Nestlé reports 2.6% growth in first-half of 2020
The Swiss food giant has released its latest financials and hinted at the potential sale of Yinlu peanut milk and canned rice porridge businesses in China in early 2021
Nestlé has released its 2020 half-year financials and reported company-wide sales of CHF41.152 billion. The Swiss food giant saw a 2.8% increase in organic growth (2.6% real internal growth) in this period, down from the 4.7% sales growth it reported in Q1.
“After a stronger-than-expected start to the year, organic growth moderated in the second quarter to 1.3%, reflecting the severe impact of movement restrictions on out-of-home businesses and some consumer destocking,” the company explained in a statement.
Nestlé said that in the first half of 2020, the company saw “sustained momentum” in the Americas and positive development in Europe, the Middle East and North Africa regions.
In the Asia, Oceania and Sub-Saharan Africa region the company’s sales decreased, with growth turning positive in the second quarter.
Organic growth was 4.1% in developed markets, based entirely on real internal growth. Growth in emerging markets was 1.1%.
By product category, the largest growth contributor was Purina PetCare, led by its premium brands Purina Pro Plan and Purina ONE.
Dairy saw high single-digit growth, based on strong demand for fortified milk, such as Nido and Bear Brand, as well as Coffee-Mate.
Prepared dishes and cooking aids grew at a mid-single-digit rate, with “strong momentum” in frozen foods.
Vegetarian and plant-based food products grew by 40%, supported by further expansion of Garden Gourmet in Europe and increased growth for Sweet Earth in the US.
Coffee remained resilient, with low single-digit growth, as a double-digit sales increase for coffee at home outweighed a sharp decline in the out-of-home channel.
Nestlé’s Starbucks products continued to grow at a double-digit rate, driven by further global expansion and the launch of new offerings.
Nestlé Health Science reported double-digit growth, reflecting elevated demand for products that support health and the immune system.
Water and confectionery saw negative growth due to their high exposure to the out-of-home channel and on-the-go consumption.
Divestitures decreased sales by 5.3%, primarily related to the divestment of Nestlé Skin Health and the US ice cream business. Foreign exchange reduced sales by 7%, reflecting the appreciation of the Swiss franc versus most currencies.
Total reported sales decreased by 9.5% to CHF 41.2 billion.
Chief executive Mark Schneider said Covid-19 continues to impact people around the world, and that Nestlé has remained resilient in a rapidly changing environment, delivering solid organic growth and improved margins in the first half of 2020.
“These results demonstrate the agility of our business and the strength of our diversified portfolio across geographies, product categories and channels.
“With consumer behaviour evolving faster than ever, we are adapting to this new reality by strengthening our innovation, leveraging our digital capabilities and executing with speed.
“Our engaged teams and their commitment to deliver business results while driving progress against our societal and environmental commitments make us a stronger company every day.”
For Nestlé, all markets shifted significantly from out-of-home and on-the-go products to at-home consumption, while retail sales significantly accelerated.
Out-of-home channels posted negative growth, with significant sales declines for Nestlé Professional, water and Nespresso boutiques. E-commerce sales, however, grew by 48.9%, reaching 12.4% of total group sales.
In January, Nestlé completed the sale of its US ice cream business for $4 billion to Froneri, the global joint venture with PAI Partners. The company closed the sale of a 60% stake in its Herta charcuterie business to Casa Tarradellas in June.
In April, Nestlé completed the acquisition of Lily’s Kitchen, a premium natural pet food business, and completed the purchase of the Zenpep business from Allergan in May. In July, Nestlé completed the acquisition of a majority stake in Vital Proteins, America’s leading collagen products brand.
In May, Nestlé announced the decision to explore strategic options, including a potential sale, for the majority of the Waters business in North America. As part of this process, the company agreed to sell the Canadian Nestlé Pure Life business to Ice River Springs in July.
The strategic review of the Yinlu peanut milk and canned rice porridge businesses in China is ongoing. Both reviews are expected to be completed in early 2021.
Nestlé expects full-year organic sales growth between 2% and 3%.