Nestlé records 3.5% organic growth in first nine-months of 2020

Image courtesy: Fortune

SWITZERLAND – Nestlé has announced that its buoyant sales in e-commerce sales, convenience foods and health ingredients contributed to organic growth of 3.5 percent in the first nine-months of this year. Total reported sales decreased by 9.4 percent to CHF 61.9 billion (US$68.4 billion), reports the Swiss food giant.

Nestlé said the pandemic has increased consumers’ health consciousness, boosting its small but fast-growing health-sciences unit and contributing to better-than-expected overall sales at the world’s largest packaged-food maker.

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Regional performance

Nestlé’s performance in North America maintained a 5.1% organic growth rate, with strong real internal growth (RIG) in most product categories. As the largest growth contributor, Purina PetCare sustained momentum in e-commerce and premium brands.

The beverages category posted double-digit growth, with strong demand for Starbucks at-home products, Coffee mate and Nescafé. Frozen food reported high single-digit growth, supported by DiGiorno and Stouffer’s.

Lean Cuisine returned to positive growth in the third quarter, supported by innovations and the successful launch of Life Cuisine.

Home-baking products, including Toll House and Carnation, grew at a strong double-digit rate. Water reported a sales decrease. Growth recovered to almost flat in the third quarter, led by S.Pellegrino and Perrier. Nestlé Professional saw negative growth, with some improvement in the third quarter.

Latin America reached high single-digit growth, with broad-based contributions across geographies and most product categories. Most brands contributed strongly, particularly Ninho, NAN and Nescafé. Notably, Brazil saw double-digit growth, Chile continued to see high single-digit growth, Mexico reached mid single-digit growth in the third quarter.

Growth in confectionery turned positive, with strong sales development in Brazil and Chile in the third quarter. Nestlé Professional saw negative growth. The decline in sales was more limited in the third quarter, particularly for food products.

In Zone Asia, Oceania and sub-Saharan Africa (AOA), China saw negative growth, turning positive in the third quarter. Coffee, culinary and ice cream all delivered positive growth, with sequential quarterly improvements. Infant cereals and Purina PetCare both grew at a double-digit rate. Nestlé Professional reported a sales decrease, with growth recovering to almost flat in the third quarter.

Japan saw a decline in sales, with some improvement in the third quarter. KitKat sales declined in Japan, impacted by a reduction of inbound tourists. India posted strong mid single-digit growth, with good momentum in Maggi, Nescafé and KitKat.

In Southeast Asia, sales in the Philippines grew at a double-digit rate, with elevated consumer demand for Bear Brand, Milo and Maggi. Indonesia delivered high single-digit growth, led by Bear Brand, Dancow and Milo.

Sales in the Philippines grew at a double-digit rate, with elevated consumer demand for Bear Brand, Milo and Maggi. Indonesia delivered high single-digit growth, led by Bear Brand, Dancow and Milo. South Asia continued to perform well.

Oceania reported strong growth across most product categories, particularly in coffee and confectionery. Sub-Saharan Africa grew at a double-digit rate, with strong growth across most markets.

Zone Europe, Middle-East and North Africa (EMENA) reported mid-single-digit growth in the third quarter. Each region posted positive growth, with strong momentum in Russia, the United Kingdom and France. The Zone saw continued broad-based market share gains, particularly in coffee and Purina PetCare, as well as vegetarian and plant-based food products.

By product category, coffee, Purina PetCare and culinary products grew at a double-digit rate. Coffee was supported by strong momentum for Nescafé and Starbucks products. Russia saw increased sales momentum, with NAN gaining market leadership.

Growth in confectionery was almost flat, turning positive in the third quarter based on strong sales development in France and the United Kingdom. Water and Nestlé Professional reported negative growth, with declines moderating in the third quarter.

“Strong organic growth was broad-based and supported by sustained momentum in the Americas, Purina PetCare and Nestlé Health Science, as well as the acceleration of our coffee business in the third quarter,” highlights Mark Schneider, CEO.

“We continue to develop our portfolio with speed and discipline. As an example, we are transforming Nestlé Health Science into a nutrition and health powerhouse through a combination of strong organic growth and targeted acquisitions,” he adds.

“The recent additions of Zenpep, Vital Proteins and Aimmune Therapeutics are further steps in the expansion of our nutritional health offerings.”

As a knock-on effect of COVID-19, the multinational saw bolstered demand in e-commerce consumption. Online sales hit growth of 47.6 percent, accounting for 12.3 percent of total group sales.

While demand for health products was boosted by COVID-19, confectionery and water categories posted sales decreases, reflecting reduced out-of-home purchases and on-the-go consumption.

Pet care boom and dairy growth

By product category, the largest contributor to Nestlé’s growth was Purina PetCare and its premium brands Purina Pro Plan, Purina ONE and Felix.

The company’s dairy category grew at a high single-digit rate, based on increased demand for fortified milks and home-baking products.

Coffee posted mid single-digit growth, fueled by strong consumer demand for Starbucks products, Nespresso and Nescafé.

Coffee posted mid single-digit growth, fueled by strong consumer demand for Starbucks products, Nespresso and Nescafé. Prepared dishes and cooking aids reached mid single-digit growth.

Vegetarian and plant-based food products delivered strong double-digit growth, supported by new product launches and continued distribution expansion.

Nestlé Health Science posted double-digit growth, reflecting increased consumer demand for products that support health and the immune system.

Meanwhile, confectionery and water categories reported a sales decrease due to their high exposure to out-of-home channels, with some improvement in the third quarter.

Portfolio management

Nestlé details that its strategic reviews for parts of the Waters business in North America, the Yinlu peanut milk and canned rice porridge businesses in China are fully on track. Both reviews are expected to be completed in early 2021.

In other notable highlights, Nestlé completed the acquisition of a majority stake in collagen products brand Vital Proteins, in July. In September, Nestlé closed the acquisition of IM HealthScience, which specializes in medical foods and dietary supplements.

Divestitures decreased sales by 5.5 percent, largely related to the divestment of the company’s US ice cream business.

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