At-Home Coffee Boom During Pandemic Powers Sales at Nestle
April 22 2021 - 6:53AM
Dow Jones News
By Nick Kostov
Consumers stuck at home drinking coffee powered Nestle SA to its
best quarterly sales growth in almost a decade.
The world's biggest packaged-food company on Thursday reported a
7.7% rise in first-quarter organic sales, which strip out currency
fluctuations, acquisitions and divestitures, driven by strong
demand for Nespresso pods, Nescafé instant coffee and
Starbucks-branded products. That performance handily beat analyst
expectations of 3.3% sales growth.
Nestle said coffee was the largest contributor to growth, with
gains in North America and Europe. Nespresso products were
particularly popular, with sales rising 17.1%, fueled by
market-share gains in North America and demand for its Vertuo
coffee machines.
When the pandemic hit last year, consumers bought whatever
coffee they could find as offices closed around the world and they
faced shortages at supermarkets. But after months of restrictions,
coffee drinkers have invested in espresso machines, French presses
and pour-over brewers as they look to upgrade their coffee
experience and replicate what they were getting in cafes at
home.
"We clearly benefited from people enjoying their coffee at home
rather than in the office or the cafeteria," a Nestle spokesman
said.
The Swiss company has made coffee a priority in recent years as
part of an overhaul to focus on product categories that it says
have the strongest growth potential, while selling noncore
businesses like U.S. confectionary.
In one of its biggest moves, Nestle in 2018 agreed to pay
Starbucks Corp. more than $7 billion for the rights to sell the
Seattle chain's packaged coffee beans, single-serve coffee packs
and other products through retail and grocery stores. It has also
gone after young and hip coffee drinkers by acquiring smaller
brands, including Austin, Texas-based Chameleon Cold-Brew.
Last month the company said it would invest in the expansion of
its Nespresso production and distribution centers in Switzerland to
meet growing consumer demand world-wide.
Nestle's challenge now, some analysts said, is seeing whether it
can keep its pandemic momentum going as some major markets, like
the U.S. and U.K., begin to emerge from the crisis.
In coffee, the company is rolling out new touchless machines to
offer safer cups for workers returning to offices, while trying to
retain the boom in at-home consumption with a range of new products
and flavors.
James Edwardes Jones, an analyst at RBC, said that while he
thought the Nespresso numbers were impressive, he didn't think it
was the start of a long-term trend.
"That growth isn't sustainable for them," he said.
Still, Nestle has performed well over the past year as consumers
stuck at home splurged on familiar foods from big brands for them
and their pets.
In the first quarter, the maker of Nesquik cereal, Friskies cat
food and Häagen-Dazs ice cream posted strong sales in dairy
products, led by demand for home baking products and fortified
milk, as well as pet care, which has been on a tear over the past
year.
E-commerce was another bright spot, with sales, fueled by
Nespresso products, rising 40% to reach one-sixth of group
sales.
Nestle also flagged signs of recovery in its out-of-home
business, selling to places like restaurants and hotels, as
pandemic restrictions ease in some parts of the world. China was
its best selling region in the quarter.
The company's first-quarter sales were also boosted by higher
selling prices, up 1.2%, to cover rising commodity costs. Other
consumer products companies have also flagged price rises,
including Procter & Gamble Co. earlier this week.
(END) Dow Jones Newswires
April 22, 2021 07:38 ET (11:38 GMT)
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