Good morning, ladies and gentlemen. Welcome to our 9 months press conference here in Werve. The conference will be held in English, but you can also follow it in French or German using the headsets provided. If you're watching the webcast, you can choose the right language by clicking on the respective link on the webcast page. Now let's start.
Paul, you have the floor.
Thank you, Robin. Also from my side, good morning and welcome to our 9 months sales conference. And I thank you all for well, the people present in the room here also the people following us over the phone and webcast for the interest in our company. I'm sharing the podium here with Van Link Martello, our CFO. We have all the members of the Executive Board here in the front line and some with renewed our new responsibilities.
We're going to back to that later. And we have for the first time also here Heiko Schepper. Heiko who has assumed as Deputy Executive Vice President for Nestle Nutrition and is a member of the Executive Board. We have also for the first time Greg Behar. Greg who has assumed as CEO Nestle Health Science and Humberto Antunes who has been linked with the company for quite a while 50% or 100% responsible Nestle Skin Health.
So welcome to you too. You will all join us later for the question and answer session. You have seen the results our sales results for the 9 months, the year to date September. And well, Linge is going to get more in details with you on this. But I would say these are good and solid broad based figures growth of 4.5 percent organic growth of 4.5 percent.
And that in an environment that I would be asked to say there is no tailwinds, a lot of volatility. We hear REITs, so I don't have to get in details there. But and I want to center this press conference in that sense in the sense of how do we as a company deliver today every day delivering results in the short term yet at the same time not being pressured by the pressures environment of the volatility and keeping also the line on the strategic direction keep the long term view in spite of the short term pressures. So but before that, I want to give now the floor to you Annalene to get us and walk us through the 9 month sales results. So please.
Thank you, Paul. Good morning to everyone with us here in Vevey and good morning and good afternoon to those of you tuning into the webcast. I'll take the Safe Harbor statement as read. So as Paul has already mentioned, the 9 month sales were CHF 66 200,000,000. Currency continues to be a factor.
The strong Swiss franc had a very meaningful impact on our sales. FX year to date was minus 7.5%, albeit slightly lower than the minus 8.8% we saw at the half year. As I said at the half year, we are operating in a tough and volatile environment, an environment in which we have delivered a well balanced organic growth of 4.5 percent with 2.3% real internal growth. Where necessary, we have taken pricing. As you all know, the currency moves we have seen this year have been extreme and we've also seen some input cost inflation.
The necessary pricing actions had therefore had an impact on real internal growth. Then you've got the continued deflationary pressures and weak consumer sentiment in developed markets. We've also seen a continued slowdown in some emerging markets. Take all this together and you have a very challenging environment. As Paul said, an environment that is lacking in tailwinds.
Having said all that, the actions we have taken and the fact that we continue to do the right things will sustain our long term growth path. Despite the tough environment and in view of our year to date results, we are still aiming for organic growth of around 5% for 20.14 with improvements in margins underlying EPS in perspective. Organic growth in Americas was 5.1%. In Europe, we had 1.4%, the same as half year. In Asia, Oceania and Africa, we had a slightly slower growth of 6.5%.
Real internal growth was 1.9% in the Americas, 2% in Europe and 3.1% in AOA. Each region has its own opportunities and challenges that we will look in more detail when I discuss our zones and globally managed businesses. Before I start with the zones, here we have our usual split by emerging and developed markets. We have seen a continuation of the emerging markets growth at 9.5% and our developed markets still positive at 0.5%. At the risk of repeating myself, especially since we discussed this just a couple of months ago, at the half year presentation, you know that the consumer sentiment around the world is weak and in many cases deteriorating.
In the developed markets, the trading environment is difficult. Many countries continue to context. However, it is our intention to continue to improve and make sure that our business evolves to accommodate the consumers' needs of tomorrow. You only need to look at the great growth rates of our innovations to see that we have the formula to grow even in the most challenging of circumstances. Looking at the emerging markets, the 9.5 percent organic growth at the 9 months shows a similar performance to the half year where we delivered 9.7%.
Many emerging markets continue to perform well, particularly in South Asia, Southeast Asia and Central West Africa. We have seen a subdued consumption in some of our larger markets. As we said at the half year, China remains soft in some categories. I know Paul is going to talk in Well, we are also adjusting quickly to make sure we can deliver today. While we are also adjusting quickly to make sure we can deliver today, it is this balance that we strive for in every market, delivering today, while at the same time maintaining the longer term perspective.
The fact that we're still growing in emerging and developed markets is testament to the successful execution of our strategy. On that note, let's now take a look at our business in more detail, starting with the Zones and Zone Europe. Zone Europe had an organic growth of 1% with real internal growth of 2%, showing an improvement in pricing as we've gone through the year. Western Europe was a mixed picture in terms of growth. The consistent factors each market shared were great growth from Nescafe Dolce Gusto and frozen pizza compensating for a generally tough season for ice cream.
France and Iberia have performed well year to date, especially in chilled and Ambient Culinary for Iberia. Benelux and Austria are another two areas where we've seen good growth. In Germany, we had slow sales in ice cream, chilled culinary and to a lesser extent our largest category, ambient culinary with Maggie. This was partially offset by growth in frozen pizza. The Great Britain region continued to see declines in the confectionery category and Italy had a very poor ice cream season.
The growth in Eastern Europe was again driven by with a strong performance in most categories there, most notably in Confectionery and Coffee, where Nescafe Gold and Nescafe Dolce Gusto are both performing well. Hungary also had a good performance in coffee and ambient culinary, in particular the soups and seasonings. And Ukraine maintained a resilient performance despite the geopolitical situation. Other parts of Eastern Europe including Poland, the Czech Slovak region are seeing some signs of improvement. But overall, the growth is still slow.
I've already mentioned this Nescafe Dolce Gusto more than once, but pet care is another category worth calling out as a highlight across the zone. The innovations we've rolled out, especially with Felix, 1, Gourmet and Snacks continue to drive the growth in this very dynamic category. Now looking at Zone Americas. The Zone had organic growth of 4.8 percent versus 4.9% at the half year and had 1.1% real internal growth. The different growth dynamics of North and Latin America remained.
Overall, the positive growth came mainly from performances in Pet Care, Ambient Dairy and Creamers. Pricing mainly in Latin America reflected the general economic environment and had an impact on real internal growth as expected. The North American business benefited from innovations across several ice cream, outshine bars at 35 to 40 calories only, my personal favorite, the continued rollout of new flavors for coffee make and the launch of Beyond in the natural segment for pet care. I also have to add that unfortunately, the trends we've seen in frozen food segment remain unchanged and continue to overshadow good performances elsewhere in North America. In Latin America, the overall trading environment was subdued.
Brazil had good growth in the largest category, which is ambient dairy, particularly in growing up milks. And we had double digit growth with Kit Kat in a highly competitive affected by the changes in fiscal legislation. In addition, ice cream did suffer due to the poor weather there this summer. On the positive side, across the region Pet Care continued to perform exceptionally well and Dog Chow and Pro Plan led the growth. Moving on to Zone Asia, Oceania and Africa.
We had 3.5% organic growth and 0.7% real internal growth, obviously a slowdown from where we were at, at half year. If you look at where we have our main challenges, they are in China and Oceania. It is important to emphasize though that while the softening we have seen in China in several categories is not showing signs of real improvement yet, we remain very confident on the long term prospects for the businesses there. In fact, if you look at the food and beverage sector as a whole in China, it has been slowing and we obviously do not operate in China and Oceania, we can see the growth across all markets within the form of a very difficult trading environment. Overall, though with exception of China and Oceania, we can see the growth across all markets was in the mid to high single digits.
This was even despite the political unrest in several countries that obviously had an impact. Real internal growth was also affected by increased pricing taken to compensate for currency movements that we've seen as well as some input costs of some commodities. For emerging markets, Philippines, Turkey, Pakistan, many markets in Central and West Africa, we saw strong performances. Ambient Culinary grew well in the majority of the markets. The Maggie brand being the category champion in many places around the world is something that's doing well, that continues to do very well.
In Cocoa and Malt Beverages, I'm happy to report that Milo has had another good period of growth. It was one of my favorite brands growing up. Another large category for DAZN, which coffee also delivered solid growth. For confectionery, the Middle East and Africa grew well, helping to compensate for the slower businesses in China as well as in Oceania. Looking at the Zones developed markets, Japan continued to deliver positive growth.
Thanks to really innovative new business models such as our ambassador program for the Nescafe barista machine. We now have over 100,000 ambassadors, over 100,000. I'm also happy to report that KitKat in Japan continued its growth momentum despite very tough comps in the last year. For Oceania, I have already mentioned the tough trading conditions, but I'd like to add that we continue to bring value continues to continues to be rolled out across the zone and delivered double digit growth. Other new launches like Yinlu walnut milk in China, new portion packs of Myto and low fat Carnation cooking cream in Australia and Felix cat food all performed well.
Moving on to Nestle Waters. With 5.1 percent organic growth and 5.8% real internal growth Nestle Waters developed and Emerging Markets again delivered a solid performance. The good growth in U. S. Retail came from our regional spring waters such as Ozarka and Deer Park and of course our international sparkling brands such as Perrier and San Pellegrino, even though the U.
S. Remains very competitive and price sensitive. Here in Europe, I think we all have felt the impact of the cooler summer weather. So it's remarkable that our waters business in Europe continued to show resilient growth year to date. The U.
K, France and Belgium were the highlights. Pricing is also challenged in Europe as it is in the U. S. But our portfolio of strong local brands, premium international brands and Nestle Pure Life is delivering solid real internal growth. Our emerging markets delivered double digit growth with strong performances in Egypt and Turkey and Nestle Pure Life.
Nestle Nutrition. Nestle Nutrition had an organic growth of 7.8%, 3.4% of which was REG. Infant Formula and Infant Cereals both delivered double digit growth. Emerging Markets sustained their double digit performance even though there were impacts on our supply chain in the Middle East from the political unrest in the region. The developed markets saw some softness in the meals and drinks category.
And for those of you who missed my our last two calls, one of the contributing factors to a slower rig in our U. S. Business is that we have refocused attention to value generation. This is reflected in tough comparisons for our real internal growth. From a brand perspective, the Gerber pouches for meals and drinks continue to do well.
And none along with our premium and super premium brands with S26 and ILLUMA continue to differentiate us from competition. Moving on now to our other businesses. They delivered 6.6 continue to compensate for their low growth environments in Western Europe and North America. The beverage solution business delivered good performances with Nescafe Alegria and the dessert solutions drove growth for the food business. Nespresso.
Nespresso continued to grow in the markets where it's well established in addition to the growth from geographic expansion for with new boutiques opening around the world. I'm happy to report that both the INITIA machine and the virtual line launches are on track and so far have been very well received by consumers. We've also continued to enhance the range of brand CRU coffees with new limited editions such as Cubana. Neste Health Science grew in all regions. This global growth came despite the pressure on public sector healthcare budgets around the world.
From a product and brand perspective, the key drivers including included Peptamin, Impact and Boost. And just a quick comment on Nestle Skin Health. The numbers are now included as of July 1. Galderma had a good performance very much in line with our expectations. So in summary, 4.5 percent organic growth in today's environment is solid growth.
9.5% in growth in emerging markets is solid growth. Even being able to achieve 0.5% in developed markets, 0.5% in developed markets, despite all the headwinds is a credit to our people. We have achieved this growth by doing the right things for the term, taking pricing where we need to take pricing, continuing to invest behind our brands and staying the course of our strategy to increase our category focus. At the same time, we're reshaping ourselves to ensure that we have the right dynamics today, we aim to end 2014 with organic growth around 5%, improvements in margins, underlying earnings per share in constant currencies and capital efficiency. With that, I will hand it back over to Paul.
Thank you, Han Ling. Well, I don't have to repeat it. And it's no tailwinds out there. And growth is not picking up in the developed markets and some of the engines are actually starting to sputter there a little bit too. And in the emerging markets, we see some softening.
We have political turmoil, unrest conflicts. We have Ebola too and so many reasons. And actually in these situations the biggest challenge a company has is how do we cope with that short term and keep the eyes on the long term perspective, the strategic direction of a company. And that's something I want to dedicate some time with you. Our strategic direction as a company is as well known we have been able to share that with you in several occasions.
Neste is all about we want to be the preeminent nutrition, health and wellness company And that translates in looking for enhancing people's quality of life and to do that through the agenda of nutrition health and wellness and wellness and based and drive that with science based innovation. So that is what we want to be. That is actually what we do with our food and beverage business. That is what we are. That is what we have been doing for almost 150 years now.
It is driving or enhancing lives by offering tasty and healthier food and beverage choices for all stages of life for every moment of the day and allowing so the consumer to care for himself and the family. That is what Good Food, Good Life stands for. A few phrases only a lot of work. We have many portfolios. We have many products.
And actually that is where our whole agenda of sixty-forty plus is being driven through. Now there's bringing taste and pleasure through food and beverages and do that in a responsible way bring in nutritional benefits in these products. A lot of R and D, a lot of investment going into that. The last 5 years we have for example reformulated over 30 or almost 35,000 products in the direction of more nutrition and more nutritional arguments and better taste. Micro fortification is linked to that.
Our communication and transparency on labels, GDA is linked to that. Our policies of reduction of salt, fat, saturated fat and sugar is linked to that. So many, many actions are linked with driving that agenda. That is what we are known for. That is quickly good life.
Now 4 years ago, we can we go back one? No, that's okay. 4 years ago, we announced and started created Nestle Health Science and at the same time also Nestle Institute For Health Science. And that was actually playing into 2 trends 2 dimensions 2 dimensions. 1st, in society we saw and there are trends and needs in society that are shaping and framing in such a way that it creates an opportunity for us.
Just think about health and how health is treated and how health care systems are costing to society increasingly more how also aging population demographic trends are playing into that. Another trend was that science and scientific platforms in sight are converging in such a way that they allow answers to many of the challenges society is facing where we can play into. And so and that is the opportunity we want to play into with sign based nutritional solutions that will transform the health care continuum in a way and the way consumers also patients and professionals are using nutrition and managing health. And that is what Nestle Health Science stands for. And in the last 4 years, we have made good progress.
In a few years' time, we have first of all built upon the existing medical nutrition that we have. We have set up Nestle Health Science, built in and brought in the people, the talent. We have been defining our strategic direction in different platforms that we want to focus on to develop for gastrointestinal aging, metabolic and others. We have built Institute for Health Science where we want to bring in the R and D, the knowledge, the links with the knowledge in the world, same time we have been driving the business we had with quite a lot of innovation. In other words, we have been building our capabilities and that is what Luis Cantarella has been helping to set up there.
Now this year, we have another announcement and another important building stone for the future for us. This year we are by bringing Galderma that we had in a joint venture with L'Oreal 100% into Nestle, we had the base of creation of Nestle Skin Health and further extending actually the bonuses of our agenda of nutritional awareness. Skin is being the biggest and the most obvious barometer of the health, the perceived and real health of people. And with Natural Skin Health we are going from merely treating the skin, merely treating the skin to truly caring for health of the skin. We've scientifically proven products and solutions over the course of people's lives.
That is pretty much also what our base strategy of Nestle is. We can build upon a fantastic portfolio of products and brands prescription self medication in the dermatology with Galderma. Galderma that is a business that is leading in its field which has 6 manufacturing facilities in the world as 5 are at these centers that is driving their innovation pipeline and also their differentiation from competition. There's 5,000 employees passionate employees in 80 countries and 34 affiliates. So it's something that has presence, has leadership in their category in their field.
And again, it's dollars out of a global market dollars out of a global market of skincare of 250,000,000,000 €60,000,000,000 it's a promising market. It is growing also. The fundamentals of growth are there, population growth, but also aging is linked to that. The skin is indeed the largest organ that has to be cared for on the human body and it represents for Nestle this interesting intersection between food, genetics and the environment and that's why we have this keen interest. With Nestle Skin Health, we have a concrete factual leading position with a complete range of innovative products to maintain, nourish, treat, enhance and restore health of skin.
And we have been quite very active in the few months we have already with launches like Mirvazor, the expansion of Delong. We have acquired also the full rights in the meantime of Restylane, Pertraline and Imirvazor and Dysport in U. S. A. And Canada.
And we have been building additional partnerships with 3rd parties and others for R and D. So indeed when we put together our food and beverage business which is what we are known for and what we do there and bring in nutritional elements by setting up Nestle Health Science by now having Nestle Skin Health that is really our strategic direction that we're building up building the capabilities building also the possibilities to be effective and winning there. And that is what's at the center of our road map, the famous road map that I shared with you over the last years. And that is actually shaping what we want to be as a company. It is also defining what we're going to leverage the competitive advantages where we want to grow.
And you see it Nutrition Health and Wellness was the growth by a pillar that is actually tremendous has a tremendous value promise for the future and growth from us and also then say how we're going to do that effectively and efficiently. That is what keeps ourselves sharp on the long term, yet at the same time allows us to deliver on the short term. It gives us our priorities. It gives us our alignment internally. At the same time we said with the pressures of the last so many years, 6 years of crisis also and we have to have our priorities right and the new reality as we have called it at the time, the new reality linked with all the trends, all the tensions, all the possibilities and opportunities that are facing us.
So and I'm not going to walk through them. But last year I was sitting here in front of you and saying, considering what we want to be in our strategic direction, considering the six priorities that are answering a reality that is different than yesterday. While we have and I have personally 3 focus areas on my desk and that was strengthening our portfolio, really also well allocating our resources and then also the complexity, mastering the complexity. The complexity that we have by what we are playing in different categories also geographically playing in every region and seeing the externalities. There is complexity how do we manage that, how do we master that not only managing that.
In the last 12 months we have gone quite a long way already on these focus areas and I want to share with you a few of them just to eliminate to show what is strengthening this company also short term and long term. The first one was strengthening our portfolio and we have been working on portfolio quite many years, but we have sharpened the portfolio management tool that was going after these three dimensions. Strategic fit first, how do our sales that we are covering now more than 2 200 sales, sales being a business in a geography in a country. Well, first of all, is there a firm strategic fit long term again? Is it fitting in our Nutritional and Analysis agenda?
Does it allow to project profitable growth? And what is the intensity of resource that it needs to get there? These are the 3 main criteria that we have for judging our sales in our portfolio management tool. Well, the first thing that we have to answer is our SKU management that we have been driving for many years now. But in the last, for example, 3 years, we have reduced 30% of SKUs and that in spite of innovation and new launches.
But then on the sales, but where we use these three criteria there's 3 possible outcomes. I shared them with you last year. We had to divest something that doesn't work and doesn't project potential of working or fix it or invest. And we have done quite a few things already in there. You see the divestment.
These are the visible ones. We have divested Jenny Gray, Galate and Milazan a few days ago we announced that. Also PowerBar Nestle Water Home and Europe Direct, etcetera. We have reshuffled also some joint ventures like DPA. So really going for that correcting in our portfolio.
Yet at the same time and the most important part of it is to identify the businesses, the brands, the sales where we want to accelerate because they have and they entail a lot of promise and they do really deliver on our strategic direction. And you see it. Basically, going back to our strategic billionaire brands, the big brands where we have created and put in acceleration plans to actually drive or increase even better their growth performance. So we have defined where we want to put the resources and allocating resources was another one. And there again thanks to the cell methodology we have, we are able to really allocate where it matters, where it delivers profitable growth.
And just a few dimension of resource, there's many more. But CapEx, the capital expenditures or marketing support that we put behind brands and R and D, you see there how we also plotting to move our R and D spends, our CapEx towards I would say the Northeast from lower growth and low return to higher growth and high return. And for example in CapEx where we have capped last year the CapEx and the capital expenditures to 4.5% on sales. We have had a discipline there actually coming in slightly lower. We maintain that capping because it creates and it drives discipline and also discerning evaluations of where we put our money.
While we have moved for example from the red box to the green box over the last year more than 10% of our capital expenditures have been allocated I would say in a better way. Same with R and D where we move to the Northeast putting the right R and D efforts into the dimension of that matter. And you see also the marketing support. The more you go on nutritional fundamentals, the more you have rational arguments and signs into your portfolio, the more you have to communicate. So our marketing direct consumer facing marketing support has increased over the last years 25% in Swiss francs.
These are quite sizable support increases in the right places. So they have been more and narrower and more discerning. Another decision that has been taken or that we are in the process of taking is we have reconfirmed that the importance and the commitment of this company to where we actually started which is with children and the 1st 1,000 days of life and see that as a cornerstone of our agenda nutrition and tremendous. It is what we say start healthy, stay healthy. A good start in life is the cornerstone is the premise of a healthy life.
And we have again and the best example for that is the acquisition of White where we really reconfirmed by acquiring geographic complementarity to what we already were and also the scientific and benefit consumer benefit platforms with also development arguments that why it was re embracing very well. So we want to strengthen our category focus focus on that start in life. And we want to bring in actually our growing up milk. Our growing up milk best known with the brand Niel, which is one of our top billionaire brands Niel that is covering the 1 to 5 years and bringing that under the management of Nestle Nutrition. Nestle Nutrition didn't manage that brand and we felt it will be really engaging in that good start in life to bring it in there because to create a continuum brand continuum if you want with our consumers but also the logical continuum of R and D capabilities that are focused on these 1st years and ensure category focus and execution also in the markets of a complete portfolio.
So that is going to move to nutrition. We are in the process of foreseeing the consequences working on that and the reporting on that and that redefined Nestle Nutrition is going to be beginning of next year. In the same vein a few weeks ago we communicated a redefinition of the zone. And that is actually to respond to that's a redefinition of the zone after many decades. That's to respond to the new reality.
And these last so many years socioeconomic developments have changed basically dramatically the face of the world. Countries, regions have developed in different intensity. They had and they do have different growth perspectives that need to redefine and realign the dedicated resources to develop the different geographies of the world. So that we also allow in each geographic zone that we have defined the same I would say different dynamics of consumers emerging and developing market dynamics etcetera. And that's why we have taken the decision to put in Europe Maghreb region the Middle East, Turkey and also Israel and the Northeast African region.
That under the leadership of Louis Cottrell so that we have these dynamics all in one zone also. At the same time, it will allow also in the zone AOA on NANDU to really focus on the enormous potential that we have and an enormous complexity that we have in what is a way. And that is key, I must say, that we go and have the right resource, the right management time, etcetera, to develop the huge potential just think about the number the huge potential or the percentage of the world population is living in that region which is 70% 75% of the world population and they're working for a better tomorrow. So the reporting of this new structure of this new alignment is going to be also the 1st January 2015. Also communicated and as a last point is the creation of Nestle Business Excellence.
And to put that on Executive Board level under the leadership of Chris Johnson. We're going to bring in Globe Nestle Continuous Excellence Initiative and Nestle Business Services under 1 Executive Board member level. And that is to basically 2 2 dimensions. 1st, lever our scale better and more effectively, but yet at the same time allowing really the markets, the front line to execute and to go for growth in their business and to compete effectively in the market. You know that Nestle is we privilege and we will always privilege a decentralized structure to have the decision making as close as possible where the consumers are.
And that's the right structure. It gives complexity, but it's the right structure to have decision making as an understanding of the market competing as close as possible where the market and where the action is. We have and we are we have structures in 150 countries. We almost sold in every country. We have 450 factories.
So that has a certain complexity. And actually 14 years ago that was the whole meaning of Globe. 14 years ago we established Globe with basically the famous three key objectives. It was to harmonize the business processes and it is to standardize the data management and align ORAS IS, IT systems. And it is was a key enabler for transparency.
It was a key enabler for rolling out best practice cross fertilization. It has become it has become part of our DNA to run this worldwide Nestle effectively and efficiently. It is actually allowing we called at the time also this plasma, the networked organization in a very effective way. Globe per se continues to evolve. It continues to adapt to the new technologies and new ways of working, the new needs of the business per se, just think also digital etcetera.
Global also has by the sideline has allowed us to also do that very cost effectively. As you can imagine with our complexity how that would have been Globe is also and that's an important the key enabler of many, many things in this organization. It has been I would say the precondition and enabler of for example our Nestle Continuous Excellence. It's a huge initiative Nestle Continuous Excellence. We started 7 years ago in factories.
We extended it 4 or 5 years ago beyond operations. There's now covering all functions. I would say 80% of the 340,000 people that Nestle has are directly involved in projects. We have over 30,000 NCE Nestle Continuous Excellent Projects Improvement Projects running. It's a new way of working, drives waste out and it has been the base of our permanent each year delivering of savings of over €1,500,000,000 It is bringing Nestle to a lean enterprise with a focus on the consumer in the middle.
At the same time, we have also and that's now as from I think something like 7, 8 years ago established Nestle Business Services to level up 5 regional shared services and 1 global corporate shared services in 5 regional shared services and 1 global corporate share services in Switzerland. The services that we see there are employee services, financial, workplace solutions services for procurement, also digital and e commerce and media. So many areas that they are covering more or less to a certain depth. But we still see significant opportunities to increase I would say the scope, the breadth and depth of the covering of lots of activities by the shared services. And that is why we have created Nestle Business Excellence.
Bringing these three building blocks that do have their place that do that are part of our company, but bringing that under one leadership of Kristjansson. Globe, Nestle Continuous Iceland, Nestle Business Services. Definitely there the equation is going to be not only 1 plus 1 plus 1 is 3, it's going to be 5 because that is what we're looking for to really drive drive to leverage our scale in a much deeper way. We have done strides in it. There is still a lot of web upside.
Also leverage our skills and drive faster best practice through the organization, serving our markets in a very efficient and effective cost efficient way. And for me one of the most important objectives is to really have them to march their back free so that they can really drive their growth, drive their markets for better performance, compete even more effectively and efficiently. Well, I hope with that I could share with you a little bit of insights on this how does it all work. We have our road map and we're building our nutritional and environmental agenda. We are building in new platforms that are promising for profitable growth for the future.
We are at the same time doing the right things on the longer term. And we're never going to do something now that is at the cost of the long term strategic direction. So we keep the discipline and alignment short term while delivering long term. Now these steps are really defining how we are structured, how we work together and that's a continuous way of doing it. It is people who are doing that.
Results and success of the company is people. So underlying is always this caring about the right talent, the right mindset, the right attitude, the right values and principles. We always have used this term Nestle as an end company. We have said that Nestle is a company that is going in the developed and emerging markets. We are a company that is going for premiumization and also PPP, the publicly positioned products.
We said modern trade and traditional trade and additional e commerce. We say global and global, while also we are a company that is long term and short term. Long term projection and direction yet also with short term intensity. Well, with that I come to the end of my presentation. Thank you for your attention.
And now I think we open up for question and answers.
Yes. Thank you, And please limit yourself to 2 questions. But now let's take the first question from the call. The first question is from John Cox from Kepler. John, go ahead please.
Yeah. Good morning, guys. Thanks for taking the call. I just have really one question on the business excellence and what you plan to do there. What if you give some more meat on the bone?
Because obviously the continuous excellence you've been delivering sort of €1,500,000,000 in savings annually. You talk about €1,000,000,000 plus €1,000,000,000 is going to actually equal €5,000,000,000 Should we be looking at a couple of $1,000,000,000 more in savings annually? And maybe just a second question for Wang Ling. On China generally, you talk about struggling somewhat there. Whenever I look at the monthly retail sales coming out of China and look at that food and drink segment, it tends to be double digit growth.
And I'm just wondering what is the disconnect there between that data and what you're saying there? Thank you.
Thank you, John. On business excellence, you say, well, what is it going to bring more than Nestle Continuous Excellence brings? Well, I have to say also Nestle Continuous Excellence has now bring for several years over €1,500,000,000 And it is exactly by bringing in these three dimensions that we go further and continue bringing €1,500,000,000 Now, I must say the whole Nestle business excellence is not about cost saving per se. It is about bringing more effectively and efficiently, yes, indeed services to the markets. Now you see, I said, we have financial services and we have employee services already to a certain extent work through shared services.
Yet at the same time you will see the differences between countries some are using it more in-depth than others for whatever reason. If you see the scaling up that's still possible to do even between the shared services etcetera. It is clear that there is a tremendous upside for effectiveness of driving all the best practice etcetera, but also of cost efficiency over time. So there is a promise of effectiveness and efficiency dramatically there. That's going to be driven by Nestle Continuous Excellence.
Nestle Continuous Excellence is not per se, it's a way of going about effectiveness and efficiency and allowing the people to own it. There's more a mindset than actually something specific as a department. Now I don't know if you Chris who is going to look into that can already talk. But I think it is definitely this bring together on the right level giving the authority in the organization of the market to buy into it, there's still too many possibilities of taking our shadow organization in the organization. Chris?
Well, sure. Well, thank you for the question. And it's good to be back. I mean, it was 14 years ago as Paul had mentioned that I was given this challenge to kick off the Globe project. And back at that time, the main objective was to leverage our size as a strength.
And as Paul mentioned, with Globe, we're able to harmonize practices, standardized data and standardized systems to allow us at the end of the day to focus on what really matters, to maintain our decentralized approach, but not do everything decentralized. So moving ahead, if I flash where we are today and this is now 14 years since I started Globe, it's a different world. Nestle has changed. The external world has changed. The external world has changed.
But some things remain the same. Decentralization and focus on the business still remains to be very clear. But we have great opportunities across the organization to be more efficient. We have shared service and we have a great network that's set up. We have a great chance to take this now to another level.
And also now with Nestle Continuance Excellence, we have the tools and processes to drive this even further. I guess at the end of the day, if we're successful, the best measure of success will be enhanced growth. At the end of the day, this will be enable us to grow, enable us to make the efficiencies, make the savings to reinvest the business to growth. So that ultimately will be the decision.
Thank you, Chris. Actually you're not going back because you have much more now. I mean, it's a little bit bigger. I have one thing maybe on China.
Yes. Hi, John. In terms of China, you have to remember, our China our business in China I mean, China is a market for us is actually growing. I mean, we're growing in nutrition, we're growing in waters. We're growing in professionals.
So where we have challenges, like I said in my presentation, was in specific categories. And we saw that even before this year when China had austerity measures in place, we saw like gifting coming down. And so some categories were affected as the economy slowed down. We also saw a pulling back in terms of the trade inventory. But the good news, even in those categories where we're not where we're challenged from a growth perspective, market share is actually growing.
And so that's really good to see. So again, it's a mixed bag in China. It's not cannot paint it with a broad brush saying that China is a challenge as a market in China is a challenge as a market in general, but just certain categories.
The China is it's an important question because China is big. And in China actually I feel personally that the fundamentals are there, our investments and platforms are there. We are somewhere like stepping one step back to jump better. We are correcting certain things that are I would say homemade. Nandu maybe you want to say a few things?
Thank you, Paul. And thanks, John for the question. To begin with, as OneLink correctly identified and earlier on in Wanling's presentation, there's been a lot of data available in China from various sources. We've seen published information from our peer group companies, from local companies. And in general, we see performances have been mixed.
In this context, the good news is our market shares are growing. Across all categories in China, we're growing market shares. In this context, it's good that we had many categories, which are in fact growing in China still. We do have some categories where growth has been challenged, where the recovery has been slower than what we expected. So what we are doing is understanding in fact because of market share growth and when we do research our brands are continuing to be strong.
Our brands are still strong. So we are leveraging some of the learnings from the businesses that are working into the businesses where we need some improvement. We're looking at the basics, fixing the basics and leveraging the strong fundamentals to make sure that we are in a good position to grow the business to return to good growth as soon as we have some recovery in the economy.
Okay. Thank you. The next question from the call is from Alain Oberhuber of MainFirst. Alain go ahead please.
Good morning everybody. I have two questions. The first question is about the European pricing. You mentioned that pricing is now more or less flat at Q3. It was negative one point percent in Q1, 1.3 percent in Q2.
Could you give us a little bit about the environment what you expect for Q4? And if you could even see a positive pricing next year? And what are the main drivers for the improvement in pricing in Europe? 2nd about North America. When you go into the different categories in particular in frozen category, which are out of these 4 categories pizza style, for lean cuisine and hot pocket, where do you see is the biggest potential for upside?
And what was the disappointment also in Q3 in one of these subsectors?
Okay. Thank you, Alain. On European pricing, yes indeed we saw some flattening from negative to flat in pricing. Europe is not the place where you have easygoing pricing and the pushback from retail deflationary been very close to this. This is one of the major challenges the deflationary environment of Europe.
So please, Laurent.
Yes. We see clearly an improvement in Central and Eastern Europe and that is driven by both input cost pressure on the one hand and ForEx. So we have been capable to price up and that reflects in the better pricing. In Western Europe, we start to see an improvement, but there the deflationary pressure which is triggered by the price war ongoing among the retailers continues to prevail. So we should continue to see an improvement, but it will be slow and will certainly take a little bit of time.
What are the drivers? Indeed the input costs and especially coffee and cocoa which are extremely relevant to Europe will continue to have their impact. That's 1. And second, our drive behind innovation, renovation helps us as well take some pricing. So we should see continue to see some improvement going forward.
Okay. Thank you, Laurent. On North America, I would ask also then Chris maybe to talk the potential of the trouble area.
Okay. Of the trouble area. Also just to give some context as all of you know, the United States, let's talk specifically about the United States is clearly very important for Nestle about a quarter of the sales. And if we look at the business performance, we have a mixed picture, but I would say primarily some very positive notes. If we look at Pet Care as Juan Link had mentioned, we're seeing growth across all 7 segments where we compete.
That's the largest category. The 2nd largest category is frozen. And it was mentioned here we are facing some challenges. Four segments and each segment has its own issues and its own challenges and its own opportunities. If we start with the largest of the 4 that we compete in is Pizza.
On a positive note, we're seeing some positive growth in the 1st 9 months of the year. We are seeing growth in our premium areas in pizza. We're seeing growth with our value brands in pizza. There are opportunities still to grow in DiGiorno and we're seeing where we have innovations like our thin and crispy crust and we're launching new items in this area. We have optimism that this we see will come back.
If we look at Stouffer's, which should be the 2nd largest area, it competes in the we call regular meal segment. Here Stouffer's is also if you dig a bit deeper a bit mixed. We have the multi serve meals doing quite well. We have innovations like the meat lovers lasagna doing well. We have innovations like the macaroni and cheese cups doing well.
We are struggling a bit on the single serve side. Hot Pockets, the next in line is competing in the handheld snacks area. This one we're struggling. We had a recall at the beginning of the year on some of our items. We've also been hit with some issues related to the reductions in federal assistance, which is a big part of the consumption of this particular product.
But what's encouraging is we're seeing increases velocities, regains in distribution and we're seeing this one is starting to come back. Lean Cuisine would be next and Lean Cuisine is a declining segment. We are also declining in this segment. We are seeing where we have innovations and where we've launched areas for example in breakfast and snacks, these are doing well. But we are across the board really facing some challenges in frozen food.
However, we do believe in this category. Frozen, we believe that this is a very, very while category for us. We have leadership on all four of these segments. We have very strong brands and it's our challenge to make sure that we're innovative and that we ride and address consumer needs better and better as we move ahead. In particular, you mentioned the 3rd quarter performance.
We intentionally backed off on trade promotion in some areas and this had of course an impact in the quarter. But if we look ahead based on the strong innovation pipeline that we have in these areas, I'm confident that we will be able to see increases.
Thank Chris.
The next question from the call is from Alex Molloy of Credit Suisse. Alex, you please go ahead.
Good morning. Two questions please. You're maintaining a full year guidance of around 5%. You're running at 4.5% at the 9 month stage. And in Q3, there was a slowdown versus H1.
So how do you rationalize moving up from 4.5% towards 5% for the full year? And then I have a follow-up after that please.
Thank you, Alex. We are aiming at around 5%. So we are 4.5% year to date. You say that's a challenge for the last quarter, it is. But we are aimed at around 5% and we see possibilities and we're going to put the right efforts in to get there.
Now it is clear that it's always the same thing. Is it 5, 4.8, 5.1? Actually, I don't care too much because well it's like Urss and Bolt when he runs nanometer he doesn't run it always in the same time either. It depends a little bit on what's coming into the wind and all that. So but the fact is we aim.
The most dangerous thing when there is pressure is start to adjust your targets, start to adjust and accommodate yourself instead of maintaining the pressure and build the right resources. I would call it staying and waking up half an hour earlier. It's tough out there. It's not easy. A lot of competition, but a lot of, lot of headwinds.
It's all true. That induces you to the question. And that is my motivation to say we aim for that's what 340,000 people are working for and I'm confident.
Thank you very much. My second question is specifically on the U. S. Is it possible to give us some trends in terms of how U. S.
Growth looked H1 and Q3? Chris hinted that some of the weakness in the U. S. Was due to backing
So I can answer that easily. We have been backing off and that is a decision. We have been backing off of quite a few sales if you want in the United States per se where the category was because of soft trading environment, because of low consumer etcetera, we're really going into the wrong corner of being almost everything 100% on deal. We backed off on that. These are huge categories.
So we see it all in one basket. But we have been taking out for example on premium retail based ice cream for example we backed off. We say well that's not our business to be competing only on price and driving a lot of efforts for nothing, for no substance, for no even strategic dimension they can build in. That's the same thing in frozen. The same thing in frozen.
Frozen is not pizza is not pizza. You have different subcategories. And we have been backing out or taking and going out of certain dimensions where we didn't feel we had a future to play. That affects your growth, it's a decision. It affects your market shares, it's a decision.
We take it because it's the right thing to do. We're not going to be let competitive intensity manage per se our businesses. Now it hurts and it has to be compensated. Very positive signs of certain turnarounds that we start to see very positive signs of certain turnarounds that are promising. So that's where we are.
I'm confident too in the
Hi, Jeremy Fialkow, Redburn. Jeremy, go ahead please.
Hi. Jeremy Thialko of Redburn here. Just got one question about pricing in AOA and the weak rig that you had there. Can you just talk a little bit about what sort of effect you saw from the price rises there in terms of volume? And do you think that was a little bit of a temporary effect as you got a bit of a price gap relative to your competitors?
And therefore would you expect that rig to improve over the remainder of the year? Thanks.
Well, first of all, I'm going to give it to Nandu. But it is clear that you say in AOA, well, we call AOA internally a little bit of CNN. It's an extremely complex region with extremely different dynamics. And so there is no price increase in a way. It's country by country.
And that's why I want to give it to Nando to give a more precise answer there.
Thank you, Paul. Thank
you, Paul and thanks for the question Warren. Let me answer your question and I personally fully understand your question and I think it's a very legitimate and good question to ask. Let me answer your question in 4 parts. The first, I'll tell you about the environment. 2nd, I'll tell you what's going well.
3rd, I'll tell you what the problems are. And 4th, I'll tell you what we are doing about it. So very structured. First, the environment. Paul alluded to it earlier.
Are facing economic headwinds. We see it in the results of our competitors and peer group companies. On top of it you have a war zone in the Middle East. You have Ebola, there's all kinds of stuff happening. The good news, despite all these problems, we're gaining market share as across the zone, across categories, we're gaining market share.
And with the exception of 2 countries, which Wanling mentioned, which is China and Oceania, across the zone, we're actually growing mid to high single digit. And not only and when we're growing mid to high single digit, this is comprised roughly half of it is RIG and half of it is pricing. So we have gotten pricing because of commodities and currencies and so on. We've taken pricing. Pricing has been accepted.
We are growing RIG and in fact this is reasonably healthy in line with our 2 decade average. So our issues and just to continue on this one, apart from growing market share and growing RIG in these markets, we have a lot of good consumer facing activity. We have digital activity, breakthrough innovations across markets, Philippines back to growth, South Asia back to growth, ASEAN back to growth, Africa growing, Middle East growing despite all the crisis in North Africa. So good stuff happening. Issues in China, Oceania.
What are the issues in Oceania? What are we doing about it? Oceania, the issues fundamentally have to do with the trade structure which as you know is dominated by 2 players who are as a result there is a certain amount of pressure coming on the manufacturers. We've stayed true to our principles, which means we have paid a price. So we are responding to the situation with more innovation with focus on alternative trade channels and we're going to work through the situation over the next few months to make sure our business gets back to growth.
The fundamentals of our business in Oceania are sound. We have good people. We have strong brands and we have good focus in place. China, I mentioned earlier and I'll repeat my answer. Fundamentally, in China, we have market across categories.
We have some categories which are doing better than other categories and even in the categories that are not doing well, we have brands which are doing better. So what we are doing is our brands are strong, our competitive position is strong, we're taking the learnings and making sure the basics are strong, so we are well placed for recovery. So to come back to your original question, we actually have good RIG except for a couple of pockets and those are areas which we are addressing.
Thank you, Andrew. These comments have very motivated too. And then Jeremy, we changed your name to Warren, but you're Jeremy.
But please. The next question in fact is from Warren Ackerman at Societe Generale. Warren go ahead please.
Hi. It's Jeremy here. Actually, that's Warren. The two questions from me. Can you talk a little bit about the competitive environment pooling coffee, both soluble coffee and Nespresso?
I think we're seeing some really low prices out there for Nespresso compatible capsules from some of the European discounters. And Paul, I'd appreciate your kind of thoughts on the French competition authorities ruling with regards to Nespresso and what it means for your intellectual property in your R and D that you put into Nespresso? And just generally about the coffee environment, what you're seeing? That's the first question. And then just secondly, just back on China.
I appreciate your comments, Nandu, on China. But can you maybe be a bit more precise as to specifically which categories within China have been impacted? I mean, you talk about gifting. Does that mean Husu Chi, for example, has been impacted? What's happening in baby food?
What trends are you seeing in baby food with wires in China? If you could maybe just talk around some of the categories and when you think China might pick up that would be great. Thank you.
Okay, Warren. Thank you for your questions. I hope you asked this question with an espresso in front of you. Competitive environment, we always said that there's lots of noise, lots of writing in the press about things in linked with espresso. But at the end of the day, the bottle is the best cup of coffee.
And that is where we really focus on with quite a lot of initiatives. But maybe you Patrice who was leading that business your comments on this also the French competition the authorities competition authorities and the relativity of these things although they make a lot of noise, but so much more of your attention is driving the business.
Thank you for your question. I guess it's Warren really. So thank you for the question. Just to frame what's happening. Coffee has becoming an extraordinary category over the last 10 years.
Premiumization growth, it moved from being a commoditized categories to 1 of the more premiumized interesting category in the food industry. And this has been led to a very, very large extent by Nestle through our Nescafe brand and over the last 10, 15 years through Nespresso. So not surprisingly, a lot of companies are looking in how to get a share of this high growth and important margin in it. We have led that and we will want to continue to lead this and you have seen our results there. So let me talk about the 2 parts.
Maybe first Nescafe where we have by far a very, very big leader on soluble coffee worldwide where we're doing continuous effort launching new product, achieving growth. And about 18 months ago, we launched a big initiative called the Red Revolution, where we are restaging our product, remodenizing all what we do and launching a worldwide campaign under the slogan, It All Starts with Nescafe. We have implemented this in about 70% of our markets today with a lot of success and we believe that we are leading and we'll continue to show the trend and to convince consumer worldwide and very importantly also in emerging market that we do extremely great cup of coffee. This is what we do on soluble coffee with a significant R and D effort behind and really also in soluble coffee which is less talked about very, very nice growth worldwide. Then we have the big battle that come on the what we call single capsule coffee where Nespresso has been leading, but also Nescafe Dolce Gusto and you have seen results in Europe there, but it's also worldwide where we have on one hand with Nespresso achieving what to call the more the affordable luxury cup of coffee and with Nescafe Dolce Gusto with a different distribution system addressing a more everyday premium coffee very, very successfully.
You've seen results at the heart of Europe with very difficult economic condition. We're achieving massive double digit growth. So we think we are in a very good position. Now as I said, this has attracted a lot of competition today. Nespresso has 185 competitors.
185 competitors and course, this is stimulating us to do new thing. We hit this new machine, new Grand Cru Coffee, new system, which we launched in the U. S. To tackle the huge opportunity in the U. S.
With a longer cap. We think we are well placed. We'll continue to work at it. And the results show that there is possibility for us in spite of competition to continue to grow. More specifically on the French antitrust, I would like to remind you that this is a decision that we made to find remedial actions we made to find remedial actions to get out of a situation where we had a bit of a limbo of having very few and I repeat this because sometimes the feeling is it's part of a strategy to have some legal action.
But very, very few out of this 185 competitor, we have a handful of situation, some situation, some of our competitors 2 competitors felt that we were having action that were not for an open market, we have decided proactively to enter into negotiation with the antitrust authorities to allow us which was very important to go back to innovate because as long as we were in this situation it was difficult for us to move on. We have found a common ground. We are satisfied with what we have done. I believe our competitors are satisfied. So we are moving on now and we are able again to innovate to do the change that we do all the time and what has been done to improve our machine, to improve our coffee and go on and continue to win consumer day after day with new cups of coffee.
Thank you, Patrice. It's clear that we are investing heavily, heavily in innovation and new ways of doing things also in espresso. It is logical that whenever we feel our intellectual property is somewhere challenged that we have to react. Now the battle as I said is for the relationship with consumers. And definitely one of the reasons why we disengage from keeping a battle going is exactly that to keep our attention in the right place and not being dragged to something we don't want to be in.
China more precision on China. It has been said that there is a convergence of factors China per se, the environment of growth. Some the gifting I mentioned was very important not only Shubishi, we had also in beverages. And it was part of the landscape that we also being local very much entrenched in that has softened dramatically. And we have been talking about China quite a while already, but I can tell you infant formulas, milk products all that is really going very, very, very, very well.
And I would keep it there. I think there's a combination of factors. But as Fernando has said, in many categories we are gaining market share. That's important. So outperforming the market.
We have a good pipeline of innovation. We are correcting certain things. Yes, indeed, certain things that we feel we could do better. We are destocking. China is a market with different layers and there is stock.
Distributors A, B, C getting to the 3rd, 4 tier cities has that dimension. I feel we are doing the right things and all conditions are there to really seeing return on our investment and money, but also in management time and brands. So that's what we can say in China. It is something that are we happy? No.
Are we satisfied? Well, with what we're doing yes results have to come. So thank you. So thanks. And the next question from
the call is from Celine Panuti of JPMorgan. Celine go ahead please.
Yes. Good morning. So my first question is Mr. Boulker, you talked about your portfolio and you show us a scatter graph with green dots and red dots. So can you kind of give us the magnitude of what these red dots represent for your portfolio?
And you mentioned that there were 3 ways you could address those. Are you satisfied disposal front? That's my first question. Second question, in fact, there's been a lot of already on China and I'm not going to add to that. But if I step back a bit, what we see is that growth rate in AOA and overall in emerging market is slowing down.
Yes, some of those economies have slowed down, but it seems the slowdown that the category is facing is much higher. So could you, first of all talk about for the overall Asian region, what is the market growth? And second, if you could, why is it that you see such a slowdown because presumably it cannot be only because of some GDP slowdown which has not been as abrupt as the
category slowdown you seem to face?
Thank you. Well, give all these details
per se as you can imagine. But for give all these details per se as you can imagine. But for example we are measuring 2,200 cells and I think there is slightly 200 something of cells that we say we have to do something here. We fix it or divest it. We're not speaking about 2,000 business that we sell.
Sell is a category in a market that may be repeated. So sometimes we have one brand that we sell out that is equivalent several sales. It is a small part of our business. Actually last year alone we have divested over 1,000,000,000 over 1,000,000,000 equivalent sales. They add up very fast.
We are privileged to have and lucky to have very healthy cells and normally cells that are promising not there yet, so we have to fix them or that are aligned with our strategy. This when they are not aligned with strategy, not promising a profitable future that we go up really to see can we fix it. If not, we divest it. And as I said, we have been moving a little bit more intensely on this. You are I am happy.
Well, I'm never happy. I mean you want to on paper things going fast etcetera, but you have to do it well. There's responsibilities linked to that. There are dimensions that are not just on paper and figures. And that is how we are.
That's how we operate and that's how we do the things. So you have as I also say as somebody who's going to smile you have to give time to time without losing time though. But you have to have the agenda. You have to have black and white. You have to have the internal discipline and then see.
You have to make the decision and then see how you do it. The how is very important and many things. Now I do believe that the major outcome of portfolio management is resource allocation. It is really identifying what matters what is promising and resource it well. And there I think that's a little bit of a shift where we had and still we have upside there that we had a little bit of this, everybody had a little bit of things.
And that comes with decentralized structure, comes with empowering people etcetera. Yet at the same time we have to find this balance between allowing localness, allowing capital decision making yet at the same time that bring the holistic view on things, strategic direction, priorities, etcetera. And I think that's exactly what portfolio management does. It puts it allows the whole market everywhere to use the same criteria to judge. And it builds a tool in that is only present.
Everybody knows, everybody works with portfolio management. That is linked with our strategic business planning process and that is the strength of this whole tool. It creates discipline. It shows you things that you don't want to see sometimes that you have to swallow and that is the strength of this tool. Now again on China that's a very That's where you work.
No, yeah, yeah. You are turning on. On Asia, AOA in general and growth, yes, Nando maybe because again, please do. Again, I always say we are not selling GDPs. So whoever comes with a GDP is down, although that's the environment to swim in.
But we should not be floating on the such thing as I would say meaningful to us GDP of AOA. But anyhow, I leave it to you to answer.
Thank you, Paul. And to begin with, Jeremy and Warren apologies for the mix up in the names. Not I just read off the screen and apparently I read the wrong part of the screen. So Celine, good question. I think Paul summarized it very well.
In general, the underlying dynamics across zone AOA that includes Africa, Asia, the underlying dynamics are there's increasing urbanization, there's a growing middle class, there's still a large young population increase in demographic dividend. So there are many drivers for improved consumption and those drivers haven't changed. What has changed is the speed at which some of this stuff is happening and that's what a slowing economic growth rate means. So we've always had 2 drivers to growth. 1 growth is to take advantage of the rising tide, which I just mentioned, which may be rising less slowly now.
But the other tide we have is innovation and communication, particularly new media. So we're using all these levers to get growth. So when we see growth in some of the economies and that I mentioned earlier, we have actually outperformed economic growth. Now that is pretty much what our intention is. And the best example we have is in fact from a developed economy of Japan where we have excellent growth both RIG and organic growth coming fundamentally through innovation, new business models and new methods of communication.
And that remains our focus to try to get growth in spite of economic conditions, which remain
from the room, we'll take a final question from the call. Patrick Schwendiman, Societe Cantonal Bank. Patrick go ahead
please. Patrick Schwendiman, Societe Cantonal Bank. Hi, Paul. Hi, Wendling. I have two questions.
Firstly, regarding the pricing. Pricing was in quarter 3 around 2.9%. How comfortable are you with your current pricing? Do you think it was enough to hedge the margin against higher input costs and lower currencies? That's my first question.
And secondly, what do we expect from the environment for 2015 compared to the current year? Thank you.
Are you satisfied with pricing? No, I rather wouldn't have it. It's very difficult. No. We are always aiming an NAND company again.
There's top line and bottom line. So and we don't do pricing here in the headquarters. Pricing is done in the markets. They have also that top line bottom line. And it's tough.
And if you cannot do pricing you have to do other things to deliver on that promise of growth and bottom line and margin. So
but we
do see it takes some time, but we do see first of all there was again you have to see category by category. But in general we didn't see this extremely high raw material price pressures that we had in a few years earlier. We see although you have milk and that had extremely high pressures, but I think we have been able to answer and again we have this natural hedge of having different categories and being able to flatten it off. You see also we are not doing it on the back of lowering our marketing spend because that will be fatal. Again pricing is hard.
It's not easy, but it's necessary. And we have to do what is necessary. We have to build the right arguments to do that. At the same time, we combine with trying to absorb part of their need through our efforts to reduce costs on the other side because at the end of the day, we have to be able to compete. So I'm happy.
Well, we are aiming to deliver top line and bottom line and the bottom line would be proof of being able to do what we have to do. The environment of 2015, I would ask you. I mean, there is one thing that is characterizing our world now today too is that there's lots of volatility and it's hard to predict and nobody dares. And you saw the latest again estimates of the International Monetary Fund, World Bank, etcetera. There is certain convergence again lower though of 3%, 3.5% of growth GDP.
As I said, we don't sell GDPs and luckily so. I mean we have to outperform depending on the markets. And I don't see many all of a sudden tailwinds coming in although being an optimist I should, but we have been coping with that for so many years, not only the last years, we had these periods even in the And I think one of the characteristics of Nestle has been having a company that's able to adjust to see without losing time, without losing focus again on the long term perspective and strategy it has because that's very important. How can you keep in spite of all, how can you keep your line going? Because that's where the value creation is.
That's where you invest in longer term. You don't invest in R and D for 2015, you invest for longer term and keep that going is extremely important to me. How can we continue in spite of lower growth 3%, 3.5% but and keep the strategic direction and do the right things longer term also which is important to me. So we are building the right putting the right stones in the right place to be able to be I would say successful and deliver on our promises also in 2015.
Thanks. Okay. Thanks,
Ned. So we still have time for some questions from the floor. Any questions? That doesn't seem to be the case. So Paul some sorry, I apologize.
Hi. I'm Rachel Ristoris from SDA, Swiss News Agency. And I have questions about health. You told us about defining your territory and what are exactly the limits? You're not converting big pharma.
And what is the next step after Galderma and Skin Health? And why are you focusing on health? Is it a trend or and where exactly are you focusing on this business?
Thank you for your question. It's a good question in the sense that it really is something that is out there and saying look Nestle food and beverage bringing this nutritional I would say benefits towards a broad range of products and that is what we're known for. That's I always say it's €90,000,000,000 of €90,000,000,000 That's what we are. That's Good Food, Good Life. That is what we're working for.
Yet at the same time and it is not that it was out there and all sudden you see it, but at the same time Nestle Health Science is answering and said the convergence of dimensions that are really getting to the surface. That may have a hint or a flavor of with that pharma Nestle Health Sciences going after the specific medical conditions where nutrition can be linked with. You see what's happening in society. You see the aging, the needs, the noncommunical diseases. You start also to see that the health care systems that we have as they are defined now are extremely expensive and increasingly expensive and increasingly hard to deliver.
You see the 80% of the world population building middle classes which is a developing world. And although they're softening slightly in growth, definitely that's where these middle classes are going to build their social structures and health care is part of that. How are they going to do that? Do they have the money to build the same systems we have here? There's many other ways of going about health.
And nutrition has always been there, but now we have also the science to understand and to investigate better how nutrients interact with the human Short term, long term, how they can be really and are an inducive dimension bring health if you do it the right way, if you have lifestyles, if you have a diagnosis of certain conditions that you're going to and all that. So fantastic. It's a huge opportunity. And it is linked with what we are enhancing quality of life of people being linked of quality of life with people nutrition, health and wellness the pillars we build upon that. And we are passionate about driving increasingly our innovation through science and knowledge understanding of which is adding the value.
Well, nutrition and Nestle Health Science is all about that. It is out there. It is a market that is in the making. And that's why the question come and what is this? Is this pharma it is not pharma.
We speak about consumers here. There are pharma arguments there because you go more deeper in science, you're going to have some clinical trial dimensions into it. But that's the passion that we have for us, it's added value. Now then you go for skin. And actually skin by bringing Caldera that was like an ideal point where we also have redefined our relationship with our partner L'Oreal.
L'Oreal is all and they say it. We are about beauty. Well, Calderma, etcetera is well skin health. We are saying nutrition health and wellness. Skin being in a shoulder the biggest organ you have, but it is your more obvious permanent barometer of how you feel, what your health is.
There's many dimensions of signs that are applicable and different combinations between nutrition and the skin or nutrition and the stomach, many same similarities there. So we feel there is a promise. It's a promising market per se. It is already a company that is successful. It is leading in their specific field of therapeutic skin health.
It is leading there. It has invested lately in more capabilities to be leading there. It is something that is I mentioned that 5,000 people passionate about what they do competing in over 80 markets directly and indirectly through affiliates. It has 5 factories. It has 5 R and D.
So it is it's there. And it is having their fortune and their definition of strategic direction very clear. So we want to be part of that. And there is commonalities that we didn't do it for that, but there is scaling of science definitely in the future to be landed there. So and it is enhancing quality of people's lives through nutrition, health and wellness and science based innovation.
It ticks off the three dimensions and it's going to help to really have Nestle building upon its strategic direction of nutritional value and others with promising growth profitable growth platforms. So that ticks off
all the boxes. Thank you, Paul. John, you had a question?
John Madhill, Wall
Street Journal. I've got a couple of questions for you both. In terms of you've spoken about the subdued economic environment in Europe and it seems to now be spreading to sort of Northern Europe as well, which previously had done quite well amidst all the horribleness out there. I was wondering how what your concerns about the subdued economic environment on the consumer spending? Do you think this is going to continue for a while?
And how long it's going to continue for? And just your general thoughts on that affecting sort of the food industry? That's my first point. My second one is, you failed to reach 5% last year and consensus is actually below 5%. I know you said you're going to strive for that this year.
But if you don't make it this year that's going to be 2 years in a row. Does that mean the model is broken?
Let me answer the second question first. I mean the model is broken. The model is not broken. We are growing outperforming the market and all that. That's what we aim for.
We have delivered 6.1%, 6.2% in the last 10 years. Then the model was broken too because we over delivered. I mean I really want to take distance from this agony. This is agony. I mean you're 6.1%, 6.4.9%, you guys do a model is broken and all that.
I mean, if I had to first of all, this is by aggregation of many dynamics you can imagine. So you add it all up. If we would be managing with the aesthetics of the figures and all that, we will be really tweaking and forcing that's not a reality. So please come back to reality. I mean, it's all performing.
It's coming about your agenda. It's delivering and building upon your strategic direction. It is delivering on fueling for growth and etcetera. And for me that's what we're around 5% is a very, very presentable dimension in the days we have today. Actually the Nestle model per se was something that was given by the outside world because we were so explicit in our internal aims and targets that actually it is haunting us to a certain extent.
But there's one thing. I keep the 5% to 6% as the band that this company should be able to deliver. Why? And let's go back to why is the 5% to 6% or around 5% or percent or around 5% or above 5%. Even if and the question came, growth of next year globally is projected to be 2.8%, 3%, 3%, 3%.
We're going to get rid of the definition because we can all start saying, it's going to be 2.8, 2.9. You can imagine if we would manage a company as big as this company on the premise of 2.8, it doesn't matter too much. It's lower. There's softness in the market and it has many reasons. I feel coming back to you, Sven.
Secondly, first question, Europe, well, Europe is there are structural dimensions in it. That's why. The emerging markets are linked to that. They took Certain markets were overgrowing, feeding up their engines, they are softening, linked also with the developed markets. They didn't pick up as fast.
Many emerging markets are linked to that dynamics too. Let's face it. So but growth is going to be 3%, 3.5%. Now we as a company we say we want to go after added value growth. Added value means signs.
We are building new platforms that do have growth promises that are higher, should we because there's new markets, there's new arguments to be built in. Just think about Nestle Health but skin health should have higher growth marks. These are the demands that come in. But we are building also through portfolio manage focus on growth then we should outperform. I do I'm the 1st to say we don't sell GDPs.
But if you want to have a comparison, if the world is growing 3%, 3.5%, I want to we should grow faster. Hence that 5% and that is what we're looking for. So did we fail? Are we going to fail etcetera? No.
We are going about our agenda, driving our growth figures where we are in a wise way, not compromising the future and outperforming the market. That is what we're looking for. But internally and they all know me for that and we're extremely hard. There's 10,000 reasons to soften our guidance. There's 10,000 reasons to be apparently realistic.
I know one thing in an organization like Nestle, if you soften up you may get what you want. And that is what is driving us. That is why we may actually look arrogant saying whatever happens out there we continue. Well, there's a certain I would say arrogance as a result of conviction, belief, motivation. And that's something that I want to put clear because I feel this is not really adding to my scheming here.
Now on Europe, I don't know you mentioned that it's going to take long. We always said a few years ago when the crisis came we said that's going to be long because the crisis was deep. It was also and I always say that there's not only a financial crisis it was actually a value crisis to a certain extent. It was something like living beyond your means. Now if you do a loan and you cannot pay it back well and there you go.
That's living really concretely beyond your means. But we were speaking about society that were living beyond their means. That's where you start talking about structural dimensions. And some countries are doing many efforts to go after them and trying to give correction to them and that's hard on the population. But you see some growth coming back there.
Just think about the southern part of Europe and you see quite promising trends. Some of the markets are hard to have for whatever reason. I'm not going to give a judgment to that. A harder time to do what they need to do. And they are big and they are impacting Europe.
And so you spoke about the northern part is linked to that reality. And you see some sputtering there I mentioned it before. Now how long is that going to take etcetera? Again we are not selling GDPs. We have been through the whole crisis in Europe.
We have been delivering growth, real growth, real internal growth. And why is that? Because again, we said we are not we are an NAND company. It's emerging markets when the developed markets were really sputtering hard. We didn't say we back off there go for growth where it is.
We went there, but we stayed there also where it was harder to get through innovation, through adjusting our sales of our ship and to really take initiatives that we're reverting, we're defying gravity. And that is what we're doing. And that is what we should do in Europe. I don't look at the end of the day, if the economical situation is bad and all that, at the end of the day, eating well is one of these affordable luxuries that may be and it is for us to make it so compelling that people go even back more to food. Remember, we always said food and the family budgets or in the person's budget because families is also but the person's budget is in Europe between 11% 17% give and take, 10%, sometimes even lower.
So if we can just take 2 arguments and all, some of the 85% that is somewhere else traveling big car and speak against other industries. But if I can motivate them to go back to something that can deliver happiness every day which is eating well, having good moment, a good cup of Nespresso or etcetera. And I can only bring 1% and that's growing 10% in Europe or 7%, 8%. That's actually what we should do.
But how long do you think this subdued environment will remain?
7 years and a half. I don't know. John you know that we don't know. I think There's There's a fundamental thing in Europe that industry diversity good schools we have it all there. That's the drama.
We have it all. We just have to embrace work a little bit more maybe and find it a nice thing in life to work hard and be competitive again and exporting what we can export. So many things we could export that we are well. And I think that's eventually going to come over and it's going to take some time. Politically speaking, it's not easy all that.
A little bit more of their leadership maybe there too, us speaking up louder maybe too. So but the intrinsics are there. So I'm and that's why we said world is changing. Everybody goes to Easter. We say, yes, we look there, but we are here too.
50% of the world growth give and take of the next 5, 10 years is going to come from the developed markets. 50 of the absolute growth that's what I read. Well, if they're right, I'm not going to leave it.
Okay. Thanks. We have time for one last question. Uli, you had a question.
Hello? Hello? Hello, Wodde Hov, AWP. Could you give us a more color on how you work in countries with Ebola and what impact do you expect if the disease is spreading further around? Well, Ebla that's something that touches the whole society.
So I don't see even speak as a company now. I mean, Ebola is something that apparently is no apparently is conditionally the world. And so your question is it what if or what do we do? Because today it is and although we see some spots coming out of that region, but it is something that is conditioned by our zone AOA now there where we always have one thing. 1st of all it affects us as it affects society in general.
And safety of people and in that sense our people is important. We are now not having operations in the countries that are most affected. We don't have factories there. We don't have a very physical presence. So at the end there we but we are on high alert in the zone there specifically and the zone is linked with our crisis management dimensions of the corporation.
Now we'll be also helping in the sense that you see the International Red Cross is doing specifics. We do actually in many regions like Ghana Ivory Coast projects already linked with cocoa farming and all that that is linked to our cocoa plant. We've also part of these actions are with the Red Cross. So that collaboration is there. We're intensifying that with quite a few companies financially if you want but also through our employees and all.
So it is something that we are totally aware of, alert in. As part of society, I think it's caring about our people and the people that are working with our people where we really can have a direct impact. Think about what we are doing already in the farms and all. Hygiene and sanitation is the I would say the most fundamental common denominator of what we do there and creating shared value as we call it. And that is actually one of the preconditions of retaining or containing Ebola.
These are concrete things that we can do as a small part of that society, but being totally part of that society is definitely something that is the first priority. I think that's what we do. We are on high alert. We are caring about our people. Then the question may come, yes, but cocoa.
I feel people is more important than that. Cocoa we do have. We are aware of that too. So this cocoa supply comes out of that region. And there we do have covers normal covers and looking into that too if what and but I can imagine that is not the highest priority we have there although it is important to us.
So Paul some concluding words perhaps for the comments. Well, the concluding words I think I'm going to repeat myself. It is considering all and I thank you for your question because it allows us to really connect on the important issues. And one of the most issue that we hear and feel and actually intensified over the last weeks is slow growth basically, common denominator tough environment and for whatever reason now. And it is true.
I call it there's no tailwinds because we spoke so many headwinds, no tailwinds. But what I wanted to share with you was the fact that yes we keep our targets, we aim, we are not paranoid about we want to outperform and we want to go about our agenda with conviction. Our agenda, the strategic, the nutrition of our mind as I mentioned that we want to build in into our capabilities because they entail profitable value creation and growth for this company. And this challenge that short term induces sometimes to tweak, to change what you aim for or to lose sight of the long term perspective of things is a danger that we don't want to do. And we're aware of that and I just wanted to share that with you.
I think also your questions helped us to explain a little bit further. So once again, thank you very much for your attention to your present and over the phone and the webcast and see you then in a few months' time.
Thanks, Paul. As usual, we're happy to take follow-up questions via e mail or Twitter. And I'm sure you know the addresses. So thank you very