Nestle S.A. recently released its full-year results for fiscal 2025, revealing a performance marked by distinct contradictions for the century-old food giant. Full-year sales reached 89.49 billion Swiss francs, a decrease of 2% year-on-year, while net profit was 9.033 billion Swiss francs, representing a significant 17% decline. Excluding the impact of currency fluctuations, the group's organic growth rate reached 3.5%, an improvement of 1.3 percentage points from 2024, with growth momentum continuing to recover in the second half of the year. The company stands at a critical strategic crossroads, with global business recovering quarter by quarter while the Greater China region experiences a pronounced slowdown; growth is barely sustained by price increases even as Nestle initiates its most determined business focus and organizational streamlining in history.
Breaking down the performance, pricing contributed 2.8 percentage points to the full-year 3.5% organic growth, while real internal growth was only 0.8%. This heavy reliance on price hikes to offset rising costs of raw materials like coffee and cocoa has become a core characteristic of the group's growth. As the organic growth rate rose to 4% in the fourth quarter, real internal growth improved from 0.2% in the first half to 1.4% in the second half, indicating the gradual effect of strategic adjustments. The underlying trading operating profit margin remained stable at 16.1%, with free cash flow staying at healthy levels.
Divergences across categories and regions were particularly evident in the financial report. The powdered and liquid beverages and confectionery categories achieved organic growth of 7.3% and 8.2% respectively, serving as the core growth engines, with brands like Nescafé and KitKat supporting performance through pricing strategies. The pet care business saw steady growth of 2.2%, with global market share continuing to increase. Prepared dishes and cooking aids declined slightly by 0.4%, impacted by a sluggish frozen food market in the US, while the dairy and ice cream, and water businesses maintained stable growth. Regionally, Europe led globally with 4.3% organic growth, emerging markets grew 5.4% overall, and developed markets grew 2.3%. However, the Greater China region reported organic growth of -6.4%, making it the only declining market in the Asia, Africa, and Oceania region and significantly dragging down the group's overall performance.
The slowdown in the Greater China region is the most prominent challenge Nestle faced in 2025. Traditional offline supermarket traffic continues to shrink, rendering the original distribution model ineffective. High channel inventories have triggered price wars and cross-regional arbitrage, directly impacting the price system and brand value. A global infant formula recall event in early 2026 further exposed weaknesses in the supply chain and quality control, leading to inventory write-downs and potential sales losses. In its core coffee segment, the company faces intense competition from local chain brands, while procurement costs for Yunnan coffee beans have been driven up, continuously squeezing profit margins. Nestle's management stated that the Chinese market is undergoing a transition from a distribution-driven model to one led by consumer demand, aiming to rebuild channel confidence by reducing inventory and restructuring the channel and marketing systems. The impact of these adjustments is expected to gradually subside in the second half of 2026.
Confronted with growth model bottlenecks and regional pressures, Nestle's new management team has launched a comprehensive and aggressive strategic adjustment. The core logic is to focus on key areas, divest non-core or underperforming assets, and streamline for efficiency. The group has clearly stated it will concentrate resources on four key segments: coffee, pet care, nutrition, and food & snacks.
Non-core businesses are now on an accelerated divestment path. Nestle is advancing sale negotiations for its remaining ice cream business, planning to inject related assets in Canada, Latin America, and Asia into a joint venture. The process to divest its water and premium beverage business is set to begin in the first quarter of 2026, with integration expected to be completed by 2027. Data shows the water business's profit margin is only 9.1%, far below the group's overall level. Divesting these low-margin, low-growth businesses is a key move for Nestle to improve its return on assets.
For 2026, Nestle has provided guidance for organic growth between 3% and 4. The shift from relying on price increases for growth to focusing on core businesses for quality and efficiency, and from diversified expansion to streamlined assets, reflects the collective challenges faced by global fast-moving consumer goods giants amid inflation, fragmented consumer demand, and intensified local competition. For this century-old enterprise, divesting non-core businesses is merely a short-term tactic; the key to navigating cycles lies in reconstructing its growth model, revitalizing the Chinese market, and strengthening the competitive moats around its core categories. The success of Nestle's transformation will not only determine its own future but also serve as a significant reference for strategic adjustments across the global food and beverage industry.
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