Despite the increasing uncertainties, there still seems to be a lot of room for innovation driven growth for the food and beverage industry.
Snack generation noted that Nestle, the world’s largest food company, recently released its first quarter earnings of 2022. Subsequently, Nestle CEO Mark Schneider and CFO Fran ç OIS Xavier Roger attended the performance meeting for analysts.
Under the new regional structure, the business performance of Nestle Greater China was discussed separately at the performance meeting for the first time. The company’s executives further interpreted the report card of the Chinese market, mentioned product innovation, and recently responded to their views on the weak baby nutrition business. In addition, in addition to pricing factors, the growth performance of multiple business segments is considered to benefit from innovation.
Let’s pay attention.
Roger pointed out at the meeting that in the first quarter of 2022, the organic growth rate of Nestle Greater China was 3.4%, and “the pricing was slightly negative, reflecting the low level of food related inflation in the region”.
He said that excluding the infant nutrition business, Nestle Greater China had “recorded near double-digit growth”, thanks to the support of innovation and the growth of market share, especially in condiments, ready to drink coffee and candy.
The business performance of Nestle Greater China was disclosed separately at the performance meeting for the first time
According to the data released by Nestle, coffee and condiments are the two categories with the highest growth rate in Greater China. Roger mentioned at the meeting that the sales of these two categories increased at a double-digit rate, “thanks to the launch of new products, including Starbucks SuiXing cup super high-quality instant coffee series (hereinafter referred to as SuiXing cup) and Taitaile oyster sauce”.
Snack generation introduced that in October last year, after entering China for more than two years and selling more than 100 million cups of coffee, Nestle Starbucks global coffee alliance made a strong bet on the trend of instant high-quality products, cut into the territory of “three and a half” and announced the exclusive sale of Starbucks with star cup in China, which is also the first customized product for Chinese consumers launched by this pair of “coffee CP”.
Starbucks cup super boutique instant coffee series
Unlike the usual strip packaging, this instant coffee adopts a mini cup design, just like a reduced version of Starbucks take out coffee paper cup. In addition to the overall shape, this package also moves up the details. For example, the contents with different flavors on the back imitate the taste customization options on Starbucks paper cups.
Another new product named and praised is Taile oyster sauce. Xiaoshidai introduced that Taitaile, which has continuously promoted the diversification of categories in recent years, launched oyster sauce products for the first time in 2020. Then, in 2021, in addition to the “abalone juice oyster sauce”, it added five flavors: fresh oyster sauce, double mushroom oyster sauce, double shell oyster sauce, salt reduced oyster sauce and fried oyster sauce.
Tai Le oyster sauce
Milk powder business
In the subsequent question session, for Nestle’s business in Greater China, one of the most interesting topics for analysts is still the repair progress of baby milk powder business.
“I know that in the Chinese market, there are some negative factors in our pricing in the first quarter, which is related to the infant nutrition business. As we are repositioning the infant nutrition business, we have made some product portfolio adjustments there, which is one of the results of our work.” Roger responded.
He said that Nestle China’s infant nutrition business “lost a little market share” in the first quarter, but for now, the situation is expected to stabilize and it is expected to return to positive growth later this year.
(data and pictures)
“As we can see from some peers, the situation of this (infant formula) industry is not as bad as some people think. Therefore, the key is that we should do what we should do, do what Nestle should do, and then resume positive growth. We are full of confidence.” Roger said.
According to the data obtained by xiaoshidai from Euromonitor Euromonitor today, in terms of 2021, the top five brands in China’s infant formula market are Feihe (21.7%), aitami (10.3%), JUNLEBAO (7.1%), illuma (6.5%, owned by Nestle Wyeth nutrition) and Yili (6.2%).
Outside each region, let’s look at the two separate business units, Nespresso (espresso) and Nestle health science.
Roger pointed out that in the first quarter of 2022, Nespresso recorded low single digit organic growth on the basis of a year-on-year increase of 17.1%. “Vertuo Fuxuan system continues to maintain its growth momentum. Outdoor channels have further recovered, especially in hotels, restaurants and catering. The introduction of new products also supports the growth. With the lifting of travel restrictions, the sales of boutiques have increased strongly.” He said.
First quarter performance of Nespresso in 2022
By region, Nespresso achieved double-digit growth in North America and its market share continued to grow; After achieving double-digit growth in the European market in 2021, sales decreased in the first quarter of 2022; Consolidation in other regions recorded double-digit growth.
Later, when asked how to deal with the slowdown, Roger responded that Nespresso’s organic growth of 3.3% in the first quarter may seem relatively weak, but this is based on the growth of 17.1% last year. “In two years, we are actually a double-digit growth of 10.2%. “Vertuo Fuxuan system may continue to be our largest growth engine.” He said.
Schneider added that since this is a period of violent fluctuations, it will have a better understanding of the real development of a category business if it is observed over a period of two or even three years. “I’m not worried about Nespresso either. In fact, the business is moving to a higher level and continues to perform well on the basis of overall innovation and vertuo system expansion.” He said.
Nestle Health Sciences’ performance in the first quarter of 2022
As for Nestle health science, Roger said at the meeting that the business achieved median single digit growth in the first quarter of this year on the basis of double-digit growth for two consecutive years, and innovation and regional expansion were the main growth contributors.
Finally, let’s take a look at the pet care business that has made a great contribution to Nestle’s organic growth.
In response to analysts’ questions at the meeting, Roger said that Nestle’s pet care business has basically gained more market share in different regions, categories and market segments. “This is mainly driven by science based innovation.”
“Asia is also one of the regions where we gain market share. Although our market share in Asia is still relatively small compared with our market share in Europe or the United States, it is also rising, and we are investing in it. The market is in the early stage of development.” He said.
(data and pictures)
In addition, the snack generation noticed that the topic of inflation, which has been hotly discussed for several quarters, is still frequently mentioned.
“Pricing rose 5.2% in the first quarter and we expect further increases this year to reflect significant cost inflation. Price increases will continue to be implemented in a gradual and responsible manner.” Roger said at the meeting, “we said in February that the impact of cost inflation is expected to increase significantly in 2022 compared with 2021; we now expect that the impact of inflation will be greater due to the conflict between Russia and Ukraine.”