VEVEY, SWITZERLAND — Purina PetCare remains a bellwether for Nestlé, heralded as “the largest contributor to organic growth” in the first three months of the company’s fiscal 2023 year. The company’s science-based and premium offerings continue to drive the company forward through significant cost inflation, with momentum led by its Purina ONE, Purina Pro Plan and Friskies brands.
“Nestlé delivered strong organic growth in the first quarter, as our teams worked diligently to protect volume and ensure resilient mix,” said Mark Schneider, chief executive officer. “Portfolio optimization efforts and responsible pricing helped to offset the ongoing pressures from two years of cost inflation.”
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Pricing for the company’s Purina division increased 12.2%, reflecting the largest price hike rate by business division in the first quarter. Overall, pricing was up 9.8% on average across the company, most notably in Zone Latin America, where it rose 13.4%, Zone North America, where it rose 12.4%, and Zone Europe, where it rose 10.7%.
“After three years of extraordinary challenges and market generations from the pandemic to the war and the surge of inflation, we're seeing a gradual easing on a number of issues,” Schneider said during the company’s first-quarter earnings call on April 25. “This allows us to devote more time and energy to what counts in the mid and long term, and that is continued strategic progress on our various key initiatives to propel, transform and future-proof our company.”
First-quarter sales for Purina PetCare topped 4.67 billion CHF ($5.25 billion USD), up 14.4% from 4.12 billion CHF ($4.62 billion USD) year-ago. Revenue growth for Purina over the quarter significantly outpaced all other Nestlé segments, rivaled only by sales growth in Confectionary at 8.38% and in Nutrition & Health Science at 7.9%. The pet segment is currently the second most profitable for Nestlé, trailing its Powdered & Liquid Beverages unit at 6.22 billion CHF ($6.99 billion USD) in the first quarter.
“PetCare posted continued strong double-digit growth despite capacity constraints,” said François-Xavier Roger, executive vice president and chief financial officer. “Science-based premium and veterinary products saw strong sales developments. Growth was also supported by pricing, continued e-commerce momentum and innovation.”
Purina posted the largest percentage increase for organic growth at 15.7%, soaring above the company’s average of 9.3% organic growth and beating out organic growth for Nestlé’s Confectionary business at 13.5% over the quarter. This trend was reflected in real internal growth (RIG) as well, with Purina posting 3.5% in positive growth, followed only by the Confectionary business at 5.9%. All other segments reported flat or declined RIG, with the company averaging -0.5% RIG in the first quarter.
“We're still having some capacity constraints that are impacting our real internal growth, in particular for PetCare, coffee creamers and Perrier,” Schneider noted.
By region, Purina PetCare was a top performer for Nestlé in Zone North America, where it saw market share gains and benefitted from demand growth on e-commerce. Purina ONE, Purina Pro Plan and Friskies brands posted double-digit growth over the first quarter in North America. The pet segment also drove overall growth in Zone Europe, led by premium brands Felix, Friskies and Gourmet.
In Zone AOA, which includes Asia, Oceania and Africa, Purina brands supported mid single-digit growth in Japan and double-digit growth in Oceania. Purina’s Supercoat, Purina ONE and Felix brands led double-digit growth for the segment in Zone AOA.
In Zone Greater China, Purina saw market share gains and double-digit growth for its Pro Plan dry cat food and veterinary products. In Zone Latin America, Purina supported “strong double-digit growth” in Colombia, Nestlé reported.
Total first-quarter sales for Nestlé were 23.47 billion CHF ($26.37 billion USD), up 5.5% from 22.24 billion CHF ($24.98 billion USD) in the first three months of 2022. Organic growth for e-commerce sales was 13.6%, accounting for 16.2% of the company’s total sales in the first quarter. Organic retail sales growth totaled 8.7%, and out-of-home sales posted 17.8% organic growth.
The company confirmed its full-year fiscal 2023 guidance, expecting organic sales growth between 6% and 8% and underlying trading operating profit margin between 17% and 17.5%. The company also projects its underlying earnings per share to grow between 6% and 10% this year.
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