In the last two years, Nestle, with an annual income of nearly 662 billion yuan, has been benchmarked by domestic food giants. But snacks generation found that Nestle, which started with dairy, coffee and nutrition products, has actually started to tell another growth story – Health Science.
Before we enter the topic, let’s take a look at Nestle’s overall operation. Next to mark Schneider, Nestle’s chief executive, let’s take a look.
Stock price trend of Nestle (blue), Pepsi (purple) and Danone (yellow) in one year
According to Nestle’s third quarter report for 2020, its sales in the third quarter of 2020 grew by 4.9%. “This is the highest quarterly growth in the last six years.” Fran ó OIS Roger, Nestle’s chief financial officer, said at a recent performance meeting in the third quarter of 2020.
Schneider once said in the third quarterly report that Nestle’s resilience in difficult times included rapid response to consumption changes brought about by the epidemic.
Xu Fuji is an example. “We (Xu Fuji) have been responding quickly, trying to offer more choice of packaging specifications and online products,” Schneider told the conference as Nestle’s candy business was hit by the decline in outdoor consumption this year
As introduced by the snack agent, Xu Fuji has launched the biggest wave of new products this year, and successively launched a number of new snacks in tmall flagship store, such as red ginseng jelly and prebiotic cake. At that time, the company told the snack agents that after the outbreak, consumers’ requirements for the health and quality of snacks had been improved, and some of the new products were also combined with these new trends.
“In terms of candy, I’m very happy with the innovation I’ve seen.” Said Schneider.
However, he also pointed out: “a large part of Xu Fuji’s existing business still comes from modular products. Over time, this problem is something we have to fix. We’re putting a lot of effort into reshaping and adapting the business to the market. So let’s give a little time to wait for the results. “
In addition to Xu Fuji, infant nutrition including Wyeth is also one of Nestle’s key concerns in China.
In response to a question about nutrition, Schneider said: “we are still very concerned about the business (including Wyeth’s Chinese infant nutrition) He also said he would continue to push the business forward.
In fact, Wyeth launched a brand new super high-end infant formula brand, zhenlang, in June this year, and is looking forward to “copy” the success story of illuma and rebuild a “1 billion level” milk powder brand.
At the same time, Schneider also stressed that the performance of milk powder should not be used to judge the performance of Nestle infant nutrition products.
“Take a look at the other products we offer, baby cereals, and I think they are doing very well and have greater potential for upgrading. There are also breast milk substitutes and vitamin and mineral supplements for mothers and infants He preached. Data show that Nestle China achieved double-digit growth in infant cereals in the first three quarters of this year.
“So it’s important not to just look at infant formula and draw all the conclusions from there. I think it’s also one of the advantages of Nestle’s nutrition business compared to some of its direct competitors. ” Schneider said growth in Nestle baby nutrition will improve over time.
“In general, it is a fact that we are committed to developing and very optimistic about infant nutrition.” But in the case of infant formula, the category faces birth rate challenges in key markets, he said.
Mark Schneider (data photo)
According to the third quarter’s financial report, the biggest contributor to Nestle’s revenue growth in the first nine months of this year was Purina pet care and its several high-end brands. In addition, vegetarians and vegetarians, Nestle Health Sciences, dairy products and coffee also saw good growth.
At the meeting, coffee and pet care became the focus of analysts’ questions. Driven by the home consumption opportunities brought about by the epidemic situation, there are many bright spots in these two categories since this year.
Speaking of coffee, Roger said the category grew by 4.9% in the first three quarters, with home coffee achieving double-digit growth, making up for the sharp decline in outdoor channels and ready to drink products. “Our coffee business improved even more in the third quarter due to the accelerated growth of home consumption in many markets, as well as the improvement in outdoor consumption. The growth was actually close to double-digit.” He said.
Roger believes that innovation is one of the main drivers of coffee growth. He said Nestle has gained considerable market share through Starbucks products through actions such as launching Starbucks coffee capsules in Europe.
“I would also like to mention that one of the highlights of coffee is Dorothy, which has been doing very well since the beginning of this year. The brand has been around for years, worth more than 1.2 billion Swiss francs, and the number is growing strongly at double-digit rates. ” Roger said.
As for Purina’s pet care, Roger said that the growth of this category is closely related to high-end and innovation, “for example, we launched anti allergen products for cats in the United States.”.
Roger also said Nestle was pushing for higher calorie conversion rates (i.e., the percentage of pet food used) in many markets, thereby gaining more market share in Eastern Europe, Latin America and Asia.
After listening to the traditional story, we return to the theme. Xiaoshidai noticed that nestle executives’ explanation of “firepower” at the performance meeting actually focused on
”With the development of the epidemic situation, Nestle has made significant progress in the development of product portfolio. “At the beginning of the meeting, Schneider said,
“Here, I would like to highlight Nestle Health Sciences, which is clearly being acquired as planned,” he said. Sales of this business are expected to double in five years.
According to the introduction of the snack agent, Nestle Health Sciences has completed several acquisitions since this year, including nearly 14 billion yuan invested by Haopai, which has won the new upstart of food allergy therapy, aimmune, etc. Schneider said recently that nestle Health Science sales are expected to reach 4 billion Swiss francs (about 30 billion yuan) in the next year.
According to Roger, Nestle Health Sciences achieved double-digit growth in the first three quarters of this year, driven by continued strong demand for consumer care products and medical nutrition products. “I’d like to mention in particular life garden and pure supplements, where we see a high demand for supplements that support health and the immune system.” He said.
“Sales of this business are expected to double in five years,” Schneider said According to the information from the conference, Nestle health science’s sales volume in 2017 was 2 billion Swiss francs, and the sales scale is expected to reach 4 billion Swiss francs in 2021 or 2022（
“By combining strong organic growth with targeted acquisitions, we are building Nestle health science into a strong business in the field of nutrition and health.” Schneider said in a recent financial report.
So, which areas will Nestle health science focus on in the future?
In response, Schneider said at the meeting that nestle was “super optimistic and determined” in this category, but it did not intend to produce toothbrushes and sunscreen, that is, it did not intend to have everything. “Nutrition science and metabolism, these are our concerns, more specifically food allergies, gastrointestinal digestion and micronutrients that people need,” he said
“I think that’s our core skill, and we’re going to continue to scale up. Although it will take a long time to build it into a sizable business. ” Schneider said that if only pursuing numbers, Nestle could build a consumer care product Empire earlier, a category that needs pharmacies or drugstore channels,.
He pointed out that Nestle is in order to become an industry leader with rich ideas and hopes to become a leading enterprise with professional knowledge in a specific field, which requires mastering health science.
Schneider stressed that nutrition science and metabolism are Nestle’s core technologies and will continue to expand. ” It will take more time to get bigger numbers, but with its rapid growth, they will be more and more significant to Nestle group. “
As previously mentioned by the food agency, Nestle’s health science business is also developing rapidly in China. Nestle has invested nearly 1 billion yuan in Taizhou, Jiangsu Province, to establish China’s first fully enclosed aseptic canned special medical food production line. Nestle has also set up a research and development center based on the plant. According to media reports, Nestle health, which is mainly engaged in the production and sales of special medical food, sold about 800 million yuan in China last year.
In Nestle’s three quarterly reports, the growth of e-commerce business is amazing. According to xiaoshidai, the sales volume of Nestle e-commerce increased by 47.6% in the first three quarters of this year, and its proportion in Nestle’s sales rose to 12.3%. If we use Nestle’s revenue in the first three quarters of this year as a rough estimate, the company’s e-commerce sales exceeded 7.6 billion Swiss francs.
“Even in the last two quarters, the level of [e-commerce growth] has been quite stable. This business now accounts for 12.3% of our total sales, and we don’t think it will fall back to last year’s 8.5% Roger said about 60% of Nestle’s online sales market share has increased or maintained.
According to its introduction, Nestle’s e-commerce sales are currently concentrated in several markets, including the United States, the United Kingdom, France, Germany, China and Japan. By category, coffee, pet care, nutrition and drinking water are the categories with higher correlation with e-commerce.
As a channel to accelerate the rise of the epidemic, Schneider believes that even after the end of the epidemic, the growth momentum of e-commerce is expected to continue.
“With the advent of the digital era in the food and beverage industry, the development rate of beverages will be slower than that of other consumer products in terms of adopting digital technology and relying on e-commerce.” “But when it’s necessary to buy through (e-commerce) etc. for safety and health reasons, people will find it convenient. We do not expect this situation to decrease after the end of the epidemic. “
Xiaoshidai also noted that Schneider proposed at the meeting that the development of e-commerce should be close to the local market.
“In terms of e-commerce capabilities, we must always be consistent with the habits of the local market, because digitalization sounds like it can be used all over the world in one move.” On the contrary, e-commerce development needs to take into account factors such as local flavor, local consumers’ preferences and local partners, so that the local market can make a “strong voice”, said Schneider.