Conglomerate Nestlé has not historically been known as a significant player in the pet care industry but revenues attributable to its pet care division have grown over the last few years, reflecting the growth of the industry. This trend showed no signs of abatement as Nestlé released its half year results in July.
Its Purina pet care division was the main driver behind the company’s positive financial performance in H1 2023, generating sales of CHF 9.37 billion. Organic growth for its pet care segment reached 13.9%, led by popular products like Purina ONE, Purina Pro Plan, and Friskies.
The category also experienced the most significant impact of price increases among all Nestlé’s businesses, with prices rising by 12.1% during the first half of the year. In Europe and North America, Purina PetCare played a crucial role in driving growth, with differentiated offerings in premium brands like Felix, Gourmet, and Purina ONE. In Asia, Purina achieved high single-digit growth, and particularly in China, double-digit growth was reported due to the popularity of Purina Pro Plan and Fancy Feast. Nestlé has an optimistic outlook for the rest of 2023, expecting 7-8% organic sales growth and an improvement in gross margin.
In July, global market sentiment remained upbeat as developed market inflation declined and GDP data showed resilience. Emerging markets (“EM”) were a strong beneficiary, with the MSCI Emerging Markets index returning 6.3%, surpassing the 3.4% return in developed markets.
Looking ahead, the outlook for EM appears promising. These markets continue to offer attractive valuations, with analysts anticipating higher growth rates in 2024 compared to their developed counterparts. The emergence of generative AI and tech-related gains, particularly in the Information Technology sector (the second-largest sector in the MSCI Emerging Markets Index by weight at approximately 20%), have also been beneficial for equities in EM. Moreover, central banks in EM economies have been proactive in addressing inflationary risks, implementing a series of rate hikes in 2021 that extended into early 2023. This timely response has enabled them to reap the benefits of reduced core inflation ahead of the developed world. Overall, these factors contribute to the positive outlook for EM economies and further strengthen their position in the global economic landscape.