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Nestle Shrugs Off Low Spain Demand as Danone Cuts Forecast

Nestle SA (NESN), the world’s biggest foodmaker, hasn’t been affected by Spanish consumers’ switch to private labels, a trend that the world’s biggest yogurt maker, Danone SA, said was to blame for its reduced margin forecast.

“The switch to cheaper brands has been an issue that’s been around for awhile and which has already peaked for us,” Jose Lopez, the company’s head of operations, said in an interview in Rio de Janeiro. Vevey, Switzerland-based Nestle has a diversified portfolio in Spain ranging from coffee to pet food, which helps it offset potential drops in demand for certain products, he said.

Danone expects its operating margin to fall by 0.5 percentage point in 2012 as Spanish consumers choose less expensive goods as the unemployment rate soars to 25 percent, the Paris-based company said today in a statement. Danone (BN) is also facing rising raw material costs, such as milk.

While raw material prices are expected to continue to climb in the medium- to long-term, driven by increased global demand, “we see volatility increasing too,” Nestle’s Lopez said.

Complications in certain European markets are offset by company growth in China, he said.

To contact the reporter on this story: Rodrigo Orihuela in Rio de Janeiro at rorihuela@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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