Innovation, Digitalization and Sustainability Bring Business to Nestlé: 2019 Annual Report
Nestlé saw strong progress in 2019, with significant improvements and organic growth of 3.5%, group sales of CHF92.6bn, according to its recently published its Annual Report for 2019.
Profitability improved again as the underlying trading operating profit (UTOP) margin increased by 60 basis points to 17.6%, reaching the mid-term target announced in 2017 one year ahead of plan.
According to the report, innovation gave Nestlé a competitive advantage. In order to keep pace with rapidly-changing consumer preferences, the company has changed its approach to innovation. It has made processes quicker, enhanced rapid prototyping and created accelerators. The company funded 50 additional fast-track innovation projects leading to product launches within six to 12 months. It has significantly reduced the average duration of centrally-led research and innovation projects. Nestlé’s innovation strength remains rooted in its scientific expertise and the ability to leverage research findings across different product categories.
Alongside a strong innovation engine, digitalization is a key ingredient to continued business success. Digitalization touches on all aspects of Nestlé’s business, from supply chain management to production to marketing and sales. In 2019, e-commerce sales grew by 18.5% to account for 8.5% of total sales, firmly establishing Nestlé at the leading edge of the food and beverage industry.
The company is moving to connect with consumers in a relevant and personalized way. In 2019, 20% of all consumer contacts with Nestlé were personalized. The objective is to reach 40% by the end of 2020. Nestlé has also built a network of more than 25 e-content studios. These studios create impactful and locally relevant content with speed and efficiency, producing market- and consumer-specific communication materials in less than 48 hours.
Nestlé is also transforming operations by further digitalizing its supply chains and manufacturing. The goal is to create a competitive edge through data, artificial intelligence, automation, and predictive analytics. For example, at the end of 2019, 100 Nestlé factories were equipped with “collaborative robots” that interact with humans in a shared space or work safely in close proximity.
The company added that it transformed their operations by digitalizing the supply chains and manufacturing. The goal is to create competitive edge through data, artificial intelligence, automation and predictive analytics. In many facilities, Nestlé is scaling up the Internet of Things with remote-sensing technologies, and deploying autonomous vehicles and collaborative robots. For example, at the end of 2019, 100 of Nestlé’s factories were equipped with collaborative robots; 60 of the warehouses were automated and 100 of the factories were paperless. Digitalization helps to generate efficiencies, creating agility and providing new platforms for growth. The shift toward agile manufacturing also helps to deliver faster innovation and supports personalization, Nestlé added.
In 2019, Nestlé also continued to make a contribution to society and help to find solutions to global challenges. Nestlé accelerated its climate change efforts to transition to a low-carbon economy, with a pledge to achieve zero net greenhouse gas emissions by 2050. As most of Nestlé’s carbon footprint relates to its sourcing of raw materials, Nestlé will support its farmers and develop a series of initiatives in agriculture.
Moreover, Nestlé adopted the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. The company will continue to work with others to mitigate and adapt to risks associated with climate change.
Nestlé said it also continued to work towards a waste-free future. The company inaugurated its Institute of Packaging Sciences, dedicated to the discovery and development of functional, safe and environmentally-friendly packaging solutions. Nestlé deployed more sustainable packaging across its product portfolio. This included launching innovative paper packaging materials, increasing the use of recycled plastic in its water brands and introducing new bulk delivery systems. It also engaged in initiatives to support local recycling infrastructure and community-based waste management systems.
Nestlé’s confectionery business includes the iconic KitKat brand and a portfolio of regional and local brands. The business focused on innovation, premiumization and improving the sustainability and nutrition profile of products, bringing Nestlé sales of CHF7.9bn, meaning 9% of the group’s total sales.