Nestlé weathers Covid-19 effects to achieve the highest level of growth in five years

SWITZERLAND – Swiss food manufacturing giant Nestlé thrived during the Covid-19 period, posting the highest level of growth in five years.  

Nestlé in its full year results of 2020 reported that its organic growth reached 3.6% supported by strong momentum in the Americas, Purina PetCare and Nestlé Health Science

The company however noted that divestitures, had a negative impact of 4.6% and as result, total reported sales decreased by 8.9% to CHF 84.3 billion (about US$94.04 million).

Zone EMENA records its best organic growth in five years

Regionally, Zone Americas reported the highest growth at 4.8% while Zone Asia, Oceania and sub-Saharan Africa (AOA) at O.5% growth was the least performing region.

Despite the dismal overall performance of AOA, sales in Sub-Saharan Africa grew at a double-digit rate, reflecting strong sales development across most countries and categories

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Zone Europe, Middle East and North Africa (EMENA) reported a growth of 2.9%, its best organic growth in the last five years.

Other businesses comprising of Nespresso and Nestlé Health Science reported the best growth, posting an organic growth of 7%.

Nespresso sales reached CHF 5.9 billion (US$6.68 billion), with organic growth accelerating to 7.0%, the highest level in the last six years while Nestlé Health Science reported sales of CHF 3.3 billion (US$3.68 billion), with organic growth accelerating to 12.2%.

“2020 was a year of hardship for so many, yet I am inspired by the way it has brought all of us closer together. Looking to 2021, we expect continued improvement in organic growth, profitability and capital efficiency in line with our value creation model.”

Mark Schneider, Nestlé CEO

Purina PetCare outperforms other product categories

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

Sales in Nestlé Health Science grew at a double-digit rate, reflecting higher demand for products that support health and the immune system.

Dairy  also saw high single-digit growth while coffee reported mid-single-digit growth, boosted by strong consumer demand for Starbucks products, Nespresso and Nescafé.

Sales of Starbucks products reached CHF 2.7 billion (about US$3.01 billion), generating incremental sales of over CHF 400 million (about US$446 million) in 2020.

Underlying trading operating profit decreased by 8.3% to CHF 14.9 billion (US$16.62 billion) while the company’s net profit decreased by 3.0% to CHF 12.2 billion (US$13.61 billion).

Acquisitions and Divestures

During the year, Nestlé completed acquisitions and divestments with a total value of around CHF 8.4 billion (US$9.37 billion).

Nestlé divested the Yinlu peanut milk and canned rice porridge businesses in China and agreed to sell its regional spring water brands, purified water business and beverage delivery service in the U.S. and Canada.

The Swiss company also completed the acquisition of Lily’s Kitchen, Freshly, and UK meal delivery service Mindful Chef.

Additionally, it repurchased CHF 6.8 billion (US$7.59 billion) of Nestlé shares as part of the three-year CHF 20 billion (US$22.31 billion) share buyback program that began in January 2020.

Mid-term outlook

Nestlé projects in the medium term, a sustained mid-single-digit organic sales growth, continued moderate underlying trading operating profit margin improvement, and a continued prudent capital allocation and capital efficiency improvement.

Mark Schneider, Nestlé CEO, commented:”2020 was a year of hardship for so many, yet I am inspired by the way it has brought all of us closer together. Looking to 2021, we expect continued improvement in organic growth, profitability and capital efficiency in line with our value creation model.”

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