Dairy growth flattens at Nestlé

Nestlé’s half-year 2024 results revealed a mixed picture for its dairy portfolio. 

The company reported market share losses in Zone Latin America (LATAM) and Asia, Oceania and Africa (AOA) and negative growth for its infant nutrition business in Greater China.

The company posted a slight decline in milk products & ice cream sales year-on-year (in millions of CHF) and an almost flat growth across dairy as portfolio optimizations and market dynamics affected performance. The company also reported a decline in coffee creamers and ambient dairy and ‘robust growth’ in dairy culinary solutions. In contrast, milk products & ice cream delivered high single-digit growth in HY23 with strong demand for coffee creamers and affordable fortified milks. 

Nestlé also reported market share losses in dairy in Zone LATAM and AOA. In LATAM, culinary brands La Lechera and Carnation delivered strong growth and dairy sales grew at a low single-digit rate.

Zone Asia, Oceania and Africa also reported market share losses in dairy but positive growth thanks to affordable milks and culinary solutions. Nestlé’s infant nutrition portfolio also grew at mid single-digit rate led by NAN and Lactogen.

In Greater China, the company’s infant nutrition portfolio posted negative growth that outperformed a category decline, as well as negative growth in dairy. A Nestlé spokesperson did not specify the extent of the infant nutrition decline in the region, saying only that the company “continue(s) to gain share globally and deliver positive growth through premium and affordable offerings”.

China is the largest market for infant nutrition products​ with nearly 50% market share in value. But shrinking birth rates have prompted manufacturers to pivot into other segments​, such as adult and affordable nutrition.

Addressing the sales decline in coffee creamers and ambient dairy, the Nestlé spokesperson said: “There is high competitive and promotional intensity in the coffee creamers business. We had to adapt to market conditions and have adjusted price gaps in coffee creamers.

“Our dairy business has also been impacted by portfolio optimization, i.e. we focused on fewer better performing products. In terms of geographic focus, our dairy business is heavily skewed to Asia, where we were exposed to some challenging market dynamics such as an inflationary environment in China.”

The Nestlé representative added that the company will continue to focus on affordable nutrition products and products with functional benefits going forward, including its N3 milk range​ of powdered dairy products formulated ‘for the whole family’.

Another potential growth avenue for the food major is through e-commerce, where the share of Nestlé sales have grown to around a fifth (18.2%) of its total group sales. We were told Nestlé is aiming for a 25% share of group sales from e-commerce for 2025, which will have ‘a significant impact’ on all markets, brands and roles.

Across the group, the company narrowly managed a positive real internal growth (RIG) of 0.1% thanks to improved volume and mix growth in Q2, with underlying sales of CHF45.0bn. Increased sales of PetCare, coffee and confectionery, notably KitKat drove organic growth to 2.1%, driven almost entirely by pricing. Pricing however has come down faster than expected, the company noted, leading it to adjust its FY24 growth outlook to at least 3% from around 4% previously.

Nestlé’s shares slid 4.8% following the half-year results announcement and were trading at -5.09% at the time of writing.