Coffee and dairy help Nestle beat expectations

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Nestle on Thursday posted its strongest quarterly sales growth in 10 years, citing stronger demand for coffee, dairy and petcare products.

The world’s biggest food group has weathered the COVID-19 pandemic well so far as consumers locked up at home bought more packaged foods for themselves and their pets.

It also expanded ecommerce and its health science portfolio as consumers bought more online and worried about their health.

“Retail sales saw solid growth and out-of-home channels saw signs of improvement. We confirm our guidance for the year and our mid-term outlook for sustained mid single-digit organic growth,” Chief Executive Mark Schneider said in the statement.

The maker of KitKat chocolate bars and Nescafe instant coffee expects an increase in organic sales growth this year versus the 3.6% achieved in 2020.

Organic sales rose 7.7% in the first quarter, versus 4.3% in the year-ago period, Nestle said, easily beating a forecast for 3.3% organic growth in a company-compiled consensus https://www.nestle.com/investors/analysts-consensus and a 3.3% drop in sales posted by peer Danone this week.

“What a blow out – the strongest quarterly number since 2011,” Kepler Cheuvreux analyst Jon Cox said, pointing to a recovery in emerging markets, while Bernstein’s Bruno Monteyne spoke of an “amazing beat”.

Shares in Nestle, up just over 2% so far this year, were indicated to open 1.7% higher, according to pre-market indications by bank Julius Baer.

Organic growth stood at 7.2% in the Americas, at 4.4% in Europe and at 9.1% in Asia, Nestle said. Asia was in negative territory in the year-ago period as the pandemic hit there first.

In terms of categories, petcare was up 8.7%, powdered and liquid beverages including coffee rose 9.9%, and dairy increased 15.7%. Nutrition and health science fell 0.5%, dragged down by nutrition.

Nestle said it had made further progress on portfolio development as it wants to offer more health and wellness foods and get rid of underperforming businesses.

It recently sold its North American water brands to One Rock Capital Partners for $4.3 billion and offloaded its Yinlu peanut milk business in China to Food Wise Co Ltd.

Peer Unilever is due to post its first-quarter update on April 29.

Photo: EPA-EFE/JEAN-CHRISTOPHE BOTT