Nestlé supply chain plan helps save £964m

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Big savings in the supply chain helped Nestlé increase profit margins by 30 basis points to 13.4 per cent in continuing operations last year.

The group’s annual results show that the Nestlé Continuous Excellence programme produced savings of £964m (CHF1.5bn). This programme focuses on the cost of goods sold, distribution and administrative costs

Group distribution costs fell by 20 basis points. “This is another area of focus of efficiencies, particularly in our more distribution intensive businesses such as Nestlé Waters and ice cream. These savings are pursued as part of our ongoing drive for continuous improvement in both our financial and our environmental performance,” it said. Administrative costs fell by 70 basis points.

The cost of goods sold fell by 40 basis points. It said: “Our savings, procurement strategy and leverage from growth more than compensated the cost pressures during the year, which increased in the second half. Our efficiency and effectiveness also contributed to an improved environmental performance in areas such as energy, water and packaging usage.”

Group sales of £70.5bn (CHF 109.7bn) rose 6.2 per cent while net profit was £22bn (CHF 34.2bn), up from £6.7bn (CHF10.4bn).

Group chief executive Paul Bulcke said: “In 2010, we delivered another year of strong top and bottom line growth, outperforming the market. We increased investment in our brands, our operations and our people. We continued to drive efficiency and effectiveness in both developed and emerging markets while at the same time accelerating innovation, serving well over a billion consumers a day across the world.

“We are starting 2011 with continued momentum, well placed to face uncertainties ahead, including volatile raw material prices. We are therefore confident of achieving the Nestlé Model in 2011: organic growth between five per cent and six per cent and an EBIT margin improvement in constant currencies.”

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