The firm revealed in its 2020 Full Year Results announcement that its businesses in Zone Asia, Oceania and sub-Saharan Africa (AOA) had seen overall organic growth of just 0.5%, with sales decreasing by CHF 1.4bn (US$1.6bn) to CHF 20.7bn (US$23.1bn) in 2020, from CHF22.1bn (US$24.6bn) in 2019.
“Growth numbers in APAC were mostly impacted only by China, where we faced some specific issues such as our exceptionally high exposure in that market to the Out-Of-Home category which was severely hit by COVID-19, as well as Chinese consumers not stockpiling food supplies at home in contrast to what was seen in most other markets,” Nestle CFO Francois-Xavier Roger said in response to queries from FoodNavigator-Asia.
“There was also the issue of the timing of Chinese New Year occurring earlier than usual last year but later this year, meaning we did not pick up any of the usual boom in sales [for the financial year].
“Without China, the APAC region actually showed mid-single digit growth in 2020, with countries such as India, Malaysia, Thailand growing by a lot, some even by double digits. So we do expect that growth will go back to mid-single digits both in and out of China moving forward, and especially emerging markets will continue to grow strongly.”
Moving forward, Nestle CEO Mark Schneider said that plant-based products are expected to become a major driver of growth in APAC markets for the firm, and Nestle will also take pains to ensure that all products are localized according to local requirements.
“We are definitely very committed to the APAC markets and rolling out plant-based products in these markets – apart from the production plant and manufacturing investments which are already in place, we will also make sure to localize these products according to local requirements,” he told us.
“These products will be tailored according to local Asian needs and tastes as part of our local commitments, which means we will not just be copy and pasting what we have done in other markets over to Asia.
“There is a global effort on the way [pertaining to plant-based] and the APAC region is to us a very important part of that, just as important as our other markets such as Europe and the US [which also have plant-based products available].”
Nestle currently has two plant-based production plans in the Asia Pacific region, one in China which opened in December 2020, and another in Malaysia – read more about specific plans for plant-based production for the region in this exclusive interview with Nestle Malaysia CEO Juan Aranols here.
Sustainability efforts
Nestle uses a great deal of dairy in its supply chains for various products, so iIn addition to pushing for plant-based production, the firm is also looking for ways to make milk production more climate friendly.
“In countries [where we source our milk] like New Zealand and China which are both very traditional dairy markets, we are working to make dairy more sustainable and are committed to advancing state of the art technology to do this,” Schneider said.
“We are seeing some significant progress, and especially in China we have a Dairy Farming Institute in the northern part of the country [where] we have been quietly contributing and helped thousands of smallholder farmers ramp up and modernize their farms with training and technology.
“Agriculture accounts for nearly two-thirds of Nestlé’s total greenhouse gas emissions - dairy and livestock makes up about half of that, [yet] milk is an excellent source of nutrients and one of our key raw materials [so] significantly reducing the carbon footprint of dairy is therefore a must.”
The firm also has plans to establich nine new net zero pilot farms globally this year, to learn and roll out best practices across dairy farms.
Affordability
Nestle highlighted overall key growth platforms for 2020 as e-commerce (accounting for 12.8% of sales), premium products (30%) and affordable offerings (8%). For emerging markets in Asia though, the latter undoubtedly was a key factor for growth.
“Although premiumisation is a key component of our portfolio transformation, [we also see the importance of] affordable products, particularly when it comes to dairy and food,” said Roger.
“Examples of these affordable products include Bear Brand Milk in the Philippines, which showed increased consumer demand [in 2020] and led sales growth at a high single-digit rate.”
Organic sales growth of Nestle’s affordable products to over 8.1% in 2020, almost double the 4.3% seen in 2019.
Schneider also reinforced the company’s pledge to continue its work in the confectionery and chocolates space whilst simultaneously improving these from a nutritional point-of-view.
“It is very clear that these categories are there for enjoyment – we do not intend to only make products aiming to advance health, but also provide products that can give consumers enjoyment whilst simultaneously making sure to provide these with better nutritionals,” he said.
“There is a lot of innovation going on in this space, [and] we definitely still see big opportunities here.”
