Nestle CEO 'upbeat but with realism' on China

CNBC.com with Reuters
Pricing was soft in 2015: Nestle CEO

Food group Nestle said it expected softer pricing and growth in line with last year in 2016 after full-year organic growth of 4.2 percent came in just below market expectations.

"We saw growth basically based on volume growth which is really what matters," said Nestle CEO Paul Bulcke, in a CNBC interview on Thursday.

"Last year, we had a soft pricing if you see that versus the last year's; our organic growth was basically built on volume growth. Soft pricing because of low increase in raw material prices and that's where it is, hence our margins continue increasing without the need for pricing," Bulcke told CNBC.

Nestle's net profit fell more than expected last year, by over a third, to 9.1 billion Swiss francs ($9.2 billion). The stock was down 3.3 percent in mid-morning trade.

Like its peers, Nestle has had to deal with slower growth and more demanding consumers in emerging markets, notably China, while sales in India have been dented by a Maggi noodle recall.

However, Bulcke told CNBC the company remains confident on China.

"In China, we have got used to a double-digit growth, [but] China is growing slower, but it's growing on a much bigger number to start with. It is also growing more and more based on consumption, local consumption, and that is where we connect as a company so I am upbeat for growth in China with a certain sense of realism," Bulcke said CNBC.

"We have invested heavily in the last years. The Chinese consumer is changing very fast also in his expectations so we have to play our strong portfolio of local brands and international brands and play into these expectations," he added.

Nestle has raised its dividend as expected to 2.25 francs per share, but did not propose a new share buyback program.

"We have, in spite of the strong Swiss franc, increased dividend payment and that is to honor long-term investors and that's what we have given priority," Bulcke told CNBC.

Bulcke also said the company was in the process of negotiating a joint venture with the UK's R&R Ice-Cream company to increase its presence in the ice-cream market.

Chinese growth is slowing: Nestle CEO

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Reuters contributed to this report.