The world’s largest packaged food company, Nestle, posted a 2.1 percent decline in sales due to which it has also lowered its full-year outlook on Friday.
Speaking to CNBC, Chief Executive Paul Bulcke says a lagging demand in China coupled with Maggi noodle recall in India has impacted the company’s results.
On the Indian Maggi row, he says: “We have been cleaned again; we always said the product was safe but that has major impact and I expected [it] to be back sooner.”
He is optimistic on the company’s growth in the two markets on the back of an innovative pipeline.
Below is the verbatim transcript of Paul Bulcke’s interview to CNBC
Q: Is there a sense though that maybe in the second quarter of this year when you spoke to analysts, maybe you were a little bit too optimistic when it comes to the return of Maggie noodles in India, that you were a little bit too optimistic about the recovery in China.
A: Well yeah we would have expected a little bit stronger, but China you hear and read it is actually going further down and the macro, be a part of that; no skews, be a part of that.
India Maggie noodles, we have to say we have been cleaned again we always said the product was safe but that has major impact and I expected to be back sooner, but it is deeper and yes, you have to work with the authorities and get it back on the shop, that is what we do now.
Q: You say that you are seeing a recovery in China, but it is a little bit slower than you have anticipated. Have we hit the bottom in China when comes to demand for your products?
A: We are growing in China, so we are not hitting the bottom. What we are talking about is that the growth is slightly slower.
And in all categories, you see e-business, almost doubling this year. It saved us six percent of our turnover there, coffee, Nescafe, growing almost double digits. If you see the returns that we have on confectionery going well again and taking some colours back.
Do we get double digits, etc. I do not think that we have that. We do not have double digit but we do have or starting to have good growth on a bigger base as a country and us in that country and us in that county. So, I am confident and optimistic for China, but we should not be spoiled by double digits always.
Q: How much visibility do you have for China though? How many unforeseen factors could you run into? How difficult is it to foresee how your business is going to pan out of the next 6-9 months?
A: I see China as a continent, so there are many influences, many factors but I do believe that you have to have fundamental structural strength of all your portfolio is there, the brands are there. We have a good innovation in pipeline for us to really make it work.
Q: Today you lowered your outlook for this year to 4.5 percent, to a lot of people that came out as a little bit of disappointment because many people are very familiar with the long term Nestle model of 5-6 percent and the question is whether that is still realistic? It came up a number of times during the press conference and what was your response?
A: Well whatever you call it, Nestle model, it is a long term ambition that we have and 4-5 percent is a sense of realism for what we had and it is part of that model over time.
We have delivered over 6 percent over time and we have many factors playing into it as well.
I am still ambitious, I do not think it is wrong to have an ambition, you have to have realism too and that is what came together then and this provision for this year.
Q: So there are no plans to actually lower the long term organic growth models from 5-6 percent to 4-5 percent?
A: I am an ambitious man. We have to build the drivers to deliver. What I have there is that we are outgrowing the market, we are outgrowing competition, that is what matters and that is actually all our ambition.
The line we put there is the line we put over time and it is a medium longer term line, so I do not have that nervousness of “you failed”. I do not feel we have a 4.5 percent and that would smell like failing, if you outperform earlier.