Nestlé organic growth jumps 7.6% buoyed by higher commodity prices

SWITZERLAND – Swiss food manufacturing giant Nestlé is upbeat about its full year sales performance after an impressive 9-month run where organic sales jumped 7.6%, beating estimates by analysts. 

Nestlé attributed the growth to continued momentum in retail sales, steady recovery of out-of-home channels, increased pricing, and market share gains. 

Growth for the food company was broad-based across most geographies and categories with the developed markets delivering an organic growth of 7.1% and emerging markets posting a growth of 8.3%.  

“We are pleased with Nestlé’s strong organic growth in the nine months, driven by broad-based contributions from most geographies and categories,” said Nestlé CEO Mark Schneider. 

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“The relentless focus of our teams on local execution and agility enabled us to navigate input cost inflation and supply chain constraints.” 

By product category, the largest contributor to organic growth was coffee, fueled by strong momentum for the three main brands Nescafé, Nespresso and Starbucks. Starbucks products posted 15.5% growth, with sales reaching CHF 2.2 billion (US$2.4 billion) across 79 markets.  

Purina PetCare saw double-digit growth, led by science-based and premium brands Purina Pro Plan, Fancy Feast, and Purina ONE, as well as veterinary products.   

Channel wise, E-commerce continued its upward growth trajectory, posting a 17.2% increase reaching 14.1% of total Group sales with strong momentum in most categories, particularly coffee, Purina PetCare and culinary. 

Retail sales remained resilient with a growth of 6.6% while Organic growth in out-of-home channels registered a 22.8% growth, helped by the further easing of movement restrictions in some geographies. 

Regionally, Zone Americas posted an impressive 8.4% organic growth with the Latin America’s double-digit growth helping raise the mid-single-digit growth reported by the supply-chain constrained North American division. 

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Zone Europe, Middle East and North Africa reported a 7.2% growth driven by product innovation and continued strong momentum in e-commerce and specialist channels. 

Zone Asia, Oceania and sub-Saharan Africa (AOA), on the other hand, managed an organic growth of 4.1% despite a difficult economic environment with regional lockdowns. 

Following an impressive 9-month, Nestlé is upbeat about the rest of the year and has updated its full-year guidance for 2021 to between 6% and 7%.  

“The underlying trading operating profit margin is expected around 17.5%, reflecting initial time delays between input cost inflation and pricing, as well as the one-off integration costs related to the acquisition of The Bountiful Company’s core brands,” Nestle said.  

Like its peers, Nestle is grappling with supply chain constraints as the world economy roars out of a COVID-19 slump. 

The maker of KitKat bars and Nescafe will increase prices further in the final quarter and in 2022 when input costs are expected to increase even more than the 4% rise seen in 2021, Chief Financial Officer Francois-Xavier Roger told investors. 

Its rivals are set to follow. Procter & Gamble, has said it will raise prices in the United States and Danone has warned of price pressures next year, adding to a global inflationary threat testing the resolve of central banks. 

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