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Nestle Reports Strongest Quarterly Growth In 5 Years Driven By Coronavirus Stockpiling

Nestle Reports Strongest Quarterly Growth In 5 Years Driven By Coronavirus Stockpiling
Stockpiling by consumers of everything - from Purina pet food to Nescafe coffee and frozen meals, in an effort to  be prepared for long lockdowns, has helped the Swiss food giant Nestlé to report its best growth in quarterly sales in almost five years.
The company said that in March, it noted strong sales in North America and Europe in particular, which was instrumental in the company notching up a revenue growth of 43.3 per cent on the overall in the first three months of the current year. That was the fastest quarterly growth for the company in almost five years time and it easily beat the market estimates of growth of 3 per cent.
There was double digit growth in sale of Purina Pet care products in North America while the company reported high single digit growth in Nescafe and Coffee Mate drinks in the same market. There was also strong demand for its DiGiorno and Hot Pockets frozen meals which helped the segment to stage a mini revival after a tough period.
The company increase its market share in most of the categories of Nestlé product in Europe, Middle East and North Africa, it the company said. there was also strong performance for Maggi noodles and plant-based products from its Garden Gourmet brand. However its water sales dropped with a drop in people eating out.
“A majority of markets, particularly in North America and Europe, saw significantly increased growth in March, partially supported by consumer stockpiling,” Nestlé said in a statement.
The results pushed Nestle shares up by 1.4 per cent. Nestlé was outperforming rivals, trading at 24.8 times forward earnings compared with 20.9 times for Unilever and 14.5 times for Danone, said Analysts at Jefferies.
On Thursday, Unilever said that there was no growth in its underlying sales in the first quarter. The exposure of Unilever to the emerging markets of much higher than that of Nestle and the novel coronavirus pandemic hit those markets earlier than the rest of the world which resulted in governments ordering strict lockdown orders which subsided consumer spending.
There was a 4.6 per cent drop in underlying sales in Asia for Nestlé because of Chinese customers staying away from restaurants and shops during much of the first quarter even though there was a spike in online sales in the market. Prices had dropped in both North America and Europe, the Swiss company also said.
A program to help you cafes and restaurants that it supplies its products to will be launched by Nestle and it will be worth 500 million Swiss franc, the company said. The company plans to extend payment terms and suspend rental fees for coffee machines. The company also pledged to maintain its orders from its dairy suppliers who have faced “significant demand disruptions.”
“Despite the ongoing challenges in the supply chain and ... fast-changing consumer needs, the company was able to deliver strong growth,” Vontobel analyst Jean-Philippe Bertschy said, adding that the confirmation of its 2020 goals showed Nestlé ’s ability to navigate the coronavirus crisis.

Christopher J. Mitchell

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