Swiss food giant Nestlé reported organic sales growth of 4.3 per cent, with real internal growth (RIG) of 4.7 per cent, for the first quarter of 2020.
Nestlé says the effect of COVID-19 varied materially by geography, product category and sales channel, depending on the timing of the outbreak, the scope of restrictions, and consumer behaviour.
Geographies
A majority of markets, particularly in North America and Europe, saw significantly increased growth in March, partially supported by consumer stockpiling. China posted a sharp sales decline, due to movement restrictions in place for almost the full quarter, limited consumer stockpiling and relatively higher exposure to out-of-home channels.
Product categories
Essential products saw increased demand. Coffee, prepared dishes and cooking aids, Purina PetCare, and Nestlé Health Science products reported increased growth. Confectionery and ice cream posted a sales decline, reflecting reduced gifting and impulse buying.
Sales channels
All markets saw a significant shift from out-of-home to in-home consumption. Out-of-home channels posted negative growth, with significant sales declines for Nestlé Professional, water, and Nespresso boutiques. E-commerce sales grew by 29.4 per cent, exceeding 10 per cent of total group sales for the first time.
“The COVID-19 crisis continues to impact all our lives in powerful and sometimes tragic ways. Our thoughts are with all those who have been affected and we extend our deepest sympathies to those who have lost loved ones,” Nestlé CEO Mark Schneider says.
“Nestlé has a special responsibility at this time. Our food and beverage products help keep people healthy, provide comfort and support recovery.
Nestlé’s organic growth was supported by strong momentum in the Americas and Zone Europe, Middle East and North Africa.
Zone Asia, Oceania and sub-Saharan Africa posted negative growth, mainly due to a double-digit sales decline in China. Organic growth was 7.4 per cent in developed markets, based entirely on RIG. Growth in emerging markets was 0.5 per cent.
Nestlé says its coffee segment saw good momentum, fuelled by demand for Starbucks products, Nespresso and Nescafé.
“Our company remained resilient in the first quarter, reflecting our diversified product portfolio and our strong local presence in 187 countries. However, this [COVID-19] crisis is far from over and we will face many uncertainties in the coming quarters,” Nestlé CEO Mark Schneider says.
“We will continue to adapt quickly to changing consumer needs and to challenges in our global supply chains.”
While organic growth grew, total reported sales decreased by 6.2 per cent to CHF 20.8 billion (about US$21.4 billion). Acquisitions net of divestitures reduced sales by 4.7 per cent, foreign exchange reduced sales by 5.8 per cent.
In North America, beverages – including Starbucks products, Nescafé and Coffee mate – grew at a high single-digit rate.
Latin America saw mid-single-digit growth, supported by most geographies and product categories. Sales in Brazil grew at a high single-digit rate, with significant growth in coffee, infant nutrition, and ambient dairy. Mexico saw mid single-digit growth, based on increased sales for Nescafé and Coffee mate.
Prepared dishes and cooking aids, coffee, Purina PetCare and infant nutrition reported double-digit growth in Europe. However, Nestlé Professional recorded a double-digit decline in sales.
Nespresso reported mid-single-digit organic growth, with positive RIG and pricing. The Americas and Asia, Oceania and sub-Saharan Africa grew at a double-digit rate, with continued market share gains in the United States and Canada. Sales in Europe decreased, reflecting boutique closures and significantly reduced demand in the out-of-home channel, particularly in the latter part of the quarter.
Nestlé says the financial impact of COVID-19 on its business remains difficult to quantify and will depend on the duration and the economic consequences of this crisis. It says the group remains resilient given its diversified portfolio of products and presence across the globe.
‘Our people, in particular our frontline workers, have shown extraordinary commitment in keeping our business running and meeting consumer needs. We will continue to work hard to provide food and beverages to people across the world, every day,” Schneider says.
“As a reliable employer and business partner we are meeting our commitments. As a good citizen and trusted neighbour, we continue to offer our help, in particular to the most vulnerable in society. Over the last 154 years, Nestlé has successfully overcome many challenges. We are confident that – together with all those who are fighting against the pandemic and its consequences – we will also overcome this one.”
