The Swiss group’s confectionery division grew revenues by 1.5% in fiscal 2017 to CHF 8.8bn ($9.5bn), which represented 0.3% organic growth and 1.4% real internal growth.
Confectionery’s organic growth was the slowest of the company’s seven business segments. Powdered and liquid beverages was the strongest unit, posting 3.6% organic growth.
The company saw confectionery sales growth in its zone EMENA driven by product launches.
Nestlé Group 2017 results
Full year revenues for the Nestlé Group were up 0.4% to CHF 89.8bn ($97bn). This represented 2.4% organic growth, which was at the lower end of its full-year guidance of 2-4% growth. Group e-commerce organic growth was up 32% for 2017, excluding the Nespresso business.
Premium driving growth
François-Xavier Roger, CFO of Nestlé, said: “Innovation is the main driver of our growth…about a third of our products [across all categories] are either new or renovated every year."
He said: “One way to innovate and to develop our sales is through premiumization."
Around 21% of Nestlé group sales in 2017 came from ‘premium products’, which it defines as products with a 20-30% price premium against mainstream brands.
“The contribution of premium products almost doubled in the last five years – it was 11% in 2012 and 21% in 2017,” said Roger.
In confectionery, Nestlé has seen success in Europe with premium chocolate brand Les Recettes De L’Atelier, which launched in Switzerland and France in 2014.
The brand recently expanded to the UK, exclusively in supermarket Sainsbury’s for the next 12 months.
Doing it my own-store way
Lindt said in 2016 its Lindt cafés were the secret behind it outpacing sales in the overall chocolate market in recent years. Ferrero recently branched out into retail by opening its first Nutella café, based in Chicago.
Nestlé also sees growth prospects in a direct-to-consumer model, which are own-brand retail or online shops that cut out third party retailers, such as Nespresso and KitKat stores.
Almost 8% of Nestlé group sales came from direct-to-consumer products in 2017, compared to 6.6% in 2015.
The company recently expanded KitKat Chocolatory shops beyond Japan to Malaysia and Australia.
“In Japan, 14% of our total sales are direct-to-consumer sales,” said Nestlé CFO Roger.
Nestlé last month opened a Hsu Fu Chi retailer in China. The company acquired a majority stake in confectionery business Hsu Fu Chi (60%) in 2011 for $1.7bn.
Out of US confectionery
Nestlé sold its struggling US confectionery business, including brands such as Crunch and Butterfinger, to Ferrero for $2.8bn last month.
Nestlé said the US confectionery business accounted for around $900m in annual sales, but posted sales declines from 2015 to 2017.
The company announced in December 2017 it would acquire North American supplements business Atrium Innovations for $2.3bn.
Mark Schneider, CEO of Nestlé, said during a press conference today, the move allowed “a sales profile in North America and a strategy that is much more aligned with our nutrition, health & wellness goals”.
Nestlé said it was committed to global confectionery when it sold the US candy division last month.
Two days after it announced the sale, Nestlé said it would become the first company to launch a consumer brand with Barry Callebaut’s ruby chocolate by introducing KitKat Chocolatory Sublime Ruby in Japan and Korea.
But it also sold Australian chocolate brand Violet Crumble to local confectioner, Robern Menz, for an undisclosed sum the same month.
Nestle forecasts 2-4% organic sales growth in fiscal 2018 for the group.