Advancing Growth Strong 2024 Performance Driving Growth Acceleration Strategy Forward
Despite challenging economic conditions and subdued consumer demand, our company delivered broad-based organic growth in 2024, signaling strong execution and strategic focus. Notably, we achieved a return to positive Real Internal Growth (RIG), highlighting our ability to drive volume-based expansion even in a soft market environment.
Steady Organic Sales Growth with Strengthening Momentum
Our organic sales growth reached 2.2%, with a 0.8% increase in real internal growth (RIG) and 1.5% price adjustments. Notably, growth momentum improved throughout the year, reflecting strategic investments and improved execution:
- H1 2024: Organic growth stood at 2.1%, with RIG at 0.1%.
- H2 2024: Organic growth accelerated to 2.3%, with RIG improving to 1.4%.
This upward trend underscores our efforts in enhancing supply chain efficiency, optimizing pricing strategies, and increasing consumer engagement. By category, our performance was led by coffee, confectionery, and PetCare, which continued to exhibit robust demand and premiumization trends.
From a geographic perspective, emerging markets and Europe were the primary drivers of growth. Emerging markets benefited from rising middle-class consumption and targeted marketing initiatives, while Europe saw resilient demand despite macroeconomic uncertainties.
Margin Performance and Profitability
In line with our most recent guidance, our Underlying Trading Operating Profit (UTOP) margin stood at 17.2%, reflecting a 10 basis points (bps) decline on a reported basis. However, in constant currency terms, the margin remained stable, supported by:
- Improved gross profit margins driven by cost discipline and productivity initiatives.
- A 40 bps increase in marketing investments, aimed at strengthening brand equity and consumer engagement.
Despite these operational efficiencies, net profit declined by 2.9% to CHF 10.9 billion, primarily due to unfavorable foreign exchange movements. Consequently, basic earnings per share (EPS) fell by 1.0% to CHF 4.19. However, underlying EPS demonstrated resilience, increasing by 2.5% in constant currency to CHF 4.77, reflecting:
- Modest growth in UTOP.
- A reduction in share count due to share buybacks.
- Partially offsetting impact from increased financing costs.
Robust Free Cash Flow and Sustained Shareholder Returns
A key highlight of our financial performance was the continued strong free cash flow generation, which improved to CHF 10.7 billion. This provides us with significant flexibility to invest in strategic growth initiatives while maintaining a disciplined capital allocation framework.
In recognition of our commitment to shareholder value, we have proposed an increase in dividend per share (DPS) to CHF 3.05, reflecting our confidence in sustainable earnings and cash flow generation.
Operational and Strategic Progress: Building for the Future
Enhancing Organizational Simplicity and Strengthening Accountability
In 2024, we implemented critical organizational changes to streamline operations and improve execution efficiency. Key initiatives included:
- Reduction in geographic reporting segments from five Zones to three, enabling a more focused and agile approach to market execution.
- Establishing Nestlé Waters and premium beverages as a standalone global business, allowing for better strategic alignment and resource allocation.
- Introducing a renewed performance management framework and revised incentive plans to enhance accountability and drive results.
These structural adjustments position us to operate more effectively in a dynamic business landscape while fostering a culture of responsibility and performance-driven execution.
Cost Optimization through the CHF 2.5 Billion Savings Program
To enhance efficiency and free up resources for growth investments, we launched a CHF 2.5 billion cost savings initiative. Early execution of this program has already delivered tangible benefits:
- Expected CHF 0.7 billion savings in 2025.
- Over CHF 300 million in savings for 2025 already secured through actions initiated in Q4 2024.
This program, branded as Fuel for Growth, is designed to streamline operations while ensuring that savings are reinvested into high-impact areas such as innovation, marketing, and digital transformation.
Accelerating Growth through Investment and Execution Excellence
At our recent Capital Markets Day, we outlined a clear roadmap to drive accelerated growth and improve market share performance in 2025 and beyond. Our strategy includes:
- Focused action plans for 18 key underperforming business units, which collectively account for 21% of sales. Execution is well underway, with early indications of improvement in several areas.
- Stepped-up growth investments, including an increase in advertising and marketing spend to 9% of sales by the end of 2025.
- A refined innovation strategy, emphasizing six ‘big bets’ that will benefit from an accelerated global rollout, ensuring greater consumer impact and competitive differentiation.
