Nestlé full-year 2020 report: Immune health trends drive NHSc “nutrition powerhouse”

19 Feb 2021 --- Despite COVID-19 headwinds, the pandemic did not slow Nestlé’s business down throughout 2020, a company spokesperson tells NutritionInsight, commenting on Nestlé’s newly released full-year 2020 financial results.

“We increased sales growth and profitability for the third consecutive year. We didn’t skip a beat on ongoing projects,” they highlight.

Organic growth reached 3.6 percent in 2020, the highest level in the last five years. Real internal growth accelerated to 3.2 percent and pricing contributed 0.4 percent. 

Notably, NHSc grew at a double-digit rate, reflecting higher demand for products that support health and the immune system. 

“Nutrition powerhouse”
Nestlé CEO Mark Schneider details that despite the pandemic’s hardships, his company continued to build NHSc into a “nutrition powerhouse” and expanded its presence in direct-to-consumer businesses.

NHSc sales reached CHF 3.3 billion (US$3.7 billion), with organic growth accelerating to 12.2 percent.

Overall, Nestlé completed acquisitions and divestments with a total value of around CHF 8.4 billion (US$9.4 billion) in 2020.

Total sales for 2020 were CHF 84.3 billion, with NHSc in the top three leading segments.NHSc completed the Zenpep business purchase in May, the acquisition of a majority stake in Vital Proteins in July and the purchase of Aimmune Therapeutics in October.

From 2021 onward, Nespresso and NHSc will be reported as stand-alone operating segments in Nestlé’s published accounts. 

“This change reflects their increased financial contribution and provides greater transparency on their performance,” the company highlights.

The “coming of age” of digitalization 
The Nutrition and Health Science segments were also two of the main growth contributors to e-commerce sales, which grew by 48.4 percent, reaching 12.8 percent of total group sales. 

“We will probably look back to 2020 as the coming of age of digitalization in the food sector,” the Nestlé spokesperson predicts. 

“A lot of this is here to stay. We may not see 50 percent annual growth rates going forward, but we are confident that e-commerce will continue to grow.” 

Pleased with plant-based
Besides being “pleased” with the performance of Purina PetCare and its three coffee brands Nescafé, Nespresso and Starbucks, Nestlé is highlighting the success of its plant-based offerings.

“Consumers are getting more and more interested in plant-based protein sources. Plant-based protein sources help us reinvigorate our entire food category, including prepared and frozen dishes,” says the spokesperson.

Culinary saw high consumer demand across all segments, particularly for Maggi and plant-based products.In European, Middle Eastern and North African (EMENA) markets, the culinary segment saw elevated consumer demand across all segments, particularly for its Maggi brand and other plant-based products. 

Innova Market Insights pegs success in the plant-based arena with its top F&B trend “Plant Forward.” 

The market research predicts the plant-based revolution’s rising mainstream appeal will drive expansion to different regions and categories in 2021.

Global moves in infant nutrition
The EMENA zone saw infant nutrition post positive growth, supported by Russia and the Middle East, with “no particular reason to highlight,” the spokesperson mentions.

The Asia, Oceania and sub-Saharan Africa (AOA) zone witnessed sales in infant formula decline, with improvement in the second half of the year. Here, infant cereals saw double-digit growth.

Outside of China, infant nutrition saw mid-single-digit growth, led by South Asia, Sub-Saharan Africa and Indonesia.

In AOA, a positive sales development for NAN was more than offset by negative growth for infant nutrition brands S-26 and illuma.Decreased sales 
The effects of COVID-19 on Nestlé’s organic growth varied by product category and sales channel. 

As demand for at-home consumption and products with nutritional benefits was strong, Purina PetCare, dairy and coffee at-home segments reported robust growth alongside NHSc. 

Sales in confectionery and water decreased, however, reflecting their high exposure to out-of-home channels and on-the-go consumption.

In 2020, COVID-19-related incremental costs were CHF 420 million, including expenses for bonuses paid to frontline workers, employee safety protocols, donations and other staff and customer allowances. 

Around CHF 260 million of these costs impacted underlying trading operating profit, partially offset by savings such as travel expenses. Overall COVID-19-related costs decreased in the second half of the year, says Nestlé, as movement restrictions eased.

Ahead of the game
“Looking to 2021, we expect continued improvement in organic growth, profitability and capital efficiency in line with our value creation model,” maintains Schneider.

This year, Nestlé envisions a continued increase in organic sales growth toward a mid-single-digit rate and underlying trading operating profit margin with continued moderate improvement. 

Underlying earnings per share in constant currency and capital efficiency are further expected to increase. In terms of mid-term outlook, the company predicts sustained mid-single-digit organic sales growth. 

Moderate underlying trading operating profit margin improvement is set to continue, as well as “prudent capital allocation and capital efficiency improvement.”

By Anni Schleicher