This afternoon, Nestle, the world’s largest food company, released its financial report for the first half of 2020.
According to the latest data, in the first six months of this year, Nestle group’s organic growth reached 2.8%, and the real internal growth (rig) was 2.6%, benefiting from the sustained growth momentum of America, Purina pet food and Nestle health science.
In the first half of 2020, Nestle reported a 9.5% decline in total sales to SFR 41.2 billion (about rmb30095 billion), according to financial reports. Earnings per share rose 22.2% to 2.06 Swiss francs.
“Divestiture and foreign exchange reduced sales by 12.3%.” Nestle said the divestiture reduced sales by 5.3%, mainly due to divestiture of Nestle skin health and the US ice cream business.
The snack reps noted that nestle reported a double-digit drop in sales in the first half of the year, but “growth in the second quarter improved to almost flat” due to the relaxation of travel restrictions.
Sales recovery in China
Let’s focus on China’s market performance.
In the first half of this year, reported sales in Nestle Asia, Africa (AOA), including China, fell by 8.5% to 10.1 billion francs; organic growth fell by 2.2%, of which real internal growth fell by 2.7% and price factor increased by 0.5%; organic growth rate of developed markets was 4.1%, while that of emerging markets was 1.1%.
“China’s organic growth recorded a double-digit decline, mainly due to the decline in real internal growth. Prices have also fallen. ” Nestle said organic growth in the AOA region fell because China’s double-digit decline exceeded the median growth in other regions.
However, Nestle also pointed out in the semi annual report that the AOA area “recovered positive growth in the second quarter” driven by the improvement of trading conditions in China.
“After a difficult start, sales in China recovered and growth in the second quarter was almost flat. Many product categories have improved. Coffee, dairy products, ice cream, condiments and candy have all returned to positive growth. ” Nestle said.
Xiaoshidai, President of Taitaile
The company continued in its semiannual report that sales of Wyeth infant formula had slowed down. In June, Wyeth launched a locally produced brand of zhenlang infant formula milk powder to strengthen its product distribution in super high-end market segments and low-end cities.
This is the first time Wyeth has launched a brand new brand series in nearly 10 years since the launch of illuma in 2011. “We hope that this brand, like illuma, will at least become a heavyweight product with a level of more than one billion.” Wyeth’s new commander in Greater China, Zhang Suyi, said earlier.
In addition, Nestle also mentioned that infant complementary food and prina pet food continued to grow at a “strong double-digit” rate in the first half of the Chinese market. Driven by Nestle coffee and Starbucks products, the sales momentum of e-commerce is good.
Consumption change under epidemic situation
Let’s take a look at Nestle’s overall performance.
Mark Schneider, Nestle’s chief executive, said in today’s financial report that nestle maintained its resilience in a rapidly changing environment, achieving stable organic growth and improving profit margins in the first half of the year.
“These results demonstrate the agility of our business and the strength of our diversified portfolio in different regions, product categories and channels. As consumer behavior changes faster than ever before, we are adapting to this new reality by enhancing innovation, leveraging our digital capabilities, and fast execution. ” He said.
In terms of categories, Nestle pointed out in the financial report that in the first half of the year, driven by its high-end brands Purina Pro plan and Purina one, Purina pet food became the “largest contributor to growth”.
The dairy business recorded “high single digit growth”, mainly due to strong demand for fortified milk such as Nido and bear brand, as well as coffee partners.
With the rapid development of frozen food, the number of pre prepared dishes and auxiliary cooking materials has increased in the middle of a single digit. Vegetarians and vegetarians grew by 40%, thanks to further expansion of garden gourmet in Europe and sweet earth’s growth in the United States.
The coffee business was in low single digit growth, and the double-digit sales growth of home coffee exceeded the sharp decline in outdoor channels. “Driven by further global expansion and new product launch, our Starbucks products continue to grow at a double-digit rate.” Nestle said.
In addition, Nestle’s health science business has achieved double-digit growth, “reflecting increased demand for products that help health and immune systems.”. However, due to the high dependence on outdoor channels and consumption, the categories of drinking water and candy recorded a decline.
“Prina’s pet food, dairy products, cooking condiments, home coffee and Nestle health science products all saw strong growth due to increased demand for home consumption, trusted brands and personal health products.” Nestle said.
In terms of sales channels, the company points out that all markets have experienced a major transformation from “outdoor consumption to household consumption”. Sales in retail channels have increased significantly, while sales in external channels have declined. As a result, sales of Nestle’s professional catering and drinking water businesses have declined significantly. “E-commerce sales increased by 48.9%, accounting for 12.4% of the group’s total sales.” Nestle said.
Evaluation of Yinlu, etc
“Portfolio management is on track.” Nestle said in its earnings report today that it is exploring strategic options, including potential sales, for its North American drinking water business and its Yinlu peanut milk and Babao porridge businesses in China.
It is worth noting that the completion time of strategic assessment of Yinlu business has been slightly delayed. “As part of this process, the group agreed in July to sell Nestle Youhuo drinking water business to ice river springs. At present, the strategic evaluation of Yinlu peanut milk and canned Babao porridge business is under way. Both assessments are expected to be completed in early 2021. ” Nestle said today.
At present, Nestle China’s drinking water business is also under strategic evaluation. According to the introduction of the company, Nestle China replied to the agency last week: “in line with the new strategic direction of global water business, Nestle has begun to explore the best solutions for the future of water business in China, including potential sales.” However, Nestle also stressed to the snacks agent: “the high-end water business is not within the scope of this potential sale.”
As for the evaluation of Yinlu’s business progress, according to sources familiar with the matter, Nestle has narrowed down the scope of Yinlu bidders, including China Resources beer, Master Kang, Dali food, private equity firm Fangyuan capital, Junqi investment and CITIC Industrial Investment Fund.
In this regard, Nestle has recently replied to snacks, saying: “we do not comment on market rumors.”
At the same time, Nestle previously stressed that it would retain the Nestle instant coffee business, which is currently filled and distributed by Yinlu, and described the business as “an engine to drive Nestle’s strategic growth” and would continue to invest heavily in Nestle ready to drink coffee in the Chinese market.
In fact, while exploring potential sales, the world’s largest food company is continuing to invest more in the Chinese market.
In May this year, Nestle announced a series of capital increase plans and projects totalling more than 100 million Swiss francs (about 730 million yuan). The capital increase plan includes expanding the company’s existing pet food and candy business capacity in Tianjin, upgrading the Nestle Quality Assurance Center in Tianjin, and building Nestle’s first plant-based product production line in Asia in Tianjin, which is expected to be completed and put into operation in the second half of this year.
In the first half of 2020, the food giant has completed a number of sales and acquisitions.
For example, the snack agency has introduced that in terms of sales, Nestle completed the sale of the US ice cream business to froneri for us $4 billion in January, and the sale of 60% of the Herta (cold cut meat and meat products) business to Casa tarradellas in June.
In terms of acquisition, Nestle completed the acquisition of Lily’s kitchen, a British natural pet food brand, in April this year. In May, the company completed its acquisition of zenprep, a multinational pharmaceutical company. In July, Nestle completed the acquisition of a majority stake in vital proteins, a leading us collagen product brand.
Annual growth forecast
“The new outbreak continues to affect people around the world. We stand with all those affected and are committed to helping where possible. ” In today’s earnings report, Schneider said the company’s priorities remain unchanged, namely, ensuring the safety of its employees, ensuring the continuous supply of essential food and drink to consumers, and providing material support to the community and business partners.
Nestle said that the new crown epidemic crisis has led to “profound changes” in the operating environment of multiple markets. The global economy has entered a recession, the supply chain has been tested and consumer behavior has changed rapidly.
Mark Schneider, Nestle CEO
“Nestle quickly deployed effective measures to deal with this new reality.” The company said its supply chain had proven resilient and that its manufacturing and distribution systems could continue to operate without significant disruption. As consumer habits change, Nestle has been developing solutions to meet the growing demand for home consumption, products that support health and enhance immunity, and affordable products.
At the same time, Nestle said it has also accelerated the development of its digital capabilities and expanded its e-commerce business and online communication.
Looking ahead to 2020, Nestle said it expects organic sales to grow by 2% to 3% for the full year, trading operating profit margins are expected to increase, and earnings per share based on fixed exchange rates and capital efficiency is expected to increase. “This performance guideline is based on our latest understanding of the development of the new outbreak and assumes that there is no substantial deterioration compared with the current situation.” The company said.
Snack generation noticed that foreign media also paid attention to Nestle’s latest performance.
According to the news agency, Nestle’s performance reflects the company’s extensive category portfolio, which provides protection against the epidemic situation, making it perform better than Unilever and Coca Cola. It is reported that the sales of Starbucks brand coffee products have achieved more than 10% growth, and strong coffee has also achieved a median growth.
Nestle’s net profit was 5.9 billion francs, higher than market expectations of 5.07 billion francs, Reuters reported. “This strong set of data exceeded market expectations and once again highlighted the solid nature of the group’s business,” the agency quoted analysts as saying
Nestle’s organic sales growth in the first half of the year was 2.8%, exceeding analysts’ expectations of 2.3%, the Financial Times reported. Although the epidemic has affected the sale of water and candy, families who buy high-end pet food online helped Nestle achieve “slightly better results” in the first half of the year.