Updated: Dec 9, 2020
They are considered to be corona crisis insurance: FMCG Consumer goods giants like Nestlé and P&G are steadily increasing sales despite the pandemic. The global shelf fillers are also refining their business model: in future they will communicate directly with their customers and their refrigerators.
Crisis winners: Consumer goods giants like Nestlé are benefiting from the Corona crisis and are driving up profit margins through digitization. People always eat: While the stationary retail trade pays for the "lockdown light" every further day with severe sales losses and former greats such as Metro or Karstadt Kaufhof fear for their future, consumer goods giants such as Nestlé, Procter & Gamble and Unilever are still adding a shovel despite the pandemic. Nestlé boss Mark Schneider, for example, promises shareholders 3% organic sales growth for 2020 and thus defines the word "crisis-proof". With sales of around US$ 93 billion, Nestlé is not only by far the largest and most important FMCG supplier to grocery retail and trade. Digitization, which has gained enormous momentum due to the corona pandemic, will also fundamentally change the business model of the Swiss FMCG giant.
Already today, hardly any supermarket customer can get past Nestlé products on the shelf. Plays with soluble drinks (Nescafé, Nesquik), water (Vittel, Perrier), ready meals (Wagner pizzas, Maggi soups, Buitoni noodles), dairy products and ice cream (Mövenpick, Schöller, Nestlé LC) and pet food (Purina, Dentalife) the company from Vevey with almost all basic needs of the household. In the Corona year 2020, the coffee, dairy products, and cat and dog food segments in particular recorded strong growth; only the confectionery division (Kitkat, Smarties) suffers from the weak "on-the-go business" at the kiosk.
More profit with coffee and cat food
Since the coffee and pet food businesses are particularly high-margin, Nestlé expects a further increase in return on sales in 2020, which is currently around 14%. Since taking office in 2017, Nestlé boss Mark Schneider has pushed the group up again with a major restructuring: For shareholders, a promise for the future and a reason that the share has risen by more than 40% to almost 100 Swiss francs since the beginning of 2019 and is listed just below the record high. Increasing sales and increasing returns on sales despite Corona: For many large asset managers, the Swiss multi is a must in the portfolio, especially after the former Fresenius boss Schneider took office.
Nestlé keeps US giants at a distance and the German competition all the more. In the ranking of the largest food suppliers in the world, Nestlé keeps the US giants at a distance, as the latest ranking by strategy consultants OC&C shows. The front runner from Switzerland (US$ 93 billion in sales) is followed by the US corporations P&G and Pepsico, with US$ 67 billion each in second and third place, Tyson Foods (US$ 42 billion in 7th place) and Coca-Cola (US$ 37 billion) , Rank 8 does not even generate half of Nestlé's sales. Only the Dutch conglomerate Unilever (US$ 59 billion dollars, 5th place) keeps the front runner at least in sight.
German companies are lagging behind in the ranking, the German DAX listed group Henkel lands on 34th place with around US$ 12 billion in sales. Nestlé is already generating sales of this amount with its online sales. The unlisted family company Oetker does not appear in the OC&C ranking because Oetker does not publish any balance sheets. In any case, Germany only plays a minor role for Nestlé: the most important markets for the Swiss are the USA, China, Brazil and France.
Coffee, water, frozen pizza, ice cream and dog food for the world: Nestlé's business model sounds a lot like old school. Nevertheless, digitization is likely to change the business model of the food giants rapidly and permanently: Like almost no other company, global consumer goods manufacturers depend on smoothly functioning supply chains. The use of cloud technology makes it easier for Nestlé, P&G and the like to organize which goods are delivered, stored, processed and resold to supermarkets around the world, when and where.
Optimized supply chains, increasing e-commerce
But it's not just the smoother supply chains. Online sales directly to customers are growing rapidly among the food giants: In the third quarter of 2020 alone, e-commerce sales at Nestlé grew by almost 50% and reached a share of 12% of total sales. Coffee, cat and dog food were also the top sales figures here: For manufacturers, e-commerce has the enormous advantage that it can sell directly to the end customer and retain the retailer's margin. Digitization is a "key factor for business success", as the annual report says: It touches all aspects of business, from supply chain management to production to marketing and sales.
Maggi Chat Bot: Talk to customers directly - and with the fridge
Perhaps the greatest return driver in the future: Digital technologies enable Nestlé to interact directly with millions of customers worldwide. At the end of 2019, every fifth contact with consumers was personalized. Nestlé aims to achieve a share of 40% by the end of 2020. Various social media channels and the Maggi chatbot, an artificial intelligence that gives (mostly young) consumers cooking tips via Whatsapp chat and also introduces them to the wonderful world of Maggi kitchen aids, should help. While parents and grandparents used to watch the episodes from the Maggi cooking studio on TV, the chatbot does it much more efficiently today and creates thousands of valuable, personalized customer contacts.
Even after the corona pandemic, Nestlé's head of media Tina Beuchler wants to further expand the digital communication and sales channels. For Nestlé, digital transformation is much more than e-commerce and social media: According to Beuchler, the intelligent networking of devices ("Internet of Things") opens up great opportunities. When the refrigerator can tell the pizza and ice cream manufacturer directly that its freezer compartment urgently needs replenishment - that is the best of all worlds for a global food giant. Nestlé has already set up such a kitchen of the future in its development department: In the Corona year, the food business is not only proving to be crisis-proof, but also a bet on the future for many investors.