Nestlé, the world’s largest food company, posted its highest sales growth in five years on Thursday as the pandemic prompted consumers to spend more on petcare and dietary supplements.
Sales growth, calculated on an organic basis, ticked up to 3.6 per cent for 2020 from 3.5 per cent a year earlier, as robust sales of Purina petcare products and supplements sold by its Health Science division helped compensate for lower sales of “on the go” products such as chocolate and bottled water.
While Nestlé has not enjoyed an acceleration in sales to match rival Kraft Heinz, which last week reported 6.3 per cent sales growth — calculated on an organic basis, which strips out the effects of acquisitions and divestitures — the Swiss group far exceeded the 1.9 per cent reported by Unilever.
Thursday’s figures also showed the impact of a portfolio overhaul in which chief executive Mark Schneider has turned over almost a fifth of Nestlé’s portfolio since 2017, selling off underperforming divisions and acquiring businesses such as Lily’s Kitchen pet food and the meal kit group Mindful Chef.
The health science division benefited from a rise in sales of consumer vitamin and mineral supplements under brands such as Garden of Life, Pure Encapsulations, and Persona, pushing sales up 12.2 per cent.
The largest contributor to growth was the Purina petcare division, which surged 10.2 per cent, partly thanks to the rising popularity of Purina Pro Plan, which is marketed for pets with health conditions. Nestle has benefited both from households adopting more animals in the pandemic, and from pet owners spending more on their cats and dogs.
The group has meanwhile expanded its presence in direct-to-consumer businesses such as the meal delivery service Freshly.
Confectionery and bottled water both reported sales declines: confectionery by 1.5 per cent and water 7 per cent.
The Swiss group said it expected growth to continue rising this year, reaching a lasting “mid single-digit” level in the medium term. Schneider said the figure might top 4 per cent in 2021, but that this could not be guaranteed.
“The global pandemic did not slow us down . . . We advanced our portfolio transformation, continued to build Nestlé Health Science into a nutrition powerhouse and expanded our presence in direct-to-consumer businesses,” he said.
The maker of KitKat, Nescafé and Maggi noodles said reported sales, which includes the effects of acquisitions and divestitures, dropped 7.9 per cent to SFr84.3bn last year because of the appreciation of the Swiss franc and sales such as that of its Yinlu peanut milk and canned rice porridge business in China.
Underlying trading operating profit margin rose 0.2 percentage points to 17.7 per cent thanks to cost-cutting and lower marketing spending, despite the operational costs of dealing with the pandemic.
David Hayes, analyst at Société Générale, said: “We believe Nestlé's categories are likely to remain relatively more resilient (though not immune) to a weaker global consumer environment in 2021.”
Nestlé on Wednesday said it had agreed a sale of several US and Canadian bottled water brands for $4.3bn to private equity companies One Rock Capital Partners and Metropoulos.
The group has proposed a dividend increase of 5 centimes to SFr2.75 a share for 2020. Shares in the group dropped 0.69 per cent to SFr99.67 in early trading.