Nestlé sales boosted by Nespresso amid dairy and petcare lift

Kieran Conroy, country manager for Nestle Ireland.

Nestlé sales grew at more than twice the rate analysts expected as the Swiss food giant sold more Nespresso capsules to people working from home and restaurants in Asia stocked up as they started reopening.

The foods giant is benefiting from the best of both worlds: People stuck at home buying coffee and convenience meals, and other markets reopening restaurants that need to replenish kitchen supplies.

Nestlé’s first-quarter report is one of several signals from companies, including luxury brand Hermes and Jameson-maker Pernod Ricard, that a consumer rebound is in full swing. 

Online sales surged

It also shows how the food industry is embracing e-commerce, as online sales surged 40% and now make up a sixth of Nestlé’s sales.

Coffee was the largest contributor to growth, with Nespresso portioned coffee up more than 17%, dairy rising almost 16% and petcare about 9%, Nestle said.

A surge in China made Asia its best-performing region. 

Shoppers in the US loaded up on Lean Cuisine convenience meals, while Nescafé and Starbucks coffee products were strong in Europe.

The 7.7% adjusted sales increase in the first quarter is the fastest in a decade, according to Sanford C Bernstein. 

That sets Nestlé up to reach its long-term goal of annual mid-single digit growth. 

Shares in Nestlé are up just over 2% so far this year. The decline in out-of-home sales to places like hotels, restaurants, and canteens moderated to 12% from 26% in the second half of last year. 

Recovery to pre-pandemic levels

While that business returned to growth in China and Japan, Nestlé expects a full recovery to pre-pandemic levels at the earliest in 2022. 

In the meantime, the company is coming up with new ways to revive the business, such as contactless coffee machines and supporting takeaway services.

Out-of-home revenue accounted for about 10% of total sales before the pandemic.

The Swiss group has weathered the Covid-19 pandemic well so far, as consumers have bought more packaged foods and tried to brighten up lockdowns with Starbucks at-home coffee or making treats with Carnation evaporated milk.

Nestle's health science business benefitted as people bought more vitamins and supplements. Demand for fortified milks boosted dairy too.

"What a blow out – the strongest quarterly number since 2011," Kepler Cheuvreux analyst Jon Cox said, pointing to a recovery in emerging markets, while Bernstein analyst Bruno Monteyne described the figures as an "amazing beat".

The maker of KitKat chocolate bars and Nespresso coffee confirmed its full-year and medium-term sales guidance.

The company expects organic sales growth, which strips out currency swings and acquisitions and divestments, to increase this year. 

• Bloomberg and Reuters