Just now, Nestle, the world’s largest food and beverage company, announced its performance for the first half of the year. According to Nestle’s mid-2022 report, its total sales increased by 9.2% to 45.6 billion Swiss francs (about 313.015 billion yuan). In the first half of this year, Nestle achieved an organic growth of 8.1%, of which the real internal growth (rig) was 1.7%, and the pricing contribution rate rose to 6.5%.
It is worth noting that this is the first semi annual report of Nestle to disclose the performance of the Greater China region separately, and it is also the first semi annual report handed over by Nestle after welcoming the new commander Zhang Xiqiang. Next, let’s have a look.
Let’s focus on the Greater China region first. According to the financial report, in the first half of this year, Nestle Greater China recorded a sales increase of 6.0% to 2.7 billion Swiss francs (about 18.534 billion yuan). The sales volume in the same period last year was 2.5 billion Swiss francs (Note: according to the weighted average exchange rate in the first half of 2022 in the financial report, 100 yuan was converted to 14.568 Swiss francs during the reporting period).
In the first six months of 2022, Nestle Greater China’s organic growth rate was 2.3%, the actual internal growth rate was 1.6%, and the pricing contribution rate was 0.7%. The foreign exchange rate had a positive impact of 3.8%.
“Affected by the travel restrictions related to the epidemic, Greater China reported low single digit organic growth. Strong demand and continuous innovation from e-commerce channels supported the growth.” Caibao said that the favorable product portfolio and strict cost control offset the impact of cost inflation to a certain extent. By category, coffee achieved a median single digit growth. Starbucks products and Nestle instant coffee continued to grow. Condiments reported median single digit growth thanks to the increase in distribution points and the launch of new products. The candy business recorded a median single digit growth, driven by the strong sales growth of crispy shark chocolate and the stable market performance of xufuji products.
Purina pet care products achieved high single digit growth, among which mon Petit and Zhenzhi, as well as the recently launched “tooth life” performed prominently. In addition, nestle professional catering reported a decline in sales, reflecting the impact of limited outdoor channels. It is noteworthy that China’s infant nutrition products, which continue to promote the recovery of Nestle, also resumed growth as scheduled. The above financial report said that with the improvement of market share trend, the growth of infant nutrition turned positive. The business showed a strong recovery in the second quarter, especially Neng en and illuma. Xiaoshidai once introduced that Fran ç OIS Xavier Roger, chief financial officer of Nestle group, said at the first quarter performance meeting in April this year that the group is repositioning its infant nutrition business in Greater China, and has made some product portfolio adjustments. It is also expected that this part of the business is expected to resume positive growth later this year. According to the information obtained by xiaoshidai from relevant channels, in the first quarter of this year, under the overall planning and guidance of the new region, the purchase, shipment and profit of Wyeth nutritional products all exceeded the target. The market share and the number of new customers have also rebounded. The high-end product line of Wyeth, illuma Yunchun, has increased significantly, and the inventory has also improved significantly.
Besides Wyeth, Nestle China is also promoting the construction of local production capacity of infant milk powder. Xiaoshidai introduced in June this year that the company is building a new workshop in Shuangcheng to produce hydrolyzed formula infant milk powder. The total investment of the project is 190million yuan. After completion, it can produce 22400 tons of hydrolyzed formula infant milk powder per year. This means that nestle will soon have its first domestic hydrolyzed infant formula production line in China. In fact, the growth of many categories in Nestle Greater China is inseparable from the positive overweight of the company. For example, in coffee, with the healthy trend driving the rapid growth of black coffee, the company launched more than 20 new types of overweight black coffee at one go, involving instant, ready to drink, concentrated liquid, ear drops, and coffee beans. In addition, Nestle coffee has also vigorously promoted the rejuvenation, and launched an examination limited product in line with the popular style of generation Z in the college entrance examination season.
In terms of pet food, Nestle Purina introduced the heavyweight product “Guanneng Changfu into cat food” to China. It is Purina’s first cat food in the world that can reduce people’s allergic reaction to cats. Since its listing in the United States in 2020, it has helped “many cat lovers who are troubled by allergic problems realize the freedom of ‘smoking cats’.
Let’s focus on Nestle’s global performance. According to the financial report, the total sales of Nestle group increased by 9.2% to 45.6 billion Swiss francs (about 313.015 billion yuan) in the first six months of 2022. Net acquisitions had a positive impact of 1.0%. The exchange rate increased sales by 0.1%. During the period, the organic growth rate of the group reached 8.1%, the actual internal growth rate was 1.7%, and the pricing contribution rate increased to 6.5%. “Most regions and categories have achieved extensive growth, pricing (contribution rate) has increased, and the actual internal growth rate has shown resilience.” Caibao said.
“In the first half of this year, we achieved strong organic growth.” Nestle Group CEO Mark Schneider said in the financial report, “our local teams have implemented price increases in a responsible manner. Our sales volume and product portfolio are resilient, which is determined by our strong brand, differentiated products and leading market position.” Schneider also mentioned that through strict cost control and improving operational efficiency,
Mark Schneider, CEO of Nestle group (information picture)
By category, many departments under Nestle have achieved growth.
With the positive growth of infant nutrition in China and the increasing trend of market share, the growth rate of Nestle infant nutrition has reached a high single digit. Driven by the further recovery of high-end brands and off home channels, the water business has achieved double-digit growth. Driven by medical nutrition and healthy aging products, Nestle health science has achieved high single digit growth. The growth rate of dairy products is in the middle single digits, and the sales of coffee partners and affordable nutritional products have a strong momentum. Due to the high base of comparison in 2021, the growth rate of prefabricated food and cooking accessories was in the low single digits, while the demand for Meiji maintained a strong growth. Driven by Jiazhi cuisine, the sales of vegetarian and plant-based foods continued to grow at a double-digit rate.
While releasing the semi annual report, Nestle also updated its outlook for 2022 today. It is expected that the annual organic growth rate will be between 7% and 8%. The operating profit margin of basic transactions (Utop) is expected to be about 17.0%. The basic earnings per share and capital efficiency in fixed currency are expected to improve.
With regard to Nestle’s interim report today, Bloomberg said that nestle promoted another round of price increases in the second quarter. With inflation further intensifying, the prices of many of its products rose. Nestle and Unilever, Danone and Li Jie became teammates: because the demand for products with higher prices did not slow down, these companies all raised their sales forecasts this week. Nestle has previously said that with the soaring prices of fuel, packaging and labor, it will raise prices to reduce its own costs.
Reuters said today that nestle raised its annual sales growth forecast and slightly lowered its profit margin guidance this time. The background is that the impact of cost inflation is lower than expected, and the rise in product prices boosted sales in the first half of the year. Consumer goods companies are facing soaring input costs of raw materials, energy and transportation. Although so far, many consumers seem to accept the subsequent price increases, the lag in the implementation of relevant strategies is also squeezing the company’s profits.
Xiaoshidai previously introduced that Schneider said when asked by Swiss media about the price rise last month that unfortunately, food prices have risen sharply in the past year. “The costs of farms have increased significantly, and these costs have been passed on to us, from us to retailers and consumers.”
Although he said that there was no sign of price decline for the time being, he believed that prices would stabilize at least in 2023.
“We have said from the beginning that we will adjust prices responsibly. Especially in emerging countries, our task is to supply people with food, which also means that products still need to be affordable. On the contrary, we have not benefited from the crisis, and our profits have shrunk.” He pleaded at that time.