Bernstein: Nestle’s Most Concerning Market is U.S., Losing Share

* Nestle’s most concerning market is the U.S., its biggest at 26% of sales, Bernstein writes; Nielsen data suggests U.S. sales vols., mkt shr growth becoming weaker in 2011-12 (marketperform).

* Bernstein: Nestle U.S. sales vols. have dropped for 3 straight periods, 1H 2012 -2%, acc. to Nielsen data

* U.S. mkt shr most concerning; has lost shr in almost every period in past 3 yrs and has recently gotten worse

* Has lost shr in most categories to both private label, other branded cos.

* Nestle’s U.S. sales weakness not as dramatic as Danone in Spain, U.S. is 3X bigger for Nestle than Spain for Danone

* Discussions with Nestle suggest 2 explanations: less promotional activity, cutting the number of brands in the mkt

* Nestle U.S. sales growth may become negative in 2Q-4Q; volume slowdown may put margin pressure on Zone Americas

* Next catalyst: 2Q results on Aug. 9

* Blue Phoenix Financials: On 3 Aug 2012, Nestle traded at a record price of 61 swiss franc per share. We are not focusing on Nestle's growth in the US and the US market certainly wasn't a major contributor to to Nestle's expansion and success globally. Nestle India reported a 15% rise in 2Q net profit to 246 crore rupees, up from 213.83 crore rupees in 2011, driven mainly by volume growth. The baby food and formula market in India has witnessed a CAGR of 4.18% between 2006 and 2011. Baby food forms the largest segment and accounts for 50.52% of the total retail sales of the baby food and formula segment of which Nestle is a leader. Nestle Nigeria's 2Q rose 52% from a year earlier. 2Q net income climbed to 9.85 billion naira from 6.49 billion and 2Q revenue rose 27% to 56.7 bilion naira. Nestle Nigeria's 1H 2012 pretax profit rose 24% to 11.52 billion naira ($72 million) from 9.27 billion naira in 1H 2011. 1H 2012 revenue rose 56.68 billion naira from 44.62 billion naira in 1H 2011. In the US, market analysts expect high growth for organic baby foods over the next five years. Recently, Nestle Health Science, a subsidiary of Nestle, has acquired a stake in a privately held company called Accera which makes a food powder that is marketed to aid Alzheimer's patients. This deal marks Nestle's first foray into products that promote brain health. Nestle plans to invest about $500 million over the next 10 years to produce more food and drink products with health benefits. Nestle Health Science is focused on gastrointestinal, metabolic and brain health. Alzheimer's, which affects memory and cognitive function, is the most common adult form of dementia and affects 5 million in the US alone. Euromonitor: The health and wellness market is expected to grow to $691 billion a year by 2015 from $600 billion in 2010. Nestle is benefitting from the global demand for safe haven assets amid the European crisis. Nestle recently sold $500 million euros ($600 million) of bonds due in July 2019 at a yield of 1.56% which is lower than the 1.58% yield for French govt seven year bonds. The Euro crisis is beneficial for Nestle as Investors snap up bonds of companies outside the periphery of Spain, Italy and Greece. In April 2012, Nestle acquired Pfizer Nutrition from pharmaceutical giant Pfizer for $11.85 billion in cash. This acquisition enhances Nestle's position in global infant nutrition. Pfizer Nutrition generated sales of approximately $2.2 billion and EBITDA of about $500 million in 2011. 85% of Pfizer Nutrition's sales comes from emerging markets including China and Africa with large, high growth populations. Nestle aim's to leverage Pfizer's R&D capabilities and aims to achieve total cost synergies of $160 million within three to four years. The Pfizer Nutrition acquisition is expected to increase Nestle's baby food sales of infant formula to $7 billion a year from $5 billion. Buy Range: 52-55 swiss francs. Target: 65 swiss francs