Nestle’s 17% marketing hike fails to bear fruit after sales and profit dip
Despite raising its marketing spend by 17 per cent in the first of the half of 2015, Nestle has failed to turn around an ongoing slump across its product portfolio after it reported a drop in both sales and profit.
Overall profits slipped 2.5 per cent to $4.6bn from $4.73bn a year earlier, while sales fell to $4.37bn from $4.39bn, blamed on sluggish demand in emerging markets and a higher valued Swiss Franc.
Nestle had hoped the reinvestment of cost-saving drives from its skin health business and higher pricing into its marketing for brands such as Nescafe and KitKat would pull back from a rocky 2014, which was marred by slowing demand and inflation.
François-Xavier Roger, the Nestle chief financial officer who joined the business in May following the departure of Wan Ling Martello, told investors this morning: “The important things is that we have decided to reinvest most of these [cost-saving] benefits largely in marketing initiatives in order to support future growth – I think it makes a lot of sense."
However, Nestle is looking to a rosier second half with organic growth of 4.5 per cent for the full year confirmed, and a possible u-turn on an Indian ban on its Maggi instant noodles after the product was allegedly found to contain high levels of lead content. The Bombay high court today (13 August) struck down the food safety regulator's order of a nationwide ban on the product.
Nestle has placed a particular focus on social activity of late, which has formed the crux of its most recent digital marketing mix with tie ups between KitKat and YouTube and US ice cream brand Drumstick and Periscope serving up as examples.
The food company has also brought on board Amazon’s Sebastien Szczepaniak to head up its ecommerce as it looks to create more effective call to action ecommerce messaging.
Speaking to The Drum last month, head of digital and social media Pete Blackshaw said Szczepaniak will help Nestle “bring discipline” to how it is driving action through various channels of communication and marketing.
Nestle is also seeing a shift emerging in its content strategy, placing a greater emphasis on utility and service for its customers, which going forward will be an “important part of the mix” for all brand builders, Blackshaw added.