Nestlé first-half sales boosted by Starbucks licensing agreement

Nestlé reported a 3.6% rise in organic sales in the first half of the year, as it benefitted from the launch of packaged Starbucks products.

The world’s largest food company posted sales of CHF 45.46 billion ($45.83 billion). Net profit declined by 14.6% to CHF 5 billion ($5.04 billion) as last year’s results were boosted by the sale of the US confectionery unit to Ferrero for $2.8 billion.

In zone Americas, Nestlé’s largest unit, organic growth for the first half stood at 3.9%, with a strong performance in the US and Brazil.

In North America, the beverages category, comprising Starbucks, Coffee-Mate creamers, and Nescafé, posted high single-digit growth. Frozen food saw positive growth led by Hot Pockets and Stouffer’s brands.

In the second quarter, the North America business posted its strongest three months of growth in eight years.

Nestlé’s Europe, Middle East and North Africa unit posted first-half organic growth of 2.4%, with vegetarian-based food products recording double-digit growth in Western Europe. In April, Nestlé announced its biggest move yet into the meat alternative market, launching a plant-based burger in Europe and unveiling plans for a similar product in the US.

Meanwhile, the Asia, Oceania and sub-Saharan Africa business saw solid growth in the first half despite negative sales development in Pakistan due to “challenging trading conditions”. Southeast Asia performed well, with double-digit contributions from Indonesia and Vietnam led by Bear Brand, ready-to-drink Nescafé and ready-to-drink Milo.

Nestlé CEO Mark Schneider said: “We are encouraged by our first-half results and have made further progress toward our 2020 financial goals. Disciplined execution and fast innovation contributed to improved organic growth and profitability.

“Our growth was broad-based with our largest market, the United States, performing particularly well. Across our categories, increased investment behind our brands and in innovation is clearly paying off, as reflected in our strong momentum in PetCare and the return to mid-single-digit growth in coffee.”

Last year, Nestlé paid $7.15 billion in cash for exclusive rights to sell Starbucks products before launching the first items through the license in February.

Schneider added: “Our Starbucks launch has been a great success so far and we plan on further geographic expansion and product innovation to make the most of this unique opportunity.”