Nestlé’s organic growth of 8.1 percent during the first half of the year was supported by sustained momentum in retail sales, a return to growth in out-of-home channels, increased pricing and market share gains. Following these positive results, the company expects full-year organic sales growth between 5 to 6 percent in its updated full-year outlook.
The Swiss food giant reported a total sales increase of 1.5 percent, to CHF 41.8 billion (US$46 billion). Foreign exchange reduced sales by 3.5 percent, reflecting the impact of the Swiss franc’s appreciation against most currencies and the negative impact of asset sales.
“Organic growth was strong across most geographies and categories, with robust momentum in retail sales and a return to growth in out-of-home channels,” comments Mark Schneider, Nestlé CEO.
“Through fast-paced innovation, strong brand support, increased digitalization and stringent portfolio management we have built the foundation for delivering consistent mid single-digit organic growth for years to come.”
Earnings per share raises slightly
Nestlé’s net profit grew by 1.1 percent to CHF 5.9 billion (US$6.5 billion). Net profit margin decreased by 10 basis points to 14.2 percent, because of one-off income related to divestitures in 2020.
Underlying earnings per share increased by 10.5 percent in constant currency and increased by 8.3 percent on a reported basis to CHF 2.17 (US$2.39). Earnings per share increased by 3.2 percent to CHF 2.12 (US$2.33) on a reported basis.
“Underlying earnings per share in constant currency and capital efficiency are expected to increase this year,” the company states.
Expansion developments
The company reports further progress in its portfolio management. In April, Nestlé entered into an agreement to acquire core brands of The Bountiful Company, which is expected to close in next month.
Nestlé’s underlying trading operating profit margin is now expected around 17.5 percent, reflecting the one-off integration costs related to the acquisition, in addition to initial time delays between input cost inflation and pricing.
This week, Nestlé and Starbucks strengthened their collaboration to bring ready-to-drink coffee beverages to select markets across South-East Asia, Oceania and Latin America.
Last July, Nestlé completed the acquisition of Nuun, a leading company in the fast-growing functional hydration market.
In the same month, Nestlé Health Science entered into an agreement with Seres Therapeutics to jointly commercialize SER-109, an investigational oral microbiome therapeutic in the US and Canada. If approved, SER-109 would become the first-ever microbiome therapeutic approved by the US Food and Drug Administration.
Coffee holds mammoth share of group sales
Growth was broad-based across most geographies, Nestlé outlines. Organic growth was 6.7 percent in developed markets, based mostly on real internal growth (RIG). Organic growth in emerging markets was 10 percent, with strong RIG and positive pricing.
By product category, the largest contributor to organic growth was coffee, fueled by strong demand for the three main brands Nescafé, Nespresso and Starbucks. Starbucks products posted 16.7 percent growth, with sales reaching CHF 1.4 billion (US$1.5 billion) across 79 markets.
Prepared dishes and cooking aids posted high single-digit growth, based on strong demand for Maggi and Stouffer’s.
Vegetarian and plant-based food offerings continued to see strong double-digit growth, led by Garden Gourmet. Dairy reported high single-digit growth, led by fortified milks, coffee creamers and ice cream. Confectionery recorded double-digit growth, supported by a strong sales development in impulse products.
Sales in Nestlé Health Science grew at a double-digit rate, reflecting strong demand for vitamins, minerals and supplements and healthy-aging products. Infant Nutrition saw a sales decrease, impacted by lower birth rates in the context of the pandemic. Water returned to positive growth, led by international premium brands S. Pellegrino and Perrier.
By channel, organic growth in retail sales was 7.3 percent, moderating to a mid single-digit rate in the second quarter due to a high base of comparison in 2020. E-commerce sales grew by 19.2 percent, reaching 14.6 percent of total Group sales, with strong momentum in most categories particularly coffee, Purina PetCare and culinary.
Organic growth in out-of-home channels was 21.3 percent, helped by the easing of movement restrictions in some geographies.
Net divestitures decreased sales by 3.1 percent, largely related to the divestments of Nestlé Waters North America brands, the Herta charcuterie business and the Yinlu peanut milk and canned rice porridge businesses. Foreign exchange reduced sales by 3.5 percent, reflecting the appreciation of the Swiss franc versus most currencies. Total reported sales increased by 1.5 percent to CHF 41.8 billion (US$46 billion).
Nestlé is transforming its global water business, sharpening its focus on international premium and mineral water brands and healthy hydration products. In March, Nestlé completed the acquisition of US functional water brand Essentia Water; it also completed the sale of its regional spring water brands, purified water business and beverage delivery service in the US and Canada for US$4.3 billion.
