Nestlé’s FY2021 results point to coffee and herbal segments as key contributors to growth amid inflation

Garden Gourmet Vrimp by Nestle (Credit: Nestlé).

17 Feb 2022 — In its results for the financial year 2021, Nestlé reports net profit growth of 38.2% to CHF 16.9 billion (US$18.3 billion), amid challenges related to the cost inflation. By product category, the largest contributor to organic growth is coffee, driven by the strong momentum of the three main brands Nescafé, Nespresso and Starbucks.

Total group sales increased by 3.3% to 87.1 billion francs / 94.5 billion dollars (2020: 84.3 billion francs / 91.5 billion dollars). This figure has been boosted significantly by double-digit growth in plant-based offerings as global consumers seek out diverse protein options.

“In 2021, we remained focused on executing our long-term strategy and scaling up growth investments, while addressing global supply chain challenges. Our organic growth has been strong, with large-scale market share gains, following disciplined execution, rapid innovation and increased digitalization,” comments Mark Schneider, CEO of Nestlé.

“We have limited the impact of exceptional cost inflation through rigorous cost management and responsible pricing,” he adds.

“The evolution of our portfolio has continued, focusing on categories with attractive growth opportunities and differentiated offerings. Recent examples include the acquisition of the core brands of The Bountiful Company and the divestiture of the core water brands in North America.

Starbucks product sales increased 17.1% to CHF 3.1 billion (US$3.4 billion) (Credit: Nestlé).Coffee and Herbal Products Segments Score Wins
Organic growth reached 7.5%, with real internal growth of 5.5% and prices of 2.0%. This growth was supported by the continued momentum in retail sales, the steady recovery of out-of-home channels, rising prices and market share gains.

By channel, organic retail sales growth was 6.4%. E-commerce sales increased by 15.1%, reaching 14.3% of total group sales, with strong momentum in most categories, in particular Purina PetCare, coffee and Nestlé Health Science.

The organic growth of the RHD chains reached 24.5%, helped by a weak comparison base due to the pandemic.

Sales of Starbucks products increased 17.1% to CHF 3.1 billion (US$3.4 billion), generating more than CHF 1 billion (US$1.1 billion) in incremental sales per compared to 2018.

Ready meals and cooking aids recorded high single-digit growth, based on strong sales developments for Maggi, Stouffer’s and Lean Cuisine.

Sales of vegetarian and plant-based foods grew at a double-digit rate, reaching around 800 million francs ($868.4 million).

Nestlé Health Science recorded double-digit growth, reflecting strong demand for vitamins, minerals and supplements, as well as healthy aging products.

Ready meals and cooking aids recorded high single-digit growth, driven by strong sales growth from Maggi, Stouffer’s and Lean Cuisine (Credit: Nestle).Dairy recorded mid-single-digit growth, based on strong demand for premium and fortified milks, coffee creamers and ice creams.

Confectionery sales grew at a high single-digit rate, supported by strong sales development of KitKat and gift products.

Water posted high single-digit growth, driven by premium brands and a recovery in out-of-home channels. Infant nutrition recorded negative growth, impacted by lower sales in China and lower birth rates globally. Sales of human milk oligosaccharide (HMO) products continued to show robust growth, reaching 1.2 billion francs ($1.3 billion).

Purina PetCare recorded double-digit growth, driven by science-based and premium brands Purina Pro Plan, Fancy Feast and Purina ONE, as well as veterinary products.

Portfolio Management Highlights
Nestlé made acquisitions and divestments with a total value of approximately 9.9 billion francs ($10.7 billion) in 2021.

In August, Nestlé completed the acquisition of the core brands of The Bountiful Company for $5.8 billion. Nestlé highlights The Bountiful Company as the number one pure-play company in the highly attractive global nutrition and supplements category.

In July, the company completed the acquisition of Nuun, a leader in the growing functional hydration market, and entered into an agreement with Seres Therapeutics to co-market SER-109, an investigational oral microbiome treatment for United States and Canada.

Meanwhile, Nestlé’s global water business continues to focus more on international mineral and premium water brands and healthy hydration products.

In March, the company completed the acquisition of Essentia Water, a premium functional water brand in the United States, and the sale of its regional spring water brands, purified water business and of its beverage delivery service in the United States and Canada.

Meanwhile, Nestlé continues to expand the reach of Starbucks-branded coffee and tea products outside of Starbucks retail stores. In July, Nestlé and Starbucks announced a new collaboration to bring Starbucks ready-to-drink coffee beverages to select markets in Southeast Asia, Oceania and Latin America.

Net divestments decreased sales by 2.9%, mainly due to the Nestlé Waters North America, Yinlu and Herta transactions.

Divestitures were partially offset by acquisitions, including core brands of The Bountiful Company and Freshly. The negative currency impact on sales eased to 1.3%. Total reported revenue increased 3.3% to 87.1 billion francs ($94.5 billion).

By Benjamin Ferrer

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