A beloved animal friend for you means big business for Nestle. According to an earnings report released today, the Swiss company reported 3.5% organic growth so far in 2020, and 4.9% growth in the third quarter, its highest level of quarterly growth in the past six years.
Some of Nestle’s core products, water and candy, have taken a hit as home-bound consumers cut out on-the-go purchases or impulse drug store buys. But its pet food brand, Purina PetCare, was a main contributor in each of the company’s global markets, growing 10.6% so far this year, CFO Francois-Xavier Roger said on a call for investors.
To those who have been tracking Nestle’s business for a while, that growth isn’t surprising. “Nestle has been investing in pet food for some years, either by making some shrewd acquisitions or R&D in more science-based nutrition,” says Duncan Fox, a research analyst at Bloomberg Intelligence. For the past 20 years it has been educating consumers on the benefits of a nutrient-rich diet for their pets, as opposed to feeding them table scraps, Fox notes. “I was always amazed that growth didn’t come earlier…guess it was a matter of time.”
It makes sense that it’s come now, though. In many parts of the world, pet adoption rates have soared as the pandemic has forced people to spend more time at home.
As the flurry of pet adoptions slows—either because there are no more pets to adopt, or because more people return to the office as lockdown orders lift—Fox says Nestle can expect the growth in this sector to cool off, too. But pet food will continue to be an important part of its business (people have to keep feeding their pets, after all).
The rise in e-commerce could help the company too, Fox notes, since big bags of pet food are bulky, which makes consumers in some markets more likely to buy them online.
“Pet food is key, and as I say has been for many years. Now that it’s one of [Nestle’s] four key product categories, I can’t see that changing,” Fox says.