Nestlé North America CEO talks inflation, pricing, and regenerative farming

well from sparkling water to frozen treats Nestle has a global footprint that raked in over 100 billion dollars in sales in 2022. the consumer staples brand owns companies like San Pellegrino Haagen-Dazs Nesquik at Castle wide net over different sectors of the food space But as we just talked about we are watching inflation data very closely continues to bite into consumer spending habits even though it's getting a little bit more moderate how's a brand like Nestle adjusting Steve Presley is joining us Nestle North America CEO he's joining us alongside Yahoo finest is Brooke DePalma so Steve thank you so much for being here I do want to start on inflation we did just get the numbers this morning that do show consumer prices moderating a little bit I know that Nestle globally has been raising prices at least earlier in the year can you give us some color on what is happening now with your pricing strategy yeah I mean look we know inflation has impacted our consumers across all the categories that they buy including food and beverage and for us in North America we've also been raising prices across the last couple years I think thankfully we're starting to finally see this inflation moderate a little bit that we're seeing it come through the business in a pretty good way as it slowly starts to monitor we're still at pretty high levels I remember actually on this program a couple years ago we were having a debate around whether this was transitory inflation or or scarcity related and and clearly we see there's some structural elements to it and there are definitely some transitory elements so it's different by sector in terms of where we see the inflation softening but overall at least the trends going in the right direction again um definitely the right direction for consumers can I read this to mean that you all have stopped raising prices for now or just that the price increases are getting smaller no actually for North America we think we hope we're generally done with price increases you know you can never say never obviously as the market continues to fluctuate and it's alive uh being as we know and so as it continues to move I think for the most part we think the peak inflation is behind us and it'll start to slowly work its way down we've actually leaned in pretty significantly uh as as it's starting to soften in terms of investing in promotion investing and advertising behind the brands to to redrive engagement with consumers and actually help those challenge consumers uh re come back to the categories good morning Steve you've been making some pretty big investments in the coffee category I mean you have Brands across the board from Starbucks Nest Cafe and espresso pretty popular among younger Generations are you seeing continued usage of these sort of machines of these sort of products at home and it's that covid-19 impact sticking along or are consumers going back out for their coffee trips yeah thanks for the question yeah it's it's great it's actually when we look we called it the at-home Revolution that started in covid but the trends are actually sticking what consumers learned is they could make these amazing great products at home and all of our products whether it's our Starbucks at home or our coffee mate or our Starbucks creamer Brands we can deliver incredible products at home with the same amount of Home quality actually at a significant value proposition versus out of home you know one example is if you buy our coffee and our creamer for 20 cup you can actually make 20 cups at home every single day for the price of one out of home cup so as consumers continue to be strained in terms of their value uh dealing with this inflation those products actually provide a great value proposition for them and so the trends are great actually not only are the transgrading machines but they're great in terms of the day parts that we drink coffee cold is absolutely a phenomenon we all drink cold coffee we drink espresso has really caught on all of the segments on where coffee can serve continue to grow at a very fast pace there's been a lot of rotation Steve of some of the brown plans that Nestle North America holds on to right now have you looked across the portfolio and identified anywhere that you would like to kind of reinvigorate even more growth areas where you could see Nestle North America making a strategic play or an acquisition you know actually actually no North America has been a core growth driver driver for Nestle ASA for the last five years and we continue so we actually look to accelerate growth on all of our businesses and we're quite proud of the progress we've made over the last five years to really grow on it we're in the quiet period for H1 but if you look at our q1 North America actually grew almost 12 percent across roughly a 30 billion dollar business and we continue to see that momentum as we move ahead and so for us we we are active in portfolio management we believe in being in the right portfolios where consumers are most engaged and we're really happy with the portfolio we have right now but we continue to look to find other categories in either deeper within categories we're in to further engage with those consumers over time we think there's still opportunities in this Marketplace we're very bullish on the on the strength of the U.S consumer in the U.S Marketplace and we continue to look for opportunities Steve when you look across your portfolio in the U.S um sort of linked back into this brand conversation but also the pricing conversation are you seeing um some trade down where people are going to store brands versus Nestle name brands to what extent are you seeing that it's really different by every single category there's not one Trend you could say there was absolutely a trend where consumers moved away from store brands during the peak of the covert crisis and and the stores are regaining some of that so there is kind of a general momentum to store brand but some categories we're seeing very strong trade down in other categories we're not really seeing it at all you know pet care for instance there's some trade down but in most of the categories that we participate in we don't play with one brand at One Price segment for consumers if you take pizza for instance you know we have very high-end pizzas at California Pizza Kitchen to DiGiorno to Jax to Tombstone so as the consumer moves through the category that's the strategy we generally approach against all of our categories to where that trade down we hope they trade down to ours we continue to our try to offer value for money in every single one of those segments and so whether it's coffee or pizza or pet care or all of our major categories we try to offer the broad spectrum of products so consumers can move down if they need to and speaking of that pizza you're joining us exclusively from the Ted countdown Summit you're set to make a major announcement around the DiGiorno wheat Supply Chain break down exactly what that investment is and how much of it ultimately cost Nestle North America yeah look for for us we're here to talk about regenerative agricultural practices and and it's a word that gets used a lot that very few people have a foundation of but I think of it simply as look by the end of the crop cycle did we leave the soil better than it was when it started and that's really what regenerative practices do and if you think about it it sounds like this very academic or kind of esoteric uh description but it's it's can be really simple practices like crop rotations or uh you know just no-till or hotel farming and it's working with those farmers and specifically around DiGiorno we'll announce a partnership with ADM and other partners for wheat which is the foundation obviously for the crust and we'll move to actually a hundred thousand acres of regenerative agriculture uh or Farms that will actually practice regenerative practices to act which will give us double the amount we need for the overall DiGiorno business in terms of uh sustainable wheat and so look there is an investment it's a transition for Farmers you're asking Farmers to change the way they Farm for the last hundred years and we understand that all that kind of transformational change is challenging and we're willing to invest and lean in with them because the way we approach this it's not just can't just be good for Nestle it has to be good and we talk about it in terms of creating shared value it has to be good for Nestle it has to be good for the farmers it has to be good for our consumer and ultimately we believe it's the right thing to do for the planet as well that's why we're willing to invest in it yes Steve spot on look you've got the right folks here for this conversation I mean I'm originally from Pennsylvania where we've got one of the top agribusiness and agriculture conversations taking place in the country and so when you think about that and all of the focus around regenerative agriculture to what extent was this prompted by climate change look obviously we we have a role as the largest food Beverage Company in the world to try to lead our industry uh around climate change and we think about look we know a third roughly 30 percent of total greenhouse gas emissions come from Total food production and and at the core of that is agriculture and for us driving agriculture changes and get to this regenerative practices will make tangible differences in this climate journey and it'll help us to cheat and we can't achieve our Net Zero roadmap if we don't make structural and systemic changes through that agricultural complex and and that's why we're so focused on it but really at the heart of it what it really gets down to we are consumer focused company that when you think about we want to make great products for our consumers every single day and that starts with great ingredients and for us to have great ingredients for the next 150 years like the past 150 we've got to take action now and improve the quality of the biodiversity and soil that we actually operate in across all our farms and Steve correct me if I'm wrong but this seems pretty costly here and you're also working across the Tomato supply chain to do something similar let's talk end game here what does this ultimately mean for prices at the grocery store for consumers when they go to get their next DiGiorno Pizza no we we actually don't think this is a problem you can pass to the consumer or an opportunity that you pass to the consumer and it's not a problem you pass down to the farmer it's one that collectively we have to solve and we think it's the right thing to do for the business and managing the crop cycles and managing your supplier base is just part of what you do when you run these businesses we will invest massively globally by 2025 we'll invest over 3.6 billion dollars over three and a half billion dollars in these regenerative sustainable practices globally and and clearly that has a cost impact us but we believe it's the right thing to do for the business long term and the and the idea is to not pass these forward to Consumers you know we believe this is the right thing to do and we've seen in test Farms that we've developed we actually see higher yield once the practices get going and so we're encouraged that actually not only will it give us regenerative better soil better biodiversity But ultimately will give us better yields out of those same Farms really interesting stuff thank you Steve really appreciate it Steve Presley Nestle North America CEO and our Brook De Palma be well Steve thank you thanks guys

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Id: Q4UBXiqXN9M

Length: 10min 20sec (620 seconds)

Published: Sun Jul 16 2023