Nestlé faces challenges in dairy sector with market share losses H1 2024

SWITZERLAND – Nestlé has revealed a challenging landscape for its dairy sector with market share losses in critical regions and a near-flat growth trajectory, according to the company’s half-year 2024 results.

The company reported declining dairy market share in Zone Latin America (LATAM) and Asia, Oceania, and Africa (AOA), alongside negative growth in its infant nutrition business in Greater China.

These setbacks were accompanied by a slight decline in milk products and ice cream sales year-on-year, influenced by portfolio optimizations and market dynamics.

Despite these challenges, Nestlé observed robust growth in dairy culinary solutions, although coffee creamers and ambient dairy saw declines.

The dairy segment, including culinary brands like La Lechera and Carnation in LATAM, experienced low single-digit growth. Despite market share losses in AOA, affordable milk and culinary solutions contributed to positive growth.

In Greater China, the infant nutrition sector experienced negative growth, albeit better than the category decline, with NAN and Lactogen leading mid-single-digit growth.

China, with a nearly 50% market share in value for infant nutrition products, has seen manufacturers pivot towards adult and affordable nutrition due to declining birth rates.

Addressing the decline in coffee creamers and ambient dairy, a Nestlé spokesperson highlighted the high competitive and promotional intensity in the coffee creamers business, necessitating adjustments in price gaps.

“Our dairy business has also been impacted by portfolio optimization. Regarding geographic focus, our dairy business is heavily skewed to Asia, where we were exposed to challenging market dynamics such as an inflationary environment in China.”

Nestlé plans to concentrate on affordable nutrition products and those with functional benefits, such as the N3 milk range of powdered dairy products.

E-commerce represents another growth avenue, with Nestlé aiming for 25% of group sales from e-commerce by 2025, a significant increase from the current 18.2%.

The company managed a slight positive real internal growth (RIG) of 0.1% in Q2 due to improved volume and mix growth, with underlying sales reaching CHF 45.0 billion.

Organic growth was driven by increased pet care, coffee, and confectionery sales, notably KitKat, primarily through pricing adjustments.

However, with pricing coming down faster than expected, Nestlé adjusted its full-year 2024 growth outlook to at least 3%, down from the previous 4%.

Following the announcement of half-year results, Nestlé’s shares dropped 4.8% and were trading at -5.09% at the time of writing.