Nespresso drives up Nestlé UK sales as petfood struggles

Nestlé posted a 3.6% rise in UK sales last year, with its Nespresso brand posting double-digit growth, but profits fell back as its key petfood division struggled.

Newly filed accounts for Nestlé UK showed UK sales for the year to 31 December rose from £1.53bn to £1.58bn.

However, its pre-tax profits dropped by almost a third from £273.5m to £184.8m, driven by “higher commodity prices and other costs” as well as a £14.2m charge relating to restructuring and an impairment of its Nestlé Ireland division. Operating profits, stripping out these charges, fell 11.1% to £134.5m.

Nestle’s figures include sales from the core drinks, confectionery and food business, as well as three subsidiaries - focused on petfood, bottled water and Nespresso coffee capsules - that also report their accounts individually.

Nespresso once again showed stellar year-on-year growth, with sales up 17.1% to £198.8m having more than doubled over the past five years.

Nestlé hailed an “increase in consumer awareness for quality coffee and increase brand awareness” for the sales rise, which also translated to a 13.4% rise in pre-tax profits to £8.1m.

However, its Nestlé Purina Petcare business posted a 2.5% sales drop back to £502.2m and a pre-tax profit fall of 25.5% to £23.2m - the division’s lowest profit figure for over seven years - as Purina’s mainstream Felix and Winalot brands struggled.

Nestlé Purina bought a majority stake in UK-based Tails.com - the fast-growing direct-to consumer petfood business - in April for £100m.

Nestlé Waters UK posted a 4.6% sales rise to £135.2m, though pre-tax profits fell back almost 40% from £11.5m to £6.9m.

At a UK group level, Nestlé said trading conditions were expected to “remain competitive and challenging”.

Sales to UK consumers were up 2.2% to £1.2bn, but exports of UK produced goods increased more notably, rising 8.5% into Europe to £355.7m and 9.3% to the rest of the world to £110.7m.

The accounts also revealed the group has reduced the book value of Cereal Partners UK, its 50% joint venture with General Mills, from £36.3m to £27.7m.

UK headcount fell more than 3% from 5,179 to 5,017 despite staffing costs rising 1.2% in the period to £295.7m.

Nestlé’s UK business paid a dividend to the group of £455m, having not paid a dividend in 2016.