MILAN — Nestlé ended 2024 with declining sales but slightly better than expected organic growth, coffee was the main driver. The Swiss food giant released today its annual results for 2024. Total reported sales decreased by 1.8% to CHF 91.4 billion, including negative impacts of 3.7% from foreign exchange movements and 0.3% from net divestitures. Organic growth was 2.2%, against expectations for +2.1 %.
Pricing was 1.5%, reflecting a reduction in inflation across most categories after two years of high input cost and price increases. RIG returned to positive growth at 0.8% and was still impacted by soft consumer demand in many markets, including consumer hesitancy towards global brands in certain markets.
Additionally, actions taken to reduce customer inventory in the second half of the year reduced full-year RIG by approximately 20 basis points.
By geography, organic growth of Nestlé was driven by emerging markets and Europe, which together more than offset a decrease in North America. In developed markets, organic growth was 1.2%, with positive pricing and RIG. In emerging markets, organic growth was 3.7%, led by pricing with positive RIG.
Organic growth by product category was as follows:
- Coffee was the largest growth contributor of Nestlé with mid single-digit growth, supported by the three leading coffee brands: Nescafé, Nespresso and Starbucks.
- Sales in confectionery grew at a mid single-digit rate, led by KitKat and key local brands.
- PetCare delivered low single-digit growth, driven by continued momentum for science-based premium brands Purina ProPlan, Purina ONE and Friskies.
- Nestlé Health Science achieved mid single-digit growth, with double-digit growth in the second half of the year.
- Water reported low single-digit growth, with solid growth for S.Pellegrino and supported by the successful launch of Maison Perrier.
- Infant Nutrition sales grew at a low single-digit rate, supported by continued momentum for NAN and Lactogen.
- Dairy posted negative growth, as a decline in coffee creamers and ambient dairy more than offset growth for affordable milks and dairy culinary solutions.
- Culinary reported negative growth, with mid single-digit growth in Maggi more than offset by a decline in frozen food in North America.
By channel, organic growth in retail sales was 2.1%. Organic growth of out-of-home channels was 3.2%. E-commerce sales grew organically by 11.3%, reaching 18.9% of total Group sales.
Nestlé: Results by geography
In Zone North America, beverages (including coffee and coffee creamers) delivered positive growth overall, with new product launches supporting continued strong momentum for Nescafé and Starbucks, offsetting a decrease in Coffee mate.
In Zone Europe, coffee posted mid single-digit growth, driven by Nescafé soluble coffee and Starbucks products.
Coffee saw mid single-digit growth in Zone Latin America, led by Nescafé, with strong growth for Nescafé Dolce Gusto.
In Zone Greater China, coffee posted mid single-digit growth, driven by distribution expansion and new innovations, particularly in Nescafé ready-to-drink offerings.
Nestlé: Gross profit and operating profit
Gross profit was flat at CHF 42.7 billion, and the gross profit margin increased by 80 bps to 46.7%. The gross profit margin reached 47.2% in H1, then declined 90 bps sequentially to 46.3% in H2, driven by higher input costs in coffee and cocoa.
Distribution expenses as a percentage of sales was flat versus the prior year at 8.3%. Marketing and administration expenses as a percentage of sales increased by 90 bps to 19.8%. This comprised: advertising and marketing expenses as a percentage of sales up 40 bps to 8.1%, as we began to step up investment; and administration expenses as a percentage of sales up 50 bps to 11.7% of sales, largely reflecting higher labor costs, the appreciation of the Swiss Franc and one-off items. Research and development costs as a percentage of sales was flat versus the prior year at 1.8%.
Underlying trading operating profit was CHF 15.7 billion, a decrease of 2.2% on a reported basis and an increase of 1.3% in constant currency. The underlying trading operating profit margin was 17.2%, a decrease of 10 bps on a reported basis and flat in constant currency.
Restructuring and net other trading items was CHF 1.1 billion compared with CHF 1.5 billion in the prior year, with the reduction mainly due to lower restructuring costs. Trading operating profit increased by 0.8% to CHF 14.6 billion. The trading operating profit margin reached 16.0%, an increase of 40 bps on a reported basis and 50 bps in constant currency.
Nestlé: Net profit and earnings per share
Net profit decreased by 2.9% to CHF 10.9 billion. Basic earnings per share decreased by 1.0% to CHF 4.19, reflecting the movement in net profit and the impact of the share buyback program.
Underlying net profit was CHF 12.4 billion, a decrease of 2.6%, and an increase of 0.6% in constant currency. Underlying earnings per share was CHF 4.77, a decrease of 0.8%, and an increase of 2.5% in constant currency. The share buyback program contributed 1.1% to the underlying earnings per share change, net of finance costs.
Cash flow
Cash generated from operations increased to CHF 19.6 billion from CHF 19.2 billion in 2023. Free cash flow was CHF 10.7 billion compared to the prior year free cash flow of CHF 10.4 billion, which included CHF 0.6 billion proceeds from the disposal of a financial asset, with the increase primarily due to lower taxes paid and lower cash restructuring costs, as well as reduced capital expenditure.
Dividend
At the Annual General Meeting on April 16, 2025, the Board of Directors will propose a dividend of CHF 3.05 per share, an increase of 5 centimes. Nestlé has maintained or increased the dividend in Swiss francs over the last 65 years. We remain committed to the long-held practice of increasing the dividend in Swiss francs every year.
Nespresso
Nespresso delivered solid RIG-led growth, driven by the continued rollout of Vertuo, particularly in the U.S. and continued good growth in out-of-home channels. Q4 saw the highest quarterly growth of the year, supported by strong seasonal campaigns and the impact of pricing actions. UTOP margin decreased as we invested behind the expansion of Vertuo and structural costs increased.
Segment performance summary:
- Organic growth was 2.2%, with 1.6% RIG and 0.6% pricing.
- Reported sales increased by 0.1% to CHF 6.4 billion, including -2.4% impact from foreign exchange movements.
- The brand achieved market share gains in the U.S., but lost some share in Europe.
- UTOP margin was down 30 bps to 20.0%, driven by increased advertising and marketing investments as well as higher structural costs.
Key sales growth drivers
By geography, sales in North America grew at a mid single-digit rate with continued market share gains. In Europe, sales posted close to flat growth.
By system, growth was driven by the Vertuo system, with strong sales momentum across all geographies. Sales for out-of-home channels grew at a mid single-digit rate backed by the continued rollout of the Momento system.
Comments
Laurent Freixe, Nestlé CEO commented: “In a challenging macroeconomic context and soft consumer environment, we achieved a solid performance in 2024 in line with our latest guidance. Organic growth was 2.2%, with a return to positive real internal growth of 0.8%, and both strengthened in the second half. Free cash flow improved to CHF 10.7 billion, and the Board proposes an increase in the dividend per share to CHF 3.05.
We have a clear roadmap to accelerate performance and transform for the future. Increasing investment to drive growth is central to our plan. This means delivering superior product taste and quality with unbeatable value, scaling our winning platforms and brands, accelerating the rollout of our innovation ‘big bets’ and addressing underperformers. We are creating the fuel for these growth investments through our new CHF 2.5 billion three-year cost savings program. We are making good progress and have already secured over CHF 300 million of these savings for 2025.
From 2025, we expect our actions to drive an improvement in organic sales growth, with a lower underlying trading operating profit margin in the short term as we invest for growth. While there is macroeconomic uncertainty, we have lots of opportunities ahead of us, and we have the strategy, the resources and the people and team to deliver.”
CHF 1= US$1.09542
