Pet food, health product sales cushion Nestle’s COVID-19 impact

By Rahul Vaimal, Associate Editor
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After beating third-quarter estimates, Nestle which is the world’s biggest food group increased its outlook for 2020 organic sales growth to about 3 percent with 4.9 percent growth led by strong demand for pet food, coffee and health products.

The Switzerland-based food manufacturer dealt with the impact of COVID-19 like the slump in food sales to cafes and restaurants better than its rivals by focusing on high-growth categories.

During lockdowns, demand for food and beverages consumed at home remained high, while sales of products consumed from home and on the go, which comprises around 15 percent of Nestle’s sales, dropped 26.4 percent in the third quarter, the maker of Nescafe coffee and KitKat chocolate said in a statement.

Nestle said it wanted to continue to grow its portfolio, especially by expanding its health science business, recently backed by the $2 billion acquisition of Aimmune Therapeutics.

Nestle’s organic revenues rose by 3.5 percent for the first nine months of the year, exceeding the 2.8 percent forecast by analysts.

For this year, Nestle had previously predicted organic growth of 2-3 percent and some analysts said the rise in projections was cautious because 2 percent growth would be enough to achieve it in the final quarter. Nestle said it wanted its margin to be increased.

During the nine-month period, sales in the Americas showed the highest growth rate, while in Asia it was only slightly positive.

The significant Chinese market, where the out-of-home business of Nestle, including its Yinlu peanut milk brand and infant nutrition division have been struggling, returned in the third quarter to positive growth, the company said.

On seeing the increased demand for the health nutrition business during the COVID-19 times, the Swiss company had announced its decision to invest in customized supplements and allergy therapies and is predicting that by the end of 2021 sales will hit nearly $4.4 billion.

Nestle’s chief executive officer Mark Schneider believes that the segment is going to be one of the main drivers for the brand’s growth.