Toronto, Jan 25, 2021 – Consumer inventories from the spread of COVID-19 helped increase Nestlé’s sales in the first quarter. The company reported a 4.3% increase in organic sales in the first quarter, but Nestlé CEO Mark Schneider adjusted the news to remind people that the consumer goods industry is facing great uncertainty.
As the market slows and competition in the FMCG market increases, companies need to discover new factors to attract more consumers. This should be done by analyzing the different elements of the marketing mix and investing in sustainable market development strategies.
Nestlé is the world’s largest food company with a market value of approximately $231 billion. As of May 2020, it had a market value of more than $247 billion. Nestlé’s products include baby food, medical food, bottled water, cereal breakfast, coffee and tea, sweets, dairy products, ice cream, frozen food, pet food and snacks.
Striving in a competitive consumer goods industry
To be part of a consumer packaged goods company means to be part of a very large family, a group of sister companies and various subsidiaries that sell everyday brands to people every day. The Nestlé family consists of more than 300,000 people in 150 countries and regions, produces more than 10,000 different products, and sells more than 1 billion products every day.
From morning to night, from birth to old age, Nestlé produces products every day. This is billions of dollars in annual revenue, thousands of employees and various other industries that are positively affected.
Compared with mature markets in Europe and North America, there is still huge potential for buyer base growth for many brands in the East Asia and Southeast Asian regions.
In addition, as the process of urbanization continues, many rural families will move to cities, thereby expanding the urban consumer base. Encouraging to try new categories, develop new products to capture more consumption opportunities, and further explore in low-end cities will effectively help Nestlé attract more consumers.
The key to success in the industry is inevitably being able to respond flexibly to competition and flexibly adapt to the latest and greatest consumer trends. The needs and demands of consumers are undergoing tremendous changes, and the markets in which we operate daily are also changing.
Therefore, many large consumer good manufacturing organizations (such as Nestlé) have designated teams responsible for generating market research, insights, and consumer behavior analysis. Ultimately, big data and research push our products to a top-notch level.
However, it is the talents behind our brand that bring expertise, ideological diversity and innovative ideas that provide impetus to our daily processes.
Consumer goods in demand for Nestlé in 2021
In the first quarter, demand for products deemed daily necessities was strong, including cooking products, Purina PetCare, coffee (driven by Starbucks demand), and Nestlé Health Sciences. At the same time, sales of sweets and ice cream have fallen because of reduced impulse purchases and gift-giving demand.
All markets have undergone a major shift from outdoor consumption to household consumption. The companies most affected include Nestlé Professional, Nespresso boutiques (98% closed by the end of March), and outdoor water channels. These businesses account for about 10% of the company’s sales.
Most of Nestlé’s markets (especially North America and Europe) have experienced short-term consumer inventory storage-in EMENA in March and the Americas in the second half of March.
Although the Americas grew organically by 7.4% during the reporting period, sales in China dropped sharply due to travel restrictions and limited consumer inventory, high exposure of outdoor channels, and supply chain challenges related to the Chinese New Year.
Nestlé strategic growth through M&A developments
In terms of mergers and acquisitions, the company is exploring the potential sales of its Lulu peanut milk and canned rice porridge business in China, but it will retain and develop its Nescafé ready-to-drink coffee business, which also operates on the Lulu supply chain platform .
Its sale of its US ice cream business to Froneri for $4 billion ended on January 31, and the sale of a 60% stake in Herta’s deli business to Casa Tarradellas is expected to be completed in the first half of 2020.
The company is expanding its medical nutrition business by acquiring Zenpep gastrointestinal drugs from Allergan, which is expected to close in the second quarter, and in April it acquired the pet food business Lily’s Kitchen.
As a manufacturer of consumer packaged goods, there is fierce competition for retail shelf space and consumer shelf space in consumer homes. The industry has become increasingly market-driven to promote connections between people and the brands they wish to love. Moreover, in recent years, innovation has become a key element in all areas of the industry to produce high consumer satisfaction results and attract brand loyal customers.