The company’s shares are up 36% year to date.
As market conditions become increasingly volatile, investors look for companies that have shown they can weather difficult economic conditions. Nestlé, the world’s largest packaged-foods company, is one such company.
Nestlé’s stock is on a roll this year. The company’s shares are up 33% even as the Stoxx Europe 600 index declined by 2% over the past year. This growth is largely thanks to the company’s efforts to streamline its operations and update its products to reflect changing consumer preferences.
Nestlé has been a household name for years, but it hasn’t always been super smooth sailing for the company. The company went through a couple of years of sluggish growth. Investors criticized the company’s inability to respond quickly to changes in the marketplace and capitalize on industry trends.
Then in 2016, Nestlé brought on Mark Schneider as CEO and that’s when things slowly began to turn around. Here are three tailwinds that can make Nestlé an investment contender in 2019.
Nestlé Strengthened Its Current Business Units
Nestlé continues to grow its current business units while also moving into new markets. The company currently owns and operates seven different business units, with its main focus being its beverage line.
Nestlé distributes powdered and liquid beverages, which account for 24% of its revenue. The company also operates a number of successful brands, including Purina, L’Oreal, Nescafé, and Coffee-Mate.
The Company Continues to Identify New Opportunities
At the same time, Nestlé continues to invest in new opportunities and offerings. The company plans to jump on the meat-free bandwagon and offer a plant-based burger in the U.S. And last year, the company partnered with Starbucks to begin offering its branded coffee in supermarkets.
These strategies seem to have paid off since Nestlé is on track to earn up to 8% in annualized profit growth each year for the next four years.
Nestlé Focused on Efficiency Above All Else
One of the biggest changes that has taken place at Nestlé is an increased focus on growth and efficiency. One of the first things Schneider did as CEO was to start selling off the company’s non-essential assets. This rid Nestlé of many of its inefficiencies and allowed it to begin focusing on new growth opportunities.
And in learning from its previous mistakes, the company has focused on speeding up its product launches. Previously, it took Nestlé as long as three years to launch a product. Now, the company has that number down to just nine months.
Little by little, Nestlé’s company culture has shifted, and as a result, the company’s organic revenue rose 3.9% in June.
Final Thoughts
Nestlé seems to have a much firmer footing than other stocks right now. The company’s shares are up 36% year to date, but the company gained 33% just in the last 52-weeks.
And the company held onto its valuation even during times when other stocks were sliding. If Nestlé can continue to improve its operating efficiencies and identify new market opportunities, we can expect to see more momentum in the coming years.
