Welcome to the Nestlé first quarter sales conference call and webcast hosted by Wan Ling Martello, our Chief Financial Officer. Over to you, Wan Ling.
Good morning, welcome to Nestlé's first quarter 2014 conference call. Time has flown by. It seems like it was only yesterday I was here with Paul presenting the 2013 full year results. This morning, I'm going to take you through a review of our sales figures for the first quarter. Then we will open up for questions. I will take that the safe harbor statement as read and move straight into the numbers. First slide. You will see there are three points that I want to highlight in these results. First, we delivered a solid organic growth performance of 4.2% in Q1, in line with our expectations in what was a tough trading environment. Second, both developed and emerging markets contributed to our growth by posting positive performances. Third, these results are consistent with the Nestlé roadmap and position us well for the remainder of the year.
To the key elements of our sales. The business delivered RIG of 2.6% and pricing of 1.6% in Q1. I would describe our RIG performance as solid with pricing in line with our expectations. The organic growth was achieved despite a slowdown in emerging markets, no meaningful pickup in the developed markets, and seasonal variations that you all would've been aware of. With challenges across many markets, including reduced consumer demand, deflationary pressure, and competitive activity, 4.2% organic growth for Q1 of 2014 shows that we have the capabilities to deliver in today's tough environment. This performance has been supported by successful new launches, innovation in both developed and emerging markets, and good execution across the value chain from PPP to premium.
The strengthening of the Swiss franc against our currency basket has again taken a heavy toll on our reported sales of CHF 20.8 billion at an impact of -8.6%. Divestitures also reduced sales by -0.7%. Looking out towards the rest of 2014, we continue to expect our growth to be weighted to the second half of the year. For the full year, we're confirming our outlook with performance weighted to the second half, outperforming the market, organic growth around 5%, and improvements in margins underlying EPS in constant currencies and capital efficiency. With that in mind, let's now review how our various regions have contributed to our growth so far this year. This slide outlines the performance by region for total Nestlé, including our globally managed businesses. It captures the challenges and opportunities in a nutshell.
The emerging markets, which represent 45% of our sales, or 9.4 billion CHF, had organic growth of 8.5%, but momentum has slowed slightly in Q1. The slowdown we saw in China and India was partly offset by Africa and the Middle East, which if you recall, lost a production facility in Syria last year. Looking at developed markets, we continue to see growth from our businesses in a no growth environment, even if at a more subdued pace of 0.0%. Despite some signs of economic recovery in some of our developed markets, unemployment in general remains high, consumer confidence fragile, many markets have deflationary pressures, and the competitive intensity has not diminished. I want to reiterate that we don't just sit here and accept this. The tough macro situation drives us to innovate, to challenge, to outthink our competitors, and to deliver results.
Q1 was tough, but we've worked to lay down the foundations for the 2014 full year. Let us now take a look at each of these areas in more detail through our Zone and globally managed businesses, starting with Zone Americas. Zone Americas grew at 4.1% in the first quarter. Both the North American and the South American businesses had their own challenges. On the positive side, where we have driven innovations, we've seen great traction and growth, starting with North America. As you all know, North America faced some really extreme weather in the first quarter. This affected not only consumer behavior but also the infrastructure, factory operations, transport links, and retail. That had an impact on our performance too.
Looking at our categories, frozen pizza had a good quarter with California Pizza Kitchen due to the launch of the renovated crispy thin crust, a must for all you pizza lovers out there. Lean Cuisine grew on the back of the recent launches of stuffed pretzels and Lean Cuisine Morning Collection. Although this was helped by easier comps. Stouffer's and Hot Pockets had a more difficult quarter. To wrap up frozen, ice cream had a strong quarter in super premium, with a weaker performance in snacks and premium. In soluble coffee, we gained market share with both Nescafé Clásico and Taster's Choice. Coffee-Mate continued its momentum, helped by the launch of new flavors, and you can see an example on the slide here. Moving on to confectionery, our chocolate business was impacted by the shift in Easter holidays.
Early Easter last year contributed to a double-digit growth in 2013. I'm happy to say that our most recent launch of Butterfinger cups is really performing well. Innovations and line extensions in pet care continued to drive our growth across the category. Dog Chow and Friskies were two of the highlights. Our launch of lightweight litter and our reintroduction of Waggin' Train Snacks have both been a great success. Many of you would have heard John Vella talk at CAGNY about the long-term potential for this great business. Turning now to South America. On a regional perspective, all of our key categories grew, with ambient dairy, pet care, biscuits, and cocoa and malt beverages being the highlights. Chocolate was clearly affected by the late Easter. Looking at our two biggest markets in the region, which is Brazil and Mexico, Brazil had double-digit growth in majority of the categories.
The value-added milk, such as Ninho and Molico, were especially strong. Our cocoa and malt beverages with Nescau grew well, and ice cream had a very strong performance, thanks to our focus on leaner operations and from the good weather down there. Chocolate is one of our biggest categories in Brazil. In fact, our biggest confectionery market globally. You can imagine the swing factor we see on seasonal sales. Mexico had a more challenging quarter, and changes in tax legislation further dampened consumer sentiment. Soluble coffee with Clásico and Nido in dairy were two of the stand-out performers for the quarter. Some of you may recall my talking about pet care in South America last year. It is now growing to a meaningful size, and the performance is good.
To recap, there is plenty in the Americas for us to be encouraged by and enough for us to work on. Let's move on to Zone Europe. RIG was 0.7%, while organic growth turned negative for Q1. This should not come as a surprise to most of you. Recent developments in the Ukraine have contributed to a slowdown across Central and Eastern Europe. Overall, across the zone, consumer confidence remained low and the deflationary trend continued. In that context, the positive RIG achieved by the zone and increased market share in Q1 is a testament to the high quality of our people delivering in a difficult environment. Innovation, premiumization, continued to underpin growth. This is best demonstrated by Nescafé Dolce Gusto, the ongoing rollout of Papyrus, the range of innovative seasoned cooking papers, and Purina PetCare.
In Western Europe, the slow start to the year in France, in Germany, and in U.K., was a contrast to encouraging signs of recovery from Spain and Portugal. Greece, however, remained a challenge. Buitoni and Wagner frozen pizzas had double-digit growth in nearly all markets. Ambient culinary had a weak start to the year, especially in Germany, although innovations like Papyrus also continued to do well in that market. Confectionery had tough comparisons versus 2013, again, due to seasonal timing of sales, particularly in key Western European markets. Ice cream, on the other hand, had a good start to the year, particularly Mövenpick, with double-digit growth in both Germany and Switzerland. In Eastern Europe, the growth was driven primarily by Russia. Confectionery and ice cream were the two strongest performers. This is growth on growth, as we saw these two categories begin to gather momentum this time last year.
Soluble coffee and ambient culinary also contributed to Russia's performance. Across the zone, Nescafé Dolce Gusto continued to grow double digits with increases in machine market share. The growth in PetCare on the back of a strong performance last year was again driven by innovations and continued rollout of Felix, Purina ONE, and Cat Snacks. By market, PetCare had especially strong growth in Russia, Germany, Poland, Italy, and Spain. Overall, it was a tough first quarter in Europe, but innovation and rollout of new products were the major drivers. Our team has worked very hard to deliver. Next up is Zone Asia, Oceania, and Africa, which achieved RIG of 2.9% and organic growth of 5.3%, despite slower economies. A number of markets have seen currency devaluations, which resulted in us taking pricing action, Indonesia specifically.
While competitive intensity remain high across the Zone, we gain market share overall on our basket of products. In our emerging markets, the Philippines, Pakistan, Turkey, and Africa delivered double-digit growth. In other parts of the Zone, large markets such as China, India, and Malaysia, saw weaker trading conditions due in part to slower economies, lower consumer sentiment, and seasonal timings. Nonetheless, we saw market share gains in many of our categories. The developed markets in Zone AOA had a mixed start to the year, with Japan continuing to perform well. The trade pressure and slower economy in Oceania has affected our business there, especially after a good comparable start to last year. Taking a look from a category perspective, powdered and liquid beverages had a great start to the year. This is essentially our Milo brand.
Nescafé Dolce Gusto kept its growth momentum and ambient dairy, with our growing up milks such as Bear Brand having a strong quarter. Premium products showed good growth, and we continue to develop opportunities such as KitKat Bake in Japan. Oh, by the way, KitKat again achieved double-digit growth in Zone AOA. In short, AOA continues to offer great growth opportunities, but it's a competitive environment. We take nothing for granted. Looking at our globally managed businesses, let's start first with Nestlé Waters. We saw a pickup in demand for bottled water in general in both Europe and North America. In Europe, this was due to the very mild winter. In the U.S., it is more a factor of consumers switching to healthier hydration. There also may have been some stockpiling of water due to the bad weather there.
Overall, though, the RIG was positive across all regions. We continue to grow double digits in emerging markets. Specifically in North America, where competition remains intense, the growth was driven by both our international sparkling waters, S.Pellegrino and Perrier, and by all of our regional spring waters, all of which were positive for RIG and organic growth. This would be Deer Park, Arrowhead, and Ozarka being the highlights. Looking at our European waters business, market share gains delivered positive growth in a highly competitive environment. Buxton continued to be a great performer in the U.K. Both Contrex and Vittel had strong performance in France. Our emerging markets, which represent around 20% of our sales in waters, accelerated. China, Turkey, and Egypt were particularly strong. Nestlé Pure Life, as well as local brands like Erikli in Turkey, were the key drivers.
Overall, these numbers reflect our ongoing investment in our leading brands. Next up, Nestlé Nutrition. Nestlé Nutrition achieved good growth in the first quarter, but at a slower rate in the context of tough comparisons. The drivers were infant formula and cereals. Meals and drinks were soft, as the category is more exposed to developed markets. Emerging markets were the key driver of the first quarter growth, notably China with double-digit RIG and the Middle East. The premium and super premium offerings such as NAN and illuma delivered outstanding growth. In fact, NAN achieved double-digit growth globally in the first quarter, helped by continued success with recent innovations, including our new Easy Scoop packaging. In infant nutrition in the U.S., we took a strategic decision to compete more selectively on individual contracts, focusing on value generation and optimizing use of our assets.
Exiting some of these contracts has had an impact on the figures you see here. Our renovated packaging in Gerber cereals met with strong consumer demand, and that part of the category was a highlight. Overall, market shares continued to improve globally. Let us now take a look at what we call other in our reporting. This includes our Nestlé Professional business, Nespresso, and Nestlé Health Science. Together, they grew at 6.4%, the main contributor being RIG. For Professional, the operating environment continued to be difficult. In Western Europe, the out-of-home segment is still under a lot of pressure, as quite simply, people are just not eating out. Something that was not there last year was also the extreme weather in North America. This is obviously having an impact on dining and consumption habits, on top of subdued consumer sentiment.
On the positive side, our business in South America continued to grow, although at a slower rate than last year. AOA delivered a good performance with a pickup in China. Overall, our solutions business delivered good growth both in beverages and desserts. Nespresso. Nespresso grew well in all markets. The global growth was supported by continued rollouts and a new machine, Inissia, as well as extension of the permanent range of Grand Cru coffees with a new lungo offering. We also introduced a limited edition Colombian terroir to celebrate the expansion of Nespresso into the Colombian market. On that note, we continued our geographic expansion with new boutiques around the world. In the U.S., we are very excited with the launch of VertuoLine, a revolutionary new system for long cup and short cup coffees, tapping into the significant opportunity of the portion coffee market in North America.
It is very early days, but so far, we're very encouraged by the market reaction. Nestlé Health Science. Nestlé Health Science grew in all regions and businesses, despite continued pressure on public healthcare budgets. Key brands that drove the global growth included Boost, Nutren Senior, Peptamen, and Alfamino. In summary, our other category continues to make its valuable contribution to group performance. On this slide, you see the breakdown of our products. As usual, we won't spend much time here, as I don't want to repeat my zone reviews. In powdered and liquid beverages, you've already heard that both Nespresso and Nescafé Dolce Gusto did well. I'm happy to report that Nescafé Soluble accelerated and contributed to the growth as well. Milk products and ice cream has seen a slight RIG deceleration, but there has been more pricing taken on the back of currencies as well as commodities.
This especially the case in Zone AOA. To repeat, we had excellent growth in the value-added milks. It is clear that growth in prepared dishes and cooking aids declined in the quarter. I've outlined by zone the reason why, particularly given the challenging frozen category in the U.S. Bottom line is we have very strong brands, and we will continue to drive innovation. Where we have done this successfully, we have seen the benefits. In confectionery, the overall performance of the first quarter suffered from the timing of festivities, most notably Easter, and to some extent, the Chinese New Year. We expect comparable growth to come back in the course of the year, with an element of increased pricing due to both currencies and commodities. As I've already outlined by zone, pet care had another good quarter.
There was a slightly lower pricing contribution following the increase of prices last year related to input costs. This, ladies and gentlemen, wraps up our business review. Before we move on to questions, let me summarize our Q1 performance. We have delivered a solid organic growth in what was a tough trading environment. Both developed and emerging markets posted positive performances. This results position us well for the remainder of the year. This is why we describe ourselves as an AND company. It is testament to the women, the men we have in our markets around the world that we grew in both developed and emerging markets. You have heard both Paul Bulcke and myself on our full year webcast and subsequent roadshows reiterate our strategic direction through the Nestlé Roadmap.
Just as a reminder, these are our four growth drivers, our four strategic pillars, and our four competitive advantages. They are as relevant now as they've ever been. The roadmap drives alignment across an organization of over 300,000 people. It ensures that we have the investment behind the right products, right brands, and geographies to deliver profitable growth from PPP to premium. We believe our Q1 performance represents a solid start to the year, and it provides us a base to confirm our outlook for 2014. Performance weighted to the second half, outperforming the market with organic growth around 5% and improvements in margins, underlying EPS in constant currencies, and capital efficiency. Thank you very much for listening. Let's now open up the phones for questions.
Thanks, Wan Ling. If you want to join the queue for questions, please press star one on your phone, and if you want to withdraw your question for any reason, please press star followed by two. Now, the first question comes from Jon Cox of Kepler. Go ahead please, Jon.
Yeah. Good morning, Wan Ling. I hope all is well. I have just a question on the emerging market slowdown, and you specifically allude to, obviously India, China, and Eastern Europe. Can you give a bit more granularity on that? I'm wondering how much is seasonal and how much do you think there is something of a reemergence of a slowdown going on, given the fact we saw an acceleration in emerging markets towards the tail end of last year, now we seem to have decelerated by 250 basis points or so. Just a second question for you, given the fact that we're starting to see commodity inflation, I'll put it to you, do you think you'll start to see some more positive pricing towards the end of the year, just on the back of what's happening in the commodity space? Thanks very much.
Thank you, John. I hope you're well too. Yes, emerging markets, like I said, represent 45% of our sales in Q1. There are different dynamics going on. Clearly, currency devaluation in some of our emerging markets. Second, in China, for instance, it has slowed down. If you look at the comparison against last year, China started to slow down as we progressed in 2013. If you look at our growth rate in China for this year, the comparison should become easier for the balance of the year. That's one dynamic that will also help us for the balance of 2014. The good thing is with China and India slowing down, like I said in my presentation earlier, we're seeing markets in Africa, markets in Middle East.
Even in Latin America, Brazil continues to do well and continues to grow very well across almost all categories in Brazil. Russia did really well in Q1. Clearly Eastern Europe, markets like Ukraine and Poland, they were tougher in Q1. Many different dynamics going on in emerging market. Our expectation is that emerging markets should continue to do okay. In terms of your second question, which is commodity costs, and the implication in terms of pricing, we have guided, and we're not changing our guidance from a commodity cost perspective. It still should be in the low single digit, but it will be higher than 2013. We should see some pricing impact going into H2 of this year. We should see a positive impact in terms of that. Again, as you know, we do not guide on pricing.
Pricing is something taken locally. I've always said this, and Paul has echoed the same sentiment. Nestlé, when we see commodity price increases, we are never in a hurry to pass that along to our consumers. Our first line of defense always is, you've heard our NCE, which is Nestlé Continuous Excellence. We do everything we can to try to offset that from an efficiency standpoint. The times that we pass on pricing is where we see innovation and new product launches. No. Clearly there's also deflationary pressure in developed markets, especially in Europe. We do, generally speaking, with commodities going up in H2, we do expect some pricing pickup for the balance of the year.
Okay. Can I just follow up on the developing world or the emerging world question? You think maybe Q1 was the worst of it in terms of that figure, which is still a decent figure, by the way, and you expect that to sort of slowly get better as we go through the year?
Yeah. It's, again, many dynamics going on in emerging market. Like I said, the comparison in China, that should become easier for the balance of the year. Big markets like Russia and Brazil, we continue to be very encouraged by that. We'll see. We're encouraged by Q1, so we'll see.
Okay. Thank you so much.
Emerging market is always volatile, so I hate to make a definitive statement. Suffice it to say, we're encouraged by what we've seen in Q1.
Thanks. The next question is from Warren Ackerman of Société Générale. Go ahead, Warren.
Good morning, Wan Ling. It's Warren Ackerman here at Société Générale. A couple of questions. First one is on the Americas region, 4.1% OG and 0.9% on the RIG. I was just wondering whether you can maybe split it for us between North America and Latin America. Just trying to get a feel for, was North American RIG positive in the quarter? Was LatAm pricing double-digit? Just a bit more granularity as to the two very different dynamics in the region. I'm trying to get a feel for whether you think the U.S. is actually really turning a corner fundamentally. Secondly, on Europe, organic growth -0.8%. We've got a situation now where Southern Europe is improving, which is obviously nice, but now Northern Europe is slowing. Just wondering why you think U.K., France, Germany has had a tough start.
If you look at the U.K., the economic data looks pretty decent at the moment. I'm a bit surprised that some of these markets are quite so weak. Russia is holding up so far, but Eastern Europe is weakening. Is that going to continue in Russia? Just trying to get a sense of whether you think organic growth in Europe overall will actually be positive this year, given it started the quarter negative in OG terms. Thank you.
Hi, Warren. I hope you're well.
Hi.
Let me just give you some color in terms of North and South America. North America RIG and OG were subdued, and it's impacted by both late Easter as well as weather issues. In frozen food, I've touched on that. We've gone through the categories, both.
Sure
Lean Cuisine, for us, Hot Pockets acceleration and pet care. The thing is, I was just in visiting North America with Chris Johnson and Patrice Bula a few weeks ago. If we talk about frozen as a category, it's very encouraging that it's not a structural issue that we are facing. We're very encouraged by all the innovations that we have in the pipeline that should be launched sooner than later. In terms of Latin America, we did see a slowdown. As I touch on that, it was late Easter, Brazil being a big confectionery business, the biggest in fact for us. Latin America, good organic growth, driven by pricing, but slowing a bit compared to last year. The overall performance was clearly impacted by slow economies. Brazil had good growth. Mexico was partly impacted by the newly enacted fiscal legislation.
Pet care continues to be really strong. Again, it's different dynamics in both North and South Americas. In terms of Europe-
North American RIG and OG were actually maybe slightly negative in the first quarter for the Easter and the frozen food reasons.
It was subdued. It was subdued for North America. In terms of Zone Europe, its RIG slowdown was impacted obviously by late Easter, a big chunk of it. You touch on the big markets like France, Germany, U.K. Confectionery business, it's big in those big markets.
Clearly, that plays Easter shift plays a big role, but even ambient culinary, to some extent, was also impacted by late Easter. By region, the slower performance, U.K., Germany, France. In the developed parts of Europe, Switzerland, Austria was strong from a product category. I already said confectionery was slow. Culinary was off to a weak start. Pet care, good growth. Nescafé Dolce Gusto, great growth. Pizza driven by Germany, France, Spain, Italy, and even ice cream was helped by good weather after a weak prior year, Mövenpick being a really strong performance. Southern Europe was improving. I talked about the two driven by Iberian region and Italy. Spain benefited from strong growth in Nescafé Dolce Gusto and good growth in chocolate, actually, thanks to Kit Kat tablets. Italy, strong growth in Nescafé Dolce Gusto, in pizza, Bella Napoli improved.
Greece remains challenging, and we saw market share gains also in Spain and Portugal. That should give you some color in terms of Europe.
Okay.
In terms of the balance of the year.
That's great. Thank you very much. Cheers.
Thank you. Cheers.
Thanks. Next question from Eileen Khoo of Morgan Stanley. Go ahead, please, Eileen.
Good morning, Wan Ling. It's Eileen Khoo here at Morgan Stanley. Hope you're well. Two questions from me. The first one is on nutrition. It was encouraging to see commentary around optimizing the use of your assets. I was wondering if you could give us a bit more color on these contracts that you entered in the U.S. and what the impact on growth was in Q1 for this business. In nutrition, and then secondly, in waters, I think you mentioned the impact of stockpiling. Would you be able to quantify or give us a bit more color on that impact and what you expect to be a more sustainable level of growth in waters going forward? Thanks very much.
Good morning, Eileen. I hope you're well. In terms of nutrition, I talked about the slowdown in Q1 was partly because of a tough comparison against last year. In the U.S. specifically, we walked away from what we call WIC contracts in the U.S. We had, I think, three states where we walked away from that WIC contract, trying to be strategic about it and making sure that growth is profitable. That affected our nutrition, infant nutrition business in the U.S. In terms of water, my comment about possibly also there's parts of stockpiling in the U.S. I don't have specific numbers in terms of how that dynamic impacted first quarter sales number for our U.S. water business, but I'm sure that played a part. In general, in the U.S., it's a fact that consumers are shifting to healthier alternatives instead of Yeah.
Just to follow up, in that case, in the first quarter, water's break was 8.1%, which you say that should be sort of reversed to an extent in the second quarter. With nutrition as well, it's 6.4% like-for-like. Is that the run rate for the rest of the year as well?
Yeah. We don't.
At least beating.
Yeah. We don't guide by business for the balance of the year. We just guide by the group that it's around 5%. But, yeah.
Okay.
Yeah. Nutrition, a lot of the dynamics because of the comparison against 2013 also.
Okay. Thanks so much.
Thank you.
Thanks. The next question in the queue is from Jeremy Fialko of Redburn. Go ahead please, Jeremy.
Hi. Morning. It's Jeremy Fialko with Redburn here. Two questions. First one is on pricing in emerging markets. Can you talk a little bit about the elasticities you're experiencing there when you put price rises through? You gave the example of Indonesia as somewhere you put quite a lot of price rises through. What sort of volume reaction you're seeing as you put those price rises through? Perhaps whether the consumer is more sensitive to price rises now versus what they were maybe six months or a year ago. The second question is just focusing on your China baby food market shares. Can you talk about that?
Has there been any change in the rate at which you've been taking market share, obviously with your competitor's recall, whether you can give us any sort of sense on whether you're not taking market share at the same sort of rate as you were towards the back end of last year? Thanks.
Good morning, Jeremy. In terms of pricing in emerging market, that very much depends on the specific market as well as the categories. If I talk about Brazil, for instance, even with inflation, our business in Brazil was able to take pricing in addition, on top of the inflation impact. Whereas in certain markets in Asia, for instance, the ability to price might not be as good. A lot depends on categories, a lot depends on market, and obviously, goes without saying, a lot depends on the competitive landscape. It's hard to make a general statement in terms of elasticity, in general. That's pricing in emerging markets. In terms of your second question, which is infant nutrition in China. Infant nutrition in China grew double digit in Q1. illuma specifically also had an excellent performance as well as NAN.
We continue to be very encouraged by our infant nutrition business in China, both in terms of growth and in terms of market share performance.
Thank you very much.
Thank you, Jeremy.
Thanks. Next question we have from Alain Oberhuber of MainFirst. Please go ahead, Alain.
Good morning, Wan Ling.
Good morning, Alain.
Question on the currency. The impact is higher than people were expecting. If we play it like that, constant currencies at the moment, what could be the impact at the current level of currencies? What could be the impact for the year on sales? If we take it from here, if we expect currencies to stay at these levels, what could be then the impact on margins for the year? The second question is about pricing development in Europe. Do you expect positive pricing in the second half, or will it be still subdued?
Thank you, Alain. In terms of currency, we obviously do not guide on what the impact of currency is going to be. Having said that, assuming currency stays at the same level that we've seen in Q1, the one thing that will be going for us is the comparison will be much easier for the balance of the year, assuming currency stays at the existing level in Q1. In terms of impact on margin, as you know, we reiterated our guidance for the year. We will improve margin on a constant currency basis, that has not changed. In terms of, I think your second question is pricing in Europe. Europe, no surprise to anybody, the environment continues to be very deflationary. Having said that, we should expect some ability to price, especially with commodity price increases in categories like coffee.
We should see some pickup in that category specifically.
Thank you very much.
Thank you.
Thanks. Next question from Patrik Schwendimann of Zürcher Kantonalbank. Go ahead, Patrik.
Patrik Schwendimann, Zürcher Kantonalbank. Good morning, Wan Ling. First, regarding your guidance for the full year, that you expect organic growth acceleration in H2. Just as a best guess, I know it's now April, but just as a best guess, would you say it's again possible to have an organic growth of over 5% then in H2? My second question is regarding the confectionery business, which was negative at the organic level of 0.5%. It's clearly because of the late Easter, but what would you say was the growth on a normalized level, excluding Easter? What shall we expect here for H1, just to have an idea? Thank you.
Yeah. Thank you. In terms of organic growth, our guidance is for the full year around 5% and second half weighted. That, we're just reiterating that. In terms of the confectionery business, we do expect organic growth recovery and there will be pricing, that should come back in the second half.
Overall, also in H1 then, a growth of several percent?
Yeah. We're not, again-
For the confectionery business.
Again, we don't want to go into specifics of H1 versus H2. Again, it's full year guidance, H2 weighted.
Okay, thanks.
Thanks very much. Next question from John Revill of The Wall Street Journal. Go ahead please, John.
Good morning, Wan Ling. Like everybody else, a couple of questions. I just wondered, with regards to Europe, you said that France, Germany, and U.K. had a slower start to the year. Can you just give us a bit more color on that? Are you talking about a sales decline there or just slightly slower growth? When do you see Europe, Northern Europe market like that picking up? That's my first point. Secondly, with regards to the U.S. Obviously, the U.S. market's been hit by the winter, but also been other problems with frozen. I was wondering, when do you see that picking up? A little bit more on what's happening out in the U.S., please.
Good morning, John. In terms of Zone Europe, I touched on this earlier. The three big developed markets, U.K., slow confectionery, that's because we have a big confectionery business in the U.K., that's clearly affected by the timing of Easter. The shift in Easter affected Germany, U.K., and France. Germany, in addition to confectionery, also had a slow start in terms of culinary. France is, again, it's confectionery. In terms of the U.S., we have to be clear. When we talk about Zone Americas, we've got the U.S. business. When we talk about U.S. in general, that's U.S., what we call Nestlé in the market. Which is not just our food and beverage, but also Waters, Nutrition, Professional, Nespresso. On a U.S. in general, we had positive RIG and organic growth.
We've got 40 segments. It's a mixed bag. Some segments doing better than others. Some market shares are up, some shares are flat to down, very much a big bag. Look, some businesses are doing really well, and some we know we have room to improve. Back to my comment earlier, it's very encouraging if you go back to where we have challenges, it's to see the improvements that are being done and the kinds of innovation that are in the pipeline.
Right. Okay. Going back to France, Germany, and U.K., are their sales actually down or just slower growth?
We do not give a specific OG in terms of our business markets. Nice try, John.
Thank you. Next question is from Jean-Philippe Bertschy of Vontobel. Go ahead please, Jean-Philippe.
Good morning, Wan Ling. I hope you're well. I have a question with regards to Galderma. Can you share with us the performance in the first quarter?
Hi. Good morning, Jean-Philippe. I hope you're well too. At this point, the transaction has not closed yet. Typically, when the transaction closes, obviously we will report Galderma as part of our results. Prior to that, Galderma is reported in our associate line. We do not report sales or profit separately. Jean-Philippe, you'll just have to wait until we close the transaction.
All right.
I'll make sure that we highlight Galderma for you.
Thanks a lot.
Thanks. Now we come to the last question, which is from Celine Pannuti of JP Morgan. Go ahead please, Celine.
Yes, good morning, everybody. Just two quick follow-ups. The first one, in your statement, you said that growth will be around the same as last year. Sorry, you said around 5%. In full-year results, you said it would be around the same level as 2013, which you have not reiterated this time. Could you just say whether you still see that, or you rather only stick to around 5%? That's my first question. Second, in terms of, you said the outlook on top line will be H2 weighted. Is it something of the same for margin expansion? Will there be a difference H1 versus H2? The reason I'm asking that is that you've been talking about pricing rather than accelerating in the second half, while you're also talking about raw material increase. I just wonder whether that could have an impact on the delivery of margin. Thank you.
Yeah. I want to make sure I understand your second question, but let me answer your first one. Your question about growth being around 5%. Yeah, that is our guidance for the full year. I think you touched on 2013.
Yes.
I think we said that the condition is much like 2013. Our guidance in terms of organic growth is definitely around 5%, that has not changed. I think I want to make sure I understand your second question. Are you asking about the second half weighting for
Yeah, it's margin. I want to know if margin will be second half weighted. The rationale behind that is you're talking about pricing accelerating through H2, so I'm wondering whether because of raw material inflation, you'll see more of H2 margin delivery versus H1.
Yeah. Celine, our year will be second half weighted, from a performance standpoint, whether you look at top line or bottom line. It's growth driven. It's a whole host of factors. I touched on China comparison being easier as we go through the second year, commodity pricing picking up, so we should be able to take some pricing. There's some innovation launches that will pick up steam. We talked about, even just to give you some specifics, for instance, like Waggin' Train, the limited reintroduction in Q1. That should continue to roll out. It's really a whole host of factors as we see the year progresses. Definitely H2-driven for the year. Clearly still around 5% is our guidance.
Right. Just maybe one follow-up since you just mentioned it. If you think that China see easier comps, I'm not too sure if there's any specific that you can pinpoint that give us some comfort that there is, I don't know, maybe inventory was low and that is an easy comp. If I look at the AOA, it has been around the 5%-6% level now for several quarters, and we still do not see an acceleration on easy comps. I just want to understand whether there is something more specific in China.
No. China's slowdown in Q1 was a few things. The timing of Chinese New Year, as you know, Chinese New Year this year is quite early. I talked about difficult comps. China in general has slowed down. It's widely known that China as a country, as a market, has slowed down. Nothing beyond those broad reasons. The good thing about China that's important for us is we continue to gain market share across many of the categories, and that's the one thing that's important, regardless of sort of the macroeconomic situation that's happening.
All right. Thank you so much.
Thank you, Celine Pannuti. Peter, I want to make sure that we answered all the questions from our investor community, and I'm getting the signal that we have, that there's no more question in the queue. Okay.
No more question.
No more question. Okay. Well, thank you. Thank you for the questions. We believe that this solid first quarter is a great base on which we will deliver our outlook for the year. We look forward to engaging with many of you at the Nestlé Investor Seminar to be held in Boston. Just as a reminder, on June 3rd and 4th. Until then, goodbye and thank you. Stay well.