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Stockpiling Stokes Strong Growth for Nestlé; Frozens Hot in Zone Americas

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Coronavirus lockdown-driven panic buying of food in many countries has been attributed to the best quarterly performance achieved by Nestlé in five years, as the Vevey, Switzerland-headquartered company posted a 4.3% sales gain during the first three months of 2020. Pricing decreased by 0.4%, however, largely because of the timing of promotions in North America.

A majority of markets, particularly in North America and Europe, saw significantly increased growth in March, partially supported by consumer stockpiling. In China, where the novel coronavirus originated in Hubei Province late last year, a sharp sales decline took place. This was due to government-imposed movement restrictions in place for almost the full quarter, limited consumer stockpiling and Nestlé’s relatively higher exposure to out-of-home foodservice channels.

All markets saw a significant shift from out-of-home to in-home consumption. Out-of-home channels posted negative growth, with significant sales declines for Nestlé Professional (foodservice products), water and Nespresso boutiques. E-commerce sales surged by 29.4%, exceeding 10% of total group sales for the first time in history.

Growth in Zone Americas (AMS) was 7.4%, while pricing slippage was -0.5%. Frozen food posted high single-digit growth, with positive contribution from all brands, particularly DiGiorno, Stouffer’s and Hot Pockets.

Zone Europe, Middle East and North Africa (EMENA) logged 7.1% organic growth and -1.1% in pricing. Western Europe saw mid single-digit organic growth, along with negative pricing; Central and Eastern Europe posted high single-digit organic growth and negative pricing; Middle East and North Africa logged high single-digit organic growth and slightly positive pricing.

Culinary products saw elevated consumer demand across all segments, particularly Maggi and Garden Gourmet vegetarian and plant-based food products.

Organic growth fell by -4.6% and pricing was flat in Zone Asia, Oceania and sub-Saharan Africa (AOA). China’ decline was in double digits, while Southeast Asia maintained mid single-digit organic growth. Sub-Saharan Africa charted double-digit organic growth, and the Japan and Oceania region logged low single-digit organic growth.

Looking ahead during these uncertain times as the world struggles with the coronavirus plague, which as of April 24 has been attributed to almost 188,000 deaths, and more than 2,715,000 confirmed cases of infection, it difficult to forecast the financial impact of the epidemic on business.

In a press release detailing Q1 results, the company stated: “As it is still too early to assess the full impact of Covid-19, we maintain our original full-year 2020 guidance for the time being. We expect continued improvement in organic sales growth and underlying trading operating profit margin. Underlying earnings per share in constant currency and capital efficiency are expected to increase.”