Nestlé revealed that its organic sales growth stepped up in the second quarter of the year, rising to a rate of 3.9% versus 3.4% in the first three months of the fiscal.
Commenting on the group’s performance, which also included margin growth of 100 basis points, Nestlé’s chief executive stressed ‘wonderful things’ happen to income and earnings when the ‘key metrics’ of organic growth and operating efficiency.
Speaking to analysts during a conference call, Schneider reaffirmed Nestlé’s 2020 targets of a mid-single-digit organic growth rate and an underlying trading operating profit margin of 17.5-18.5%. This will be underpinned by the group’s plan to step-up marketing investment behind its brands, supported by lower commodities costs.
The chief executive then singled out what he identified as two growth drivers for Nestlé’s business: further expanding the Starbucks brand in retail and food service and growing its offering of plant-based foods.
Speedy Starbucks: Accelerating global launch
Nestlé entered into a deal to use the Starbucks brand in retail and foodservice with the US coffee chain in August last year. Since then, the company has rapidly moved to develop a retail offering.
Nestlé completed the first wave of the launch this spring, unveiling a line of 24 SKUs in mid-February. It now offers Starbucks products in 14 markets, including Italy and the Netherlands in Europe.
Further countries will shortly be joining the roster, with four additional countries planned this summer. The second wave of roll out, which will involve close to 20 countries, will follow between October and March, Schneider revealed.
Nestlé is also ramping up its innovation efforts behind the brand. It just launched in the creamer category and is planning ‘further SKUs’ in January 2020.
“In all modesty, the Starbucks opportunity is big, really big. We're seeing massive interest, in particular in the Nespresso and Nescafé Dolce Gusto capsule formats,” the chief executive revealed.
While the company now has a full quarter of revenue results for Starbucks, Nestlé is not sharing granular detail on its sales trends. "In markets where we are present, so take Japan and Korea and Asia, take North America, the US market, or take The Netherlands or Italy in Europe, I think market data will show very clearly that this is a successful ramp-up, but it's hard for me to give you any specific summary numbers at this point.
“I have to leave it with this anecdotal assessment because with the low number of markets where we are right now, this will get down into competitive information fairly quickly, and at this point, we're totally committed to maximising this opportunity.”
Plant power: ‘right for you, right for the planet’
On plant-based foods, Schneider noted the ‘strong’ investor and media interest in the space. While this has created the sense of a boom in the sector, Schneider stressed Nestlé has been ‘working hard to create exciting plant-based food choices’ for a ‘number of years’.
He said this development process came in the context of providing consumers with more choices to ‘enjoy more flexible and broad-based diets’.
“It is not about advocating a departure from animal-based proteins,” he stressed.
Schneider believes plant-based food is an area where Nestlé’s innovation clout can be leveraged to deliver competitive advantage. “This plant-based arena is ideal to showcase the speed and the depth of our research and development organisation.
“We believe that plant-based products should not only be delicious but that they should also offer a superior nutritional profile. Right for you, right for the planet. This credo summarises the potential health benefits as well as the lower environmental burden, in particular lower CO2 emissions and water usage.”
He concluded: “We have the ambition and the perseverance to be a major player in this area. Initial results and growth rates are very encouraging, and we see all the elements of a significant long-term trend in the market.”