Nestle to review vitamins business as H1 organic sales beat forecast
posted better-than-expected first-half organic sales growth on Thursday as the world's biggest packaged food company announced a strategic review of its vitamins business that could lead to the divestment of some brands.
The Swiss company maintained its 2025 outlook, saying it still expects organic sales growth to improve and estimates an underlying trading operating profit margin at or above 16%.
Nestle's results may ease investor pressure on CEO Laurent Freixe, who was appointed a year ago to revive the company's share price and sales after the business struggled following the pandemic.
The company's share price has risen around 4% this year but lagged rivals like Unilever and Danone since Freixe's appointment in August last year.
Nestle, the maker of KitKat chocolate bars, Nespresso coffee and Maggi seasoning recently announced that Chairman Paul Bulcke would step down. Reuters reported the decision followed rising investor unease over the tenure of Freixe's predecessor and concern about the firm's corporate governance model.
Organic sales growth, which excludes the impact of currency movements and acquisitions, rose 2.9% in the six months through June, Nestle said, just above analysts' average forecast of 2.8%.
Total reported sales decreased by 1.8% to 44.2 billion Swiss francs ($55.8 billion), compared to analyst expectations of 44.6 billion francs. Nestle said this included the negative impact of 4.7% from foreign exchange, given the Swiss franc's significant strengthening.
Freixe said in a statement that Nestle was taking steps to address underperforming business cells and was focussing on winning premium brands in the Vitamins, Minerals and Supplements business.
"We have launched a strategic review of our underperforming mainstream and value brands, including Nature's Bounty, Osteo Bi-Flex, Puritan's Pride, and U.S. private label, which may result in the divestment of these brands," Nestle said.
Nestle's 2.7% price increases were above the average analyst estimate of 2.5%. Real internal growth - or sales volumes - rose 0.2% versus expectations for a 0.4% increase.
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Mint
3 hours ago
- Mint
Suresh Narayanan—the accidental CEO
NEW DELHI : Suresh Narayanan's entry into the corporate world was serendipitous. Growing up in pre-liberalized India, he didn't consider a career in the packaged consumer goods industry. He wanted to be a bureaucrat, following in his father's footsteps. But a chance encounter during his final year at the Delhi School of Economics led to his first corporate job. This week, he'll end his four-decade corporate career when he steps down as the chairman and managing director of Nestlé India Ltd. On 1 August, Amazon's Manish Tiwary will replace Narayanan, who has been with the Swiss packaged foods company for over 25 years, including a decade of leading its India operations. But a look back at his career, in some sense, suggests he was being prepared for this role from the very beginning. 'People wanted me to do engineering or medicine. I studied economics instead with every intention of being a bureaucrat that was drilled in me—my father was in government, so was my grandfather," said Narayanan. Hindustan Lever Ltd (now HUL), a coveted employer at the time, was recruiting on campus—a rare event back then. Narayanan, who hadn't even taken the CAT exam (mandatory for pursuing an MBA), was persuaded by a peer to apply, and to his surprise, he got the role. This prompted his move to Mumbai, with a monthly salary of ₹1,200 to ₹1,300. HUL and foods Narayanan's career at HUL was entirely focused on the food division, a natural precursor to what was to come. At HUL, his peers included Nitin Paranjpe (non-executive chairman of HUL) and Leena Nair (the current chief executive, Chanel), among others. He worked on brands such as Dalda and animal feeds and later became part of the Brooke Bond Lipton team. He eventually headed sales for their tea and coffee business before a brief stint at Colgate. While he respected Colgate's culture and values, the toothpaste and shampoo categories didn't appeal to him after years of being a 'foods guy". Narayanan joined Nestlé in 1999 as executive vice president for sales in India, a rare external hire into the company's core management committee at the time. 'What struck me about Nestlé was that it was a company with a huge premium on quality and safety and very strong brands," he told Mint in an interview earlier this month at the company's Gurugram office. What followed were over 25 years of service at the Swiss foods company, including international assignments in Nestlé Indochina, where he led sales, marketing, and food services across Thailand, Cambodia, Myanmar, Laos, and Vietnam. He also served as managing director of Nestlé Singapore Pte. Ltd, followed by chairman roles for Nestlé North Africa and Nestlé Philippines. He was chairman and CEO of Nestlé Philippines prior to joining Nestlé India as managing director. The Maggi crisis Narayanan returned to India and joined as managing director on 1 August 2015, in the midst of the Maggi noodle crisis. This period, he said, was an 'existential crisis" but also a defining one. Nestlé India's instant noodles brand got embroiled in controversy following allegations of high levels of lead and monosodium glutamate (MSG) exceeding permissible limits. The issue first emerged in March 2014 when a food inspector in Uttar Pradesh found MSG despite the 'no added MSG" label. This led to the Delhi government imposing a 15-day ban, followed by a nationwide recall order on 5 June 2015. Nestlé India recalled and destroyed approximately 38,000 tonnes of Maggi noodles, plummeting its market share from over 80% to zero in one month. Maggi noodles eventually returned to the market in November 2015 and have since regained market share, now hovering over 60%. In 2015, the company's net sales decreased by 17.2% to ₹8,123.27 crore, largely due to the crisis, with a profit after tax (PAT) of ₹563.27 crore. However, the crisis did push the otherwise media-shy company to open up more to investors, shareholders, and the public at large. 'It was groundswell not only from global, but from the local market as well. Nestlé has always been a reticent, low-profile company. There is less known about it than should be known. Post the crisis, we became more open. I became a kind of regular fixture on media calendars. We shared a lot more. We have come out of the crisis stronger," he said. Nestlé also stepped up its innovation efforts to shake off the company's dependence on the Maggi brand. 'In 2015, many considered us to be solely a Maggi noodles company. Since then, we have diversified our portfolio, expanding categories such as breakfast cereals, premium coffee, and pet food with over 150 new products that have contributed to 7% of sales," he said in the company's annual report for 2024-25. For instance, the company's pace of innovation is now 4X faster than it was a decade ago. 'We have become less failure-averse as a company," he added. In 2024-25, the KitKat chocolate maker reported sales worth ₹20,077.5 crore, more than double since Narayanan took over. PAT stood at ₹3,314.5 crore. 'Over the last decade, Nestlé India's revenue witnessed a compound annual growth rate of 10.3%, while the corresponding profits from operations grew by 13.5%.The capex levels have risen from 1.8% of sales in 2015 to 10.0% of sales in the fiscal year ending 2024-25," according to the company's annual report. Nestlé India's share price was around ₹654.86 when Narayanan took over. It has risen 248% to ₹2,279.20 as of 25 July. The Maggi troubles aside, the company has faced other challenges, such as skyrocketing coffee prices over the last year that have impacted margins and a sluggish demand for packaged foods in general. In the June quarter, profit fell because of input cost pressure and higher finance costs for the company. Analysts said Nestlé's volume growth was 'modest", and the company missed margin expectations due to input cost pressure. There were some misses, too, such as rival HUL outbidding it to buy health food drink brand Horlicks. However, Narayanan seems to have little regret over the deal now. 'Let us just say, we are a nutrition company," he said. In 2024, Nestlé India faced scrutiny over allegations of adding high levels of sugar to its baby food products, particularly Cerelac and Nodi infant cereals, sold in India and other developing countries. 'We were fully compliant with the laws of the land. We have launched products with low refined sugar," he said. India investments Meanwhile, the company has made substantial capex investments over the last five years, including expanding production capacities for Maggi, confectionery, and coffee. Narayanan expects the pace of innovation to pick up even more. 'We've invested almost ₹6,000 crore as capex (between 2020 and 2025). We have done a lot of capacity creation to meet the demand we are anticipating. I would reckon that the pace of innovation, which today contributes about 7% of sales, we should reasonably target at least a 10% interim goal going forward," he added. Narayanan said urban Indian consumers are changing, with greater emphasis on quality and more premium experiences. This is playing to the advantage of companies like Nestlé, he added. For instance, the company opened its premium coffee boutique, Nespresso, in India this year. It has also expanded into the pet care business and has a joint venture with Dr. Reddy's to sell nutraceutical brands. It has also stepped up distribution in rural markets after years of being an 'urban" company. Rural markets now account for 20% of its domestic sales, albeit less than the industry average, but growing. While affordability remains an important plank for FMCG companies in the Indian market, Narayanan has been pointing to a trend of 'premiumization", with consumers increasingly willing to pay for quality products. Beyond business, Narayanan has rarely held back views on broader economic and social trends. He said consumption growth in India will depend on controlling food inflation and creating meaningful employment opportunities, especially in sectors like manufacturing. Greater spending on infrastructure could go up, "that's what's fueling growth in rural India", he added. Second innings As he transitions into his 'second innings", Narayanan plans to pursue teaching, particularly in executive education, starting initially with guest lectures. He is also in conversations with private equity firms for advisory roles. 'I've worked for 44 years and have had my fair share of operating and running businesses. I have no desire to uproot myself, but I'd rather give back. I want to also see more places in India, and travel a bit of the world," he said. On management lessons, Narayanan said humility and keeping one's ego in check are critical, especially as people move up within organizations. 'One of the biggest challenges of leadership is that you develop the plaque of ego and you're not able to scrape it off," he added.
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Business Standard
3 hours ago
- Business Standard
Crisis does not come with a calling card: Nestle MD Suresh Narayanan
An aspiring civil servant who became an accidental corporate executive and eventually Nestle's 'crisis man', Nestle India's outgoing Chairman and Managing Director Suresh Narayanan believes crisis does not come with a calling card and wants his successor to keep the organisation vigilant. In an interview with PTI before he hangs up his boots at the end of this month, Narayanan, who brought back Nestle India from an 'existential crisis' in 2015 after the Maggi fiasco to a thriving organisation, said there is opportunity even in crisis, and engaging with community, people and focusing on the goal of satisfying the consumer is a leadership he learnt from his varied experiences, including in Egypt. Having gone through crises, including leading Nestle Singapore during Lehman Brothers collapse, and Nestle Egypt during the Arab Spring, Narayanan quipped that once his "boss" asked him to consult his astrologer and check his horoscope. "The next crisis is always round the corner. So you cannot rest on your laurels and wish that nothing is going to happen. Something will happen -- it doesn't come with a calling card. The next crisis is always around the corner and (it is important) to keep the organisation vigilant for such moments," he said on what would be his leadership advise to his successor. Manish Tiwary will take over as Nestle India Chairman and Managing Director from August 1. Recollecting his 26 years in Nestle in various roles globally, Narayanan said, "I have had a whole series of different crises." He termed his stints as Managing Director of Nestle Singapore, Nestle Egypt Chairman and CEO Head of NEAR along with Nestle India Chairman and Managing Director as "the defining movements" in his journey with the company. "When I was posted as the Managing Director of Nestle Singapore, it coincided with the Lehman Brothers collapse. Singapore was the first country to go through a recession. I had a difficult and challenging task. They were holding the water for the company, in terms of the growth and profitability. That was a big challenge. We did well, but it was a challenge," he recollected. Then he went to North Africa, Egypt, and everything was peaceful. But not for long. "Within a few months, the Arab Spring struck. So the whole region, which I was responsible for -- Egypt, Libya, and Sudan, went into turmoil. But again, I think one of the lessons I learned in leadership was that you really engage the community, engage with the people and you focus on the goal of satisfying the consumer, there is opportunity even in a crisis," Narayanan said. He further said, "We grew double-digit for five years in a row and we invested more in those five years than we invested in the previous 15. We were a company of choice for Egyptians. I think I had one of the best years of my career during that period." After four months of leading Nestle in the Philippines, which was "a peaceful and calm posting", Narayanan was called to India to bail out Nestle India from the Maggi crisis. "We don't like to invite a crisis. But when they happen, they become times when you can do a lot of revolution and a lot of reforms in the organisation. I think that has been the satisfaction," he noted. Terming the Maggi crisis as a "difficult time", Narayanan gave credit to the "help and support of numerous colleagues, partners, and well-wishers, and the consumers" for helping the company stage a comeback. "The only example of a brand that went from market leadership to death and back to leadership in three months' time and from then on, it has been a journey that has been upwards despite the crisis that we have faced," he said. On how he entered the corporate world, Narayanan said, "It was more of an accident." "I was studying at the Delhi School of Economics pursuing master's in economics with every intention of being a bureaucrat after I completed my honours in economics from Delhi University. I had never given the CAT exam. So I was very clear that I wanted to be a bureaucrat because in the family, there were government servants. My father was one, my grandfather was one," he said, adding, "I always thought a career in the bureaucracy is what I should be pursuing." However, things started changing after FMCG major Hindustan Lever (now HUL) came for campus placements. "And that was the first time they came and I think it's also the last time they came because they realised what a mistake they had made in making a selection," Narayanan said in a lighter vein. The head of the placement committee cajoled him to apply for this, though he was not interested. "But he said, no, just apply for it and I went for it. And lo and behold, as fate was to beckon me, I got selected as a management trainee in the company," which was considered to be a very "coveted job" at that time. His father persuaded him to join HUL as he was getting a decent salary in a decent company. One of his uncles, who was an IAS officer, also convinced him. He was 24 years old then, when he decided to go for the corporate world Narayanan said, adding "I have no regrets". "I tell young people that sometimes accidents happen in life and you have to learn to live with the circumstances and live with what fate holds for you rather than always trying to mould it," said Narayanan.
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Business Standard
4 hours ago
- Business Standard
India is key driver of future growth for Nestle, says MD Suresh Narayanan
India will be a 'key driver of growth for the future' for Nestle which has "faith" in the market that offers a 'large consumption basket', according to Suresh Narayanan, the outgoing Chairman & Managing Director of its Indian arm. The economic and political stability offered by India coupled with 'high consumer resonance' of the company's brands make it an attractive market, he told PTI in an interview. The Swiss FMCG major, which had faced an existential crisis with the Maggi fiasco in 2015, has long left behind the chapter and is investing to enhance capacity, product innovations, expansion of sales network to digitisation for having a "value added journey", said Narayanan who will be retiring by end of July. "I can foresee that even if I am not there at the helm, but the market attraction, the levels of investment and the future of Nestle will continue to be bright in this country," he said when asked how he saw Nestle in the next five years in India. Elaborating, he said, "I think we will then become a much larger entity, a much more robust entity in terms of products that we have, a much more deeper entity in terms of the geographies and the manufacturing presence that we have, and overall, a much more impactful company than even what we are today. So by 2030 I think we will have a double-digit growth." Nestle India's compounded annual growth rate (CAGR) for the last 10 years has been about 10 to 11 per cent, and despite the current patch, which has not been good, particularly for most consumer goods companies in India due to consumption slow down in the urban market, Narayanan said, adding he expects to get back to double-digit growth path. "Consumption will come back in this country and I think we will get back to the double-digit growth," he said. Asked if he saw India becoming among the top five global markets of the Swiss FMCG giant Nestle SA in the coming years, Narayanan said, "India (market) is very well placed. India has had a very good track record." In the last 10 years, investment by Nestle India has gone up from about 2 per cent of sales to about 10 per cent of sales. "So it's been almost dramatic. Almost Rs 6,000 crore to Rs 6,500 crore is the amount of money that we have invested in creating new capacities," he said. This investment is because of two factors - the performance of the Indian market and, more importantly, the "faith in India" market of Nestle, he added. India offers a large consumption basket with economic and political stability, and the relative stature of the company is high in the country, he said, adding, "the consumer resonance is high for our brands and therefore, we look at India as a very promising market". He expects Nestle India to be a "more robust entity" in terms of its geographies and manufacturing presence, regaining its double-digit growth journey with a revival in the consumption cycle. When asked about the next phase of Nestle's growth in India, Narayanan said it will look to accelerate its penetration-led volume growth journey, which has yielded positive results for the company over the last decade. He expects Nestle India, which is now an over Rs 20,000 crore (nearly USD 2.5 billion) entity, to "become a much larger entity, a much more robust entity in terms of products that we have, a much deeper entity in terms of the geographies and the manufacturing presence" in the next five years by 2030. India is among the top ten global markets for the Vevey (Switzerland)-based company. It is a globally leading market for food brand Maggi and the second largest for its confectionery brand KITKAT According to Narayanan, Nestle's "thinking globally and acting locally" policy helps to customise offerings and to customise products to the local context. "A lot of investments are guided by three things, opportunity, salience and future growth and returns that you can get all these three, I think India satisfies the checklist extremely well. So that's why I have the confidence that India can continue to be like it is for many, for some companies, can be a key, key driver of growth for the future," he said. Nestle India, which has been present in India for over a century, is now setting up its tenth factory, which is coming at Odisha. Narayanan expects it to be operational in next couple of years. About the next phase of Nestle's growth in India, Narayanan said it will look at accelerating its penetration-led volume growth journey which has given positive results to the company in the last decade. Nestle under its 'Rurban strategy" will continue to expand its presence in the small rural markets, as rural India is opening up. Nestle India is creating infrastructure for the portfolio in order to increase the penetration of its brands. Besides, Nestle India is also increasing its play in the premium segment, which is having fast growth after the pandemic, with shift in consumer purchase behaviour towards more value-based products. "Premium products, which have been growing at about 16 per cent for us in the last 10 years, will continue to accelerate. Therefore, whether it is Nespresso or Nescafe Gold or premium chocolates or premium food items or premium nutrition items, these will get accelerated in the country," he said. Nestle will also amplify its activity in the digital and analytics side, which will take a "quantum leap". "We have already made progress, but I think there is a lot more that can be done in this field. The company is preparing itself for it," said Narayanan. Moreover, Nestle will continue to pursue innovation-led growth, which was paced up by the company after the Maggi crisis, which happened a decade ago. "Innovation, which is today at about 7 per cent (of sales), we hope will reach about 10 per cent of sales," he said.
