’s second- and third-largest states for revenue in the US, he added.
In Europe ice cream was the main source of volume decline, London- and Rotterdam-based Unilever said in a statement. The company’s refreshment business, which includes the frozen dessert and tea, accounts for about one-fifth of overall sales.