Dunkirk plant cited in Nestle sales
The efforts of northern Chautauqua County workers are helping drive one of Nestle’s strongest-performing divisions.
Nestle’ recently reported nine-month sales growth of 8.5% while pricing growth was 7.5%, reflecting significant cost inflation. Real internal growth was 1%. Total reported sales increased by 9.2% to 69.1 billion Swiss Francs, compared to $63.3 billion Swiss Francs for the same time in 2021.
Zone North America reported double-digit organic growth, driven by pricing, strong momentum in e-commerce and further recovery of out-of-home channels. Nestle’ gained market share in the Zone, led by pet food as well as portioned and soluble coffee. By product category, Purina PetCare was the largest growth contributor with strong momentum across channels, particularly in e-commerce and pet specialty stores. Purina Pro Plan, including veterinary products, Purina ONE and Fancy Feast all posted strong double-digit growth. Mark Scheider, Nestle CEO, said there are good signs that pet care products will continue to be a strong point for Nestle’ in the coming years.
“But I think this is where the very strong underlying growth dynamics of PetCare come in as a saving grace. And this is independent of the onetime step-up that we’ve seen as a result of COVID,” Mark Schneider, Nestle’ chief executive officer, said during a recent conference call with investor analysts. “There are some pretty long-term growth drivers here, building on emerging markets and the calorific conversion that we’re seeing there when people turn to dedicated pet food as opposed to feeding the pet with household food waste.
“And in developed markets, we’re seeing ever more premiumization and interest in higher value offerings. And those two growth drivers continue to apply. They were already in place before COVID. They continue to apply now. So clearly, when we did some sensitivity analysis, it was very clear that even if some other people also have significant capacity investments and even if maybe we design things a tad too large and if there’s a temporary demand downturn, eventually you will grow into it. There’s no question. And hence, any pressure here, if anything at all, will only be short term. In our case, I think we were running pretty close to capacity limits already. And if anything, we probably waited a little bit too long because no one saw COVID coming. Then, of course, we accelerated those investments. But I’m not concerned going forward here that it would lead to significant oversupply and price pressure simply because the category dynamics are so great.”
Purina began operating in Dunkirk in 1972. The Dunkirk plant employs more than 500 people who make several pet food brands including Purina Pro Plan, Purina ONE, Cat Chow and Dog Chow. The Purina factory in Dunkirk is also the sole producer of several popular Purina treats, including Busy Bones, DentaLife and Prime Bones.
Like many other local companies, supply chain issues have been an issue for Nestle’, though Schneider said the issues are starting to ease somewhat. Pet care, however, has come with its own set of issues.
“One element where we’ve seen a bit of easing is around global container shipping rates and availability. So, as you know, that was a major issue in 2021. I think that one has relaxed quite a bit. And it’s not quite back down to where it was before. The price rises started about 1.5 to 2 years ago, but certainly a lot better than we saw last year. At the moment, some of the key supply chain issues are the ones where we had run into our own capacity constraints. So, think about PetCare in the U.S. or think about PetCare in Australia that also was kind of dampening our volume and (real internal) growth … for the third quarter. And then, of course, obviously, we will need to watch the geopolitical situation for any surprises that may be happening. But I think compared to last year and some of the shipping mayhem, we certainly have seen the situation relax somewhat.”
Purina recently completed a $19 million expansion project at the Dunkirk plant to increase capacity for Fancy Feast Savory Cravings, a new cat treat. In 2020, One investor on a recent conference call with Nestle’ corporate officials asked if pet care products has been as resilient today as it was during the 2009 recession, going so far as to say the area is “recession-proof.”
“The short and reassuring answer is that it certainly is one of our more resilient categories,” said Schneider said. “I think many crises have proven that in the past. And the world financial crisis is not the only comparison point because as we look around the world, we’ve also seen in select markets temporary and more limited crisis. And generally, pet food has continued to hold up really well there.”