Nestle was referring to innovations such as Sinergity - a proprietary blend of probiotics and six human milk oligosaccharides (HMOs) used in its new range of infant formulas launched under its brand Nestle NAN in Hong Kong for instance.
Nestle announced its FY24 financial results on February 13.
Net profit for the year was down 2.9 per cent from CHF11.2bn (US$12.3bn) to CHF10.9bn (US$12bn), while gross profit margin was up 80bps from 45.9 per cent to 46.7 per cent.
In Greater China, reported sales declined 1.3 per cent to CHF5bn (US$5.5bn), which Nestle attributed to the impact of foreign exchange rates.
However, organic growth was up 2.1 per cent, with real internal growth of 4.3 per cent.
Real internal growth (RIG) represents “the impact on sales of volume increases or decreases, weighted by the relative value per unit sold.”
Sales of newly launched products tend to increase RIG, while products which are discontinued have a negative impact on RIG.
“In Zone Greater China, growth was underpinned by positive RIG delivery in every quarter despite soft consumer demand and intense price competition in several categories.
“This performance was achieved by driving faster innovation in key categories and adapting route-to-market and channel strategies to capture new growth opportunities. The decline in UTOP margin reflects increased commodity costs and higher growth investments,” said Nestle in its FY24 financial results.
Infant nutrition was highlighted as the “largest contributor” to organic growth in Greater Zone, registering high single-digit growth.
Growth was driven by the Nestle NAN brand and supported by improved sales momentum from the brand Wyeth illuma.
Improving underperformers
In fact, the infant formula business under Wyeth Greater China had been identified as one of the underperformers earlier on.
The loss of “premium-ness” from its product Wyeth illuma was cited as one of the factors for its lacklustre performance.
However, CEO Laurent Freixe said the company has turned around the situation over the past year by launching “science-based innovation with HMOs.”
He was elaborating on how Nestle had tried to address underperforming business units last year. A total of 18 business units or cells were identified for underperformance.
“We have assessed what gaps in our value proposition have driven the underperformance. Across most of the 18 cells, there is work to do on more than one dimension.
“It is important to address the issues in the right order. For instance, there is no point in increasing marketing spend behind a product without taste preference or where we have the wrong pricing.
“Overall, you can see we had the most work to do on value and visibility. We are investing to address those gaps and our progress is measurable. Let me give you a couple of examples.
“First, on product superiority, look at Wyeth China. Illuma had lost its premium-ness and differentiation vs. competitors. We are addressing that through science-based innovation with HMOs. Along with improvements on distribution, this is starting to drive an improvement in share,” said Freixe.
Freixe, a long time veteran at Nestle, took over the helm from former CEO Mark Schneider last September.
In the case of Sinergity, he said that Nestle had rolled out products containing the blend in 15 markets last year.
There is much more potential for products containing the blend, especially in Asia, Oceania, and Africa (AOA) and Latin America, he said. The plan is to launch it in over 10 more markets this year.
“Nutrition Health and Wellness is a key component of our Nestlé strategy. Our infant nutrition business continues to build on science-based innovation.
“One of our big bets is Sinergity, a proprietary blend of probiotics and HMOs. We have rolled out in fifteen markets in 2024 and we see much more potential - in particular in AOA and Latam,” he added.
What is Sinergity?
Sinergity is a synbiotic blend.
It contains six HMOs as prebiotics, namely 2-Fucosyllactose (2-FL), Lacto-N-tetraose (LNT), 6-Sialyllactose (6-SL), 3-Sialyllactose (3-SL), 3-Fucosyllactose (3-FL), and Difucosyllactose (DFL).
It also contains B. infantis LMG11588 as the probiotic strain.
The blend was designed to support age-appropriate growth, digestive health, bone, muscle, cognitive development, and the immune system, Nestle said earlier.
Elsewhere in the US, the vitamin and mineral supplement business was flagged as one of the underperformers.
Temporary supply constraint was said to be a reason for this and the company has sought to address the issue by improving its retail execution.
“On our underperformers, we are seeing a continued strong turnaround of our VMS business in the U.S. We have improved availability and are now focused on flawless retail execution and winning back consumers,” Freixe said.
Healthy longevity and women’s health
On the other hand, healthy longevity and women’s health have been identified as Nestle’s “new growth platforms”.
The plan is to expand the healthy longevity product line-up, as well as addressing specific needs and conditions for its women’s health portfolio.
In fact, the focus on healthy longevity and women’s health was highlighted by a Nestle Health Science executive during our Growth Asia Summit last year.
Rania Abou Samra, global head of product technology and development at Nestle Health Sciences Institute, said it was important to develop personalised health strategies and products to target life stage needs and support the ageing process.
Growth Asia Summit returns to Singapore on July 15-17 this year
We will once again shine the spotlight on healthy ageing, women's health, infant nutrition and more. Find out more here.
