Nestlé and Danone are reshaping growth around health and efficiency
Nestlé has placed a larger share of its business in subcategories that it identifies as high growth. These areas represented about 30% of the business and expanded by more than 7% in the first half of the year. The company said that proportion could reach 40% to 50% in the future.
The change also applies to marketing allocation. Nestlé reduced the number of brands receiving media investment from 400 to 120 and began using econometric tools to measure returns by brand and country. Its stated approach is to direct more funding towards categories with stronger growth and less towards areas with limited potential.
Danone’s second phase of its “Renew Danone” plan is organised around promoting health through food, with science, distribution and selected categories as its main supports. The company is pursuing a more premium and diversified portfolio that includes protein, digestive health, kefir, skyr, medical nutrition and plant-based products.
Protein is one of the principal areas in Danone’s repositioning in North America. Its Oikos Pro brand has passed €1bn in revenue, while Danone expects its European kefir category to exceed €100m in revenue. At Nestlé, coffee and pet care were among the categories that grew by more than 2% in the second quarter. The company is also developing products with higher protein or fibre content and more convenient formats.
Performance has varied by region and business line. North America accounts for 35% of Nestlé’s revenue, but its real internal growth there was almost zero in the second quarter; management described that result as unacceptable. The company cited weak frozen food performance, difficulties at Gerber and production problems affecting coffee creamers. Danone said production-capacity constraints had also limited its North American performance and that it expects capacity to increase gradually over the next 12 to 18 months.
Nestlé reported broad growth in emerging markets in Latin America, Asia and Africa, driven mainly by market-share gains. It highlighted Brazil, Mexico, Central and West Africa, the Philippines and Malaysia. China remained more difficult: Nestlé estimated that the category’s value was declining by 2% to 3%, although its market share was stabilising. Danone considers China and India strategic markets. China’s infant-formula market is valued at about €20bn, and the company identifies medical nutrition as a long-term opportunity amid population ageing. Danone estimates that India has about 23m births a year, compared with 7m to 8m in China.
Profitability remains part of both companies’ plans. Nestlé expects to improve its gross margin and said it remains confident that UTOP margins can stay above 17% through the cycle. It achieved CHF600m in cost savings in the first half, against an annual target of CHF2bn. Danone said inflation in protein, packaging and energy continued to increase costs, and identified pricing, productivity and product mix as tools for restoring profitability.
Nestlé is also monitoring how consumers use artificial-intelligence tools to research products and categories. It tracks searches on its websites, studies consumer prompts and is seeking to ensure that its brands appear in recommendations generated by large language models. The company’s strategy combines portfolio simplification, selective resource allocation, global brands and faster-growing categories. Danone’s approach centres on health, science, specialised nutrition, protein and additional distribution channels.
