U.S. markets closed
  • S&P 500

    -24.85 (-0.54%)
  • Dow 30

    -41.06 (-0.11%)
  • Nasdaq

    -119.54 (-0.84%)
  • Russell 2000

    +19.37 (+1.04%)
  • Crude Oil

    +0.21 (+0.29%)
  • Gold

    +10.80 (+0.53%)
  • Silver

    +0.02 (+0.07%)

    +0.0007 (+0.07%)
  • 10-Yr Bond

    +0.0620 (+1.47%)

    +0.0006 (+0.05%)

    -0.0060 (-0.00%)
  • Bitcoin USD

    +1,725.74 (+4.31%)
  • CMC Crypto 200

    +2.18 (+0.25%)
  • FTSE 100

    -16.39 (-0.22%)
  • Nikkei 225

    -202.07 (-0.61%)

Regenerative farming practices are a 'transition for farmers': Nestlé North America CEO

Food and beverage company Nestlé is changing the way it harvests its ingredients by investing in regenerative farming practices to reduce its carbon footprint and maximize crop yields. Nestlé North America CEO Steve Presley joins Yahoo Finance Live to discuss inflation's impact on its consumer brands, where its growth drivers are, and its plans for sustainable farming.

Video Transcript

JULIE HYMAN: Well, from sparkling water to frozen treats, Nestle has a global footprint that raked in over $100 billion in sales in 2022. The consumer staples brand owns companies like Sanpellegrino, Haagen-Dazs, Nesquik, and cast a wide net over different sectors of the food space. But as we just talked about, we are watching inflation data very closely, continues to bite into consumer spending habits, even though it's getting a little bit more moderate.

How is a brand like Nestle adjusting? Steve Presley is joining us, Nestle North America CEO. He's joining us alongside Yahoo Finance's, Brooke DiPalma. So Steve, thank you so much for being here. I do want to start on inflation. We did just get the numbers this morning that do show consumer prices moderating a little bit. I know that Nestle globally has been raising prices at least earlier in the year.

Can you give us some color on what is happening now with your pricing strategy?

STEVE PRESLEY: Yeah. I mean, look, we know inflation has impacted our consumers across all the categories that they buy, including food and beverage. And for us in North America, we've also been raising prices across the last couple of years. I think, thankfully, we're starting to finally see this inflation moderate a little bit that we're seeing it come through the business in a pretty good way as it slowly starts to moderate.

We're still at pretty high levels. I remember actually on this program a couple of years ago, we were having a debate around whether this was transitory inflation or scarcity related. And clearly, we see there's some structural elements to it and there are definitely some transitory elements. So it's different by sector in terms of where we see the inflation softening.

But overall, at least the trend is going in the right direction again.

JULIE HYMAN: Definitely, the right direction for consumers. Can I read this to mean that you all have stopped raising prices for now or just that the price increases are getting smaller?

STEVE PRESLEY: No. Actually, for North America, we think-- we hope we're generally done with price increases. You can never say never. Obviously, as the market continues to fluctuate and it's a live being as we know. And so, as it continues to move. I think for the most part, we think the peak inflation is behind us and it'll start to slowly work its way down. We've actually leaned in pretty significantly as it's starting to soften in terms of investing and promotion, investing in advertising behind the brands to re-drive engagement with consumers and actually help those challenged consumers come back to the categories.

BROOKE DIPALMA: Good morning, Steve. You've been making some pretty big investments in the coffee category. I mean, you have brands across the board from Starbucks, Nescafe, Nespresso-- pretty popular among younger generations. Are you seeing continued usage of these machines, of these sort of products at home? And is that COVID 19 impact sticking along or are consumers going back out for their coffee trips?

STEVE PRESLEY: Yeah. Thanks for the question. Yeah, it's great. It's actually, when we look-- we called it at-home revolution that started in COVID. But the trends are actually sticking. What consumers learned is they can make these amazing great products at home and all of our products, whether it's our Starbucks At Home, or our Coffee-mate, or our Starbucks creamer brands, we can deliver incredible products at home with the same out-of-home quality.

Actually, at a significant value proposition versus out-of-home. One example is if you buy our coffee and our creamer, you can actually make 20 cups at home every single day for the price of one out-of-home cup. So as consumers continue to be strained in terms of the value dealing with this inflation, those products actually provide a great value proposition for them.

And so, the trends are great. Actually, not only are the trends great and the machines, but they're great in terms of the day parts that we drink coffee. Cold is absolutely a phenomenon, we all drink cold coffee. We drink-- espresso has really caught on. All of the segments on where coffee can serve continue to grow at a very fast pace.

BRAD SMITH: There's been a lot of rotation, Steve, of some of the brands that Nestle North America holds on to right now. Have you looked across the portfolio and identified anywhere that you would like to reinvigorate even more growth, areas where you could see Nestle North America making a strategic play or an acquisition?

STEVE PRESLEY: Actually, North America has been a core growth driver for Nestle, I say, for the last 5 years and we continue. So we actually look to accelerate growth on all of our businesses and we're quite proud of the progress we've made over the last 5 years to really grow. And we're in the quiet period for H1. But if you look at our Q1, North America actually grew almost 12% across roughly a $30 billion business.

And we continue to see that momentum as we move ahead. And so, for us, we are active in portfolio management, we believe in being in the right portfolios where consumers are most engaged and we're really happy with the portfolio we have right now. But we continue to look to find other categories and either deeper within categories were in to further engage with those consumers over time.

We think there's still opportunities in this marketplace. We're very bullish on the strength of the US consumer and the US marketplace and we continue to look for opportunities.

JULIE HYMAN: Steve, when you look across your portfolio in the US-- linked back into this brand conversation, but also, the pricing conversation, are you seeing some trade down where people are going to store brands versus Nestle name brands? To what extent are you seeing that?

STEVE PRESLEY: It's really different by every single category, there's not one trend you could say. There was absolutely a trend where consumers moved away from store brands during the peak of the COVID crisis and the stores are regaining some of that, so there is a general momentum to store brand. But some categories, we're seeing very strong trade down. In other categories, we're not really seeing it at all.

Pet care, for instance, there are some trade down. But in most of the categories that we participate in, we don't play with one brand at one price segment for consumers. If you take pizza, for instance, we have very high end pizzas at California Pizza Kitchen to DiGiorno to Jack's to Tombstone. So as the consumer moves through the category, that's the strategy we generally approach against all of our categories to where that trade down, we hope they trade down to ours and we continue our try to offer value for money in every single one of those segments.

And so, whether it's coffee, or pizza, or pet care, or all of our major categories, we try to offer the broad spectrum of products, so consumers can move down if they need to.

BROOKE DIPALMA: And speaking of that pizza, you're joining us exclusively from the TED Countdown Summit. You're set to make a major announcement around the DiGiorno wheat supply chain. Break down exactly what that investment is and how much it will ultimately cost Nestle North America?

STEVE PRESLEY: Yeah, look. For us, we're here to talk about regenerative agriculture practices and it's a word that gets used a lot that very few people have a foundation of. But I think of it simply as, look, by the end of the crop cycle, did we leave the soil better than it was when it started? And that's really what regenerative practices do. And if you think about it, it sounds like this very academic or esoteric description.

But it can be really simple practices like crop rotations or just no till or low till farming and it's working with those farmers. And specifically around DiGiorno, we'll announce a partnership with ADM and other partners for wheat, which is the foundation, obviously, for the crust. And we'll move to actually 100,000 acres of regenerative agriculture or farms that will actually practice regenerative practices to-- which will give us double the amount we need for the overall DiGiorno business in terms of sustainable wheat.

And so, look, there is an investment, it's a transition for farmers. You're asking farmers to change the way they farmed for the last 100 years. And we understand that, all that kind of transformational change is challenging and we're willing to invest in lean in with them. Because the way we approach this, it's not just can't just be good for Nestle. It has to be good-- and we talk about it in terms of creating shared value.

It has to be good for Nestle, it has to be good for the farmers, it has to be good for our consumer, and ultimately, we believe it's the right thing to do for the planet as well. That's why we're willing to invest in it.

BRAD SMITH: Yeah, Steve spot on. Look, you've got the right folks here for this conversation. I mean, I'm originally from Pennsylvania, where we've got one of the top agribusiness and agriculture conversations taking place in the country. And so, when you think about that, in all of the focus around regenerative agriculture, to what extent was this prompted by climate change?

STEVE PRESLEY: Look, obviously, we have a role as the largest food and beverage company in the world to try to lead our industry around climate change. And we think about, look, we a roughly 30% of total greenhouse gas emissions come from total food production and at the core of that is agriculture. And for us, driving agriculture changes and get to this regenerative practices will make tangible differences in this climate journey and it will help us achieve-- and we can't achieve our net zero roadmap if we don't make structural and systemic changes through that agricultural complex.

And that's why we're so focused on it. But really at the heart of it, what it really gets down to, we are consumer focused company that when you think about it, we want to make great products for our consumers every single day and that starts with great ingredients. And for us to have great ingredients for the next 150 years, like the past 150, we've got to take action now and improve the biodiversity and soil that we actually operate in across all our farms.

BROOKE DIPALMA: And Steve, correct me if I'm wrong, but this seems pretty costly here and you're also working across the tomato supply chain to do something similar. Let's talk end game here. What does this ultimately mean for prices at the grocery store for consumers when they go to get their next DiGiorno pizza?

STEVE PRESLEY: We actually don't think this is a problem you can pass to the consumer or an opportunity that you pass to the consumer and it's not a problem you pass down to the farmer, it's one that collectively, we have to solve. And we think it's the right thing to do for the business. And managing the crop cycles and managing your supplier base is just part of what you do when you run these businesses.

We will invest massively. Globally by 2025, we'll invest $3.6 billion, over $3.5 billion in these regenerative sustainable practices globally. And clearly, that has a cost impact to us, but we believe it's the right thing to do for the business long term. And the idea is to not pass these forward to consumers. We believe this is the right thing to do. And we've seen in test farms that we've developed, we actually see higher yield once the practices get going.

And so, we're encouraged that actually not only will it give us regenerative better soil, better biodiversity, but ultimately, will give us better yields out of those same farms.

JULIE HYMAN: Really interesting stuff. Thank you, Steve, really appreciate it. Steve Presley, Nestle North America CEO and our Brooke DiPalma. Be well, Steve. Thank you.

STEVE PRESLEY: Thanks guys.