Strong start: Nestlé posts solid first-quarter growth, Coffee and Waters categories boost performance

18 Apr 2019 --- Measures taken last year to bolster the world’s largest food company Nestlé have started to pay off as the Swiss giant reports higher-than-expected growth for the first three months of 2019. As Nestlé continues to pivot its businesses towards high-growth categories and changing market conditions, CEO Mark Schneider confirms the company is on track to meet its target of more than 3 percent organic growth this year.

“We are pleased with Nestlé's solid organic sales growth in the first quarter, building on our full-year 2018 momentum. Our increased speed, innovation for a changing world and execution focus are clearly paying off,” he says.

In the first quarter, Nestlé revenue climbed 3.4 percent on an organic basis, while pricing increased to 1.2 percent, with significant improvement in Brazil and the US.

Organic sales growth accelerated to 3.4 percent and total reported sales increased by 4.3 percent to CHF 22.2 billion (US$22 billion). Net acquisitions had a positive impact of 1.2 percent and foreign exchange reduced sales by 0.3 percent, notes the company.

Nestlé is exploring strategic options for the Herta charcuterie business (cold cuts and meat-based products) including a potential sale. The company says this strategic review is expected to be completed later this year.

The company is looking to potentially divest its cold cuts and meat-based products, in favor of plant-based products to keep pace with current consumer trends.

Earlier this year, Nestlé unveiled its first coffee lines under the Starbucks name which comes after it closed a US$7.15 billion licensing deal to market Starbucks Consumer Packaged Goods and Foodservice products globally.

“In the quarter, we announced the launch of a new range of 24 premium coffee products under the Starbucks brand. The Nestlé and Starbucks teams did an outstanding job and developed these products in just six months,” adds Schneider.

“The notion of business as a force for good resonates very strongly inside Nestlé. Starting with this report, we will highlight each quarter how Nestlé creates shared value. We will begin by showing how Nespresso delivers on its commitment to quality and sustainability.”

Nespresso maintained mid-single-digit organic growth. North America and emerging markets saw double-digit growth, while sales in Europe were flat. Growth continued to be supported by the Vertuo system.

Nestlé Health Science grew at a mid-single-digit rate, with double-digit growth in medical nutrition and geographic expansion in emerging markets. Innovation provided additional growth momentum, with strong demand for Compleat Organic Blends, the only organic, real food tube-feeding formula.

There was a 2 percent organic growth in Nestlé Waters. North America reported positive organic growth, while Europe saw slightly negative organic growth. Reported sales in Nestlé Waters increased by 2.4 percent to CHF 1.8 billion (US$1.8 billion).

North America maintained good sales development in the first quarter, says Nestlé, where pricing increased to reflect cost inflation. The largest contributor to growth was its Purina petcare brand, which saw strong momentum in e-commerce and in premium brands, such as Purina ONE and Tidy Cats litter. North America recorded mid-single-digit growth in Nestlé Professional and in the beverages category, comprising Coffee-mate creamers, Starbucks and Nescafé. Frozen food returned to positive growth led by the Hot Pockets and Stouffer’s brands.

In Europe, Middle-East and North Africa (EMENA), the Confectionery category posted a good quarter, with double-digit growth for KitKat and strong demand for the recently launched Yes! snack bar. Frozen pizza brands Wagner and Buitoni moved to positive growth, while vegetarian products posted high single-digit growth.

Full-year guidance for 2019 was confirmed, with continued improvement in organic sales growth and underlying trading operating profit margin towards the company’s 2020 targets. Underlying earnings per share in constant currency and capital efficiency are expected to increase.

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