Nestlé Brews Strong Coffee Growth

Boosted by at-home consumption under global COVID lockdowns, Nestlé has seen double-digit growth in coffee.

Reporting its first-half results, the Swiss food giant said its organic growth, which stood at 8.1 percent, was fuelled by coffee, its largest contributor to like-for-like gains. Nestlé’s three power brands – Nescafé, Nespresso, and Starbucks saw strong demand with Starbucks sales increasing 16.7 percent/ Powdered and liquid beverages gained 11 percent organically.

Innovation has proven to be an important element of the company’s growth.

“New products included a new range of ice coffees, and Kahawa ya Congo, the first organic coffee in the Reviving Origins range. Nespresso also rolled out Momento, a versatile touchless machine that creates specialty coffees with fresh milk for out-of-home channels,” noted CEO, Francois-Xavier Roger.

A big boost for the company, however, came in the structural changes ushered in by COVID-19. Retail consumption of coffee spiked during the pandemic as the out-of-home channel was decimated across several markets.

“While we’re seeing a strong recovery in out-of-home, we’re not back yet to pre-COVID levels,” explained chief executive Mark Schneider.

“In coffee, I think it’s fair to assume, that we will spend a larger part of our time going forward, even after the pandemic, working remotely. And remote for most people means working from home, hence this is exactly our wheelhouse, the at-home consumption of coffee. This is where we’re strongest, and so we stand to benefit with cups consumed at home.”

Highlights from Nestlé’s first-half trading update include:

  • Organic growth reached 8.1 percent, with real internal growth of 6.8 percent and pricing of 1.3 percent.
  • Total reported sales increased by 1.5 percent to CHF41.8bn.
  • Underlying trading operating profit margin was unchanged at 17.4 percent.
  • Updated full-year organic sales growth guidance of between 5 percent and 6 percent. Previously the company had said it was looking towards a mid-single digit rate.
  • Underlying trading operating profit margin is now expected around 17.5 percent, which implies a 20bps year-on-year decline.