Nestlé Earned Itself A Kit Kat

Nestlé Earned Itself A Kit Kat

almost 4 years ago2 mins

Nestlé’s first-quarter update gave investors a break from disappointing earnings updates late last week: the Kit Kat maker announced its fastest sales growth in almost five years 🎉

What does this mean?

You probably won’t be surprised to hear that another consumer staples company has benefited from lockdown-driven stockpiling. But what might surprise you is how sharply the recent trend toward organic products just reversed: turns out consumers who have spent the last few years shunning processed foods suddenly couldn’t get enough of artery-cloggers like Hot Pockets 🍕

It was in part this reversal that helped the world’s biggest listed food company report a higher-than-expected 4% growth in revenue versus the same time last year – and, more importantly, maintain its annual growth forecast.

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Why should I care?

Nestlé’s stock rose 3% after its announcement on Friday. Investors were probably well aware of Nestlé’s “defensive” nature – in that consumers tend to buy the company’s products no matter the state of the economy – but they mightn’t have expected the company to stand by its earnings forecast when lots of its coronavirus-shy peers were abandoning theirs. It may be they hadn’t considered Nestlé’s unique advantage in times like these: as the biggest company in its industry, it’s better positioned than its rivals to take the lion’s share of any growth in the market 🦁

Nestlé also revealed on Friday it’s thinking about selling its Chinese peanut milk and canned rice porridge business. If it does, it could help pay for the $500 million program it’s rolling out to support its café and restaurant customers. The program will help small businesses stay afloat by pausing rental fees on coffee machines and giving them more time to pay for products, and could help boost loyalty – and business – when the economy’s back in full swing. That’s all well and good, but where does it leave the Chinese peanut milk enthusiasts? 😱

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