By 2025, Nestlé expects to nearly double its e-Commerce sales to 25% of group total by significantly increasing its digital marketing spend, reports Reuters. The size of the investment was not disclosed. In Q1-3 2021, Nestlé sales were CHF63.3bn (US$68.3bn), with e-Commerce, which grew 17.2% in that period, reaching 14.1% of total sales. On the back of the success of DtC sales of products such as Nespresso coffee pods (Nespresso.com) and Purina PetCare (Purina.co.uk), the company will use a similar model. Speaking at a virtual investor summit, Executive VP Bernard Meunier said markets such as USA, Europe and China would drive growth.
Nicholas Hall commented: This is high ambition by Nestlé, bearing in mind that many of its brand leaders are available very widely through retail outlets. Whether its CHC business can also reach this level internationally is a moot point, but in its favour Nestlé competes mainly in the VMS sector, where there are lower regulatory hurdles governing e-Commerce in more conservative countries, so maybe it is a fair ambition. And why not, when we ourselves forecast that e-Commerce will hold a 23% share of the entire global CHC market by 2030?
e-Commerce has had an amazing ride in the past ten years, with very few headwinds and the Gulfstream equivalent caused by the Covid lockdown, but the latest news from China implies that this trend may not continue in such a dynamic way in future. To quote from the unusually downbeat Alibaba: “The extremely high growth that China’s overall e-Commerce market has experienced in recent years is getting harder to maintain following government crackdowns on internet retailing this year.” Perhaps the e-Commerce sector has reached the inflexion point of all growth sectors when additional revenues have to be created rather than assumed.
Among the other top CHC players, the ratio of e-Commerce sales is generally on a par with Nestlé. In Q3 2021, Unilever and Reckitt announced that e-Commerce now accounts for 12% of group net revenues, while at GSK it represents 7% of sales. However, during a recent earnings call, Consumer Healthcare CEO Brian McNamara noted that in Q1-3 2021, e-Commerce had grown in the mid-20% range, adding: “Our ongoing investment in digital capabilities continues to position us well for growth in this key channel.” With online shopping clearly appealing to consumers and continuing to grow in popularity even as lockdowns ease, it is likely other companies will have similar targets to Nestlé’s in mind.
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