Nestle, the world's biggest food company, has reported a slowdown in underlying sales growth due to pricing pressures. But as Axel Threlfall reports, it expects an improvement over the rest of the year with coffee a key battleground.
Nestle says sales growth and profits are down. The Swiss food giant makes everything from Kitkat bars to Nescafe coffee. It saw sales rise just 3.5 percent in the first half, below forecasts. Profits falling to just over four billion Swiss francs. Reuters consumer goods correspondent Martine Geller says the company faces challenges on every front: (SOUNDBITE) (English) REUTERS CONSUMER GOODS CORRESPONDENT, MARTINE GELLER, SAYING: "Nestle overall faces a lot of pressures, like all consumer goods makers, from slowing economies around the world, and even more demanding consumers. Aside from that there are new competitors getting stronger. In particular, JAB Holdings has done nine coffee acquisitions in the last four years and now is becoming a huge competitor." Coffee now the key battleground for the company. Nescafe is the global market leader for instant, while Nespresso created the market for coffee capsules. And Nestle hopes innovation will help it catch up in the US market, where it lags local rivals: (SOUNDBITE) (English) REUTERS CONSUMER GOODS CORRESPONDENT, MARTINE GELLER, SAYING: "It's been trying to increase its presence there through this Vertuoline machine. Whereas Nespresso makes espresso drinks that are small, Americans tend to drink longer cups. Vertuoline makes bigger cups of coffee for American drinkers. So far it's going very well." Nestle far from alone in battling headwinds. Rival Kraft Heinz reporting a drop in sales earlier this month. Like the Swiss firm, it's grappling with governments and consumers who want to cut salt, sugar and fat consumption. That's forcing food firms to reformulate many of their products. Nestle is betting that pricey coffee could be the way forward.