Good morning, everyone. Thank you for joining us this morning, and a warm welcome to Nestlé's 2023 full year results presentation. With me here today are Mark Schneider, our CEO, and François-Xavier Roger, our CFO. Before we get started, let me remind you of a couple housekeeping items. You are currently placed on mute. You will be invited to ask questions after the presentations. Now, please take a moment to read the disclaimer on your screen. Thank you. With that, let me hand over to Mark.
Christoph, thank you, and a warm welcome to our press conference participants this morning. We appreciate, as always, your interest in our company. Our CFO, François Roger, and I look forward to answering your questions and giving you an update on where the company stands. Let me move right to the key messages for the year. I think the high-level summary is that in a year that has seen some distinct consumer softness in the food sector, Nestlé delivered resilient performance, and we were able to come in within our guided range. We were able to increase, most notably, our operating margin. We were able to keep our underlying earnings per share within the guided range of 6%-10% in constant currency.
Free Cash Flow is up significantly from the year before, and we were also able to increase our return on invested capital. It's important to point out that these improvements do not come at the expense of putting in the fundamentals that allow us to succeed in the long term. So most important, meaningful innovation and renovation that keeps our product line up fresh and relevant to consumers, stepped up investments in brand support, which is important, especially in the day and age when product manufacturers are competing with private label offerings. And then also on the sustainability front, continued progress, which I will talk about later when it comes to our agenda on good for you regarding nutrition and good for the planet regarding sustainability.
Based on these resilient results, the board proposes a dividend per share of 3 CHF, which is an increase of 0.05 CHF, and that marks our 29th consecutive dividend increase. Again, another hallmark of the Nestlé stability in what was definitely a turbulent and unsettled time over the last few years. Moving to the next slide, I won't dwell too long on this, but it is important when you look at the food sector softness, to put it in historic perspective. What we've seen over the last 2 years was definitely a food price inflation spike of historic proportions. In fact, it's fair to say that it's a 1 in 50-year event. The last time we have seen 2 consecutive years of similarly high food price inflation was in the 1970s, in 1973 and 1974.
In between, movements have been either shorter term or much lower, and hence, it is understandable that against this backdrop, there have been a consumer reaction when it comes to volume, shifting down to lower priced brands or favoring private label offerings. Especially against that backdrop, what I would like to point out is my sincere thanks and gratitude to Team Nestlé around the world. This has been a difficult year, a challenging year in many ways. Nestlé prides itself on good, solid performance, doing the right thing in a decentralized manner from the ground up in the 187 markets we serve around the world. In quite a few of these markets, we had to deal with something that needed to be dealt with over many decades, and that is hyperinflation.
We still had ongoing, lingering supply chain issues, and so coping with all of this, serving our consumers, at the same time, while we're serving consumers, advancing our sustainability agenda, had been a tall task, and I deeply appreciate the commitment that Team Nestlé has shown in this context. Now, going forward, in addition to the strong commitment from Team Nestlé, what does give me confidence when it comes to the continued growth and success of the company is our ability to generate and to advance growth catalysts. What you're seeing here on this slide is five of them in particular, where you see continued strong, resilient performance, including what we call real internal growth, so the sum of volume and mix in such a year, like 2023, that had seen inflation challenges.
What's important, many of you knew about our continued success in pet care and in coffee, but the ability to generate these growth catalysts goes far beyond that, and hence, it's important to appreciate the full spectrum of what we can do here. Just these five examples, and this is not an exhaustive list, on this page, they stand about a third of the revenue of our company and continue to develop that, keeping the product line up fresh, keeping brands exciting. I think this is the recipe for continued success in our industry. Looking at the year 2024, definitely we continue to operate in a very demanding environment in challenging economic times and also significant global issues from some supply chain stress to geopolitical issues.
Hence, it is important that we stay fully focused on execution excellence in that year, and that is a priority for Team Nestlé. So this range ranges from supply chain management to in-store execution. It ranges from order fill rates, improving those, continuing to improve those, to anything that is related to branding and safety. And all of these aspects, we will continue to stress and definitely implement on with a high degree of fidelity. It's also important that we continue with our marketing and growth investments. We've already seen a tremendous recovery of those in the year 2023. We increased our PFME spend, so that's the brand support, by 70 basis points last year, and we will continue to increase it going forward in 2024. In particular, with a focus on our fast-growing billionaire brands.
So for 2024, the recipe is not only to spend more on brand support, it's also to spend it in a more focused way on our proven winners. We will be committed to delivering what we call real internal-led growth. So real internal growth is, as I mentioned, the sum of volume and mix. This is important in a day and age when this has to take over as the main bedrock of our growth from pricing. Over the last 2-3 years, pricing, during this historic food inflation spike, took over, but now definitely we have to come back what is the long-term recipe for success, and that is continued focus on volume and mix. Mix, as you know, in particular, stands as a good proxy for innovation.
Our ability to dish up products that find relevance with consumers and interest of consumers, and to use that to drive the growth of the company going forward. It's also important that we continue to restore our gross margin after that historic food inflation surge that was a hit to our gross margin, and I think we continue to make good progress on that. And as you've seen, we've already taken a first big step in 2023 in restoring free cash flow, and we will continue to work and improve on that in 2024 and going forward. Next, I would like to spend a bit of time on a business unit that certainly has caught a lot of attention in the year 2023, and where I know that, with our investors and the public, there are quite some questions.
So it is about Nestlé Health Science and the performance of this business. We did regret that in the second half of the year, we had significant supply chain issues in our vitamins business in particular. So the vitamins, minerals, and supplements business did suffer from a fairly significant IT integration issue that started to hit us from the third quarter, and that has taken more time, more effort to fix than we initially anticipated. The purpose of this slide is to assure you, first and foremost, of the valid, strong strategic underpinnings that Nestlé Health Science has now, continued commitment to it, but then also to explain to you in a bit more detail what has gone wrong and why. So in terms of the operating segments that Nestlé Health Science is engaged in, consumer care and medical nutrition, those continue to see very strong fundamentals.
Medical nutrition has been a double-digit grower last year, and consumer care, when it comes to advanced nutrition products, also had been a successful grower. The problems were isolated to the vitamins, minerals, and supplements space, and in particular, two factories where we had this IT integration issue that stopped us from supplying for several weeks and then took us quite a bit of time now to ramp up volume again. We do confirm something that we had shared with the public at prior events, and that is that midterm, that specific portfolio is positioned to deliver high single-digit organic growth. So what we have to do is put these integration issues behind us and then make good on that promise going forward.
I do believe that we do have a strong and focused portfolio with world-leading brands, brands that have global appeal and where we have a continued opportunity to roll them out across the world, since we have seen very, very strong consumer interest across the board. Now, specifically, the question did come up a few times: Why did such an integration issue happen? Why is there an IT issue? Isn't Nestlé known for IT excellence? And yes, it absolutely is. Had this issue occurred in one of our main regional environments, it would have been far more mitigated. But as you do know from the past, Nestlé Health Science was a globally freestanding unit. We established it as a globally managed business in order to prioritize growth over the years.
We had delivered on this growth, in my opinion, in a very convincing way, building it from an annual revenue of less than CHF 2 billion in 2016 to something that is now north of CHF 6 billion in 2023. But what we had to realize is that with this very strong focus on growth, clearly some integration issues were initially underestimated. I think we did take very energetic action as soon as the problem surfaced. We did make very significant management changes and structural changes. We are preserving the globally managed business structure, but we're giving the full support from IT and group operation resources that the group can bring to the table, and we're throwing everything at fixing this problem as fast as possible, and we have seen good progress already.
As it stands now, we're seeing some continued shortness in the first quarter, hence the year will continue to start on a slow pace. But then we do believe to turn the corner in Q2, and then we're also looking at a fairly strong second half. While we usually don't give guidance for our business units, the expectation here is still for negative organic growth in the first quarter, then turning the page in the second quarter. We expect double-digit organic growth in the second half, and the whole thing for the full year should add up to mid-single-digit organic sales growth performance.
So again, we regret that we were not able to live up to the original expectations for 2023 and 2024, but we're also confirming the long-term viability of this business and also confirming our 2025 midterm expectations that we had for this business, which we articulated as part of our Barcelona Investor Day at the end of 2022. For the next three slides, I would like to talk about some aspects of our strategic direction and strategic posture. And the first one I would like to start with is what I consider to be a very convincing premiumization drive over the last 10 years. Premiumization, it's important for me to point out, this is not luxury. Premiumization, as you can see from the footnote of this slide, is essentially defined as starting from 20% above the midpoint of pricing in a category.
As you can see here, premiumization has done wonders to our organic growth and also to our margin, and we have increased the share of premiumized products from 11% in 2013 to now 36%. So a 3x increase over the decade, a very convincing performance. For good order, I would also like to point out we're still very committed to the other end of the spectrum. As you know, in emerging markets, Nestlé products very often do stand for affordability. They do stand for bringing significant nutritional benefits to people that are economically challenged. That drive is not ending. This is something that's also expanding and also making good business sense for us. But clearly, premiumization as an across-the-board, broad across-the-spectrum trend globally, is something that we're very committed to.
At the bottom of the slide, you're seeing a few examples of where we brought that premiumization to the table, where we made it work, where we made it happen. Next, I would like to talk about a significant demographic opportunity that the company wholeheartedly embraces, and that is healthy aging. As you know, our company got founded in the 1860s with an infant nutrition product at a time of globally high birth rates, but also globally high infant mortality. So we were answering the need of that specific time. We do remain committed to nutrition across all life stages, so that has not changed, and that commitment counts going forward. But we do see now a particular demographic opportunity when it comes to healthy aging solutions.
Clearly, across the world, in most major markets, the elderly and older population is growing over proportionally. They do have specific nutritional needs. Some of them are itemized here with products, as examples on this page, and we're fully committed to addressing those needs. You see in each of the boxes, examples from the unit that I think leads the charge, and that is Nestlé Health Science. But it's important to me that this opportunity is not limited to Nestlé Health Science only. I believe, in fact, that almost all of our categories, over time, will develop meaningful, relevant, healthy aging solutions. You see here some examples from our food and from our dairy sector, but again, there's gonna be more to come.
I believe this will be a significant demographic tailwind, and it's also an area where through our industry-leading research and development effort, we can bring our specific nutritional expertise to the table. When you're asking, what specifically are some of the content items that contribute to healthy aging? There's obviously quite a few, but there's top four that come to mind. The first one is achieving and maintaining an appropriate body weight. Second one is avoiding or reducing the loss in lean muscle mass. The third one is avoiding or reducing the lack of micronutrients, because we see around the world that micronutrients, even in areas where affordability is not an issue, tend to be scarce.
And then the last one, that also is important on this, quick, high-level list is avoiding sugar spiking, either by reducing the amount of sugar in our products or by making it slower release, so that some of the inflammation and stress on the cardiovascular system, gets avoided. Now, on the first one, and that is, target weight and weight loss. Obviously, we did have a very extensive debate in 2023 regarding the GLP-1 products, that were clearly an important new treatment option and caught a lot of public attention when it comes to reducing weight and achieving your desired target weight. We embrace that debate very wholeheartedly. I believe this is a new option that's giving consumers new opportunities to initiate meaningful weight loss.
We do understand that while you're on a GLP-1 treatment, your nutritional needs do not go away, but they shift in nature. You see here three specific examples. Again, the muscle mass preservation I mentioned earlier, avoiding micronutrient deficiencies, and also contributing to the gastrointestinal health while you're on that treatment. You see specific examples. All of those come from the Nestlé Health Science parameter. And even at the moment, as a snapshot, we're seeing a business volume of about CHF 1.5 billion growing very nicely, that can serve very well as what we call companion products, while you're on this treatment or after the treatment. Now, the important thing, as part of this public debate, that's quite noteworthy, is that GLP-1s made a contribution that goes way beyond their inner core medical benefits alone.
As a result of this debate, to put it in a high-level punchline, losing weight and being on a diet has become cool again. And obviously, there's different ways of losing weight and being on a diet. And what people see now is, there's new tools in the toolbox. There is new ways to really get meaningful results, and there's a lot more of a public debate around this. It's important for us to point out that beyond the inner core of GLP-1 products, we do have, as you can see from the bottom, part of the slide, a number of products that can help consumers manage their weight and also their blood glucose levels.
As you know, these two are very closely related, and those, of course, just like the GLP-1 companion products, are gonna see continued attention from our research and development area. And so in addition to the present-day parameter, you can also expect a continued stream of new products that's going to address that need. So all in all, the way we look at it is that the increasing interest in GLP-1 products is not seen as a straight reduction in demand, but rather a shift in demand. These shifts in demand and shifts in consumer preference have happened all the time in our industry. It's our job, it's our challenge to basically adapt to that, and we're fully committed to doing this, to fully meet consumers' needs who would like to achieve weight loss and manage their weight going forward.
Next, I would like to shift gears, and for the next two slides, talk about our Creating Shared Value agenda. As you know, our Creating Shared Value report was also made available online today, and I would like to talk about the two key planks that we are pursuing. On the nutritional side, the Good For You agenda, and on the sustainability side, the Good For the Planet agenda, and give you some specific examples. Last year, for context, we were the first food and beverage company that rated its entire global portfolio on the Australian Health Star Rating system. I think in the spirit of transparency, it was important for us to lay down that baseline for the public to see.
I'm glad to report that now in the first year of this, we not only continue the practice, but we're also seeing good progress on the first side, that is the growth side of healthier products, more nutritious products, with a Health Star Rating of 3.5 and higher. And that side has been increasing from 57% of our global portfolio to 59%. So good progress in year one, continued commitment here to full transparency and sharing that growth journey with you. We have also issued a growth target for these products, the more nutritious ones, with a Health Star Rating of 3.5 and higher. So within this decade, we intend to build an additional book of business of CHF 25 billion-CHF 30 billion to grow this, which is over and above the average group expected growth.
On the guidance side, when it comes to the more enjoyable and enjoyment-related products, it's also important for us to be fully committed to industry-leading marketing practices and also anything that can help people make the right choices. You see two examples here. One is applying the calorie caps for children in confectionery and ice cream, and the other one is the full transparency, whether it's front-of-pack guidance or digital tools that can help people make informed choices. On the Good For the Planet side, I won't get into all the aspects, but I wanted to highlight one particular data point on our greenhouse gas reduction journey.
Here again, this is something we published today with our Creating Shared Value report, a reduction of 13.5%, net reduction of 13.5% in greenhouse gas emissions from our 2018 baseline. As you know, as part of the Science-Based Target commitment, you're reporting progress against that baseline. We had committed to -20% by 2025. With this -13.5, we are on track to achieve that first important milestone. I'm very proud to report that for a period where, of course, our business volumes grew. What that's telling you, the net reduction on the one hand and the growing business volumes on the other hand, we are effectively, and we have effectively decoupled the growth of our business from the growth in greenhouse gas emissions. We've also included other greenhouse gases now.
So rather than just providing the summary number, we are also, in particular, reporting on methane, and there you're seeing an increase that's even stronger than for the total greenhouse gases, 15.3%, as part of our very diligent long-term work in our dairy supply chain, which of course is one of the key areas of methane emission. So very strong progress, and building on what I shared with you in previous press conferences, to me, in a day and age of lots of long-term, decades-long commitments that you see around the world, there are two litmus test questions that really, in my opinion, make the difference between the doers and the talkers. The first one is: Are you, year for year, publishing your greenhouse gas emissions? Yes, we do.
And the second one is: Is peak carbon behind you? And here also, I'm proud to say, yes, we are. We put that behind us sometime around 2019, 2020, and as you see from the data now, we have effectively decoupled the growth of the business from the growth in greenhouse gas emissions. Let me turn to the guidance, for the year 2024, but then also remind you of our midterm targets for 2025, which we fully confirm today. So organic sales growth is expected for the year to be around 4%. It's important to note that this is our organic sales growth expectation in this post-food price inflation environment, where we will see some remnants of inflation, but nowhere near the spike that had occurred in the years 2022 and 2023.
So that growth will rest a lot more on volume and mix going forward, so the quality of that growth will be a lot better than what we've seen in past years. We do foresee a moderate increase in our Underlying Trading Operating Profit Margin. That's also a hallmark from our financial models of the past and something that we stay beholden to. And all of this should continue to add up to an Underlying Earnings Per Share growth in constant currency within our midterm target range of 6%-10%. So even though it's still a globally turbulent environment, we do believe that these essential key financial targets will be met in the year 2024. And then it's important for us to point out, as you know, we do have a long-term commitment to achieve mid-single-digit growth.
We told you in earlier years that we see our portfolio fully, equipped and adjusted to deliver mid-single-digit growth, and hence, it's important for us to confirm to you these 2025 targets and, the mid-single-digit organic sales growth that they imply. With that, I would like to thank you for your attention, and, let me turn over to François Roger, our CFO, for the financial update. Thanks.
Thank you, Mark, and good morning to all. Let me start with some of the key highlights for 2023. We delivered what we consider a resilient financial performance in a context of soft consumer demand. As you can see from the chart, organic growth was strong at 7.2%. Our underlying trading operating profit margin was up 40 basis points in constant currency versus the previous year. Underlying earnings per share growth was robust, increasing by 8.4% in constant currency, and free cash flow increased by CHF 3.8 billion to CHF 10.4 billion. Organic growth was driven by pricing of 7.5%, reflecting the impact of cost inflation over the last two years.
RIG was -0.3%, impacted by soft consumer demand, capacity constraints, and in the second half, a temporary supply disruption for vitamins, minerals, and supplements. Net divestitures reduced sales by 0.9%. Foreign exchange had an exceptionally negative impact of 7.8% on net sales, following the significant and broad-based appreciation of the Swiss francs against our basket of currencies. On average, over the last 10 years, foreign exchange has had a negative impact of about 3.5% per annum on our reported sales. In 2023 last year, this impact was more than twice as large. Total reported sales decreased by 1.5% to 93 billion CHF. This slide illustrates the development of our sales by geography and includes both our zones as well as our globally managed businesses. Our business is geographically diverse.
We operate in 188 countries, and we maintain a global footprint, with North America being our largest region in terms of sales. As the chart shows, organic growth was positive in all geographies. Beyond pricing, the key drivers of growth were continued momentum for e-commerce and out-of-home channels across all regions. Growth was broad-based across geographies, and growth in Latin America was particularly strong. Just as a reminder, China delivered mid-single-digit growth in a geography that did not experience the same level of inflation as elsewhere. Let's now look at product categories. As the chart shows, organic growth was positive across all categories. Our largest category is powdered and liquid beverages, which accounts for more than a quarter of our total sales. Coffee, the largest component of this category, posted high single-digit growth, supported by continued momentum for out-of-home channels.
Pet care was the largest growth contributor, with sales growing at a strong double-digit rate for the fourth consecutive year. Growth was supported by continued e-commerce momentum and innovation, particularly for functional products. Nutrition and health science posted 5.4% growth. Nestlé Health Science reported low single-digit growth as continued momentum for medical nutrition was partly offset by a supply constraints for vitamins, minerals, and supplements in the second half of the year... Infant nutrition reported 8.5% organic growth, with broad-based contributions across geographies, segments, and key brands. Sales of our premium Human Milk Oligosaccharide products grew at a strong double-digit rate, reaching CHF 1.4 billion. Prepared dishes and cooking aids saw 4.9% growth, driven by Maggi, which reported double-digit growth. Milk products and ice cream recorded 6.1% growth.
The key contributors to growth were fortified milks, coffee creamers, and home baking products. Sales of ice cream grew at a mid-single-digit rate. Growth in confectionery was 8.5%, reflecting continued strong broad-based demand for Kit Kat, which continues to gain share across all geographies, as well as positive developments for key local brands. Finally, sales in water grew by 4.9%, despite temporary capacity constraints for Perrier on a high base of comparison in 2022. San Pellegrino and Acqua Panna saw double-digit growth. After several years of progress on RIG until 2020, we went through a period of heavy turbulence, beginning with the pandemic and followed by a period of unprecedented inflation. These factors created significant volatility and clearly disrupted the components of our organic sales growth.
During 2023, we have seen clear signs of normalization, with a lower contribution from pricing and a higher contribution from RIG. We expect this trend to continue in the coming quarters. We are confident in our ability to return to positive RIG and expect RIG to trend back towards pre-COVID levels over the course of 2024. The phasing of RIG is not expected to be linear and should be more weighted to the second half of 2024. In the first quarter of 2024, RIG could be below the first quarter of 2023, given muted consumer demand and the residual impact of supply issues in our US VMS business. Just as a reminder, the first quarter has one less trading day. Next is underlying trading operating profit, which it decreased by 0.3% to CHF 16.1 billion.
As a percentage of sales, it increased by 40 basis points in constant currency. The increase was driven by higher gross margin and lower distribution costs, which more than offset increased investments in marketings and one-offs in 2022. We are on track to deliver our 2025 targets of 17.5%-18.5%. As expected, free cash flow increased from CHF 6.6 billion to CHF 10.4 billion as a consequence of a significant reduction in inventory levels. As a reminder, the decision to increase inventories in 2022 was taken in the context of supply constraints and the energy crisis in Europe. At the same time, we have continued to invest in capital expenditure above historical levels to support the expansion of capacity, mainly in pet care and coffee.
Working capital and CapEx are normalizing, and we are seeing a corresponding increase in free cash flow trending back towards 12% of sales by 2025, in line with our midterm financial targets. Finally, at this year's annual general meeting in April, the board of directors will propose a dividend of CHF 3 per share, an increase of 5 centimes. If approved, this will be the company's 29th consecutive annual dividend increase, in line with our practice of increasing our dividend in Swiss francs year on year. The company has maintained or increased its dividend in Swiss francs over the last 64 years. The dividend in Swiss francs has more than tripled over the last 18 years, representing a compounded annual growth rate of close to 7%.
This year's increase takes the dividend above the Swiss francs level for the first time, reflecting our commitment to return cash to shareholders, many of whom rely on the steady and reliable income earned through their investments in Nestlé. This concludes my presentation, and now I hand over to Christoph, who will moderate our Q&A session.
Thank you, François. Let's now move into the Q&A session. Mark and François are joining me on stage. If you wish to ask a question, please raise your hand. You will find the yellow hand icon in the bottom toolbar of your application. As soon as I call on you, please, unmute yourself. You will be able to unmute yourself, and once your question has been answered, you will be placed on mute again. And maybe, please, I may ask you to ask only, only two questions at a time so that everybody has an opportunity to speak. So the questions are coming in. I see the first one is from Richa Naidu, Reuters. Richa, please go ahead.
Thank you, Christoph, and good morning. Thank you so much for doing this call. So my two questions are, one, you know, you've mentioned that price increases will slow this year, but I'm wondering how that's gonna happen, when freight costs are still quite high, especially with things like the Red Sea, prompting them to go higher. And then my second question is... So, I guess, how are you going to keep prices lower? And my second question is, a major European coffee company said yesterday that new EU sanctions on Russia have created uncertainty over the future of its Russian business. Will they have the same impact on Nestlé's business there?
Richa, thank you. This is Mark, and let me try and answer both of your questions. I think the situation on inflation and pricing this year is going to be a lot more nuanced from the two previous years. So rather than reflecting all commodities and all input costs going up, I think you will have select categories that will see increased input costs. As you do know, some commodities like cocoa and robusta coffee, and sugar are still very high. Others have come down, and so I think the situation is going to be a lot more nuanced.
On freight overall, it's important to point out that the situation right now, while there is some stress, and especially on the former Red Sea routes and routes that connect Europe to Asia, on a global scale, the situation right now is nowhere near the disruption that we have seen in the year 2021. And so it's important to keep that in perspective that the impact from this is gonna be a lot less on our company than it used to be in 2021 and beginning of 2022. Regarding Russia, no news on our side. I think we have fully complied with what we announced in March 2021, and at the moment we see no change to that situation.
Thank you, Richa.
Thank-
Now, the next question is from Ivo Ruch, Finanz und Wirtschaft. Please go ahead, Ivo.
Good morning, everyone. So my first question is on pet food. Do you expect there positive volumes in 2024? And the second question is on the water operations. Do you see any impact on the financials from the announced review?
Thank you, Ivo. So as you know, generally, we do stay away from specific forecasts on volumes on our specific categories. But we do see very positive underpinnings in the pet food business going forward. It will not add up, in more likelihood to the kind of double-digit growth that we have seen now for four consecutive years, but it will still be one of our highest growth categories going forward. With that, I'm confident that we can achieve positive continued positive volume growth in this area. On waters, it was important to flag this review to you so that the public and our investors have full visibility and transparency on this. It's too early now to give specific estimates what this means.
The next question is from CNN, Hanna Ziady. Hanna, can you hear us? Please go ahead.
Hi, good morning. Thanks very much for taking my question. Just want to follow up a little bit on the demographic opportunity you see in aging, which I think is really interesting. Could you give any more detail on sort of whether you've earmarked a specific amount of money that you're going to invest in these solutions, or just any more color around, yeah, either investments or sort of, you know, adding to teams in that area, and sort of how then you see your product mix maybe changing in future? Because one of the questions I was going to ask was whether you think your infant formula business, for example, is going to become much smaller, given the collapse in birth rates that we are seeing in many major economies.
Obviously, you know, you closed a factory in China not so long ago. So do you think... Yeah, how do you think the mix of your business is going to change? And then maybe just a question on another one on pricing. So clearly, consumers have been trading down. Are there particular areas where that has been more pronounced than in other areas? Any particular products that you've seen that in? And then do you think you're going to continue to see consumers trading down this year? So if I'm correct in understanding, you think your prices are going to come down this year, but, and inflation is obviously falling rapidly, but, you know, a lot of people are still really struggling with high living costs.
So how do you see the consumer behavior changing or not changing that much this year compared to last year? Yeah, that would be great. Thanks.
Hanna, thank you. Let me try and take a stab at the first question and then hand it to François for the second question. So, obviously, we're trying to be helpful as possible to help you understand the opportunity. Having said that, it was hard for me to find a single number that describes the full extent of our efforts here. Because as you can imagine, nutritional needs that may be relevant for another life stage may also be relevant for the healthy aging opportunity. So many of the things that we've done in the past can be taken off the shelf and then focused on the healthy aging opportunity. So that's why a specific team size or investment amount now may not tell the full story.
It is something we're quite focused on, and where between R&D and also our marketing teams and strategy teams across the categories, we're trying to maximize this opportunity that enjoys such a strong demographic tailwind. Let me also address the infant nutrition side, where it is true that we've seen now for a number of years, globally declining birth rates. But let me say, as I pointed out in the presentation, it's important for us that we renew our commitment to offering superior nutritional solutions to all life stages, and that includes specifically what the company was founded on. That includes these incredibly important first 1,000 days, and making sure that the best nutritional options are available at that time. The right start in life will make things a lot easier for the later stages in life.
And, so that opportunity and technology leadership in that space, continues to be very important to us, and, even when declining birth rates make that opportunity somewhat smaller, it's important for us from a share perspective and technology perspective, that we continue to lead in it.
And on your second question, it is, we, we confirm absolutely the fact that there has been some trading down last year and probably a bit, the previous year, linked to the very high level of inflation, food inflation. Mark mentioned it earlier. It was the highest level in the, in the last 50 years. So it did put pressure on consumers, and we have seen a little bit of trading down. We do have offerings that are on the affordability segment, and we have plenty of offerings as well, obviously, in the mainstream segment. We have seen anywhere over the last two years, the two extremes in the consumer pyramid, both, premium is premium and affordability growing faster than what is in the middle, which is a mainstream, offering.
We have seen a little bit of trading down to the benefit of private labels, but it was more and they regained market share a bit last year against most of the global brands like us and most of our peers. But actually, the private labels have gained market share, which corresponding more to the regaining of the market share that they had lost during the pandemic. So there was no real major concern as far as we can see it. The other thing is that if you look at it over the last couple of months, we have started actually to regain market share against private label, which seems to indicate that they have probably reached the full potential of what they can achieve.
Once again, we do have sizable offerings, and we did adapt our innovation in order to make sure that we could provide affordable offerings to consumers in the context of a high inflation environment.
Thank you, Hanna. Sophie Marenne from AGEFI is next.
Yes, hi. Thanks for the presentation. So I have a question on the health science. So we've seen that, yeah, serious execution problem, seems quite disappointing after so many years of investment, so many acquisition. So my question, my first question is, as we see, the subsidiary is not really delivering on its, promises. Would, a stronger integration under the Nestlé banner be on the cards? And second question, how to deal with the disappointment of investor, you know, that expected maybe much more, from you, as, yeah, one of the biggest company in here. So that's my two question. Thank you.
Thank you, Sophie. And, look, let me start with the investor side right up front. As you know, business is inherently related to risk, and not everything that you embark on fully delivers on day one. And that's why it's important for us that we put, things and the facts very clearly on the table and give you full transparency. The full transparency is strategically, we strongly believe, and I think we have the data to back it up, that, this is a significant opportunity and continues to be a significant opportunity where we see continued strong growth going forward. The industry, after seeing outside growth in vitamins during the Covid years, had about a 4- to 6-quarter period where just simply coming out of Covid, you had some growth compression. It has since gone back to, very solid and dependable mid-single-digit growth.
It's regrettable that exactly at this time when it was rebounding, just like coffee was rebounding at some point last year, that in Nestlé Health Science, as a result of these integration issues, we were not able to fully capitalize on that. But I hope you also see that what we're talking to you about today is not like we're walking away from the targets. We're essentially saying to you that these integration issues have caused a delay in reaching the targets. This whole notion of healthy nutrition, micronutrient supplementation, and as you see, some of the healthy aging solutions that are smack at the center of Nestlé Health Science, all of that, I think, are very worthy targets that will give us growth down the road. So we will put this integration phase behind us.
We will put this on the ground in a very reliable manner, and then afterwards, we will continue on the growth trajectory, which is also why I believe that the setup as a globally focused unit does continue to make sense. While we're doing the integration, we're making the full group resources available and, yes, we are strong when it comes to IT integration. We are strong in operational performance, and that's given me confidence, and you will see that reflected in the growth performance later this year.
The next question is from Johannes Ritter, Frankfurter Allgemeine Zeitung. Please go ahead.
Yes, good morning. Thank you. I have two topics. First, I'd like to touch on your water business. Just yesterday, Foodwatch has announced to sue Nestlé over cases of contaminated mineral water, and it was saying that Nestlé has. I'm quoting, "Deceived, ripped off, and defrauded consumers." What's your comment to this, and how does this, these incidents come about? What does it tell about your internal controls, were those not tight enough? And in this context, I saw in your press release, you were saying that Nestlé is reviewing its operating practices in the water business in several countries. Which countries are these?
And the second topic, I'd like to come back on what you said about the run on weight loss injections. I mean, many people think that could—this could actually be bad for your own business. But if I understood you right, it's the opposite. You see opportunities to grow within this flow. Is that right?
Johannes, thank you. So on the waters issue, we've seen the media reports about the Foodwatch publication. We have not seen the details of the suit yet. It hasn't been delivered to us yet, so we'll need to study that. Let me stress, since you used the word contamination, it's not about contamination. We did stress this very important primary goal of food safety in all our publications around that issue, and so that is something I wanted to assure all of the consumers about. Also wanted to stress and point out that the unique mineral content of our waters that's indicated on the label, that's exactly what you find inside the bottle. At this point, again, it's still very early days.
What you've seen from the media reports over the last few weeks, we proactively had approached the French government with this issue, worked very patiently under their guidance to address these issues. We're now including a number of other countries, and it was important for us to flag that to you. Our primary responsibility in these countries is to talk to the relevant authorities first and have constructive discussions, which is why, at this point, I wouldn't want to list other countries beyond the ones that have been mentioned in the media already, which are France and Switzerland, and we'll keep you posted on any relevant development there. Regarding the-
Can I-
... weight loss drugs, if I could just continue there. So this is an area that we believe will find good consumer interest, and there will be select individual products for which demand over time may be moderated as a result of these weight loss drugs. But again, it's important to see that the nutritional needs of GLP-1 patients are not going away. They're changing, and it was important for me to point out these opportunities to you. And then over time, we believe it's gonna be a balance between some products where demand may be moderated and others where demand will significantly increase, and we believe there's an opportunity for us.
Okay. Well, just one follow-up on the water business. Is it now an option for you to withdraw completely from the water business? I mean, the margins are below average anyway.
We're working on these water issues, and I think this is not the time to have a strategic debate around it.
Thank you, Johannes. The next question is from Jean-Philippe Rutz, Swiss Broadcasting System, RTS. Jean-Philippe, you need to unmute yourself. Doesn't seem to work. We have an echo in the system. Maybe we move to the next one and come back to you, Jean-Philippe. And the next question is from Dasha Afanasieva, Bloomberg.
Hi, Ulrik. I know I asked you this a bit on the other Newswires call, but I was just wondering if you could go into any more detail in how Nestlé is sort of protecting itself from... You know, in the context of high cocoa prices. Is it adjusting its approach in terms of increasing the marketing for brands that contain less chocolate, such as Häagen-Dazs and Milo, or encouraging consumers somehow else to seek out these products because they now-- they're now sort of relatively higher margin because of the costs? And I know you answered about formulations, but anything else you could say about that would be really useful. Thanks.
Yeah. Dasha, thank you. And, obviously, as a company, we have a long history in cocoa and cocoa-flavored products, and a lot of brands that are beloved around the world. What's important to us is, recipes that consumers are tuned into and whose flavor profile they appreciate and love, that these, flavor profiles get fully upheld. So tinkering now with the recipes and flavor profiles simply because, the input cost for cocoa has gone up, in my opinion, would be a mistake. This is clearly a long-term commitment that, you know, on these beloved brands, you will see, and you will continue to experience the beloved flavors that you've gotten used to. Obviously, by brand, by market environment, you need to see then tactically on marketing opportunities and how to adjust to this and brand support.
But, it is like so many other commodity, cost variations, it's just one more commodity cost variation, that we tactically have to deal with. As a category, we're very strongly committed to confectionery, and I think you've seen very good continued success as we, put this, confectionery category back on a growth track. KitKat certainly is, the tip of the iceberg, but I think you're also seeing very good continued success on a number of other brands.
Thank you, Dasha. The next question is from Matthias Benz, the NZZ. Please go ahead, Matthias.
Good morning.
Good morning.
I have one question, regarding the share price. Development has been quite disappointing recently. What is your assessment of the current share price, and what are the main levers you see to increase it again? Thanks.
Matthias, thank you. Obviously, as a CEO and as operating management, it's important that we're not seen as interpreting for the public the share price. Our main job is to run the company the best possible way, and to be sure then that investors also have the transparency that's needed to form their views about our future prospects, and then price the shares properly. Let me just point out to you and our investors, that, of course, we're not happy with what we're seeing today. We're not contented with this, and that we're deeply committed to convincing our investors through sustained, successful operating performance, and then also reviewing every strategic option that's available in order to create value for our investors.
The next question is from Dario Pelosi, Swiss Broadcasting System, SRF. Please go ahead, Dario. We seem to have a technical issue. Dario Pelosi, we can't hear you. Maybe you need to unmute yourself.
Maybe you hear me now?
Now we can hear you. Yeah.
Ah, perfect.
All right.
Good morning. Sorry for the technical issues. Could you give a little bit more color on your coffee business? You have, on the one hand, you have coffee price spike, and you have the shortages due to climate change on the coffee. Then you have the focus on the prime product. Where do you see the coffee business going to?
Thank you, Dario, and it's important that we discuss this because, as you know, coffee is one of our key categories. I think it is important to separate the longer term climate change issue, which I know has been debated over the last few months with increasing intensity, from some of the short-term dynamics we're seeing. On the longer-term climate change issue, we take that seriously, and we have taken it seriously for many decades. In fact, with climate change that has already happened, you see that either further north or further south, or at a higher altitude, new coffee growth areas have been developed over the last few decades that take over from some of the areas where the heat may have become excessive.
We also did do extensive work when it comes to creating coffee varieties and seedlings, and making those available that are more drought resistant. And I think this is a good example where on the ground we're helping farmers. And by doing that, we're not only helping the farming community, we are also helping the overall global coffee business adjust to the climate change that happened underway already and has been underway already over several decades. A good example for a new coffee growth area is the Yunnan region in China, where over the last 20-25 years, we have been contributing patiently to the growth of the coffee industry, and that, of course, is helping us now supplying the increasing demand coming from China for coffee.
Short term, until about the second quarter last year, you saw a bit of a year-over-year slowdown in the coffee segment at home. And this was post-COVID, so this was people returning to work and consuming less cups of coffee at home and more coffee, more coffee again out of home. I think we successfully lapped that, and you see this proven in the performance of Nespresso in the second half of the year, which was quite convincing. And now, of course, you're dealing with some short-term pricing issues, Robusta being a coffee variety that trades very high, certainly against Arabica at fairly historic levels. But these are operational issues, just like on the cocoa question earlier, it doesn't change our significant growth prospects in this area.
We are adjusting to it operationally and we'll continue to see success in coffee.
We're now going back to, Jean-Philippe Rutz to see whether the technical issues have been resolved. Jean-Philippe, please go ahead. You probably need to unmute yourself.
Huh?
Yes, we can hear you. It doesn't work, so let's continue. Next question is from Laura Onita, Financial Times. Please go ahead. Go ahead, Laura.
Morning. Thank you for doing this. I think you said earlier, you know, that there has been some hesitancy among Middle East shoppers. You've also had companies such as Unilever experience various trends in the trading because of this, and I was just wondering if you might be able to tell us a bit more about what you might be seeing at this stage.
Thank you, Laura. I think what we've seen, after the tragic events of October 7, is across the Middle East and, some other countries in Asia, consumer hesitancy in general when it comes to global and, Western brands. Nothing where, I would see that, it's targeted specifically at our company. It's more of a global trend overall, and, local companies are benefiting from that. That trend, I think for the moment, continues. I don't see it particularly accelerating or decelerating, and then we'll need to see, where things develop in 2024.
The next question is from Richa Naidu, Reuters.
Hi. Thanks for taking a couple more questions from me. I just wanted to ask what specific products or brands might be easiest for you to reduce or slow price hikes on? And then my second question is, I see that price increases in China were much lower than other regions. Are you seeing a deflationary environment in China, and if so, how are you dealing with it? Thank you.
Yeah. Thank you, Richa. So regarding China, I think that over the last year we've seen lower inflation levels than elsewhere on the globe. And it's not exactly a deflationary environment, but the inflation rates were lower than elsewhere. And that's why the posted organic growth numbers were not as high as you've seen in some of our other geographic zones. And going forward now, it's hard to guess exactly where things are going. I'm still seeing a very moderate price development. I'm not seeing very strong signs for real deflation. Regarding the products and adjustments on prices, again, this varies a lot by category, by country, so it's hard to answer that one specifically. I ask for your understanding.
We don't see any further questions. It looks like we are done. At this point, I would like to thank you again very much for joining us this morning and for having joined us. If you have any further questions, don't hesitate to reach out to the corporate media team, and we will get back to you. Thank you very much, and have a nice day.