Coffee lovers and home bakers drive strongest Nestle quarter in a decade

By Silke Koltrowitz

ZURICH (Reuters) - Coffee drinkers, pet owners and home bakers helped to drive the biggest rise in quarterly sales at Nestle for 10 years, as the world's biggest food group outshone Danone and set a high bar for Unilever.

The Swiss group has weathered the COVID-19 pandemic well so far, as consumers have bought more packaged foods and tried to brighten up lockdowns with Starbucks at-home coffee or making treats with Carnation evaporated milk.

"Our confidence level to get to an organic growth rate of more than 4% (this year) has certainly increased on the back of our first-quarter performance," Chief Executive Mark Schneider told investors on a call on Thursday.

Nestle's ecommerce business also fared well in the first quarter, with sales up 40%, and its health science business benefitted as people bought more vitamins and supplements. Demand for fortified milks boosted dairy too.

"What a blow out – the strongest quarterly number since 2011," Kepler Cheuvreux analyst Jon Cox said, pointing to a recovery in emerging markets, while Bernstein analyst Bruno Monteyne described the figures as an "amazing beat".

Shares in Nestle, up just over 2% so far this year, were 2.9% higher at 1321 GMT, outperforming the European food sector.

The maker of KitKat chocolate bars and Maggi soups confirmed its full-year guidance for higher organic sales growth, which strips out currency swings and acquisitions/divestments, than the 3.6% achieved last year.

Schneider said he wanted to see how the COVID-19 recovery played out in the second quarter before revisiting a full-year guidance that might now seem conservative. He cautioned against excessive margin expectations as input costs were on the rise.

Organic sales leapt 7.7% in the first quarter versus 4.3% in the same period last year, easily beating a forecast for 3.3% growth in a company-compiled consensus https://www.nestle.com/investors/analysts-consensus and a 3.3% drop in sales posted by peer Danone this week.

Unilever is due to post its first-quarter update on April 29.

The Americas, and also Asia where the pandemic struck first last year, showed strong growth, while Europe saw a 4.4% rise.

Coffee was the largest growth driver, with Nespresso portioned coffee up more than 17%, dairy almost 16% and petcare around 9%.

The group's out-of-home business, which sells food and drinks to restaurants and hotels, struggled, although not as badly as earlier in the pandemic.

The infant nutrition business returned to growth in China, but was under pressure elsewhere as birth rates fell.

Nestle said it had made further progress in reshaping its portfolio, as it expands in health and wellness foods and pulls out of underperforming businesses.

Schneider said the company's focus for acquisitions was on high-growth categories like coffee or petcare, but "across the full spectrum, if something is a good fit and strengthens us, we're open".

Nestle recently sold its North American water brands to One Rock Capital Partners for $4.3 billion, but bought U.S. premium water brand Essentia. It also offloaded its Yinlu peanut milk business in China.

(Reporting by Silke Koltrowitz. Editing by Kim Coghill, Mark Potter and David Evans)