Good morning. Welcome to the Nestlé first quarter sales conference call. I am Roddy Child-Villiers, Head of Investor Relations, and I'll take you through the details today. First, though, I'd like to remind you that the call is being recorded. I will now take the safe harbor statement as read and move to the group numbers and outlook. The sales were CHF 21.9 billion, up 5.4%. This is similar to the level of growth of 5.6% reported in the first quarter of 2012. The organic growth was 4.3%, achieved on the tough 2012 comparative of 7.2%. Real internal growth was 2.3%. Pricing was 2%, considerably down from last year, reflecting the rather different raw material cost environment. Acquisitions net of divestitures added 2% due to the inclusion of Wyeth Nutrition.
Wyeth is not in our organic growth, but its inclusion within the group means that the emerging markets now represent about 45% of sales. Foreign exchange was negative 0.9%. The first quarter of the year has been characterized by volatility, and I will touch on this as I go through my presentation. Looking beyond the first quarter volatility to our expectations for the rest of the year, we expect our growth to be weighted to the second half of the year, and the same is likely true of our margin. For the full year, we expect to deliver the Nestlé model with an improvement in the margin and in underlying earnings per share in constant currencies and in our capital efficiency, and with organic growth likely coming in at the lower end of our 5%-6% guidance.
The consensus on organic growth is 5.5%, clearly, our guidance is confirming what a number of you are already expecting. The next slide shows our performance by region for total Nestlé, including our globally managed businesses, and I will start with an overview of trading conditions. The emerging markets have slowed down since the first quarter of last year, and there's volatility in Asia and the Middle East. They continue to provide opportunities for good growth. The environment in Latin America has also slowed somewhat in recent months, but remains buoyant. The North American market has picked up a little recently, but it continues to be sluggish. Europe continues to be characterized by the growing impact of austerity programs, the worsening crisis in Southern Europe, food price deflation, weak consumer sentiment, and reduced consumer spending on food.
Our performance is consistent with previous periods in that we have grown in all three regions of the world. I'll now go through the numbers in detail, beginning with Zone Americas. North America continued with the trend seen in 2012, reporting positive real internal growth and pricing. I'll start with frozen food. The pizza market returned to growth in the first quarter, and we saw good growth in DiGiorno, helped by a strong start from the Pizzeria launch. Stouffer's and Hot Pockets both gained share. Sales of Lean Cuisine fell in the quarter, impacted by continued weakness in the diet category, increased competition, and promotional activity. More positive for Lean Cuisine is the early performance of the launch of Salad Additions. Ice cream also had volume growth helped by the Häagen-Dazs Gelato launch in the super premium segment. Nescafé continues to perform well, particularly Clásico.
Coffee mate also achieved share gains. Coffee-mate powder and Natural Bliss remained a highlight. Confectionery had a very strong start to the year. Skinny Cow performed well, and the launch of Butterfinger Bliss king size pack looks like being a success. The pet care market has been very competitive, but we grew overall and had a strong market share performance in CAT. Turning to Latin America, we saw high pricing due to currency-related inflation. Both Brazil and Mexico continued to grow. KitKat performed well in Brazil one year after its launch. Ambient culinary and ambient dairy were highlights in Latin America, contributing to a generally good performance across the region. Pet care was outstanding, continuing to grow double-digit. Next is Zone Europe. The zone continued to deliver growth in Western Europe. It has also seen accelerated growth in Central and Eastern Europe.
I'll start with a few general comments on the environment and the particular volatilities in the quarter. There is intense competition between the players in traditional retail and between them and the alternative channels and new channels such as e-commerce. This has led to tough negotiations in the quarter between them and us. Aspects of volatility include the number of trading days, the industry horse meat scandal, and our voluntary pizza recall. The weather was generally poor, including over Easter when the ice cream season would normally start with the placement of freezers in the impulse channel. All in all, a challenging environment for the zone, but one in which it has performed well, as reflected by both its positive organic growth and its market share performance in many categories. In Eastern Europe, we had a good start to the year following our reorganization in Russia last year.
Let's now look at the zone business in more detail. Ambient culinary had a slow start, but should see improving momentum through the year following customer relistings in March in Germany. The frozen business was negative for the quarter, and we do not expect to see positive growth this year. Chilled culinary also had a slow start. Soluble coffee continued to be a key growth driver. The Nescafé Dolce Gusto system, the premium freeze-dried Nescafé, and the refill packs are all doing well. There are strong performances in the big British and Russian markets, among others. Confectionery also had a good start to the year, with the Russian business continuing to pick up momentum. France and Germany also performed well. Ice cream had a slow start to the year, generally, in contrast to 2012, with Southern Europe particularly weak. Russia, on the other hand, was a highlight.
One innovation in ice cream was the launch of cones under the Mövenpick brand, helping that brand to start the year well. Pet care had a strong start to the year across the zone, including double-digit growth in the emerging markets due to the continuing impact of our successful innovation and to the expansion of our presence in specialist retailers. Next is Zone Asia, Oceania and Africa. First, a general comment. Our market share performance is mixed by country, as you would expect, but our market shares are up as a whole at the zone level. In view of our level of growth, this supports my earlier statement that the trading environment in the emerging markets has slowed, even if we still have double-digit growth in some countries, including China.
The most immediate impact of the slowdown has been on our downstream distributors, who have found themselves with too much stock. This stock needs to be dispersed before their order levels with us normalize. A further issue for us has been the destruction of our factory in Syria, which was a supplier for several categories across the Middle East. The Middle East is an important region for the zone. We have put in place our business continuity plan for that region. The developed markets had a good start to the year. Japan continued to perform well, and Oceania picked up momentum after a slow 2012. Let's have a look at the categories. Ambient culinary, Maggi, had a slow start to the year due to some short-term supply disruption in Central West Africa region, Maggi's biggest market in the zone.
It was also impacted by the loss of our factory in Syria. More positively, culinary continued to grow double digits in China and India and performed well generally. Ambient dairy had a strong start generally, with good performances in China, including from Yinlu, and in Indonesia and parts of Africa. There are challenges for dairy in the zone, though, including in the Middle East and the Philippines. Globally, we have had real momentum in the dairy business, and this applies in Latin America too. Our innovation, delivering enhanced nutritional benefits and supported by compelling communication, touches the whole range from kids offerings to adult nutrition solutions and is clearly resonating with consumers. You will be aware that the global milk price has been on the rise. There is a risk that this will impact demand amongst lower-income consumers in the coming quarters. Back to Zone AOA.
The soluble coffee market has been competitive, particularly in the mixes business. Nescafé Dolce Gusto performed very well. Amongst other beverages, the ready-to-drink are growing double digit, and powdered also are growing, but slightly less fast. Ice cream had a very strong start to the year. Particular highlights included China, Egypt, and Israel. A note of caution here, as the lack of foreign exchange in Egypt is likely to impact our growth as it will be difficult to import raw materials. Confectionery started the year well with strong performance in South Asia and China, even if the Chinese New Year celebrations were more subdued than normal. Hsu Fu Chi performed well. Nestlé Waters is next. You might remember that Nestlé Waters had a very strong start to 2012. Well, not so in 2013.
The weather has been poor in Europe and North America, where we have 80% of our sales. The situation in both regions has been extremely competitive. More positively, we have continued to achieve double-digit growth in emerging markets. In North America, we grew marginally despite the tough comparative of near double-digit growth in 2012 and despite increased price competition in 2013. The regional waters were most under pressure, whilst Nestlé Pure Life continued to perform well. Just to put my earlier comment on the weather in context, in March 2012, six U.S. states had snow on the ground. In March 2013, 26 had snow. The North American market as a whole is continuing to grow around mid-single-digits, and our international brands are performing well. I have already discussed the environment in Europe in my zone comment.
Nestlé Waters saw sharply increased promotional activity there from its main competitor, in contrast to our efforts to improve profitability. The sparkling portfolio is performing well in Europe, particularly Perrier, in its 150th anniversary year, and we continue to see good growth in the U.K. Next, Nestlé Nutrition. Infant Nutrition has started the year strongly with double-digit growth and broad spread share gains. The business grew in all three regions and was double digit in AoA and Latin America, as well as Russia, with infant formula a highlight. There was good growth, too, in North America. Infant formula had a strong start there due to the innovations launched late in 2012, whilst in meals and drinks, Gerber Graduates and Gerber Organic pouches also performed well. Meals and drinks also had a good start to the year in France and Russia.
The infant cereal business continued to grow double digit as the three key innovations were further rolled out. The innovations are around immune protection and incorporating the appeal of yogurt into infant cereals. The consistent themes in infant nutrition are a high level of innovation and renovation, strong, appropriate communication, and a good pace of geographic rollouts. Infant formula was a particular highlight, as I said, with double-digit growth in many countries, such as China, the U.S.A., India, Russia, and Indonesia. This growth was driven very predominantly by rig with only a little price. Performance Nutrition started the year under competitive pressure, including an increased presence of private labels. Weight management experienced a further erosion of visitors to its centers and saw a decline in sales. We are not expecting an immediate improvement. Next is other. Nestlé Professional is the biggest business within the segment.
The business had a strong performance in 2012, as you might remember, with high single-digit growth. The first quarter of 2013 has been rather slower. Growth is still positive. Importantly, the two areas of strategic focus, the Beverage Systems and Solutions business and Food Solutions, have held up well. Beverage Solutions, in particular, with continued double-digit organic growth. The trading environment has been impacted by food safety concerns and quality issues and by austerity programs in Europe and Asia. Performance in the Americas and AoA has, however, remained good. Nespresso has started the year with growth in all regions, despite having a lower intensity of launches than in 2012, as well as increased competition. The quarter was marked by limited edition capsules celebrating the different coffee cultures in Italy, as well as further boutique openings.
Nestlé Health Science had a slow start in terms of growth. Has seen good progress in terms of business development, closing the acquisition of Pamlab and getting approval for the Nutrition Science Partners joint venture. Next is the chart summarizing the categories. All are positive except Prepared Dishes and Cooking Aids. I think I've given a full account to their performance as I ran through the zones. I'm happy to discuss them further in the Q&A session. That concludes my presentation. It has been a challenging quarter in many ways, whether you look from a macro perspective, from the context of the tough 2012 comparative, at the volatility in parts of Africa and the Middle East, or if you just remember the weather and the headlines about food quality. For all that, we have delivered growth in all regions.
We will continue to manage the shorter term challenges while doing the right things to ensure long-term profitable growth. As we look beyond the challenges of Q1, we are confirming our full-year outlook for 2013 of delivering the Nestlé model with a possible second half weighting of both growth and margin improvement. That brings us to the end of the presentation. Let's now open up for questions. Over to you, operator. Thank you.
Ladies and gentlemen, your question and answer session will now begin. If you wish to ask a question, please key star 1 on your tone dial pad. If you change your mind and decide to withdraw your question, simply key star 2. All questions will be answered in the order received, and you will be advised when to ask your question. All other lines will remain on listen only. Please restrict yourself to two questions per person.
Okay. Shall we have the first question, please?
Thank you. Your first question is from Celine Pannuti from JPMorgan. You may now ask your question.
Yes, good morning. My two questions. First, the first one is on Asia. Early on this year, you were talking about normalization of growth to high single-digits in Asia. Do you think that's possible this year? Thanks for your explanation on that, could you give us a bit more color on why you say the trading environment has slowed? Where is that? Especially, could you give us a bit of color on what happened by countries? I understand that China is still double-digits. Oceania and Japan have picked up. Are we inferring that Southeast Asia is weaker and exactly which countries are doing badly? If you could as well help us understand where destocking is. Is it a country-specific issue, a category-specific issue? My second question is on the outlook.
I think earlier on in March, you talked about the impact from the leap year, which I assume would be 1% on Q1. That would mean the underlying trend is five-ish for Q1. Is that what we should be looking at for coming quarters or effectively there would be issues that will recur in the second quarter that you're already seeing in April? Thank you.
Many thanks, Celine. AOA, first of all. We have said that we expect the long-term growth in AOA to be around high single-digits. As you know, Q1 is a very tough comparative. Actually, Q2 is an even tougher comparative for AOA. The comparatives obviously ease off somewhat. We would certainly expect to see a good acceleration in AOA from where we are today. My one caveat on that is that clearly last year we had some quite considerable pricing, even if that also eased during the year. We don't have the same cost pressures in 2013, therefore, we may not have the same level of pricing contribution to our growth in '13. Certainly, we expect to see a pickup in RIG and a meaningfully higher level of organic growth than we are today. Where have we slowed?
We have slowed, if I talk about by region to start with Africa, first of all, South Africa has been quite weak, and I think you're aware that there have been some issues down there. I mentioned CWA, Central West Africa region. This is a region where we've been doing comfortable double-digit growth, we are in Q1 struggling for any growth. We think that will pick up a bit as the year goes on, though, as part of that relates to us changing some distribution networks in the region. Northwest Africa region has continued to perform well. If you look at the Middle East, I mentioned the loss of our Syrian factory. This was a major regional manufacturing center for us, we've clearly had to put in place continuity plans to replace the lost volumes, that's clearly not going to be an immediate recovery.
Middle East was actually growing around 20% last first quarter. This quarter, again, we have barely any growth at all. We expect that growth to pick up in the rest of the year as things improve. Asia, we had a slightly slow start in India relating somewhat to our chocolate business and bringing new manufacturing on stream. Philippines was very tough, very competitive. China, as I said, continues to perform double digit. It's growing well. I would say that there has been some slowdown even in China relative to the first quarter of last year. Where else? Indonesia has continued to perform very well. Indonesia seems to be maintaining its momentum. Indochina, on the other hand, rather weaker. I think that really covers off the whole of the zone. In terms of outlook, yes, obviously, the trading day has an impact on Q1.
As I mentioned earlier, there are lots of impacts in Q1. Some are positive, some are negative. We factored that into our guidance that we've given for the rest of the year. I hope that answers the question, Celine.
Yeah, thank you very much. Just one thing on the destocking. Was there any particular country that this happened? Was it what you mentioned in Africa, or was it as well in Asia you saw destocking, and which country was that?
No, it was not in Africa. In Africa, or in Central West Africa Region, the issue was more with our changing our distribution over. The destocking came in those markets where there's been a slowdown in consumer demand, and where the middlemen have effectively bought stock, assuming a similar level of consumer demand. Consumer demand has come off a bit. They're holding more stock than they would expect. They need to move that stock downstream before we start to resupply them with our usual levels of stock.
Thank you.
All right. Thanks, Celine. Next question, please.
Thank you for your question. Your next question is from Warren Ackerman from Société Générale. You may now ask your question.
Morning, Roddy. It's Warren here at SocGen.
Hi, Warren.
My question is just around the powdered and liquid beverage division grew 4.4% in the quarter. Usually, we expect that to be high single digit or maybe low double digit in a decent year. You talked a little bit on the call about more competition. I think you mentioned that in reference to Nespresso. I'm just wondering whether you can maybe just elaborate a bit more on what you're seeing, the quantum of price competition and whether you are able to give us an indication of, I know you don't give the specific numbers anymore on Nespresso, but an indication on the direction of growth and maybe where you are seeing more pressure. That's the first question. Then secondly, Roddy, just your comment about input costs.
Obviously, we are seeing skimmed milk powder prices up very significantly in recent months. You did say that that may have some impact on demand, particularly on Zone AOA, where milk powder is a big part of the portfolio in some countries. Wondering, maybe you can give us a bit more color as to how you see that playing out, what you expect to do in terms of your pricing strategy, and how big a drag might that be come the second half of the year. Thank you.
Thank you, Warren. Thanks very much. Okay. Powdered and liquid. First, this is a big category. It incorporates, obviously, the Nescafé coffee business-
Yeah
powdered business, such as Milo and Nesquik, the liquid business, and also Nespresso. I'll start with Nespresso. Yes, Nespresso had a slower start to this year than to last. I mentioned increased competition. That was a reference, you know about the competition generally in Europe. The difference between Q1 2013 and Q1 2012 is the introduction of competitor capsules in Migros in Switzerland, which is clearly a big market for Nespresso. Nespresso does expect, however, to pick up its growth during the course of the year and to deliver in line with the targets that we talked about in the past of around an incremental half a billion CHF of sales in 2013. Moving to Nescafé, there are two aspects, well, there are three aspects to the Nescafé business. Dolce Gusto. Dolce Gusto is continuing to perform very well, growing double digit. We have the out-of-home business.
We have seen a pretty marked slowdown in the legacy out-of-home business, which is the spoon and jar ingredient business. Albeit that we're still seeing good growth in the systems business and out-of-home as well, Nescafé Milano, Alegría, and such like. A slowdown in the big ingredient business out of home for Nescafé.
Retail Nescafé. I mentioned some highlights in my speech. Some challenges, too, quite competitive in Philippines as well as in a number of countries in Western Europe, where we had a relatively flat year in China. Sorry, flat start to the year in China. Interestingly, our market shares in China are at all-time highs, so we expect that probably to pick up again in the rest of the year. The liquid business is performing well. This is, for example, the Nescafé Smoovlatté business in China. It's Nesquik ready to drink in other markets. We've had a slightly slower start in the powdered beverages business. Also, of course, as a whole, this is a category that's got less pricing than it had last year.
Turning to milk, I think that one thing worth mentioning is that we have adapted our sourcing strategy since the last peak in the milk price three or four years ago, in that in those days, we were very weighted towards New Zealand in terms of our milk sourcing for AOA. In the years in between, we've increased our sourcing capabilities in Latin America, we now have a broader geographic source for AOA than we used to have. I think that is good news going into the current inflationary environment in milk. I think also you will start to see us taking some pricing, we're not concerned about this from a profit perspective. We've seen it in the past, and hence my note of caution.
When you do take pricing, you do tend to see some of the PPPs come under pressure in terms of volumes, and that was my note of caution.
Mm-hmm. Roddy, just to clarify, your comments on the call about the margin phasing being a bit more second-half weighted and maybe a bit low in the first half. Is that just purely an input cost reflection that the comps get easier in the second half? Or is it also an issue because the growth is a bit lower, you're going to have slightly lower operating leverage in the first half? Just wondering what's behind that comment.
Yeah, I think that the latter point about the leverage is really the key driver of the guidance.
Right. Okay.
All right.
Okay, thanks. Roddy, cheers.
Thanks a lot. Thanks so much. Next question, please.
Thank you for your question. Your next question is from Mr. Jon Cox from Kepler. You may now ask your question.
Good morning, Roddy. Jon Cox with Kepler. At the start of the call, you said that you expected sort of seem to be guiding organic sales growth at the lower end of the 5%-6% range. You said, but you're comfortable with consensus, which is 5.5%. I'm just trying to square the circle there. Secondly, just on this whole dividend issue announced with the AGM last week. I wonder if you could just give us a sort of, a bit of an update or sort of clarity on the company's thinking on that. It looked like Pieter Brabeck gave maybe a board view that the payout ratio should come down from where it has been towards 55%, from over 60%. If I can, just the last one on the whole horse meat issue.
You talk about frozen in Europe likely to be weaker or down this year. Is that really on the back of the whole horse meat issue? Maybe you can just give us some sort of granularity on that horse meat issue from Q1. Thank you.
Thanks, Jon. Thanks very much for your questions. On the guidance, first of all, what I said was that the consensus is 5.5%, and therefore clearly, for the consensus to be 5.5%, a number of you, the analysts, are already expecting us to have organic growth at the lower end of the 5%-6% range. That's below 5.5%. That's what I was saying. I didn't say I was happy with the consensus. I said that if the consensus is 5.5%, a number of you are already expecting us to have organic growth a little bit above 5%. On the dividend. First of all, my apologies for the mistranslation that happened on the instantaneous translation into English, which clearly confused a lot of people, including the wire services. We'll obviously do our best to ensure it doesn't happen again.
On the dividend policy, our intention is to have a sustainable dividend policy, such that we can continue, hopefully, to have a year-on-year improvement in the absolute Swiss franc payout. Which, of course, has been the case for more than 50 years. The ratio might come down, but each year the dividend will be proposed by the board in view of our results, our prospects, the external environment, and the relative competitiveness of our payout. Our focus is very much on increasing the absolute rather than running a specific ratio. Okay. Your third question was on frozen. Yes, the frozen business in Europe was down high single digit in Q1, relating both to the horse meat scandal, but also to our recall in pizza. You combine those two issues, we had a fairly big impact in Europe.
I think, again, all credit to Europe who are continuing to produce growth despite these issues. We have to be realistic, and in the case of pizza, the factory that was involved supplied all of Europe except France, and it's obviously taking time for us to rebuild the stocks in the retailers in Europe. In the case of the food quality issue, we have to accept that it's going to take time for consumers to rethink their purchasing decisions. We're not expecting to have positive growth in the full year. I should say also, by the way, that this impacted Nestlé Professional as well, the big Davigel frozen business that we have in Nestlé Professional. It's a fairly meaningful impact. Is that okay, Jon?
Great. Yeah. I want to just have a quick follow-up.
Yeah
On the infant nutrition.
Yep.
You talk about double-digit growth there in China. I'm just wondering about Wyeth. You talk about things going as expected. I'm just wondering, can you give us a bit of an indication of Wyeth in China? I guess that's growing very strongly. I guess that's included in the net M&A rather than organic sales, because you've only just started to integrate that.
Yes, exactly. Yeah, for sure. Infant formula in China has performed extremely well. If you look at the total infant formula business in China including Wyeth. Our total sales in China in Q1 in infant formula are bigger than our total sales for the full year last year in China in infant formula. The business has been significantly changed by the acquisition of Wyeth. When I talk organic growth, the organic growth in China in infant formula relates only to the legacy Nestlé business. The growth there is around mid double digit, and it is almost wholly volume-driven. We've also seen extremely strong growth from Wyeth as well. As I say, that is not included in the organic growth. Okay?
Great. Thank you.
Okay. Thanks, Jon. Next question please.
Thank you for your question. Our next question comes from Miss Aileen Koo of Morgan Stanley. You may now ask your question.
Morning, Roddy. Aileen Koo here, Morgan Stanley. Just a couple of follow-ups really from the earlier questions. The first one is on the destocking that you mentioned. Could you just tell us which particular countries you are seeing this issue in, and how long might you expect this to last? The second one is on nutrition. You actually just quantified that you said it's mid double digits. Does this therefore imply a really big weakness in the rest of the business, so performance, weight management? Was there some kind of impact there from discontinuation of some businesses, or was that just purely organic? Thanks very much.
Morning, Aileen. Thanks very much. No, to be clear, the mid double digit is on infant formula. Infant nutrition also includes infant cereals, the baby food business. It's a much bigger business than just infant formula. Infant nutrition, thus including the other businesses, also grew double digit. Having said that, yes, you're right, there's clearly a weak bit performance from the weight management business. The destocking touches the countries that I referenced earlier, where we've had a slowdown in growth. It's fairly broad across the zone.
Okay. How long would you expect this to last?
Well, hopefully it will resolve itself in the coming quarter. As I say, we still have a tough comp in that quarter, I wouldn't expect an immediate bounce back.
Okay. Just on the performance weight management, that was not because some of the businesses had been discontinued. For example, I think in the U.K., you've ended up the Jenny Craig business there. That wasn't what was driving that big weakness then?
No. The U.K. business was only started last year, I think, or even late the year before, but I think last year. It was tiny.
Okay.
It didn't really have any particular impact on the overall number. The weakness is very much North America.
Okay. Thanks.
Thanks, Aileen.
Thank you for your question. Your next question is from Mr. Alain Oberhuber from MainFirst. You may now ask your question.
Yes. Good morning, Roddy. Alain Oberhuber, MainFirst. Two questions. The first question is about Latin America, coming back again. Two questions specifically there. Latin America, did you see double-digit growth? Could you elaborate more on the development in Brazil? The second question is about Nestlé Health Science. Could you let us know what happened, why the growth was weak? Was it specifically because of Europe, or did you lose some tenders with your customers?
Thanks, Alain. Good morning. On Nestlé Health Science, the issues that are most relevant to the performance are the ongoing reimbursement situation in Southern Europe, and also, there's been a change in the competitive set for Carnation Breakfast Essentials in North America, with the entrance to the market of two branded players, Kellogg's and General Mills. That's clearly impacted, obviously, the shelf space availability. There are two particular issues for Nestlé Health Science. In terms of Brazil and Latin America, Latin American growth as a whole is heavily weighted towards price. This is also true for Brazil. We are seeing positive volume growth in Brazil, positive volume growth in Latin America. In fact, actually, the real internal growth in North America, Latin America is fundamentally about the same level, low single digit. You've got heavy pricing in Latin America.
You've got a little bit of pricing in North America. Brazil, more specifically, the big business is dairy is performing very well. Double digit growth, strong pricing. Biscuits, slightly weaker. Chocolate had a good Easter, so it performed well. Market share performance is pretty mixed. Is that the?
Okay. Thank you very much.
Has that answered the question?
Yeah. That's fine. Thank you.
Okay, great. Thanks. Next question, please.
Thank you for your question. Your next question is from Alan Erskine of UBS. You may now ask your question.
Hi. Good morning, Roddy.
Alan.
Yeah. I just wonder, doing a back of the envelope calculation and the difference between the Zone AOA and the geographical region. Would I be right in thinking that the sort of infant nutrition business in Zone AOA grew, you mentioned double digits, but maybe even beginning with a two. If that was the case, can you give us any color on what happened to infant nutrition in Europe? Because you implied the U.S. had a reasonable performance as well. Was infant nutrition negative in Europe? Thank you.
Thank you, Alan. I think from my back of the envelope, I think you'll find that infant nutrition is mid-teens in AoA. Water, of course, was also very strong in AoA. In Europe, infant nutrition, it was between 4% and 5% positive organic growth in Europe. It performed well really everywhere.
Okay. Thank you.
Okay, thanks. Next question, please.
Thank you for your question. Your next question comes from Mr. Jeremy Fialko of Redburn. You may now ask your question.
Jeremy.
Morning, Roddy. Jeremy at Redburn here. A couple of things. First of all, on this de-stocking point, I know you've touched on it already, but can you tell us how much visibility have you got on your distributor's inventory so that you'll kind of know when they are back at what you would term as sort of a normal level? The second question is on Southern Europe. I know it's a very difficult market, but would you say it's kind of stable but difficult at the moment, or have you seen a further deterioration there during the first quarter? Thank you.
Yeah. Thanks, Jeremy. I don't really know what I can add to my previous de-stocking comment. It'll take as long as it takes for the consumer demand to exhaust the existing stocks. As I say, I think we'll see a little bit of benefit in the current quarter, but we have tough comps. Hopefully things will be normalized for the rest of the year. On Southern Europe, if we're talking specifically about Portugal, Italy, Greece, and Spain. Greece, we were about flat. For the picture as a whole, we were down about 5% in the first quarter, so a worse performance than you're used to from us. I would highlight here again the frozen food issues I mentioned, the pizza issues I mentioned, and of course, the ice cream performance with the poor weather. Is that okay, Jeremy?
Okay. Thanks. You'd look for that 5% not to be repeated in subsequent quarters?
Well, it's clearly very difficult. I said that the frozen business issue is not going away.
We'll see.
Okay, thanks.
Again, I think it's a credit to the team that they're delivering growth in Europe despite these issues. A flat performance in Greece is, I think, outstanding in this environment.
Thanks.
Thank you for your question. Your next question is from Mr. Patrik Schwendimann of ZKB. You may now ask your question.
Patrik Schwendimann, Zürcher Kantonalbank. Good morning, Roddy.
Hi, Patrik.
I have two questions regarding your outlook. You were mentioning that you see some strong momentum in key emerging markets. Which emerging markets do you mean here? That's my first question. Secondly, you were mentioning in your outlook that you're seeing some progress in the North American business. What was the organic growth in quarter one in the U.S. maybe compared to last year? Also, what do you expect here for the U.S. for the full year? Do you see an acceleration in growth, and why? Thank you.
Thanks, Patrik, very much. On the outlook, the emerging markets, I think we would hope to see, as I say, a pickup in the Middle East as our continuity plans pick up momentum. We would hope to see a recovery or a pickup in CWAR as our distribution comes on stream. I think those are the two big swing factors, if you will. On the U.S., we had positive organic growth, as I said. We're not expecting any particular acceleration in the U.S. It's positive. Our share gain performance is improving. The environment remains tough. I think we're expecting, in our guidance, a similar level of performance as in Q1.
Positive means really low single digits?
Yes.
Okay. Thank you, Roddy.
As I said, it's positive both for RIG and for price as well in North America.
Thanks.
Thanks, Patrik.
Your next question is from Mr. Robert Waldschmidt of Merrill Lynch. You may now ask your question.
Morning, Roddy. A couple questions, if I may. Coming on to Europe again, you've mentioned France is seeing some slowdown. Is it still in positive territory, and how do you see the shape of France trending over the upcoming quarters? Then two, when you speak about ice cream and the impacts we have from weather, can you speak more specifically about the U.S., in particular, where we know the market environment's been pretty competitive and perhaps is a bit less impacted by weather and what's going on there? Thank you.
Thanks, Robert. France as a whole was slightly positive. The impact, I think the big issue in Q1 was that we had some quite tough negotiations with retailers. They've been resolved. Hopefully things will pick up a bit following those negotiations for the rest of the year. In U.S., I think the environment is tough. In water, we're clearly seeing price competition from the private label players. Frozen, the issue I think for frozen now is really Lean Cuisine. The rest of the business has picked up pace. The whole diet segment is really struggling. Lean Cuisine has lost share. Ice cream, actually, there's a bit of a change in the trend there. We're seeing some share gain in premium, where last year we'd been losing share. We need to get the momentum into the super premium, hence the gelato launch. That's going well.
We still think we have a competitive advantage in terms of the snacks channel with our cones business and the other activities we're doing there. On soluble coffee, there's clearly been a change in the competitive set with the entry of a new branded player. I think that's been good for the segment. We are looking at our communication strategy around Nescafé to see how we can continue to benefit from the growth in that category. I think those are the key categories. Nutrition, I talked about earlier on. Infant nutrition doing very well, and that covers really Infant Formula doing well, and the baby food business also doing well. Then, of course, the other business is Purina. As you know, we've had a number of years of very strong market share performance in North America.
We've seen the inevitable sort of fight back by the competitors, and that's brought shares under pressure in dog. We have plans in place to redress the balance. In cat, we are still gaining share, and in fact had nearly double-digit growth in cat in North America. That's a sort of a more detailed review of the U.S. business. Does that address the question, Robert?
Yes. Thank you very much.
All right. Many thanks.
Okay.
Thank you for your question. Your next question is from Mr. Jeff Stent of Exane. You may now ask your question.
Good morning, Roddy. Just a quick one. You said when talking about Chinese infant milk formula that this legacy Nestlé business grew around mid double digit, and you achieved share gains. Can I take it then that your view of the market is that the Chinese IMF market grew at less than mid double digit in Q1? Thanks.
I guess so. We grew share.
Some peers have been making some pretty lofty comments in terms of sales growth in China.
Yeah. I think mid double digit is quite lofty. I think the thing to appreciate is that we are present in all segments of the market. We are seeing growth. Everybody talks about the super premium end, we are seeing growth in all the different categories, not just in the super premium. Yes, I think we're comfortable that the market is growing nicely, and we are growing faster.
Okay. Thank you.
Thanks.
Thank you for your question. Your next question is from Mr. David Hayes of Nomura. You may now ask your question.
Morning, Roddy. Hi. Just two quick follow-ups, I guess, effectively. Just on the AOA region, I think one of the things that end of last year you had an issue with was the Australian retailer negotiations. Just wondered whether we could clarify that that's all been resolved and you're fully restocked. Also, just on China New Year, clearly you said it was a less exuberant celebration this year, but just wondered whether there was some kind of benefit from the timing of the New Year, which we obviously saw impacting some others in the quarter. Secondly, on the prep dishes side, I know there've been a little bit of some plans generally to, I think, rationalize the portfolio maybe a little bit there in some areas, perhaps in the U.S. specifically.
I just wonder whether that was taking place, whether, again, there was a little bit of impact of that in the first quarter, whether that timing-wise means that recovers through the rest of the year. Thanks very much.
Thanks, David. Yeah, the Australia business grew in the first quarter, so I think we've resolved the issues, and hopefully we can continue to work constructively with the retailers. China New Year. Yeah. Clearly, the fact that we had one is a benefit. It wasn't, I think, as big a benefit as one might have hoped, but it was certainly a benefit. Prepared dishes. I don't think there's anything that's going on in terms of business reorganization above the normal. I wouldn't say there's any impact. Clearly, there are some sub-lines that have come out. There's new innovation coming in. There's nothing out of the normal going on, I don't think, David, in North America.
Okay, great. Thanks very much, Roddy.
Thanks, David.
Thank you for your question. Your next question is from [Vincent Trelut] of [Exotix]. You may now ask your question.
Good morning, Roddy. I have two questions regarding your business in the Central and West Africa Region. First of all, I would like a little bit more color on what's happening currently. You mentioned that Maggi, there was a bit of a slowdown in the uptake of Maggi, and you faces some challenges surrounding the reorganization of your distribution network. I was just wondering, when do you expect a pickup in the CWA region? The second question is regarding the possible impact inflationary pressure of milk is having on that region. My understanding is that milk is mainly sourced locally. Is that the case? If not, would you be able to give us a little bit more color on the impact on that region? Thank you.
Yes, certainly. Thank you very much. In Central and West Africa Region, CWAR, the two issues are related. The reason that Maggi is struggling in CWAR in the first quarter is because of the reorganization of the distribution in the region. The two are the same issue, effectively. As I say, we would hope to see that pick up in the current quarter and then thereafter. In milk, it's not entirely correct to say that most milk is sourced locally. We have spent many years building milk districts in a range of countries. However, we still source a lot of milk from New Zealand. Fonterra is the biggest supplier of milk in the world. There are two different dynamics. You have the global milk price on the one hand, then you have local milk prices on the other. The two are not entirely disconnected.
The rate of change and the trends can be a bit different, they are connected. As I also said, what we've been doing over the last few years is increasing our own milk sourcing capabilities, particularly in Latin America, and this has reduced our exposure to that global milk price and to New Zealand. Does that answer the question?
Yes. Thank you.
Okay. Thank you very much. I think there's one more question.
There are no more questions in the queue.
No more questions. Okay. Well, many thanks for your questions. My team and I are looking forward to seeing many of you in our coming roadshows. Thank you very much for your interest in Nestlé, and goodbye.