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Letter to our shareholders

Paul Bulcke and U. Mark Schneider

 

Nestlé is the Good food, Good life company. We pursue opportunities for foods, beverages and nutritional health solutions that contribute to a healthier, tastier and more sustainable future.

 

 

We continue to make progress on our value creation model based on a balanced pursuit of top-line and bottom-line growth with capital efficiency.

Our ability to continuously deliver profitable growth demonstrates the consistency and dependability of our company. We achieve this by:

We believe that our company can only be successful in the long term by creating value both for our shareholders and for society.

Read our full letter to shareholders below.

 

 

Exemplifying consistency and dependability

2021 saw continued impact from the COVID-19 pandemic along with new supply chain pressures. Nestlé is navigating these challenges as we consistently pursue our long-term strategy. We are innovating new products quickly and moving purposely forward in our digital transformation to stay at the forefront of our industry. We conduct our business as we always have - in the spirit of Creating Shared Value.

Thanks to fast-paced innovation, strong brand investment, increased digitalization and stringent portfolio management, organic growth was strong across most geographies and categories. This was supported by momentum in retail sales and a return to growth in out-of-home channels. Highlights from 2021 include the following:

  • Organic growth reached 7.5%, with real internal growth (RIG) of 5.5% and pricing of 2.0%. Growth was supported by continued momentum in retail sales, steady recovery of out-of-home channels, increased pricing and market share gains.
  • Total reported sales increased by 3.3% to CHF 87.1 billion (2020: CHF 84.3 billion). Foreign exchange reduced sales by 1.3%. Net divestitures had a negative impact of 2.9%.
  • Underlying trading operating profit (UTOP) margin was 17.4%, decreasing by 30 basis points. The trading operating profit (TOP) margin decreased by 290 basis points to 14.0% on a reported basis.
  • Underlying earnings per share increased by 5.8% in constant currency and decreased by 5.1% on a reported basis to CHF 4.42. Earnings per share increased by 41.1% to CHF 6.06 on a reported basis.
  • Free cash flow was CHF 8.7 billion.

With a global, balanced and diversified portfolio, Nestlé's decentralized structure enables agile responses to shifts in consumer needs, customer demands and supply chain challenges. In 2021, we sharpened our geographic focus even further, creating Zones North America and Greater China effective January 1, 2022.

 

With a global, balanced and diversified portfolio, Nestlé's decentralized structure enables agile responses to shifts in consumer needs, customer demands and supply chain challenges.

 

 

Living our strategic focus

We continued our portfolio transformation in 2021, investing in high-growth categories that contribute to our Nutrition, Health and Wellness strategy.

Nestlé Health Science is building a nutrition and health powerhouse through a combination of strong organic growth and targeted acquisitions. The addition of core brands of The Bountiful Company establishes Nestlé Health Science as the industry leader in vitamins, minerals and supplements.

We continue the strategic transformation of our global water business, completing the divestment of our North American Water brands. The focus is on our iconic international and premium mineral water brands as well as healthy hydration products. The acquisition of Essentia premium water expands our functional hydration offerings.

Beyond portfolio transformation, we are investing in research and development (R&D) to make our portfolio more nutritious, delicious and sustainable. We have increased capital expenditure to support our fast-growing categories - particularly coffee and pet care - to meet future demand.

 

Sweet Earth hot dog, Nespresso coffee, salad with plant-based shrimp and Essentia water

 

Driving fast-paced innovation

We invest in developing solutions to meet growing consumer preferences for healthier products, reducing the time from concept to store shelf. Our focus is on anticipating growing trends, rapidly testing new ideas and bringing products to market with ongoing adaptation. We have maintained the same innovation speed since 2019 despite challenges due to the pandemic.

Building a pipeline of meaningful innovations by investing in R&D fuels our growth. We deliver innovations quickly and scale them across brands, categories and geographies. Throughout the pandemic our launches have steadily increased. In 2021, we increased the number of global/multi-market launches and test launches by 12%.

Coffee. From the way coffee is grown and produced to how it is consumed, we are innovating for better consumer coffee experiences and improved livelihoods for farmers. Nestlé's plant scientists announced a major breakthrough in 2021 by discovering two new Robusta varieties with up to 50% higher yields per tree versus standard varieties along with lower carbon emissions. Harnessing Nestlé's unique expertise in roasting technology, the new Nescafé Gold Blend Roastery Collection is a super-premium barista-style soluble coffee. For coffee connoisseurs, Nespresso limited edition La Cumplida Refinada coffee uses fermentation to create a uniquely sweet and fruity flavor profile.

Vitamins, minerals and supplements. Our rich pipeline of innovations in Nestlé Health Science continues to empower people to take more control over their health. Responding to increased demand for products that support a healthy immune system, Nestlé Health Science introduced Vital Proteins Immune Support Gummies and Persona Immune Support.

Plant-based. Market demand for plant-based products is creating opportunities for new offerings across the entire food and beverage portfolio, which also contribute to our sustainability goals. Following the success of Vuna since its launch in 2020, in 2021 Garden Gourmet introduced vegan egg and shrimp alternatives, vEGGie and Vrimp. Plant-based food products generated sales of around CHF 800 million in 2021, posting 16.8% organic growth. We also expanded our dairy alternatives with pea-based, carbon-neutral Wunda. The new plant-based KitKat V is delighting both KitKat lovers and new consumers.

Building a pipeline of meaningful innovations by investing in R&D fuels our growth. We deliver innovations quickly and scale them across brands, categories and geographies.

 

 

Connecting through digitalization

Nestlé is accelerating digitalization, using data and technology to unlock efficiencies and growth opportunities. We are taking advantage of rapid shifts in consumer behavior by amplifying our digital-centric businesses and scaling digital capabilities. Artificial intelligence and remote assistance are allowing us to be more agile and flexible in our manufacturing sites and supply chains.

We see enhancing digital capabilities as a success factor. Across each of our categories, digital ecosystems are unlocking new avenues for insight, innovation and sustainable profitable growth. We are scaling direct access to consumers to enhance personalization in our marketing and direct-to-consumer offerings for greater engagement and loyalty. E-commerce sales grew by 15.1% to account for 14.3% of total Group sales.

 

San Pellegrino, planting cocoa, l'atelier incoa chocolate and Wunda drink

 

Creating Shared Value

Creating Shared Value has always been fundamental to the way we do business at Nestlé. We have long believed that our company can only be successful in the long term by creating value for both our shareholders and society. For decades, our activities and products have aimed to make a positive difference to society in order to foster Nestlé's ongoing success.​ We have not wavered in that commitment.

This focus on shared value is more important than ever. Nestlé is fully committed to accelerating the transformation toward equitable, net-zero emission and nature-positive food systems that can nourish all people. In September 2021, Nestlé unveiled a new promise to advance regenerative food systems at scale, building on our net zero roadmap.

Regenerative agriculture. We are investing CHF 1.2 billion by 2025 to contribute to building regenerative agriculture practices. Our initiatives aim to protect ecosystems, enhance biodiversity and reduce emissions caused by farming in our supply chain. We are working closely with farmers, suppliers and communities where we operate to enable an equitable and just transition.

More sustainable portfolio. Innovation is driving forward products with reduced environmental impact. Several new plant-based, lower-carbon food and beverage products were launched in 2021. The new Les Recettes de l'Atelier Incoa illustrates our efforts to implement more sustainable production by using a proprietary innovation to create a dark chocolate made entirely from cocoa fruit, reducing waste by using cocoa pulp as a natural sweetener.

Creating Shared Value has always been fundamental to the way we do business at Nestlé. We have long believed that our company can only be successful in the long term by creating value for both our shareholders and society.

 

 

Refining Board oversight

Our Board of Directors continued to provide valuable guidance on our strategy and our environmental, social and governance (ESG) agenda in 2021. We maintained our practice of adding diverse experience and expertise through the appointment of a new independent director. In recent years we have, in particular, strengthened the Board's expertise on food systems, food and beverage, digitalization and other topics.

During 2021, the Board further refined its governance framework by the creation of a separate, dedicated Sustainability Committee, which advises on all aspects of Nestlé's ESG agenda, including the Group's efforts on climate change, human rights, and diversity and inclusion.

 

Bringing our purpose to life

We are Creating Shared Value for our shareholders and all stakeholders connected to our business by unlocking the power of food to enhance quality of life. Our employees bring our purpose to life - we thank them for their exemplary dedication and hard work. We are also grateful for our business partners, our consumers and the support of the communities in which we operate. And we thank you, our shareholders, for your continued trust, confidence and motivation to be part of our journey.

 

Downloads

The Annual Report contains our Annual Review including Creating Shared Value highlights, the Corporate Governance & Compensation Reports and our Financial Statements