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Nespresso and pet food help Nestle to record sales

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LaToya Harding
·Contributor
·3-min read
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Coffees are poured for a tasting at the Nespresso production plant, part of food giant Nestle, in Romont, Switzerland, August 30, 2016. Picture taken August 30, 2016. REUTERS/Denis Balibouse
The Zurich-based company, which is the world’s largest food group, said consumers were snapping up Nespresso pods, Nescafe instant coffee and Starbucks-branded products. Photo: Reuters/Denis Balibouse

A demand for coffee, dairy products and pet food sent sales at Nestle (NESN.SW) soaring to its strongest quarterly growth in a decade.

The Zurich-based company, which is the world’s largest food group, said consumers were snapping up Nespresso pods, Nescafe instant coffee and Starbucks-branded products as sales grew 7.7% on an organic basis - higher than analysts had forecast.

Volume increases for dairy products were achieved in part thanks to lockdown trends like home baking.

The company also expanded its ecommerce business over period, which now makes up a sixth of its sales, and its health science portfolio as people become more concerned with well-being. 

Although more people bought online as they were forced to stay at home to curb the spread of coronavirus, retail sales saw solid growth and its out-of-home channels reported signs of improvement.

The maker of KitKat chocolate bars confirmed its guidance for the year and expects an increase in organic sales growth compared to the 3.6% achieved in 2020.

During the first quarter of this year it was also boosted by an economic recovery in China. This made Asia its best-performing region.

Nestle said it expects a full recovery to pre-pandemic levels at the earliest in 2022.

Shares were more than 3% higher on the back of the news, outperforming the European food sector.

Nestle shares jumped on Thursday on the back of the news. Chart: Yahoo Finance
Nestle shares jumped on Thursday on the back of the news. Chart: Yahoo Finance

"We are pleased with Nestlé's strong organic sales growth in the first quarter, building on broad-based contributions from most geographies and product categories,” Mark Schneider, chief executive, said.

“Our growth was fuelled by disciplined execution, enhanced digital capabilities and rapid innovation, resulting in further market share gains.”

Nestle added that it had made further progress on portfolio development as it aims to offer more health and wellness foods and dispose of underperforming divisions.

It recently sold its North American water brands to One Rock Capital Partners for $4.3bn (£3.1bn) and offloaded its Yinlu peanut milk business in China to Food Wise.

Schneider has previously said the company’s focus will be on more acquisitions this year. The group also recently bought premium water brand Essentia in the United States.

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He added: “The development of COVID-19 vaccines has given the world hope and we are supporting the broad and equitable delivery of vaccines in the communities where we operate.

“Our partnership with the International Federation of Red Cross and Red Crescent Societies is helping to get vaccines to those who need them most. In these challenging times, we can truly demonstrate how business can act as a force for good and help accelerate the recovery."

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown said: “Nestle is doing what it says on the tin – despite the pandemic, Nestle is still Nestle – the same consumer staple. 

"It has of course had to grapple with changing spending habits, as out-of-home consumption dried up. But the group’s still leading with an aggressive increase in volume, which is something we liked about Nestle before COVID, and that hasn’t changed.

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