Vontobel has modified its valuation model for Swiss consumer goods titles, shifting away from a primary focus on volume growth, known as Real Internal Growth or RIG. According to Arben Hasanaj of Vontobel, the previous fixation on volume often triggered high stock volatility during corporate results announcements when companies beat or missed volume targets. While volume remains relevant, prices are rarely sustainable growth drivers and often just pass through inflation temporarily, meaning volume is only one factor in achieving ultimate value creation. Consequently, the analyst proposes a four-pillar evaluation matrix comprising demand quality, margin development, cash conversion, and capital allocation.
Following this framework update, Vontobel has adjusted several ratings and price targets across the sector. The bank confirmed Buy ratings for Aryzta, Givaudan, and Nestlé, while upgrading Emmi to Buy from Hold and downgrading DSM-Firmenich to Hold from Buy. Givaudan remains top-tier in margins and cash conversion, though it must address its lagging Taste & Wellbeing segment, with third-quarter sales results expected next week. Givaudan's price target remains unchanged at 4,100 Swiss francs. For Nestlé, the analyst notes the company is moving in the right direction, but operational restructuring will take time. Nestlé's price target is kept at 90 Swiss francs.
Aryzta's execution deserves greater recognition, and a free cash flow yield of 12 percent more than prices in growth issues and problems in Germany. Overall investor sentiment has been shaken by a lack of visibility and subdued growth, but this appears more than reflected in the valuation. Growth headwinds are expected to persist initially before stabilizing in the second half of 2026. For Aryzta, earnings before interest, taxes, depreciation, and amortization along with free cash flow should hold up, easing investor concerns, with restructuring announcements in Germany viewed as the next catalyst. The price target for Aryzta was reduced to 65 Swiss francs from 70 Swiss francs.
Emmi showed the most pronounced impact from the new matrix, being categorized as a solid, underestimated volume story with upside potential regarding medium-term ambitions. Consequently, Vontobel lifted Emmi's rating to Buy from Hold and increased its price target to 1,100 Swiss francs from 900 Swiss francs. Emmi's volume growth has recovered to above 2.5 percent for the years 2024 through 2026 following the 2022 and 2023 inflation shock, aided by innovations and consumer interest in protein and other dairy nutritional benefits. Given its premium positioning and growing growth platforms, the 10 percent return on invested capital target appears to act as a floor rather than a ceiling over the medium term. Meanwhile, the downgrade of DSM-Firmenich follows a share price increase of more than 40 percent since its initial Buy recommendation in June. Further re-rating is expected to occur gradually, supported by steady margin and cash generation alongside shareholder returns, while its price target remains unchanged at 102 Swiss francs.
