VEVEY, Switzerland - Nestle , the world's biggest food group, expects higher sales growth this year after beating 2009 forecasts through strong growth in North America and developing markets helped by lower commodity prices.

The maker of Nescafe coffee, Gerber baby food and Perrier water topped estimates with 4.1 percent growth in underlying sales last year, ahead of rivals Unilever and Danone and a forecast of 3.9 percent.

Nestle, which has seen roaring demand for its Nespresso coffee brand, now expects higher growth in 2010 from its core food and beverage business compared to 3.9 percent growth in 2009 and a rise in 2010 operating or EBIT margins.

For 2010, I expect our food and beverage business to achieve higher organic growth than in 2009 and a further EBIT margin increase in constant currencies, said Chief Executive Paul Bulcke in a results statement.

The Swiss group is focusing on its core food and drink business which sells KitKat chocolate bars, Buitoni sauces and Carnation Milk after agreeing to sell off its remaining stake in U.S.-based eyecare group Alcon last month.

Bulcke was upbeat on prospects for a recovery after seeing a clear end to the economic downturn. I feel the fire is out but we still have to put our house in order. There are many things to be done still, he told a results news conference.

Nestle shares were up 2.7 percent at 52.85 Swiss francs by 1145 GMT, outperforming a 1.1 percent rise in the DJ Stoxx European food and beverage.

After a slower start to 2009, Nestle's operating performance picked up steam in H2....which certainly bodes well for H1 2010, said analyst Andrew Wood at Sanford Bernstein.

The Swiss group was boosted by strong growth from its coffees like Dolce Gusto and Green Blend, and petfoods such as Friskies and Purina, while seeing strong growth across developing markets in Latin America, Asia and Africa.

The company is well positioned especially in the emerging markets as soon as economic growth accelerates again, said analyst Patrick Hasenbohler at brokers Sarasin.

Bulcke added, We are increasing our intenseness in the emerging markets. We have seen the emerging markets growing definitely faster... than the average growth rate. We have to increase our capacity there.


Nestle has plenty of firepower with $28 billion from the sale of its final stake in Alcon agreed last month, but Bulcke gave no hint on possible acquisition targets.

It is not just a question of putting money aside. I do believe we have this flexibility, he said.

The Swiss group swallowed up Kraft's North American pizza business for $3.7 billion in January, a deal which helped Kraft sweeten its successful bid for Cadbury , but a number of potential acquisitions have complications like anti-trust issues with baby food group Mead Johnson and the Hershey Trust's control of chocolate maker Hershey .

Nestle emphasized its current preference for share buyback saying that once its 25 billion franc program was completed in the middle of 2010, it would launch a further 10 billion franc buyback to help soak up the Alcon cash.

Bulcke saw less need to push up prices due to commodity price pressure despite current supply problems for cocoa from the Ivory Coast, the world's largest producer.

We do see in the world of today not a lot of upside for price increase, he said. The environment is just not there to translate them (input price increases) to the consumer.

Group net profit was 10.4 billion Swiss francs in 2009, ahead of forecasts for 10.3 billion, while it will pay a 2009 dividend of 1.60 francs ($1.48) per share, up 14.3 percent.

Finance Director James Singh said the group had a strong fourth quarter with underlying sales up 5.3 percent, and even its slowest growing European region was showing positive momentum going into 2010, while he committed the group to the Nestle model of 5-6 percent annual growth in the long-term.

Analysts are forecasting Nestle's growth will accelerate to around 4.6 percent in 2010 while operating margins, which rose 0.3 percentage points in 2009 to 14.6 percent, will see a similar rise 0.3 point in 2010. (Additional reporting by David Jones) (Editing by Will Waterman and Jason Neely)