Nestlé presents strategy for sustainable value creation

28 Sep 2017

The company detailed how it will reach its mid-single digit organic growth target by 2020, and announced an underlying trading operating profit margin target of 17.5% to 18.5% by 2020.

Nestlé presents strategy for sustainable value creation

At its investor seminar on Tuesday in London, Nestlé presented its strategy for sustainable value creation. The company detailed how it will reach its mid-single digit organic growth target by 2020, and announced an underlying trading operating profit margin target of 17.5% to 18.5% by 2020, up from 16.0% in 2016.

Nestlé described its plans to accelerate organic sales growth, building on what it says is its industry-leading volume growth, by capitalising on recent key consumer trends in categories and markets around the world. Food and beverages remain core to the company’s strategy, it said, with a continued focus on nutrition, health and wellness enabling the company to meet changing consumer demands. Nestlé’ says its strategy balances growth with increased cost discipline and margin expansion as well as improved capital efficiency.

"Nestlé has a strong foundation, a clear path forward and a bright future,” said Mark Schneider, Nestlé CEO. “We have a proven track record of delivering sustainable, industry-leading performance. In line with today’s accelerating pace of change, we are intensifying our focus on innovation, operational efficiency, and portfolio management. We will grow by remaining at the forefront of consumer trends and offering the brands and products to meet people’s changing needs, especially their demand for a better, healthier life."

Nestlé said it will continue to pursue a value creation model that balances growth in earnings per share, competitive shareholder returns, flexibility for external growth, and access to financial markets, noting that it will increasingly focus capital spending on advancing the high-growth food and beverage categories of coffee, petcare, infant nutrition and bottled water. It said it will also build on its strong position in emerging markets and pursue growth opportunities in consumer healthcare.

Nestlé said it will pursue external growth opportunities that fit within targeted categories and geographies, deliver attractive returns, and build on the company’s leadership positions. Nestlé is actively adjusting its product portfolio in line with this strategy, as shown by the recent investments in Blue Bottle Coffee, Sweet Earth, and Freshly, as well as the decision to explore strategic options for its U.S. confectionery business.

Nestlé noted that it will also provide an update to the previously announced capital structure review. In June 2017, the company announced its intention to make an additional CHF 20 billion available for M&A and share buybacks over the next three years. In light of its strong cash generation, Nestlé said it intends to accelerate buybacks by spreading them evenly over three years. The buyback will augment Nestlé’s previous return of over CHF 100 billion to its shareholders over the last 10 years, including CHF 43 billion as share buybacks.