Nestle making progress in North America

VEVEY, SWITZERLAND — Building on first-half momentum, Nestle SA tallied organic sales gains across its global business and categories in the fiscal 2026 third quarter.

For the three months ended Sept. 30, reported sales rose 5% year over year to 22.76 billion Swiss francs ($27.58 billion) from 21.64 billion Swiss francs. Organic sales were up 4% on real internal growth (RIG) of 2.8% and a 1.1% uptick in pricing, Nestle said.

“We delivered a strong quarter of growth,” Philipp Navratil, chief executive officer, told analysts in an Oct. 22 conference call. “We are on track towards our midterm ambition. Organic growth was positive across all zones and globally managed businesses, and it was positive across all categories. Emerging markets continued to grow strongly, while we saw improving momentum in developed markets. On strategy, we keep executing. We are prioritizing incremental investment behind our growth platforms, which again delivered high-single-digit growth, and the performance in the core is improving further.”

Food & Snacks sales climbed 5% organically in the quarter, as 5.4% RIG was partially offset by a 0.4% dip in pricing. Nestle attributed the growth to a strong performance in Americas confectionery and improving trends in US frozen foods, aided by seasonal order phasing. Also fueling organic growth was coffee, up 3.4% on 1.3% RIG and a 2% pricing increase. In the United States, coffee RIG “recovered progressively” from the initial impact of price hikes earlier in the year, according to Nestle.

In other segments, Nestle said organic sales grew by 5% year over year in pet care (on 4.3% RIG and a 1% pricing increase) but edged up 0.3% in nutrition (on a 1.1% decrease in RIG and 1.4% growth in pricing. Meanwhile, organic sales rose by 7.5% in Nestle Waters & Premium Beverages (on 3.5% RIG and a 4% pricing gain) and rose 3.7% for Nespresso (on 1.5% RIG and a 2.2% pricing uptick).

“We delivered another good quarter of RIG-led growth,” chief financial officer Anna Manz said in the call. “And within RIG, the majority is coming from volume rather than mix, meaning that consumers are eating and drinking our products more. With now five quarters of better OG (organic growth) and RIG, we’re building good growth momentum. As Philipp said, this comes from putting incremental investment against our biggest opportunities and improving execution. Progress is never linear, and Q3 RIG was particularly strong.”

North America lifts Food & Snacks

Among Nestle’s business regions, reported sales for Zone Americas (AMS) in the third quarter climbed 6.5% to 10.09 billion Swiss francs ($12.23 billion) from 9.47 billion Swiss francs a year earlier. AMS’ organic sales increased 3.3% on 2.4% RIG and a 1% pricing gain, driven mainly by the United States and Canada, Nestle said. North America organic sales grew 2.6% on 1.8% RIG and a 0.8% uptick in pricing.

In AMS, Food & Snacks (30% of zone sales) generated mid-single-digit organic sales growth. Nestle said confectionery saw strong RIG, with “good underlying momentum and market share gains.” Growth in food reflected improved performance in US frozen food brands Stouffer’s, DiGiorno and Hot Pockets, with “positive market share trends despite the challenging category environment,” the company noted.

AMS’ coffee business (19% of zone sales) turned in low-single-digit organic sales growth, fueled by pricing. Nestle said US RIG is improving, driven by “progressive recovery” from earlier price increases for Starbucks and Nescafe, as well as improvement in Coffee Mate.

Nestle said US frozen food brands Stouffer’s, DiGiorno and Hot Pockets helped drive mid-single-digit organic sales growth for Food & Snacks in its Americas business unit. 

| Photo: ©BILLTSTER – STOCK.ADOBE.COM

“Pricing has been moderating through 2026, and that’s mainly due to input cost dynamics,” Manz said. “Last year, we took significant pricing in coffee and confectionery due to rising input costs. This year, we’ve been lapping those increases with limited further price increases as coffee and cocoa prices fell. Looking forward, there’s now again some upward pressure on input costs. And through this volatility, our approach won’t change. We’ll take pricing to the extent we can without damaging medium-term consumer penetration.”

Navratil said Nestle remains on target for its fiscal 2026 guidance, which calls for organic sales growth of over 4% in the medium term and 3% to 4% for the year.

“We are maintaining our full-year guidance,” he said. “It is now a year since I first stood before you as CEO of Nestle. We have made good progress in the last four quarters. That has come from focus, setting clear priorities and embedding them in the organization. We are starting to see improvement in the way the organization is changing and in our financial results. This gives me confidence that we are on the right path. I am pleased with our progress, but I’m not satisfied. There is much more for us to do to deliver the potential of the business. We need to continue this journey, execute relentlessly and deliver consistently.”

Russia business seizure, VMS sale

Nestle provided an update on its situation in the Russian Federation, in which a September presidential decree put the company’s Russia operations under temporary external administration. Although Nestle remains the assets’ legal owner, the company said it currently doesn’t have management control of its Russia operations.

“As a result, we’ll stop consolidating it into our financials effective end of September,” Manz said. “There’s no impact to OG, RIG and pricing, as Russia has been excluded from organic growth since 2022. But the deconsolidation does impact reported sales, UTOP (underlying trading operating profit) and free cash flow starting in Q4 this year. In addition, the net assets of the business have also been derecognized. In total, this is expected to negatively impact group net debt by approximately 900 million Swiss francs ($1.09 billion) for full-year 2026. The situation remains fluid, and we’ll continue to provide updates as appropriate.”

She added, “The deconsolidation of Russia will have a limited impact on the full year.”

Nestle said the Russia business contributed about 2% of group sales and 3% to 4% of group UTOP and free cash flow on an annualized basis, and net assets of rough 1.6 billion Swiss francs ($1.94 billion) have been derecognized. Nestle also said it has recognized a non-cash charge of about 1.4 billion Swiss francs ($1.7 billion) from cumulative currency translation adjustments, which the company noted “will have no impact on the group’s total equity.”

“Russia will be a slight headwind next year because you’ll have three quarters of that impact,” Manz said.

In response to an analyst question, Manz declined to provide guidance on the billion-dollar sale of its mainstream vitamins, minerals and supplements (VMS) business to Yellow Wood Partners, announced Sept. 1 and expected to close by the first half of 2027.

“In terms of the implications from M&A, we’ll give you quite clear guidance at the end of the year because we’ll have more clarity as to exactly when the transactions are closing,” she said.

The VMS deal encompasses seven brands — Nature’s Bounty, Osteo Bi-Flex, Ester-C, Gard, Nuun, Puritan’s Pride and Sisu — plus the US private label supplements business and related operations. The VMS business, which primarily operates in the United States but has a presence in Canada, China and other countries, totaled sales of $1.2 billion in 2025.