Nestlé optimistic on margin preservation supported by eat “at-home revolution”
“This whole notion of the at-home revolution, that's something I very strongly believe in" - CEO Mark Schneider
Nestlé is optimistic profit margins will be preserved this year as pricing takes effect and an “at-home revolution” supports sales, a trend CEO Mark Schneider predicts will be long-lasting.
Schneider guided to an underlying trading operating profit margin of 17-17.5% in 2022, a closely-watched metric that fell 30 basis points last year to 17.4%. However, two thirds of that decline was due to a lag in price increases filtering through on the back of “significant” input-cost inflation and the rest was related to Nestlé’s purchase of the nutrition assets of The Bountiful Company.
Further pricing will also be initiated this year on expectations inflationary pressures will continue, with Schneider describing the margin target as “conservative” within a “volatile environment” dominated by rising prices for raw and packaging materials, transportation and energy costs, and supply chain bottlenecks.
Presenting Nestlé’s annual results today (17 February) on a media conference call, Schneider was asked why the business has been able to weather the pressure on margins.
“In an environment where we knew from the beginning that we had to price very responsibly, we looked first at all internal efficiency upsides to make sure that we can spare consumers any unnecessary inflation. And it continues to be a top priority in 2022,” he said.
He added: “When you have this compression point, when inflation starts to rise, that temporarily was going to be a drag on our margin. In the future, one of two things is going to happen. Either we’re settling into a regular inflation pattern. And in that case, I think the company can adjust so it’s not a permanent downward pressure on our margin. Or inflation at some point will ease again. Then I think you will see some of those negative effects reversing themselves.”
Schneider described last year’s performance as “strong”, with organic sales growth of 7.5% outperforming 2020’s 3.6%, the fastest pace in five years. And he is sticking with a longer-term target of mid-single digits – 4-6%.
Pet food was pinpointed as a standout amid increased adoption of pets during the pandemic, along with frozen foods, ready meals and coffee as restrictions confined people to their homes. And as Covid eases, Nestlé anticipates flexible working will be supportive of sales.
“This whole notion of the at-home revolution, that’s something I very strongly believe in. And that to me is a longer-term trend that is here to stay,” Schneider said. “As a result of that, at-home consumption of coffee, frozen meals and many other products will probably continue to benefit. [And] there will also be a time squeeze, so convenience will be important.”
However, as the world slowly comes out of Covid, and the elevated pandemic-related retail demand tails off somewhat with the opening up of foodservice, Nestlé has guided to organic growth of 5% for this year.
Schneider explained: “What you may see is short term, year-over-year slowdowns. That’s normal, that’s math. One year that’s very strong, creates a higher base for the next year. But the more important value-creation outlook is mid and long term. And there I think we’re right on story here when it comes to this at-home revolution.”
Despite the rise in the cost of living, Nestlé has not seen a pattern of downtrading by the consumer, except in what the CEO called “mid-range products” and in infant formula. In fact, CFO Francois-Xavier Roger said demand for premium products increased last year, growing 12% organically and accounted for 35% of group sales, which rose 3.3% on a reported basis to CHF87.1bn (US$94.6bn).
Schneider added: “Generally, premium products, as we know from past downturns, do hold up very well. We see most of the pressure in mid-range products. And we have seen some of the downtrading in more exposed economies last year, for example, in developing markets. But overall, with the strength of our premium products, and also some of the efficiencies we were able to gain, we have been able to offset any negative impact.”
However, sales in emerging markets (59%) were robust at 7.8% organic growth, comparing favourably with 7.2% in advanced economies.
There was some downtrading in infant formula to “cheaper solutions” in some markets, with China again weighing on sales in the category as birth rates continued to decline, a phenomena Nestlé noted as being consistent with a world trend during the pandemic.
China has been a baby-food issue for Nestlé in the “past two years” but Schneider has previously emphasised his commitment and made no suggestions today around any planned restructuring. It is a market being “addressed very energetically right now”, he said, adding “the business leadership is now taking very decisive steps and I hope that we can already point to improving results there for the year 2022”.
Plant-based foods were an area of interest during today’s call in light of perceptions the category might be slowing in some markets. Nestlé reported sales in the sector – one Schneider views as a “once in a generation opportunity to revitalise and re-energise our food business” – of CHF800m last year. That represented 16.8% organic growth, well ahead of 12.7% in pet care and 13.5% in the health sciences business.
He explained: “I think our early foray into specialties, in addition to some mainstream products – so think about plant-based alternatives to tuna and shrimp or egg as an example – has clearly paid off and we continue to put significant research and development effort in this area.”
EuroTier 2022: Trade programme takes shape
"Transforming Animal Farming" – this is the guiding theme of EuroTier 2022, reflecting the changes currently embracing the livestock sector, The EuroTier trade fair will take place from 15 to 18 November 2022 at the Hanover Exhibition Grounds and will be supported by an additional digital offering. The focus is on animal welfare, animal health, sustainability, emissions, genetics, husbandry, feeding, digitalization, management, processing and direct farm sales.
With TopTierTreff (‘Top cattle genetics’), Cattle & Pig Event and the International Poultry Event, the networking classics of the world's leading trade fair for animal husbandry professionals will once again be at the start.
You will find all current information available at www.eurotier.com.
We look forward to seeing you in Hanover.
Agriculture Technology and Agrochemical Expo in Ghana West Africa
Agritech West Africa is expecting 100+ exhibitors this edition with over 5000 visitors from the agribusiness community from Ghana & West Africa, and over 100 hosted buyers/ partners from the Agribusiness sector at Accra International Conference Center, Accra Ghana from 23-25 Mar, 2022.
The exhibition is organized under the Auspices of Ministry of Food & Agriculture, Ghana and with support of all major chambers and association in the Agribusiness in Ghana, namely Ghana National Chamber, Association of Ghana Business, Chamber of Agribusiness Ghana, Federation of Association of Ghanaian Exporters, Farmers Organization Network of Ghana etc.
WHY EXPLORE GHANA & WEST AFRICA?
- Agriculture contributes 20% of Ghanaian GDP – largest employing sector with 65% land area in agriculture, where less than 2% is irrigated.
- Ghana is becoming the center of Business and Agriculture transformation in the West Africa region emerging as a trading, manufacturing & manufacturing hub.
- Government schemes like Planting for food & Jobs and Planning for exports co-located with 1 district 1 factory scheme expected to attain agriculture & food processing self-sufficiency and exports.
- Targeted double digit growth in crop production like maize (30%); rice (49%); soybean (25%); and sorghum (28%) from current levels & create 75,000 new jobs, directly and indirectly.
- Very low mechanization in agriculture & food processing along with less than 2% irrigated land area dedicated for agriculture and shortage in storage facilities are key need areas to be focused.
- With a favorable climate for partnership and investment & smooth trade ties, it's advantageous to establish technology / trade partnership in Ghana & West Africa.
- Annually over 10,000+ tractors and associated Agri implements & parts required in Ghana, making it 14% shareholder in Ghanaian Agritech import volume
- Irrigation setups including pipes, pumps motors is the 5th in the row, where only 2% of agricultural land is irrigated.
- Crop care & protection among the top imported products in Ghana’s Agritech sector, followed by levelers, scrapers, mechanical shovels which are second in line with 15% share.
- Fertilizers, Spare parts and machine tools are other products in the top 10 complementing the Agritech requirement of Ghana with a sizable volume.
KEY FEATURE OF AGRITECH WEST AFRICA
| No of Exhibitor | 100+ |
| No of Visitor | 5000+ |
| Exhibiting Countries | 10+ |
| Hosted buyers/partners | 80-100 |
We invite your esteemed participation in the expo and look forward to hearing from you.
Danone backs US meal-delivery firm Splendid Spoon
The French giant has taken part in a Series B funding round for the New York-based business.
Danone has made US meal-delivery firm Splendid Spoon its latest venture-capital investment.
The French giant took part in a Series B funding round for the New York-based direct-to-consumer business, which focuses on ready-made plant-based soups, bowls and smoothies.
Splendid Spoon, which was set up in 2013, said the round had raised US$12m. The company declined to comment on the amount of money it had attracted since it was founded.
Sweden-based investment firm Nicoya led the Series B tranche. Nicoya’s portfolio includes Swedish ice-cream maker Nick’s and local snacks firm Oatlaws. Other investors in Splendid Spoon included Ashok and Meera Vasudevan, the founders of US ethnic-cuisine business Tasty Bite, which they sold to Mars in 2017.
Splendid Spoon, which also refused to be drawn on its annual sales and earnings, said the funds would be used to “scale” its “core product line”, launch more items and hire staff.
Danone made its investment through the Danone Manifesto Ventures VC-style arm the Activia maker set up in 2016.
In a statement, Danone said: “Since its creation in 2016, Danone Manifesto Ventures’ mission has been to invest in disruptive food and food-tech companies which invent new brands, categories and business models aligned with Danone’s mission. With its focus on plant-based diet and a direct-to-consumer delivery model, Splendid Spoon is a great fit.”
Through Danone Manifesto Ventures, the company has so far backed more than a dozen firms, ranging from US vending-machine business Farmer’s Fridge to Drums Food International, the India-based Greek-style yogurt supplier.
In 2019, Danone bought a majority stake in the first company the venture fund had backed, snapping up control of French biscuits-to-yogurt maker Michel et Augustin.
SOUTH AFRICA’S FOOD, DRINK AND HOSPITALITY TRADE EXPO
26 to 28 June 2022 @ Sandton Convention Centre, Johannesburg
Dear Sir’s
We are delighted to invite your esteemed participation in the premier Food & Beverage and Hospitality Exhibition in South Africa – HOSTEX 2022 in Johannesburg happening from 26-28 June, 2022.
HOSTEX is a fully REFRESHED industry platform to launch your INNOVATIONS. The event gives you access to the African market with RENEWED opportunities for business transactions. USE this chance to REINFORCE your RELATIONSHIPS and FORTIFY YOUR BRAND!
Why exhibit HOSTEX?
- Access to the African market
- Face-to-face engagement with decision makers
- New customers to interact with your brand
- Driving sales and brand awareness to industry specific visitors
- Schedule meetings at the show with buyers
South African Food Market:
- The South Africa fast food market size was valued at $2.7 billion in 2018 and is expected to reach $4.9 billion by 2026, registering a CAGR of 7.9% from 2019 to 2026. South Africa is the largest foodservice market in the sub-Saharan Africa with a large and highly competitive hospitality industry.
- The country has a large number of domestic as well as international restaurant chains; thereby, fueling the growth of the fast food segment. This is attributed to increase in demand for different types of fast food products from the target customers.
- According to Southern Africa Food Lab, over the past five years, there has been an increase in consumption of convenience food due to rise in availability of take-away vendors. Moreover, easy availability of fast food products is anticipated to influence the cooking practices, that is, decrease the frequency of home cooking; thereby, increasing the dependency on fast food products.
- Urbanization is one of the major factors that drives the demand for fast food products in South Africa. More than 60% of South Africa’s population lives in urban areas. Out of which, more than half of the population relies on fast food products, owing to increase in rate of employment and adoption of busy lifestyle. This has resulted in an increase in number of transactions from fast food chains in recent decades.
- Food and beverages account for the majority of the country’s imports. Beverages, spirits, vinegar, sugar and residual foodstuffs in particular are imported. In 2017, the total value of these imports was approximately €2.2 billion.
- The demand for imports is increasing. Beer, cereals and poultry meat in particular are areas where demand for imports from all countries of origin is growing. The opportunities export products to South Africa is immense, especially on the B2B market and in E-Commerce.
HOSTEX Statics:
- 5000+ visitors
- 300+ exhibitors
- 30+ participant countries
- 86% influenced decision makers
Participation charges:
- 9sqm built up stall: INR 300,000/-
- 6sqm built up stall: INR 200,000/-
We invite your esteemed participation as an exhibitor in Hostex and look forward to hearing from you.
Regards
Thomas James
Director Wegvoraus
Mob/WA: +91 7827202718
Email: This email address is being protected from spambots. You need JavaScript enabled to view it." rel=" noopener noreferrer" target="_blank">This email address is being protected from spambots. You need JavaScript enabled to view it.
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