Nestlé Health Science delivers 6.6% growth, sales surge due to infant formula shortages

28 Jul 2022 --- Nestlé’s Nutrition & Health Science marked a CHF 7.7 billion (US$8 billion) sales growth in the first half of the year, the company’s latest financial results have revealed. The Infant Nutrition segment returned to positive growth in China, reaching an unspecified high single-digit rate.

Nestlé’s CEO Mark Schneider explains the company was not immune to inflationary pressures and supply chain challenges, as vitamins, minerals and supplements reported low single-digit growth, following strong growth in H1-21 and H1-20 boosted by pandemic-related demand and supply chain constraints.

“We see vitamins, minerals and supplements as a key growth platform going forward given strong market growth, leadership positions and differentiated offerings,” a Nestlé spokesperson tells NutritionInsight.

“Underlying category fundamentals remain strong following increased interest from consumers in health, well-being and immunity as a result of the pandemic.”

Inflation and supply chain issues are leaving nutrition companies struggling to obtain the necessary ingredients they need for their products, with shipping delays and price hikes exacerbating the issues. 

Investments behind capital expenditure, digitalization and sustainability increased significantly, the company says.Impact of external factors
The company implemented price increases “in a responsible manner,” according to Schneider. Its organic growth reached 8.1%, with real internal growth of 1.7% and 6.5% pricing.

“We limited the impact of unprecedented inflationary pressures and supply chain constraints on our margin development through disciplined cost control and operational efficiencies. At the same time, investments behind capital expenditure, digitalization and sustainability increased significantly.” 

Supply chain disruptions and inflationary pressures have been exacerbated by the war in Ukraine and extreme weather events related to climate change, the company notes.

“People’s purchasing power has been reduced.”

Profiting over formula shortages
Baby food posted strong growth, fueled by new launches for Gerber in healthy snacking and high demand for organic plant-based offerings.

The company’s infant formula products recorded strong growth following supply shortages in the US market. Nestlé was among the companies exporting products to the US under Operation Fly Formula, aiming to boost supplies amid a nationwide shortage with consumers desperate for infant formula.

Sales in Infant Nutrition grew at a double-digit rate, based on strong momentum for human milk oligosaccharides products. Specifically, Latin America, North America and the EU saw market share gains in the segment.

The company previously pledged it would end the promotion of formula marketing for infant products up to six months of age across the globe. The announcement was met with skepticism by the World Health Organization and observers who said they were concerned the company would try to indirectly market the products. 

Healthy aging and medical nutritionNestlé’s US exports boosted infant formula sales, as the country grappled with shortages. 
Nestlé Health Science recorded high single-digit growth at 6.6%, with sales reaching CHF 3.2 billion (US$3.3 billion) driven by Medical Nutrition and healthy-aging products, which grew at a double-digit rate, supported by Boost and Nutren brands. 

Medical Nutrition reported double-digit growth, with strong sales developments for pediatric products. Earlier this year, Nestlé Health Science announced it would acquire Brazil-based Puravida, expanding its presence across the vitamins, minerals, herbals and supplements segment.

Orgain, the newly acquired plant-based nutrition business, posted strong double-digit growth based on innovation and increased distribution.

Meanwhile, Dairy reported mid-single-digit growth, with strong sales developments for coffee creamers and affordable nutrition offerings. Eyeing specific markets, sales in North America grew at a high single-digit rate. Europe saw positive growth. Other regions combined posted double-digit growth.

Micronutrient fortification
Looking ahead, the company aims to focus on offering “ affordable, nutritious food to lower-income consumers.” 

Eying Pakistan, where Nestlé says one in two children are iron deficient, the company seeks to focus on micronutrient fortification. It is also active in the Central and West African regions. 

The company is also expanding its nutrition education programs and partnerships. 

In May, Nestlé Health Science announced its double-digit growth was driven by supplements, while its Infant Nutrition segment suffered a sales decline.

By Andria Kades