As COVID-19 continues to impact consumers and businesses worldwide, Nestlé has delivered substantial organic growth and improved margins in the first half of the year. The company reported strong growth in Dairy and Coffee-at-Home segments, while frozen and vegetarian foods also gained momentum. Water and Confectionery categories suffered a decline overall. With consumer behavior evolving faster than ever, Nestlé says it is adapting to a new reality.
“We have remained resilient in a rapidly changing environment, delivering solid organic growth and improved margins in the first half. These results demonstrate the agility of our business and the strength of our diversified portfolio across geographies, product categories and channels,” says Mark Schneider, Nestlé CEO.
After a “stronger-than-expected start to the year,” organic growth moderated in the second quarter to 1.3 percent, reflecting the severe impact of movement restrictions on out-of-home businesses and some consumer destocking. In the first half, Nestlé saw sustained momentum in the Americas and positive sales development in Europe, the Middle East and North Africa (EMENA).
Dairy saw high single-digit growth, based on strong demand for fortified milks 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 percent, 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. The company’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.
Business impacted by COVID-19
The COVID-19 pandemic has led to profound changes in operating environments across markets. Supply chains have been tested and consumer behavior has changed at a rapid pace. Nestlé’s supply chain has proven resilient, as manufacturing and distribution facilities continued to operate without significant disruptions. With shifting consumer habits, Nestlé has been developing solutions to meet the increased demand for at-home consumption, with affordable products that support health and boost the immune system.
The exact financial impact of COVID-19 for the full-year remains challenging to quantify. It will depend on the duration and economic consequences of this crisis as well as the speed of recovery in the out-of-home channel, notes the company.
Nestlé expects its full-year organic sales growth between 2 and 3 percent. The underlying trading operating profit margin is expected to improve, as should underlying earnings per share in constant currency and capital efficiency. This guidance is based on the current knowledge of COVID-19 developments and assumes no material deterioration versus present conditions, the company states.
