VEVEY, SWITZERLAND — Nestlé got off to a slow start in 2024, met with headwinds in the North American market. Nearly all product segments posted year-over-year net sales declines for the first three months of 2024, except for its Confectionary division, which posted 0.6% growth. And while the company’s Purina PetCare division reported a 1.7% year-over-year decline in sales, it was still Nestlé’s top contributor to organic growth over the quarter.
“We had expected a slow start and see a strong rebound in RIG [real internal growth] in the second quarter with reliable delivery for the remainder of the year,” stated Mark Schneider, chief executive officer, Nestlé. “A wide range of growth initiatives across the group are now starting to deliver.”
Purina reported 4.59 billion CHF ($5.02 billion USD) in sales, down slightly from year-ago 4.67 billion CHF ($5.11 billion USD). Real internal growth for the segment was -0.4%, while organic growth was reported at 4.3%. Segment pricing increased 4.7% over the quarter.
Nestlé attributed Purina’s strong organic growth to “continued momentum for science-based premium brands,” including Purina ONE, Fancy Feast and Friskies.
“As expected, PetCare growth moderated to mid-single digits, following four consecutive years of double-digit growth,” said Anna Manz, chief financial officer at Nestlé, during the company’s three-month earnings call on April 25. “This deceleration is largely a factor of slowing pricing, with category fundamentals continuing to remain healthy and the latest Nielsen research showing an increase of nearly 2% in the US pet population.”
Purina was the largest contributor to organic growth in Zone North America, led by e-commerce sales. The segment’s Fancy Feast, Friskies and Purina ONE brands grew strongly over the quarter, according to Nestlé.
In Zone Europe, growth for Purina ONE, Felix and Gourmet brands made Purina a “key contributor to growth,” Nestlé shared. In Zone Latin America, Purina’s Alpo and Felix brands contributed to low single-digit growth for the segment.
In Zone Greater China, Purina experienced double-digit sales growth thanks to product innovation and e-commerce gains, according to Nestlé, particularly for its Pro Plan and Fancy Feast brands. Market share gains for pet food were observed in each operating zone.
Nestlé shared ambitious plans for innovation in its Purina PetCare portfolio over the next two years. The company recently completed a $450 million facility in North Carolina, and expects its greenfield plant in Ohio to be fully operational within 12 months.
“In Purina Petcare, in the United States alone, we plan to launch over 100 new products across the year as we take advantage of our new capacity,” Schneider said. “Across 2024 and 2025, we will re-enter segments we had opted out of when supply was constrained. We will feed new products into our brand growth engines, significantly expanding the microbiome-focused line-up for our Purina ONE True Instinct dog food. These products apply some of the best of our scientific and nutritional expertise.”
Overall, Nestlé reported 22.09 billion CHF ($24.18 billion USD) in net sales, down 5.9% from the first three months of 2023. Real internal growth was down 2%, while organic growth was clocked at 1.4%. Pricing across the company increased 3.4% over the quarter.
Sales decreases in North America were offset by organic growth in Europe and emerging markets, Nestlé reported. For example, organic growth for emerging markets was 4.1%, compared to -0.4% in developed markets. In North America, US frozen foods and soft consumer demand were the main headwinds.
According to the company, recent portfolio transformations have made beverages and pet care segments a greater portion of its business, and this transformation is part of the company’s strategy to foster future growth in Zone North America. In 2018, pet care made up 31% of Nestlé’s business and beverages made up 16%. Today, pet care accounts for 44% of the business, and beverages accounts for 24%.
E-commerce sales outpaced in-store retail sales in the first quarter, with e-commerce up 6.1% and in-store retail up 1.4%. Online sales now account for 17.4% of Nestlé’s total group sales.
For its full-year fiscal 2024 guidance, Nestlé expects organic sales growth around 4% and a “moderate increase” in underlying trading operating profit margin, the company stated. Earnings per share is expected to grow between 6% and 10% from 2023.
“Nestlé’s top priorities remain to execute with excellence, leverage our science and nutrition expertise, and drive growth with our billionaire brands,” Schneider said. “We reiterate our 2024 guidance and look ahead with confidence.”
Read more about corporate strategy, financial performance, mergers and acquisitions on our Business page.
