Good afternoon and good morning to everyone. Thank you for joining Nestle's First 9 Months 2020 Conference Call and Webcast. I am Luca Brollini, Head of Nestle's Investor Relations team. We hope everyone is doing well and staying safe. The conference call will start with some prepared remarks from our Chief Executive Officer, Marc Schneider.
Marc will also cover the 2020 outlook. Our Chief Financial Officer, Francois Roger, will follow with a review of the 9 month sales. We will then open the lines for your questions. Before we begin, please take note of our disclaimer as usual. And now I hand over to Marc.
Thank you, Luka, and a warm welcome to our conference call participants today. As always, we appreciate your interest in our company. In these truly unsettling and difficult times, Nestle has delivered a strong quarter of very reassuring organic growth. Throughout this pandemic, our 3 key objectives of safety, business continuity and community solidarity were guiding us in our actions. We made good on all three of them.
I tip my hat with true and heartfelt respect to our 290,000 Nestle associates around the world. You are truly rising to the challenge of the global pandemic and making a noticeable difference to our consumers, retail partners, suppliers and communities around us. As the COVID crisis evolves, we're also making significant progress in our portfolio development activities. As expected, it has been and continues to be a busy year on the acquisition and divestiture front. I would like to focus here on Nestle Health Science, which is clearly on a roll.
Stellar organic growth and operating performance of a starting point. I'm a strong believer in the mantra that you have to earn the right to acquire. Nestle Health Science has clearly done that very consistently over the past years. In addition, they have landed a very impressive string of deals with strong strategic fit, as you can see from the bottom of the slide. The net result is that we're almost doubling this business over a 5 year period.
Bringing nutrition and metabolism science to the table to advance the health and well-being of our consumers and patients has always been core to our mission. Over the past decade, Nestle Health Science has also grown into a meaningful contributor to our consolidated financial results. I'm impressed by the strong pipeline of internal and external growth opportunities to build this business further, onwards and upwards. In this quarter's Business as a Force for Good section, I would like to focus on our sustainable packaging journey. We are now almost 2 years into the pursuit of our ambitious 2025 packaging commitments, Lots of momentum and lots of learning.
We have made solid progress, in particular when it comes to novel materials that facilitate recycling. In addition, we're now putting increased emphasis on the areas of reduce and reuse. The reduce pillar focuses on scaling down the size and volume of our packaging material and on using less virgin plastics. The reuse pillar has the goal of scaling up new reusable and refillable systems to eliminate the need for disposable packaging. Both pillars hold significant promise and will require close cooperation with our retail partners around the world.
The goal is to have a range of packaging options available that are a good fit for all the various geographies around the world that we serve. Depending on factors such as climate, infrastructure, population density and others, we aim to have safe packaging choices available that offer a superior environmental footprint. Before handing it over to Francois, I would like to cover our improved guidance for 2020. The only change is our increased expectation for organic growth, reflecting the strong third quarter. We are raising our organic growth expectation for the full year from the band of 2% to 3% to around 3%.
While it is important to have some downward protection at this volatile time, we would be disappointed if full year organic growth in 2020 would not stay at or above 3%. Certain calendar items such as the timing of Chinese New Year will work against us this quarter. But other than that, at the present time, we're not aware of major headwinds that would stand in the way of making good on this expectation. With this, let me hand it over to Francois.
Thank you, Marc, and good morning or good afternoon to all. Let me start with the highlights for the 9 months. Organic growth was 3.5 percent following a soft second quarter impacted by lockdowns. Organic growth accelerated in the 3rd quarter to 4.9%. This is the highest level of quarterly growth in the last 6 years.
Real internal growth for the 9 months was strong at 3.3%. Most geographies contributed to the improvement in the 3rd quarter. Pricing contributed 0.2%, largely reflecting currency depreciations in emerging markets. Acquisitions net of divestitures reduced sales by 5.5%. This mainly relates to the divestments of Nestle Skinnels, the U.
S. Ice cream business and the Erta Charcuterie business. Foreign exchange had a negative impact of 7.4%, reflecting the appreciation of the Swiss francs against most currencies. Total reported sales for the 9 months were CHF 61,900,000,000, a 9.4% decrease. The effect of COVID-nineteen on organic growth continued to vary materially by sales channel.
As this slide shows, organic growth for retail sales accelerated materially to 7.1%, reflecting sustained strong demand for at home consumption. Within retail, e commerce saw exceptional growth of 47.6%, and e commerce now accounts for 12.3% of total sales. Out of home sales declined sharply, sharply as a consequence of movement restrictions and the closure of many offices, restaurants and hotels to name just a few. As a reminder, before COVID-nineteen, the out of home channel accounted for around 10% of group sales. Sales in retails continued to be strong with a further increase in the 3rd quarter.
In out of home, the rate of decline bottomed out in April at around minus 60%. In the 3rd quarter, sales declines moderated to minus 26%. We remain cautious as the channel may come under further pressure in the coming quarters should movement restrictions be reinstated in major markets. Improvement in the out of home channel is expected to be gradual with a recovery back to pre COVID levels at the earliest in 2022. This slide shows the development of our sales by geography.
It includes both our zones as well as our globally and regionally managed businesses. Growth was positive across all geographies. The Americas saw sustained strong momentum in both North America and Latin America. MENA posted robust growth, accelerating in the Q3, with positive contribution from all regions. Growth in AOA turned positive in the 9 months, reaching a mid single digit level in the 3rd quarter.
Now looking at the growth dynamics between developed and emerging markets. Organic growth in developed markets was 3.9%, supported by broad based strong rig. Pricing remained negative. Emerging markets saw growth of 2.8% with an acceleration to a mid single digit rate in the Q3. While turning positive in the Q3, China posted a sales decrease.
Excluding China, emerging We remain positive on emerging markets as the key growth platforms for the years to come. Let's now look at the results of our 4 operating segments, starting with Zone AMS, where we continue to see strong organic growth momentum. Sales were CHF 25,000,000,000 Organic growth was 5.1 percent, supported by robust RIG of 4.7%. Pricing was positive at 0.4%. North America continued to grow at a mid single digit rate.
Most product categories performed very well. Purina Pet Care remains a standout contributor. Growth continued to be driven by successful innovation, e commerce and premium brands. As a result of increasing demand, we are further expanding our production capacity with an investment of $450,000,000 in a new plant in North Carolina, which will be operational in 2022. Growth in coffee reached a double digit rate with sustained high demand for Starbucks at Home, Coffee Met and Nescafe.
Frozen food posted high single digit growth, supported by DiGiorno and Starfers. Within frozen, we created a new range of modern health offerings, which include Lean Cuisine and the newly launched Live Cuisine. The range delivered positive growth in the 3rd quarter. We captured growth opportunities in dairy and baking to meet increasing demand for cooking at home through innovation and digital engagement. Water reported a sales decrease reflecting a high exposure to out of home channels, but recovered to almost flat in the 3rd quarter, led by San Pellegrino and Perrier.
Latin America reached high single digit growth with positive contribution from most markets and categories. Brazil was a standout performer, supported by strong sales development in dairy, nutrition and coffee. Confectionery saw strong demand across brands in the 3rd quarter. Chile continued to see high single digit growth, led by dairy and ice cream. And sales in Mexico reached a mid single digit rate in the 3rd quarter, with strong demand for La Lechera, Nescafe and Purina Pet Care.
Turning now to Zone M and A. Sales were CHF 15,000,000,000. Organic growth reached 2.9% with strong rig supported by both volume and mix. Pricing decreased by 0.4%. Growth reached a mid single digit rate in the 3rd quarter.
The zone continued to see broad based market share gains, particularly in coffee and pet food. All regions posted positive growth. Western Europe reported mid single digit growth in the 3rd quarter, supported by the United Kingdom and France. In Eastern Europe, Russia was a standout performer with double digit growth. By category, coffee, Purina Pet Care and Culinary Products were the main contributors, all delivering double digit growth.
Growth in coffee further improved with high demand for Nescafe, Nescafe Dolce Gusteau and Starbucks products. Purina Pet Care sustained strong momentum across most brands, supported by e commerce and premium innovations. In September, we introduced a recyclable flexible pouch for wet pet food under our Felix brand. Increased at home consumption continued to boost sales of culinary products. Vegetarian and plant based sales posted strong double digit growth, supported by new launches.
We also upgraded Garden Gourmet's Sensational Burger, which has among the best nutritional scores of any plant based burger on the market, with a Nutriscore A rating. Infant Nutrition posted positive growth. Russia performed strongly, and we recently achieved market share leadership with NAN. Growth in confectionery was almost flat, turning positive in the 3rd quarter, supported by strong growth in tablets and home baking. Water reported negative growth, with declines moderating in the 3rd quarter as sales in the out of home channels improved.
Moving next to Zone AOA with sales of CHF 15,300,000,000. Organic growth was flat, reaching 4.5% in the 3rd quarter. China saw negative growth, turning positive in the 3rd quarter. Coffee, culinary and ice cream contributed positively, seeing sequential improvements. The contraction in YS infant formula sales continued to moderate.
Our turnaround plan for this business is underway. YS launch of locally manufactured formula, Belsol, is on track. The new brand strengthens YS offering in the super premium segment and in Tier 3 and Tier 4 cities. Infants' reals grew at a double digit rate. Purina Pet Care sustained double digit growth, led by FELIX, Purina Proplan and Purina 1.
Sales momentum in e commerce continued with broad based improvements across most categories. Southeast Asia continued to grow at a mid single digit rate. The key growth contributors were the Philippines, led by Bear brand, Milo and Maggie, as well as Indonesia supported by Bearbrand, Dankau and Milo. South Asia continued to perform well. India posted strong mid single digit growth with good momentum in Maggie, Nescafe and KitKat.
Sub Saharan Africa grew at a double digit rate with strong growth across most markets, particularly South Africa. Japan, South Korea and Oceania saw positive slightly positive growth. Oceania had strong growth across most categories. Japan saw a decline in sales with some improvement in the 3rd quarter. KitKat sales declined in Japan impacted by a reduction of inbound tourists.
Overall for the Zone, dairy, culinary, coffee and Purina Pet Care were the main contributors to growth. Outside of China, infant nutrition saw good sales momentum, and Starbucks products continued to attract strong demand. Finally, turning to other businesses, which includes Nespresso and Neste Health Science. Total sales for the other businesses were CHF 6,700,000,000 Strong organic growth of 7.4% was driven almost entirely by RIG of 6.8%. Pricing was positive at 0.6%.
Nespresso continued to see mid single digit growth with broad based improvement in the Q3. E Commerce and the virtual system were the largest contributor to growth. The Americas and AOS saw double digit growth with continued market share gains in North America. Growth in Europe turned positive in the 3rd quarter with the reopening of boutiques and a strong momentum in e commerce. Nestle Health Science continued to be one of our key growth platform, reporting double digit growth.
Consumer Care and Medical Nutrition both contributed positively as demand remained high for products that support health and the immune system. E Commerce continued to see strong double digit growth. Garden of Life and Pure Encapsulations performed strongly. The newly acquired Vital Protein also delivered robust growth based on high demand for premium collagen protein powders. Healthy aging products grew at a double digit rate, supported by Boost in North America, Nutrane in Brazil and Meritaine in Italy.
Medical Nutrition posted high single digit growth. Food allergy and adult medical care products were the main contributors. Looking now at growth by product categories. A clear contrast remains between segments. Overall, our growth highlights the strength of our diversified portfolio and the ability of our company to adapt to a fast changing environment.
Powdered and liquid beverages reported growth of 3.1%. Coffee posted 4.8% growth. Losses in the out of home channel were more than offset by strong developments in at home consumption, which grew at a double digit rate. Starbucks products, Nespresso and Nescafe continued to gain market share. Starbucks products are now sold in more than 60 countries.
Powdered formats in cocoa and malt beverages, including Milo and Nesquik, grew at a high single digit rate. Sales declined in ready to drink formats moderated as lockdowns eased at the end of the second quarter. Pet Care continued to see outstanding growth globally, supported by momentum in e commerce, premiumization and science based offerings. Most segments grew at a double digit rate with market share gains. We continued to bring innovation to the market, including Purina Pro Plan Life Clear in North America and Europe and Purina Prime Bones in North America.
Nutrition and Health Science grew at 1.5%. Infant Nutrition growth remained impacted by a sales contraction in China. Outside of China, growth was in low single digit. Infants areas posted strong growth, boosted by increased demand in China, Brazil and India. We already discussed Nestle Health Science.
In Prepared Dishes and Cooking Ahead, growth was broad based by region and product segment. Our vegetarian and plant based food offering continued to see strong momentum. Ambient culinary and frozen in retail grew at a high single digit rate. Growth was supported by new product launches and increased digital engagement focused on maintaining a strong level of at home consumption.
Milk products
and ice creams grew at 8.2%. Within the category, dairy performed strongly with elevated demand for home baking products and fortified products such as Nino and Bear brand. Coffee Mate in retail posted double digit growth. After a difficult Q1, ice cream continued to show sequential improvement, with growth reaching a double digit rate in the 3rd quarter. Water saw negative growth, given its high exposure to the out of home channel.
Sales declines moderated in the 3rd quarter. Confectionery declined, with growth turning positive in the 3rd quarter as the On the Go conception improved. Demand for tablets and baking products remained high. Let me now hand over to Luca for the Q and A session.
Thank you, Francois. With that, we move to the Q and A session. We open the lines for questions from financial analysts. The first question is coming from Richard Taylor at Morgan Stanley. Please go ahead, Richard.
Good afternoon, Melanie. Two
everybody. Two questions from
me on digital, one specific one and then one more broad question. In the statement, you point to online sales now being 12.3% of the group, which in itself is a big step up on last year, which I think was 8.5%. Can you give us a sense for how big categories like Pet, Coffee, Health Science and Infant Formula are online versus the rest of the group? And perhaps what your fastest capabilities, but my sense is that you've been somewhat understated about your own abilities. It's been quite a while since I've been out there, but I remember well in 2012, you had a social media digital monitoring room.
So can you give us a sense of how you have upgraded your digital capabilities under your tenure mark, maybe in terms of hiring, investment, data, that kind of thing? What I'm really trying to get at is, if Nestle is now at the level in terms of its digital capability, can it disproportionately benefit from this ongoing digital leap that we're seeing given the categories that you're exposed to, which should work pretty well online?
Yes. Thanks, Richard. And maybe I'll start with that second one and then hand it to Francois for the first part. So look, even before COVID hit, this had been a key priority of ours. And I think we've been quite open and outspoken about this, for example, last year in our Investor Day in Arlington.
And we've been putting things into action. I think under the leadership of our new Chief Marketing Officer, we've been significantly now expanding our digital skills and across the full spectrum here from digital communication, social media outreach, but also then when it comes to e commerce fulfillment capabilities. It's important that we do this always in line with local market customs because digital, it sounds like a one size fits all, but there's lots of local flavors and local consumer preferences and also local players that you have to work with. And so we adapt to that. We try to avoid duplication by basically having a central toolbox and support system here.
But it's important that we also let local markets have a strong voice in how they tailor those systems and apply them. So feeling very good about this. It's a key priority in essentially all of our strategy meetings. And then of course, at the beginning of this year, like with everyone else, we've seen this tremendous acceleration coming with COVID. This is where everyone in a short period of time had to improvise and redouble their efforts.
So that one is more like your short term ability to adapt to changing circumstances. My view is now this is the coming of age when it comes to digital in food and beverage. As you know, beverage had been comparatively slow compared to other consumer categories in adopting more digital and e commerce driven business. But now I think this is here to stay. People had to adopt this way of purchasing out of safety concerns and health concerns.
Now that they see the convenience, we don't expect this to slide back even after the immediate pandemic is over. So all the more reason to give it continued effort, green light more investment in this area and be a leader in this space.
Richard, Francois speaking. Let me cover the first question. So COVID-nineteen accelerated e commerce sales, as you say, with an exceptional strong growth of almost 48% since the beginning of the year. It was fairly consistent even across the last two quarters. E commerce sales now represent 12.3 percent of our total sales, and we don't think that it will go back to where it was last year.
It was 8.5% last year. The good news is that we continue to gain market share online. In about 60% of our business sales online, we have improved and maintained our market share. And the interesting thing as well is in about 2 third of the cases, we have a better market share online than offline. You talked about geographies and categories.
Our online sales are essentially concentrated in certain number of markets by weight and by value. It's largely coming from the U. S, U. K, France, Germany, China and Japan. Some countries are more advanced than others.
But if we look at the growth rate since the beginning of the year, it has been relatively consistent across geographies, maybe with a stronger development in the U. S. And especially because of Pet Care because we really did very well over there for Pet Care. Category wise, we have 5 categories, which 4 categories which are more relevant for e commerce: coffee, pet care, nutrition and water. There again, I mean, we had strong growth momentum across categories, probably a little bit stronger in coffee, as you can understand, especially because of Nespresso, because we used that channel online platform almost exclusively in Q2 during lockdowns in many geographies as our boutiques were closed.
Next question is from Warren Ackerman at Barclays. Please go ahead, Warren.
Hi, everybody. It's Warren here at Barclays. Hi, Mark, Francois, Luca. So my first question is, for me, the 2 big standouts from today were the big acceleration in powdered and liquid beverages in Q3 and also the huge acceleration in the MENA in Q3. I was wondering whether you can say what the coffee growth was overall in Q3 and kind of split it out between Nespresso, Nescafe and Starbucks?
And same thing on Amina, you mentioned UK and France has been the contributors, maybe you can flesh that out. I'm just trying to get a sense of how much of this is kind of elevated category versus market share? Is this kind of how much is rising tide in this all boats versus better execution and innovation from Nestle specifically related to powder liquid the first one? And then the second one for me is on the guidance. I know you're kind of trying to beat but your 3.5% at the 9 months, your 3% guidance plus for the year.
You mentioned Chinese New Year is later, so that's a swing factor. Could you maybe help us a little bit how much of a swing factor can that be? And then maybe what you're assuming for out of home in Q4? I mean, I know it's moving because of COVID and restrictions, but do you think out of home will be better or worse than Q3? And then related to all of that, what does this all mean for margins?
Because I mean the growth today is very, very rig driven, hardly any pricing. Should we see big operational gearing on those high margin categories like pet food and coffee driving down into a better margin performance in the second half? Thank you.
Good afternoon, Warren. Let me cover the question on Coffee. So Coffee grew by 4.9% in the 9 months. Coffee at home saw double digit growth, so we saw a clear acceleration there. And that more than offset and compensated the significant sales decline that we saw in the out of home channel as well and in the ready to drink format.
We had actually a strong improvement in Q3 for coffee, we were not far away from being double digit actually in Q3, driven by a broad based acceleration of in at home consumption and some improvement as well in the out of home channel, which reflects one of the slide that I presented earlier today. The improvement of our growth largely came as well from the market share gains in the 9 months across segments, across geographies and brands. And the same remark applies to the growth. It happened across brands from Starbucks to Nespresso and through Nescafe as well. Just one additional remark.
We had some pricing improvement as well, and we were slightly positive in pricing, which is a change versus what we experienced over the last couple of
years. Warren, it's Marc. And let me just reiterate what Francois said. I feel very good about how the coffee category has developed in Q3. So this is not just the rising tide.
I think this is also us winning in quite a few markets and segments there. So look on the guidance, I think I was pretty open with you that we know this is cautious. And as you know, this year with COVID, this is not exactly the environment for high precision forecasting. This is where you would want to leave yourself a little bit of safety margin and this is what we're doing. And as I mentioned, other than the timing of Chinese New Year, which is going to be lighter on Q4 sales compared to the previous year, we don't see really any specific new negatives here.
But it's very hard to predict where exactly COVID is going to turn next and what the measures are going to be in key markets for us. As I hope you also appreciated, the guidance was as short and crisp as it usually is. We've removed all cautionary language around it that existed as part of the H1 guidance. And so this is something that you can absolutely hang your hat on. It's not designed to flag here any specific bad news that we're seeing for the second half of the year and specifically for Q4.
The you asked about out of home. So we have not seen that trending down yet. So I saw I mean, you saw from Francois's slide that there was a recovery in Q3. We're watching very carefully if it now starts to trend down again with some restrictions out there again. That has not happened.
It could happen as things get worse. And that is one of the cautionary items that, of course, we're watching out for. But as of this point, mid October, we have not seen it yet in major out of home markets for us. On the margin, I can only refer to the guidance, which is unchanged from the summer and some of the explanations we've given in the summer when it comes to the margin. We have started to reinvest some in PFME because I think now is the good time to do this.
You see the benefit in organic growth. And other than that, no new comments on the margin. And when it comes to rig and pricing, do keep in mind, I mean, rig has expanded very, very solidly. Some of that is mix. And I think mix really is signaling the strong innovation track record that we've been building up now and that essentially people are paying for.
So to us, as you know, mix is the new form of pricing, and it is clearly paying off.
Next question is from Jon Cox at Kepler. Please go ahead, Jon.
Yes. Good afternoon, guys. Jon Cox, Kepler Cheuvreux here. Just a couple of questions for you. Looking into next year, and congratulations, by the way, on that very strong volume mix.
I think it was the strongest in almost 10 years. Just looking into next year, though, I'm wondering, is there any reason why you can see at this point that organic sales growth would go lower than what we're seeing this year, just given some of the M and A you've been doing and some of the positives we're seeing in the category? So it's like a 2021 question for you. And then the second question, we're hearing about inflation coming back into the system potentially, which would help pricing next year. Do you see much of that at all?
Obviously, your figures still look quite weak in terms of pricing.
John, let me start on the first question about next year's OG. Look, with the strong roller coaster profile that you're seeing this year, I mean, when it comes to a quarter over quarter comparison, I mean, you will see a messy 12 to 18 months period. I think that's unavoidable. So it's hard to sort of give you any forecast here exactly by each quarter. But by and large, the trend towards more in home consumption, which favors us, I think is here to stay.
And I think that bodes well for next year. But again, on specific quarters like Q1 over Q1 when you saw some of the consumer stockpiling here in March 2020, it's going to be very hard to give precise expectations. For the full year and then also beyond, I feel quite optimistic because it's clear that even when some of the immediate health care concerns might be abated, people do actually skew towards more in home consumption now.
Jean Francois speaking. Let me answer your question on inflation. As you know, pricing is relatively limited in today's world because first of all, we live in a deflationary environment. And pricing is actually the mere reflection of 2 forces. 1 is depreciation of currencies, which happens essentially in emerging market as well as input cost, which means essentially commodity and packaging material pricing.
If I look at next year, there is no evidence at this stage that we will have a significant inflation on commodities and packaging material. We have seen over the last couple of months rather a trend of softening price increases for commodities and packaging material probably by linked to lower demand maybe for some of this raw material. On the other side, as far as inflation coming from depreciation of currencies, yes, we will see more of it. And we have started already to raise prices in some emerging markets when we have been facing in a number of cases depreciation of currencies of 25%, 30%. That has to be addressed over time with some kind of inflation.
So we will see some of it. What matters at the end for 2021 is the net of it. Still early to say, so we have some 2 conflicting trends, I would say, over there.
Next question is from Celine Panuti at JPMorgan. Please go ahead, Celine.
Yes. Good afternoon, everyone. My first question is on trying to understand competitiveness. I think in the past, you had given some numbers about where the percentage of your business where you hold or gain share. If you could share that with us how that evolved into Q3?
And more specifically, if you can talk about where maybe you don't seem to be gaining share, which is Nutrition. Could you talk about how your share losses are progressing in China? And if you give us a bit of an outlook here, given that some of your competitors, or at least one yesterday, seem to be a bit more cautious about the market growth going into 2021? And second question, again, going into the year end in 2021, I would like to understand how you see consumer spending next year. There seem to be a bit of conflicting messages.
Some corporates are seeing still consumer willing to spend for at home and willing to spend on brands. Others are worrying about potential pressure and especially in emerging markets. I don't know Brazil is doing well, but what will happen to the consumer when the government will shower consumer less with corona checks? So could you give us a bit of your perspective on that? Thank you.
Celine, good afternoon. Let me take the first question on market share. So our market share have been improving. We have close to 60% of our business sales. A sale is a combination of a geography and a category, which have been gaining market share.
It's actually 52% gaining. Our holding is 6% market share. That's close to the highest level that we had since 2013, so it's good overall. There are obviously different trends by region, by product category and channel. The market share gains, the main ones are M and A and AMS as well if we exclude water, but as you know most of it is linked to water in North America.
The other market share gains, notable ones are pet care as well as in coffee, both on soluble portion and Rosten Ground. We gained market share on creamers and chilled culinary, infant cereals and malted beverages as well. As I mentioned earlier, we also gained market share in an interesting way for the e commerce channel and we are gaining market share there as well in about 60% of the sales. Where we lost market share is essentially with Yinlu in China and with S26 as well in China essentially for YS. And I mentioned as well for Waters North America.
Celine, this is Marc. So as to your second question, it's hard to give a one size fits all answer here, but let me share a few thoughts with you. One is that the model that we've seen in previous recessions where the two extremes of the pricing spectrum hold up pretty well, I think that is poised to happen again. So you will see strong interest on the value side of things, including value packs, larger pack sizes, just getting good deals, good value. And on the other hand, there is a continued interest in premium products and people don't want to give up on those easily.
And those who can afford to continue buying them will do that. So from everything we've seen so far, that continues to play out again this time. I think at some point, yes, some support checks are running out. There may be less consumer spending overall. But do keep in mind, you have to eat and drink.
So it's not like this is where you start to save. And also, let's not forget, with less out of home consumption, there's a savings effect anyways because typically your unit prices at retail level that you spend in out of home tend to be much higher. So that purchasing power is available then for more in home consumption or support the in home consumption.
Next question is Alain Oberhuber at MainFirst. Please go ahead, Alain.
Alain Oberhuber, MainFirst. Good afternoon, Marc, Francois and Luca. Two questions from my side. The first question is regarding the rotation of the portfolio. As Neste announced, they would like to turn around 12% of its sales till 2023.
I would be very much interested how is the current development of these divestments you have already announced, which is U. S. Bottled water and Yashvili. Could you even expect an earlier divestment than you have guided for? And we've seen that regarding the investments with the recent acquisition of IMOON Therapeutics, you went into a new area, in particular, into parenteral nutrition versus your previous focus of intra nutrition.
Could you expect more of these parenteral nutrition acquisitions in the future? And the second question is confectionery, Obviously, a good improvement, in particular, I guess, in Brazil and in Europe, as you mentioned. I would be interested how is current development of China, Sufuzi. And I guess it's not doing good at the moment. When do you expect we could see a recovery with that brand in China?
Alain, thanks for the questions. And let me try and tackle both. So we feel very good about the time line of the ongoing reviews. But I do feel that the time frame that we had given, which is Q1 of next year, is still the right one. So we're fully on track for that, but I don't see much room here for an acceleration.
As you know, there's only 10 weeks left in the year. And so the Q1 2021 time frame to me makes sense. I'm very glad you're asking the question about Aimmune because this gives me an opportunity to clear up a misconception here. I noticed that a few media reports when we acquired the company talked about a biotech firm. And then some people came to assume that this is a parenteral product that gets injected because this is what happens to many biologics.
The product itself got regulated by FDA as a so called biologic approval pathway. And the FDA has a few pathways for approving products and they chose a biologic one. But it is an integral product. And it is not like an antibody or something that gets injected. And hence, it's less high-tech than maybe some biotech products out there in other therapeutic areas.
So we believe that this is very much within our range of skills. It's something we can handle really well. It builds nicely on our portfolio of allergy products we had already. And we'll continue to do research and try to expand also the technology platform that Aimmune offers to over time cover other allergens not just the peanut. So we believe this is a wonderful fit.
As you know, we've been a minority investor in that company since 2016. So we had a chance to follow the technology and its approval process very closely. And so we feel very comfortable with leading this business going forward and handling the technology and maximizing its potential. When it comes to confectionery, look, I'm very pleased with the progress now we've seen in Q3. So clearly, this business has been hard hit by the reduced out of home consumption.
And then in particular, when it comes to Sufuchi in China, as you know, a big part of that business is pick and mix. And so this is where you essentially self serve. And in this current environment with hygienic concerns, this is sometimes a hard sell on people. We've been responding, of course, in a swift way trying to have more package choices and online. But nonetheless, a large part of the existing business was exposed here to pick and mix.
And this is something that I think we have to repair over time. We're putting a lot of effort on reinventing and rematching that business. And so let's give it some time for the results to play out. But overall, in Confectionery, I'm very pleased with the amount of innovation I'm seeing, new things we bring to the table, the continued strong success story of our wonderful Kit Kat brand and others. So feeling good about it.
Next question is from David Hayes at Societe Generale.
Thanks, Luca. Hello, gentlemen. 2 for me, one on Nestle Health Science and one on AMENA. So on Nestle Health Science, looking at the numbers, it looks like it really stepped up in the Q3, probably up in the high teens. I just wonder whether you can comment on whether there's anything specific in there that means that, that was a slightly standout quarter that maybe unwind a little bit in the Q4 or is that just a growing trend, a growing evolution of people wanting to eat or take healthy supplements and so forth?
And the second question on AMENA, we've still got this gap when you look at AMENA with and without other in the numbers, 2.9 versus 2.2. Back in that hour, it looks like others down, therefore a couple of percent or so. Given that NHS is doing so well, it would suggest Nespresso is struggling a little bit in MENA, which I guess in some ways is surprising given the move to out of home. Is that just because there was sorry, moved in home, is it because that's so much out of home so much that business is out of home in that region? Or are you seeing some cannibalization early on with the Starbucks push and that cannibalization will ease off as we go through next year?
Thanks so much.
David, Francois speaking. Let me answer the question. So on Nestle Health Science, so it grew at double digit rate, supported by strong growth for Consumer Care and Medical Nutrition Products. Clearly, Consumer Care Products were supported by both Atrium Innovation, Vital Protein and the healthy aging products. I would mention specifically Garden of Life and Pure Encapsulations, which clearly saw strong momentum with high demand for supplements that support both health and the immune system.
I could mention more even more specifically encapsulation pure defense for respiratory health, garden of life organic Edelberry syrups and gummies as a herbal remedy. We have some range like Garden of Life probiotics as well, which did very well. The medical nutrition side was supported by pediatric products and for adult medical care. And there, I could mention a brand which is Peptamin that did very well. And finally, for NHS, part of the growth came as well from the e commerce sales that grew very strongly in double digit growth.
As far as MENA is concerned, you're absolutely right that the difference that you mentioned is largely coming from Nespresso. As you know, Nespresso, most of our boutiques were closed for quite some time and we went actually we had difficulties because of some issues with the post office in some countries to deliver during the peak of the lockdowns in some European countries. It got sorted out over time. Now it's back to normal. And actually in Q3, we are happy to report that we were back into positive territories for Nespresso in Europe.
There is no sign of cannibalization at this stage, so no specific concern on that side.
Next question is from Patrick Schwindeman, Zurcher Kantonalbank. Please go ahead, Patrick.
Patrick Schwindeman, Zurcher Kantonalbank. Hi, Mark, hi, Francois and Luca. You have reached 3.5% organic growth after 9 months in a tough environment. Your mid- to long term target is to get to a mid single digit growth of, let's say, 4% to 5% growth. How close are you already to this target?
Or what has still to be changed to reach this target on a sustainable basis? That's my first question. And second, regarding China, the Chinese New Year is almost 3 weeks later. What's your best guess impact for China in terms of sales? Does this mean 10% lower sales?
Or what's your best guess assumption here for China? Thank you.
Thanks, Patrick. So let me start on the mid single digit target, which still very much, of course, guides our actions. And so we're very much focused on ensuring the internal steps that are necessary to hit that consistently over time. No one served if we hit this for 1 quarter or 1 year and then slide back. It's important to have an innovation engine here in all of our categories allows us to stay there in a consistent manner.
Now short term, this is what I was trying to explain earlier. With COVID around us, you will see roller coaster movements here in the numbers going forward. And so the quarterly pictures are going to be very messy. And still midterm everything we told you in February about aiming here for mid single digits still applies. And I think the good news to me and the reassuring news to me is that while we're handling the COVID crisis in all modesty so well, the internal work when it comes to ensuring future innovation, building product pipelines, building new digital capabilities and all of that, that continues unabated.
So that has not slowed down. There were a few weeks in the spring as everyone kind of improvised to set themselves up to work from home offices and everything like that. But beyond that now, I saw solid progress on all of these efforts throughout the year. Management very much focused on it. And so I feel good about our ability to be there in a reasonable amount of time.
Patrick, Francois speaking. On the question of impact of Chinese New Year, indeed we do expect one impact for the quarter, which is the reason why we are a little bit cautious as well on the outlook for the full year. We expect to lose probably close to 2 weeks as far as China is concerned. And as you know, China is our 2nd largest market. So you can do the math.
It's about 200 basis points potentially of loss in because we won't get this preseason shipment for China on its own, which is probably 40 to 50 basis points of impact in terms of organic growth for the quarter for the group. So it's quite material. Not all categories will be hit in the same way. And so and this is still an estimate. It's not an exact science either.
So we'll see exactly how it goes, but it could go up to that level.
Next question is from Guillaume Delmas at UBS. Please go ahead, Guillaume.
Good afternoon, Marc, Francois and Luca. A couple of questions for me. The first one on Nutrition and going back to your mid single digit organic growth ambition, it strikes me that all your high growth categories this year are already performing at or actually well above your medium term ambitions. And the only exception to this rule is nutrition. So curious to hear your thoughts about how you look at this, whether you think it's just a temporary softness and it's come to challenging market conditions or if you think there is more you can do to improve your performance quickly there?
And then my second question, going back to Nestle Health Science, the category remains fragmented. We're hearing more and more about pharmaceutical groups creating standalone entities for their consumer healthcare assets. So my question here is, what's your vision for Neste Health Science? I mean, are you happy with that combination of strong organic sales growth and bolt ons? Or would you actually be open to a more transformational deal to accelerate the transformation of your portfolio?
Thanks, Guillaume. I think both of these are really important questions. Look on Nutrition, I think you're seeing 2 things at work. One is we were pretty open all throughout the year that we're not happy with the performance we're seeing in China and in particular with YF there. I think I told you as part of the H1 call that we changed our leadership.
We're very focused on this. And as always, you've seen us in the past, when we focus on matters, I think we set them straight and we get them going. And we'll make sure it won't be different this time. Generally, while we're totally committed and very bullish about infant nutrition, It is true that on infant formula itself, when you look at birth rates in key markets, it's very hard to get to significant growth rates right now. I think the best way to address that and still keep the growth ambition of this category is to also think about some of the additional products that we have on offer there.
Think about infant cereals, which I think are doing extremely well and there's lots more potential here to upgrade those over time. Think about the VMS, vitamins, minerals, supplements space for both mothers and children to be sure that the first 1000 days are nutritionally optimal. So I think by defining our business scope there a little broader not just in infant formula as we've done already over the last several years. And then in a good way executing on that, I think we will be able to improve the growth profile over time. So it's important not just to narrowly look at infant formula alone and then draw your conclusions from there.
I think this is one of the benefits of our Nutrition segment as I compare it to some of our direct competitors. On Neste Health Science, nothing has changed from what I laid out to you as part of the investor meeting in London in 2017, and that is we are super bullish on this, super committed, but we're not intending to build a toothbrush to sun cream kind of soup to nuts portfolio. We are focused on nutritional and metabolism products, and we want to be the thought leader and market leader in products that relate to that. And this is what we're patiently building up. Had it just been for large numbers, we could have built 1 of these consumer care empires so much earlier.
But I think a business model that only rests on one common denominator and that is a channel to the pharmacy of a truck store, in my view, has no future. I think you want to be the thought leader. You want to be the know how leader on a particular area. You want to own it. And for us, of course, this is nutrition science and metabolism and this is what we focus on.
So particular problems such as food allergies, digestion problems and ensuring that humans have all the micronutrients they need, I think this is what our core skill is and we'll keep expanding there. It takes a little longer to then build it up to sizable numbers, but I hope you've seen by now that with the central doubling that we have accomplished here or are on track to accomplish, we are heading now to something that is meaningful for the group. But then more importantly, it's built to last because it really builds then on the know how we have in the space and it's not just a mini portfolio that gets sold through a truck store or pharmacy.
Next question is from Jeremy Fialco at HSBC. Please go ahead, Jeremy.
Hi, good afternoon. So a couple of questions from me. The first one is, in the quarter, you saw both an improvement in the retail side of things, but then also the out of home did better. So really just a question of whether there are any stocking that you're seeing, any sort of catch up spend, just any items that you would see being, let's say, not representative of the kind of longer term or medium run rate? And then the second question is just on the mix versus volume.
So all of your growth is coming from rig now. I know you alluded to this in a previous question, but whether you can give any indication as to whether mix or volume is the primary component of your rig? Thanks.
Yes. Thanks, Jeremy. And let me take the first one and then maybe hand it to Francois for the second one. So again, it's pretty hard to give a one size fits all answer. And there may have been sort of isolated circumstances consumer may have been stocking up.
But broadly speaking, this quarter felt different from what we've seen, for example, in March, where clearly some cautionary stockpiling at the consumer level and also the retailer level was at work. This is not so much the case now. I think what you're seeing here is genuinely people staying more at home, consuming more at home and also now getting settled into that habit, which I think is going to be here to stay with us for a while. And I think that bodes well generally. So I see it as something positive.
And so talking about the components of our growth. So as I mentioned earlier, pricing, I would not say doesn't exist anymore, but is limited because we live in a deflationary environment. And this is just the passing through of input costs that we have commodities, packaging material or currency depreciation as well. We don't create really any value there, but we have to reflect it and pass it through. Mix is certainly more interesting because we are creating value there because the mix that we have is essentially product mix, which is largely linked to premiumization.
We are creating value there because the price per kilo, the price per liter is usually higher. And this is what we have been really doing over the last couple of years. That continued during the since the beginning of the year, which is rather good news. And volume, volume is important as well. You saw that in the past, we had about 1% of volume gain per annum.
We are still around the same level as we speak. And this is important as well because this is certainly creating value, this is share of stomach as well, so we value that overall.
[SPEAKER JEAN FRANCOIS XAVIER BOUVIGNIES:] We are getting close to the end of our call, but we still have time for 2 more. So next question is coming from John Ennis at Goldman Sachs.
Yes, good afternoon, everyone. I have a follow-up question on market share trends, please. You highlighted Coffee and Pet Care as categories that have gained share and they're, of course, more e commerce friendly categories. So I just wondered what do you think has been the main driver behind the share gains? Is it predominantly down to channel shift?
Or is it down to your supply chain strength maybe relative to some other competitors during COVID? Or is it something else altogether? I'm just interested to see what you think has been the biggest driver of those share gains how confident you are that these share gains, now that you have them, can be held on to medium term.
The share gain, if I talk of coffee, it happened, as I said, across brands and across geographies. Certainly, one of the key driver of the growth has been in innovation, and I would mention Starbucks there. We did gain significant market share through Starbucks. I would mention one clear example in MENA. We have gained about 10% of the Nespresso compatible capsules branded Starbucks in Europe, which is a market where we were not present before.
As you know, we sell only Nespresso capsules through our own boutiques and our own e commerce platform. So that's a good example of it. We have been very innovating as well entering into restaurant grounds with and there's a Starbucks brands and so forth. I would mention as well one highlight for as far as coffee is concerned, which is Nescafe Dolce Gusteau. We have been doing very, very well since the beginning of the year.
As you know, we built over the years a business which is more than CHF 1,200,000,000 by value and this is growing at a strong double digit rate. Pet Care, a lot has to do with premiumization and innovation as well. So we launched products like, for example, this anti allergen product for cats in the U. S. So we have launched as well, just to name a few products that limit barking for dogs and consumers are ready to pet parents are ready to pay a premium for it just to name a few of the innovative products that we have launched.
In Pet Care, in emerging market, it's a different story. It's a little bit less about premiumization. It's much more about calorie conversion, which we are actually driving in many of the markets. And as you know, we are gaining significant market share as we speak in Eastern Europe, in Latin America as well as in Asia overall.
And Jonathan, to build on that, sorry, fully concurrent, I feel that the trends that we were building on here in coffee and pet care were by and large trends that were already at play before COVID hit. So this is not a supply chain game. I mean, I'm very proud of what our supply chain people have done, but this is not only supply chain driven, but rather a continuation of the good trends we've seen before.
Last question is from Jean Philippe Berchi at Vontobel. Please go ahead, Jean Philippe.
Thanks, Luca, and thanks for taking my question. Good afternoon, gentlemen. The first one is regarding some possible production bottlenecks considering the strong growth in some categories. And if you want maybe to reallocate your capital in some strong growth or high growth categories? And the second one is on Starbucks, double digit growth in North America.
I'll be very much interested in your first take of this acquisition, what you've been learning from Starbucks and vice versa. It looks that you are like what about your expectations from back then when you acquired the business? Thanks.
Thanks Jean Philippe. So look on production, we just touched upon pet care and I think this is the one I would call out. We are in a massive capital expenditure triath right now. As you know, this is our 2nd year now of very significant outsized growth rates. A lot has to do with a trend that we covered in earlier calls, but not today and that is a renewed interest in science based products and maybe less growth in some of the premium natural products.
And that trend, of course, is very much right now wheelhouse and something that we very much welcome. But as a result of that, we had to fast track quite a lot of CapEx now around the world in pet care. And this will take a bit of time to come on stream. And so nothing that at this point looks absolutely serious here when it comes to continued growth. But nonetheless, we need to work hard here to keep expanding in line with the market demand we're seeing.
But again, there's nothing I like more than spending CapEx into a rising category. So for me, as much as I know this is hard work for the team, I see it as good news. The Starbucks partnership is absolutely wonderful. And as you know, we closed the transaction in August 2018. So this is now 2 years of work side by side to bring all these SKUs to the market.
As you've seen, beyond the initial batch of 24 SKUs, which was unveiled in early 2019, we now also have a steady stream of new products coming to the market. I feel very good about the pipeline that is shaping up for 2021. We had some really, really good launches this year. So this is not a one shot deal. This is an ongoing strong partnership where I think the 2 companies sort of put their best coffee thinking together, and they continue to come up with amazing and dazzling products.
So couldn't feel better about it.
Thank you all. With no further questions, we come to the end of our session today. If you have any other questions, please feel free to
reach out to our IR team. Thanks, everyone.