China Food

Nestle Global CEO’s latest statement on China’s milk powder business!

Recently, Nestle, the world’s largest food company, announced its full year results in 2021. Mark schier, chief financial officer of Nestle, attended the performance meeting.

The snack generation noticed that due to the global “price rise tide” in recent years, the inflation situation, pricing strategy, profit margin and other related topics faced by Nestle have become one of the biggest focuses. They spent a considerable amount of time explaining and answering questions in detail to increase visibility. In addition, there are, of course, the Chinese market topics that analysts are very concerned about.

Nestle CEO Mark Schneider (profile picture)

Let’s pay attention.

“No, we won’t”

Let’s take a look at the headquarters’ further interpretation of China’s performance.

“In terms of organic growth (excluding factors such as business acquisition and divestiture), the Chinese market achieved low single digit growth last year.” Roger said at the meeting that due to the impact of the challenging market environment, the sales of some businesses also declined. The company also launched relevant countermeasures, including the evaluation of product portfolio and distribution strategy, and continued to make progress. It is reported that Nestle’s professional catering, coffee, condiments and Purina pet care have promoted its business in China.

When talking about the performance of the global candy business, Roger also mentioned that the growth of the business reflected the continuous recovery of impulse consumption and gift consumption, in which KitKat achieved double-digit growth. “The launch of innovative products has supported growth, such as vegan KitKat and crispy shark nut chocolate Weihua launched in China.” He said.

Snack generation noticed that in the subsequent Q & a session, many analysts asked about Nestle’s infant nutrition business, especially in the Chinese market.

Schneider said he was still committed to the business, and I want to make this very clear, because the problem has occurred several times – “is it possible for you to exit the market?” He said.

“We firmly believe in our core business. We firmly believe that China is the largest and leading infant formula market. Therefore, if we want to continue to focus on this business, I think it is important to stay there and win the competition. That’s what we intend to do.” “Therefore, I think the management has taken very positive actions, and we expect the improvement results to show up this year,” Schneider said

Then, Schneider said that Nestle is often asked another question, that is, whether it expects to return to the growth track this year.

“Yes, I think we are likely to return to the positive growth field this year, and then on this basis, we will gradually recover over time.” “Basically, what we need to do is to improve channel distribution, enhance our influence in low-level cities, and continue to innovate and provide cutting-edge products. Therefore, we believe that we have a space for competition and success, and we are fully committed to achieving this,” he said

(data and pictures)

Subsequently, some analysts asked whether Nestle was conducting a global strategic assessment of its infant formula business. In this regard, but in general, “we still do our best in infant nutrition and infant formula.

“It is clear that in the face of the epidemic, the birth rate has fallen sharply again. Obviously, people feel uncertain about health care and finance. This is not the best time to establish or expand families. Some of them will recover over time.” ‘Nestle is doing a good job in the Chinese market wholeheartedly, so we won’t evaluate it,’ he said. “(on the contrary) if we stand up and compete, our business and performance will improve.” Schneider made it clear.

It is understood that the organic growth of Nestle’s global infant nutrition decreased by 4.6% year-on-year, but the sales of HMO (human milk oligosaccharide) products increased strongly, reaching 1.2 billion Swiss francs.

Xiaoshidai once introduced that feishilan is conducting a global strategic assessment of the brand of Maisu Jiaer, which is still in progress. In addition, Mead Johnson’s parent company, Lijie, was also instructed to evaluate its infant nutrition business, including potential sales.

Inflation impact exceeds 2021

Under inflation, Nestle’s pricing strategy is one of the most frequently discussed topics at the performance meeting.

“In 2021, we actively and responsibly responded to inflationary pressures and steadily raised prices. In 2021, pricing reached 2% and accelerated to 3.1% in the fourth quarter.” Roger said at the meeting that Nestle’s brand strength, product differentiation and leading market position have enhanced its pricing ability.

“So far, we haven’t seen any substantial evidence of demand elasticity (large) (Note: demand price elasticity refers to the sensitivity of market commodity demand to price changes, usually the demand elasticity of daily necessities is small) , we are closely following any signs of change. In the past few quarters, sales growth has been higher than before the epidemic. ” He said.

Roger pointed out that especially in the second half of 2021, inflation was significant and widespread, with inflation in raw materials, packaging materials, freight and energy costs.

Fran ç OIS Xavier Roger, chief financial officer of Nestle (information picture)

It is worth noting that nestle expects the impact of cost inflation in 2022 to be much greater than that in 2021.

“The impact of cost inflation is expected to increase significantly in 2022, especially in the first half of the year, with most of the growth in raw materials coming from coffee and metals. We expect to offset the rise in inflation through mitigation measures, including pricing, operational leverage and efficiency.” Roger said. Xiaoshidai noted that he then mentioned that the rise in coffee bean prices in 2021 did not have any substantive impact on Nestle, but “this impact will be significant” by 2022.

Roger said that for 2022, Nestle is expected to continue to gradually increase pricing in a responsible manner.

“We continue to offer products at different prices and focus on developing affordable products, especially those that meet the nutritional needs of emerging markets. These efforts help mitigate the impact of inflation on the most affected people. We are also using other levers, such as product portfolio, strict cost management and the further introduction of strategic revenue management tools 。” He said.

Nestle’s strategy to deal with cost inflation

Looking forward to 2022, Nestle expects its organic sales to increase by about 5% and its basic operating profit margin to be between 17.0% and 17.5%. Basic earnings per share and capital efficiency at fixed exchange rates are expected to increase.

“I think we have a conservative answer to the problem of inflation and profit volatility. For example, I think we have a conservative answer to this question.” Schneider said at the meeting, “the same is true for organic sales growth. Of course, it depends largely on inflation and pricing measures. Therefore, we think it is likely to reach about 5%. But it depends on the direction of inflation, which may also make us higher.”

Pay attention to “snack generation” (wechat: foodinc) “and reply to” Nestle “to see the wonderful news.

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