News
Nestlé’s real internal growth recovers
Nestlé’s half-year results for 2024 have shown that its RIG – the sum of volume and mix – has grown, reaching 0.1% in the first quarter of the year and strengthening in the second to 2.2%.
Commenting on the results of 2024 so far, the group’s CEO, Mark Schneider, said: “Positive real internal growth is back. We delivered improved volume and mix growth across the Group in the second quarter.”
During an investor’s call, he emphasised the importance of this metric to the company, adding that the increase in RIG was broad base across geographies and categories.
“We continue to improve our market share,” he said. “We’re managing price in what is a tough consumer environment. We’ve made good progress in our Nestle Health Science Business – that swing was very important to us and sets us up for strong second half in this business, where we’re seeing, now, good category growth.
“In essence what we’re doing here is delivering for consumers, which is key, and that’s what we remained focused on. That is the Nestle way – we manage the short-term while building for the long term.”
Organic growth drivers
The business’s organic growth was driven by Europe and emerging markets, which saw 4.5% and 3.7% growth respectively.
Coffee was the largest organic growth contributor for the group, supported by its brands Nescafé, Nespresso and Starbucks.
Pet care also delivered mid single-digit growth, driven by continued momentum for its science-based premium options, such as Purina Pro Plan.
Meanwhile, dairy witnessed close to flat growth, as dairy culinary solutions delivered robust growth, offsetting a sales decline in coffee creamers and ambient dairy.
Sales in confectionery grew at a high single-digit rate, led by its KitKat brand. While growth in Nestlé Health Science turned positive, with sales improvements across most segments in the second quarter.
By channel, organic growth in retail sales was 2.0%, and e-commerce sales grew by 10.6%, reaching 18.2% of total group sales. Organic growth of out-of-home channels was 3.8%.
Pricing and profits
Pricing came down faster than the company anticipated, decelerating to 0.6% in the second quarter. This reflected a high base of comparison in 2023 and a climb in growth investments.
The group’s gross profit margin increased by 160 basis points, reaching 47.2%, driven by pricing, lower input costs and portfolio optimisation.
Among the lower costs was distribution, with percentage of sales decreasing by 10 basis points to 8.5%, mainly as a result of lower freight and energy prices.
What's next?
Commenting on the future, Schneider said: “Looking ahead to the remainder of the year, we will continue to drive RIG by launching innovations that address consumer trends and growing our large iconic brands.”
He added that the surprisingly speedy falling prices will see the group tweaking its guidance for the year, with organic sales growth now expected to be at least 3%.
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