Nestlé raises full year guidance following strongest first half growth in a decade
SWITZERLAND – World’s largest food manufacturing company Nestlé is upbeat about the remainder of the year following an impressive run in the first half of 2021.
In the recently released financial results, Nestlé reported an organic growth of 8.1% – the company’s highest in over a decade – as consumers doubled down on new buying habits acquired during the pandemic.
According to a statement from Nestle, the company’s growth was supported by continued momentum in retail sales, a return to growth in out-of-home channels, increased pricing, and market share gains.
Total reported sales increased by 1.5% to CHF 41.8 billion (US$46 billion) while the company managed to maintain its underlying trading operating profit (UTOP) margin at the 17.4% which was achieved a year prior.
By product category, Coffee emerged as the largest contributor to organic growth, fueled by strong demand for the three main brands Nescafé, Nespresso, and Starbucks.
Starbucks products posted 16.7% growth, with sales reaching CHF 1.4 billion (US$1.54 billion) across 79 markets while Nespresso sales were up 14.6 percent on an organic basis to CHF3.6 billion (US$3.96 billion).
A strong performance from Nestlé’s health science division was also a key driver of revenue. The division registered organic sales growth of 13.6 percent with sales of CHF1.9 billion as demand for vitamins and immunity-boosting supplements from customers worldwide remained high.
Petcare and confectionery, which have also benefited from the pandemic’s impact on consumer habits, also reported double-digit sales growth, Nestlé said.
Impressed by its H1 results, Nestlé said it was raising its full-year guidance on organic sales growth — a measure that strips out the impact of acquisitions, divestitures and currency movements — to 5-6 percent from 3.6 percent.
Analysts were impressed by Nestlé’s growth figures and noted that the company appeared better placed than others in the consumer sector to manage rising prices. “While we don’t expect this magnitude of growth to be sustained, it is impressive,” noted James Edwardes Jones at RBC in a note to clients.
“Nestlé continues to deliver thanks to strong product offering and favourable mix,” Jean-Philippe Bertschy, an analyst at Vontobel said adding that FY21 guidance is not a surprise, as some Nestlé’s competitors had already warned of significant cost inflation.
Nestlé’s financial results come after the company announced that it had extended its partnership with Starbucks which will see the food manufacturing giant bring Starbuck’s ready-to-drink coffee beverages to select markets across South-East Asia, Oceania and Latin America.
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