VEVEY, SWITZERLAND — Nestlé shared its full-year 2023 financial performance on Feb. 22, again highlighting Purina PetCare as the “largest contributor to organic growth” for the company. Purina ONE, Purina Pro Plan and Friskies brands led the category with double-digit growth throughout the year, with the company recording nearly CHF 3 billion ($3.4 billion USD) in sales for Purina Pro Plan brand only.
“Pet care posted strong double-digit growth for the fourth consecutive year,” said Mark Schneider, Nestlé’s chief executive officer, during the company’s full-year earnings call on Feb. 22. development… Growth is also supported by the continued momentum of e-commerce and innovation, especially for functional products.”
Note: Swiss franc (CHF) to USD currency conversions are based on conversion rates as of Feb. 23.
Total sales for Purina in 2023 reached CHF 18.86 billion ($21.41 billion USD), up 4.2% from CHF 18.10 billion ($20.5 billion USD) in 2022. Organic growth was 12.1%, outpacing all others division of Nestlé, and real internal growth was reported at 2.8%.
Prices rose 9.3% for the pet food division, representing the second highest rate of price increase behind Water, which rose 10% for the year.
Purina’s underlying trading operating profit was CHF 3.91 billion ($4.44 billion USD), up 5.4% from CHF $3.71 billion ($4.21 billion USD) year-over-year, and the underlying trading profit margin for the division was 20.7 % in 2023, up slightly from 20.5% in 2022. This was supported by “growth leverage and an improved mix, which more than offset the significant increase in advertising and marketing costs,” according to Schneider.
Purina was recognized as a key contributor to Nestlé’s performance in Zone North America, driven by the Purina ONE, Purina Pro Plan and Friskies brands, and in Zone Europe, driven by the Felix, Gourmet and Purina ONE brands. The pet food business saw mid-single-digit growth in Zone Asia, Oceania and Africa (AOA), led by the Purina ONE, Supercoat and Felix brands, as well as in Zone Latin America. According to Nestlé, Purina also contributed to mid-single-digit growth in the Japanese market.
In Zone Greater China, Purina gained market share and experienced double-digit growth driven by “new product launches and strong e-commerce momentum.”
“We continue to see normalization of channel trends across categories with growth supported by momentum in out-of-home and e-commerce particularly for pet care, coffee and Nestlé Health Science,” said Schneider .
Capital expenditures will increase by around CHF 800 million to CHF 6.2 billion ($7.03 billion USD) in 2023, mainly due to investments in the company’s pet care and coffee segments, Schneider added. He noted that the company expects CapEx to return to a more normal level, accounting for 5% of its total sales, by 2025.
“We continue to invest in capital expenditures above historical levels to support the expansion of livestock and coffee production capacity,” Schneider said.
Over the past four years, Nestlé has invested HUF 325 billion (approximately $906.2 million USD) in its pet food manufacturing capabilities in Bük, Hungary, which is expected to increase the company’s annual capacity in the area to half a million tons. The final phase of this investment, which will establish a new pet food plant in Bük, is currently underway.
Source: Nestlé
Overall, Nestlé reported net sales of nearly CHF 93 billion ($105.50 billion USD) in 2023, down 1.5% from CHF 94.42 billion ($107.12 billion USD) in 2022, with organic growth up 7.2%, real internal growth decreased by 0.3%, and inflation increased by 7.5%. Underlying trading operating profit for the company was CHF 16.05 billion ($18.21 billion USD) in 2023, down 0.3% from CHF 16.10 billion ($18.27 billion USD) in 2022, and the underlying trading operating profit margin was reported at 17.3% , up slightly from 17.1 % year-over-year.
“Unprecedented inflation over the past two years has increased pressure on many consumers and affected demand for food and beverage products,” Schneider said. “In this challenging context, we delivered strong organic growth and solid margin improvement with increased marketing and other growth investments.
“… In 2024, we are prioritizing volume and mixed growth with increased brand support, as we increase value for consumers through active innovation and customization, premiumization, affordability and healthier options, ” he added. “We will continue to focus capital allocation on our fast-growing billionaire brands, enabling us to deliver reliable growth while enhancing brand loyalty.”
Nestlé expects organic sales growth of around 4% in fiscal 2024, with underlying earnings per share growing between 6% and 10%.
“To drive market share gains, our top priorities are delighting consumers through differentiated offerings and focusing on efficient execution,” concluded Schneider. “We are confident that we have the right strategy, portfolio and capabilities to deliver on our targets by 2025.”
On track to net zero
Nestlé also published its “Creating Shared Value and Sustaining” report on Feb. 22, detailing its progress toward net zero emissions. By 2023, Nestlé has reduced its greenhouse gas (GHG) emissions by 13.5% compared to its 2018 baseline, and is set to reach a 20% reduction in GHG emissions by 2025.
The company is also tracking its emissions for specific gases, including methane, to decrease by 15.3% from 2018 to 2023.
Nestlé continues to implement renewable energy throughout its operations. The company reports that 91.9% of electricity used in global manufacturing will come from renewable sources by the end of 2023, and will continue on this path towards 100% renewable energy.
Along the value chain, Nestlé works with farmers and suppliers to reduce its Scope 3 emissions. By the end of 2023, the company noted that 15.2% of raw materials will be sourced from suppliers using regenerative agriculture and addressing their own emissions. Nestlé hopes to increase this number to 20% by 2025, as it strives to reduce fossil fuel use in packaging and distribution.
“If you look at the 2018 baseline and when you look at the continued growth of the company since then and then the 13.5% net reduction, it’s very clear that we have successfully decoupled the growth of the company from the growth of our greenhouse gas emissions, and in I think it’s very safe to see,” Schneider said.
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