Coffee drinkers drive strongest Nestle quarter in a decade, shares rise by 2%

Coffee drinkers, pet owners and home bakers helped to drive the biggest rise in quarterly sales at Nestle for 10 years, as the world's biggest food group outshone Danone and set a high bar for Unilever. 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 ecommerce business also fared well in the first quarter, with sales up 40%, and its 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".

Shares in Nestle, up just over 2% so far this year, were 3.2% higher at 0857 GMT, outperforming the European food sector. 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/divestments, to increase this year versus the 3.6% achieved in 2020. Organic sales leapt 7.7% in the first quarter versus 4.3% in the same period last year, easily beating a forecast for 3.3% growth in a company-compiled consensus and a 3.3% drop in sales posted by peer Danone this week.

Unilever is due to post its first-quarter update on April 29. The Americas, and also Asia where the pandemic struck first last year, showed particularly strong growth, while Europe saw a 4.4% rise. Coffee was the largest contributor to growth, with Nespresso portioned coffee up more than 17%, dairy rising almost 16% and petcare around 9%, Nestle said.

The group's out-of-home business, which sells food and drinks to restaurants, hotels and cafeterias, struggled, although not as badly as earlier in the pandemic. Sales were down 11.6% in the quarter, after falling over 30% last year. The infant nutrition business returned to growth in China, but was under pressure elsewhere as birth rates fell.

Nestle said it had made further progress in reshaping its portfolio, as it expands in health and wellness foods and pulls out of underperforming businesses. It recently sold its North American water brands to One Rock Capital Partners for $4.3 billion and also offloaded its Yinlu peanut milk business in China.

Schneider has said the focus will be more on acquisitions this year. The group recently bought premium water brand Essentia in the United States.

Also read: Nestle net profit rises 14.62% to Rs 602.25 crore in Mar quarter