China Food

Nestle CEO’s latest forecasts for food industry in 2021

 

Last week, Nestle, the world’s largest food company, announced its 2020 results. Subsequently, mark Schneider, Nestle’s chief executive, and Fran í OIS Xavier, Nestle’s chief financial officer, attended the performance meeting for analysts.

Xiaoshidai noticed that nestle made some predictions on the macro environment and category development of the food industry this year. Here is a brief summary of their discussion.

Prospects for 2021

In 2021, the import costs of the industry will increase significantly, mainly from dairy products, grains and packaging materials. Coupled with the impact of currency devaluation in 2020, this will lead producers to “take a step up” in product pricing, and it is expected to be more obvious in the second half of the year. Nestle will increase efficiency to offset some of the impact.

 

In 2021, Nestle believes that it will still see some good acquisition targets that complement its business, but the company believes that this will never be a repeat of previous years. With the end of the restructuring of the company’s drinking water business, Nestle will have other product portfolio adjustments in the medium term, but the adjusted scale will not be as large as the drinking water business.

 

It is expected that in the first half of this year, outdoor consumption channels will still be a major adverse factor, so Nestle will remain cautious. This channel is expected to gradually improve, but it will not have a chance to return to the pre epidemic level until 2022 at the earliest.

Last year, despite the high degree of uncertainty, Nestle always wanted to forecast business as accurately and reliably as possible. Among them, the most important indicator is organic sales growth data. In 2021, Nestle’s target is to achieve median single digit growth, which means higher than the 3.6% sales growth in 2020. As for the underlying profit margin, Nestle hopes to continue to improve steadily this year.

 

Besides the epidemic situation, there are also optimistic factors in 2021, mainly from several aspects. First, Nestle believes that with the end of 2020, the company’s product pricing strategy has also achieved success. Second, the company has done a lot of work in the fixed marketing expenditure of products, hoping to see the results this year. Third, we should start to solve the problem of China’s infant nutrition business, which achieved results in the second half of last year. We hope that the business can achieve greater results this year. Finally, there is the adjustment of business portfolio. For example, the transaction of silver heron has been completed; for example, the transaction of selling drinking water business in North America market has signed a contract and is about to be completed.

 

Study and judgment of food categories

 

Plant based food: Nestle recorded strong double-digit organic sales growth last year. This category brings the company a broader space for imagination, re creation and re vitality. It is a category of 12 billion Swiss francs (calculated according to the weighted average annual exchange rate in Nestle’s financial report in 2020, RMB 100 will be converted to 13.596 Swiss francs in 2020). Among them, there are a lot of new opportunities to revive the food industry, which are “only once in a lifetime”. It’s not just “plant meat,” it can be extended to pizzas, condiments and frozen foods, and so on. In addition, it can also provide alternatives to dairy consumption, which can be applied to ice cream, candy, etc., and will blossom and bear fruit in more downstream products.

Coffee: it can be expected that people will consume more coffee at home in the future, which has benefited Nestle’s performance. This year, Nestle opened a new coffee factory in Mexico.

Pet food: this category has an excellent growth in the world, which is mainly supported by e-commerce channels, high-end products and scientifically based product formulas. Nestle has built a pet care ecosystem, and gives guidance on pet feeding, nutrition and other aspects. The company will continue to innovate in this category and has announced a number of new investments, including new plants in two states of the United States.

Nutrition: in the past few years, the fundamentals of infant nutrition business have hardly improved, because globally, the birth rate is declining and the breastfeeding rate is rising. In the face of such fundamentals, what Nestle needs to do is to extend the concept of infant nutrition from “1000 days in early life” to a few years after the birth of the baby, so as to provide nutrition solutions for both mothers and children. However, the CEO of Nestle still firmly believes that it will benefit the company to change the business from global headquarters management to regional market management, because the region is obviously the best operator of the business. At the same time, he firmly believes that the nutrition business can become a growth contributor in the medium and long term. It is also part of Nestle’s DNA and will not give up. In the Chinese market, Nestle will make greater efforts to push its business down to the third and fourth tier market, and further develop its cross-border e-commerce business.

Drinking water business: this business is highly exposed to outdoor channels. Last year, Nestle saw negative growth in this business, with a “moderate decline” in the second half of the year. Last year, Nestle announced a new strategy for its drinking water business. Now the strategy has taken the first step, but it still needs time to implement to make the business competitive and bring the company the ideal growth rate. In China, Nestle will focus on ready to drink products after selling Yinlu peanut milk and porridge business.

E-commerce channel: last year, the scale of Nestle’s business exceeded 10 billion Swiss francs. About 60% of Nestle’s business units reported that it increased market share last year, which is close to Nestle’s record high in 2013. Among them, pet care, instant coffee, baby cereal, ice cream, etc. are the businesses that have gained shares. From the perspective of channels, share growth mainly depends on e-commerce channels.

 

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