Strong Demand for Food and Beverage
Nestle recorded a strong recovery amid the COVID-19 pandemic as consumers were buying more packaged foods and at-home coffee products, among other products. The food and beverage company also reported a 40% increase in its ecommerce business sales.
Similarly, the health science business is also bearing fruit as consumers spent more on vitamins and supplements during the COVID-19 pandemic. Demand for dairy products surged as well, the company said, particularly fortified milk.
“We are pleased with Nestlé’s strong organic sales growth in the first quarter, building on broad-based contributions from most geographies and product categories. Our growth was fueled by disciplined execution, enhanced digital capabilities and rapid innovation, resulting in further market share gains,” Mark Schneider, CEO of the company, commented.
The company’s organic sales soared 7.7% in Q1, compared to the same period from a year ago and outshining the consensus estimates of 3.3% by far. Nestle also confirmed its full-year and mid-term sales outlook and said it expects organic business sales growth. Additionally, Nestle said it expects organic business sales to increase more compared to the 3.6% from last year.
Analysts heaped praise on the company following the blowout of Q1 results.
"What a blowout – the strongest quarterly number since 2011," said Kepler Cheuvreux analyst Jon Cox.
Bruno Monteyne, an analyst at Bernstein, described Nestle’s Q1 earnings as an “amazing beat.”
Similarly, Vontobel analyst Jean-Philippe Bertschy described Nestle’s figures as “spectacular,” noting that ecommerce and “faster, bolder innovations” had helped the company increase its market share.
Nestle performed particularly well in the Americas and Asia, while sales in Europe were up 4.4%. The food company said coffee was the top performer, with sales of Nespresso portioned coffee surging more than 17%, dairy soaring nearly 16%, and petcare roughly 9%.
Amid the COVID-19 pandemic, Nestle’s out-of-home unit struggled in its Q1, with sales dropping 11.6% during the period, somewhat better than the 30% decline from last year. CEO Schneider commented that “out-of-home channels saw signs of improvement” in Q1.
Business sales in infant nutrition products surged in China but struggled in other markets as a result of lower birth rates. Nestle also said it made progress in reorganizing its business portfolio as the company continues to expand in the health and wellness sector and exit underperforming businesses.
The company recently sold its North American water business to One Rock Capital Partners in a $4.3 billion business deal and sold its Yinlu peanut milk operations in China. The Switzerland-based company also said it will focus more on acquisitions in 2021 and has recently acquired premium water company Essentia in the US.
Shares of Nestle have moved 3.3% up this morning. Unilever, one of Nestle’s biggest rivals, is set to report its Q1 business sales results on April 29.
The world’s largest food business Nestle reported the biggest increase in quarterly sales in ten years, boosted by high demand for food, coffee, dairy, and petcare products.
About the Author
Mariliana has an MSC in Consumer Analytics and Business Strategy. She has a special interest in fast-moving industries and Big Data.