As Nestlé put a brave face on underwhelming first half results that fell far below market expectations, its Jenny Craig weight management brand was singled out as being one of its worst performing.
Pricing issues, the global recession and stiff competition from global category leader Weight Watchers have all hit the brand hard.
Although no specific sales figures were released by the Swiss food giant, in 2010 the business was estimated to be worth in excess of €400m.
“We have put in place a Jenny Craig turnaround plan,” said chief financial officer, Wan Ling Martello, in a call with investors. “The Jenny Craig business this year and last year was very much below our expectations. We are dealing with it.”
Jenny Craig has been withdrawn in the UK after just a couple of years there and its only remaining European outpost remains a small operation in France. Sales were also slow in its key US and Australian markets.
“The dynamics you are seeing are similar between Jenny Craig and Lean Cuisine,” Martello said. “We have closed down our UK operations.”
She also said Jenny Craig weight loss centres were being restructured.
Nestlé head of investor relations, Roddy Child-Villiers, added of the European Jenny Craig situation: “We don’t really have a big European business – Jenny Craig when we bought it was basically a US and Australian business. We have a small operation in France and that continues.”
Nestle H1 results
Nestlé Nutrition contracted “60 percentage points” Martello said in her formal H1 presentation, “with weight management continuing to contract” and the division affected by the 2012 Wyeth infant nutrition deal.
Nestlé cut its growth target from 5-6% for the full year to ‘around 5%’ after cutting prices in Europe failed to generate as much revenue as it had hoped from cash-strapped consumers.
Martello said even the revised target would be a challenge to achieve in a conference call with investors: “It’s not going to be easy. It’s going to be a stretch.”
The company reported a 3.7% increase in net profit during the first half, to CHF5.1bn, while sales rose 5.3% to CHF45.2bn.
Organic sales growth was 4.1% in the quarter, missing analyst expectations of 4.6% growth, according to a Reuters poll. Second quarter organic growth had also slowed from the first quarter’s 4.3% growth.
The strongest growth came from the Americas, Asia, Oceania and Africa at around 5% with European growth below 1%.