Nestlé S.A. ($NESN)

Good morning, and welcome to Nestlé's 3-month 2026 sales update. I'm David Hancock, Head of Investor Relations, and I'm joined today by Philipp Navratil, CEO, and Anna Manz, CFO. Before we get started, please take a moment to review the disclaimer on Slide 2. Let me quickly take you through our short agenda. We'll start with an overview of the key messages from Philipp before Anna reviews the 3-month sales in more detail. We will then open up the lines for Q&A. With that, I'll hand over to Philipp.

Thank you, David. Good morning, and thank you for joining us today. We have started the year well. Our performance demonstrates that our RIG led growth strategy is delivering in a complex and uncertain environment. Before turning to the details, I would like to thank our people around the world for their continued dedication and focus as well as our customers and consumers for their trust. Let me start with the key messages for the quarter. Growth momentum continued with organic growth of 3.5% and RIG of 1.2%. Our performance is broad-based. RIG was positive across all zones and categories, except Infra formula with Nutrition, which was impacted by the recall. By category, coffee was the star with recovering volumes and positive mix. Emerging markets also continue to stand out, driven again by RIG. The infant formula recall impacted performance in the quarter as expected. We acted quickly. Product availability is back to normal, and we are seeing new parents coming to our brands as they enter the category. So Q1 was a quarter of focused execution and good momentum. At the same time, it is clear that geopolitical and macroeconomic uncertainties have increased. Taking these together, we're maintaining our full year 2026 guidance. Here is a reminder of our strategic priorities. As I have said before, my highest priority is RIG-led growth. There is still much to do in order to drive this sustainably. Let me talk about what we have done in Q1. We are accelerating investments behind our growth platforms. These are areas where structural growth drivers, competitive advantages and our strong innovation pipelines come together, driving high single-digit organic growth or better. Elsewhere, we are addressing affordability and driving premiumization by sharpening our price pack architecture. We are investing more behind fewer, stronger brands, and our marketing transformation is a key enabler. Winning portfolio is another priority. We are making progress on the waters and VMS disposals, and we have announced this morning that we have reached an agreement to sell Blue Bottle Coffee. All this is underpinned by disciplined execution. I have talked about clear accountabilities and aligning incentives with delivery of sustainable, high-quality growth. To support this, we needed to strengthen our KPIs and performance management system. And this is now fully rolled out. Taken together, action on these priorities positions us well to deliver our plans for this year and beyond. And with that, I will now hand over to Anna to go through our Q1 performance.

Thanks, and good morning. We delivered 3.5% organic sales growth in the quarter, with RIG of 1.2% and pricing of 2.3%, and Sales were significantly impacted by foreign exchange. Last year, the Swiss franc strengthened sharply in early Q2. So assuming current spot rates, the year-on-year impact will reduce significantly from now on. We currently expect a full year currency headwind on sales of around 5%, which is a little less than we expected in February as the Swiss franc has weakened since then. Looking at organic growth in a bit more detail. On RIG, we maintained our second half momentum despite the infant formula recall and U.S. pet care phasing, both of which I called out at the full year. The chart on the right shows RIG for the first quarter by category. The impact in Nutrition and Pet Care were compensated, in particular, by coffee. You see the standout performance Philipp mentioned with 3.5% RIG in Q1 compared to less than 1% last year. Food & Snacks also improved delivering rig above 2% for the first time since 2021. Let me get into a bit more detail. Performance in coffee was very strong. Pricing continues to contribute positively, although its impact will ease as we progress through the year. RIG momentum is improving, supported by the strength of our brands, take Nescafe as an example. In the U.S., we had very strong pricing and double-digit RIG in Q1, even in a more difficult consumer environment. This reflects smart price pack architecture and strong in-store execution as well as occasional expanding innovation like Nescafe Gold Espresso. Overall PetCare growth was subdued during 2024 and most of 2025, that has showed signs of improving momentum over the last 2 quarters. Q4 and Q1 are distorted by customer order phasing in the U.S., which boosted growth in Q4 by a bit more than 1 percentage point, and that reversed in Q1. Over the 2 quarters, the effect is neutral. The improvement in PetCare is largely coming from the U.S. And this is driven by additional capacity coming online, allowing us to finally service unmet demand in wet cat where the market is growing. And we see that same strong demand for wet cat in Europe too. And here, we have greater skew towards cat and fewer capacity issues and so continue to deliver strong rig led growth. As expected, our performance in Nutrition was largely driven by the impact of the infant formula recall. And I'll cover this in a bit more detail later. Outside of this, medical and adult nutrition performed well, and the combination of Nutrition and the former Nestlé Health Science business will help us unlock further growth. And finally, Food & Snacks. Overall, organic growth has been relatively stable over the last 5 quarters, but the quality of that growth has been improving. RIG was negative in Q1 and Q2 last year, but has been improving progressively in the last 3 quarters to reach more than 2% in Q1. A major factor has been our confectionery business returning to growth as we've moved through our pricing actions. Before moving to our loans, here's a view by geography. In developed markets, Growth is a bit lower, reflecting the softer macroeconomic environment and weaker consumer confidence, but our performance versus our categories is improving. On the other hand, as Philipp mentioned, we're seeing good growth in emerging markets. Excluding China, OG is close to 7%, with almost 3% RIG. In most of these markets, momentum in our categories is supportive and the actions that we're taking are driving growth and share gains. Turning to the zones. In AMS, we delivered another good quarter with an improving momentum and positive OG across all markets and categories. RIG has strengthened as a result of our focused investments despite the difficult consumer environment in the U.S. Many of the category dynamics I mentioned for the group are playing out in AMS. I'll highlight coffee and PetCare in particular. I referenced Nescafe in the U.S., but the strength in coffee is actually really broad-based. In each of our other large coffee markets including Mexico, Brazil, Chile and Canada, rig was mid-single digit or better. In PetCare, underlying momentum is improving. -- driven by a good category growth in cat and by our super premium brands, One and Fancyfeast. In AOA, there are a few moving pieces, and this chart doesn't quite tell the full story. The infant formula recall accounts for all of the slowdown in growth from Q4 to Q1, and overall growth is still impacted by the continued correction of trade inventory in China. That aside, we're performing well. This is especially true in some of our emerging markets, including India, Indonesia and Central and West Africa as well as developed markets such as Japan. Market dynamics have generally been supportive and we're outperforming. Take Maggi in India, which delivered strong double-digit OG and RIG. Maggi is a loved brand in India, and we've built on that by combining affordable price points and flavor innovations, such as spicy noodles to capture rural and younger consumers. In Zone Europe, growth was solid. Here, we are continuing to deliver great growth in PetCare, as I already mentioned, and coffee is recovering nicely, with growth still price-led, but with improving RIG. The growth in pet and coffee was partly offset by the impact of the infant formula recall and a competitive environment in food. And finally, but importantly, we've largely navigated the annual price negotiations in Europe with limited disruption. Turning to the globally managed businesses. In Nespresso, growth is still led by pricing, which is expected to moderate as we begin to annualize increases from 2025. RIG recovered in the quarter, partly due to an increase in active consumers in Europe as well as the reverse and negative customer order phasing from Q4 last year. For Nespresso, the big news of the quarter was the launch of our new global brand ambassador, Dua Lipa. We've had a great response from a much broader consumer demographic. This collaboration, along with others like KitKat with Formula 1, reflect our new approach to brand building. investing in the right partnerships, which elevate our brands and engage a broad spectrum of consumers and especially those younger demographics. Finally, in Nestlé Waters and premium beverages, we delivered solid growth led by our international brands of San Pellegrino with innovations like Chao and the continued expansion of Maison Perrier. Turning to the infant formula recall. The recall was executed rapidly during the first quarter. Our priority has been to replenish shelves and ensure parents have access to the products that they need. And as of April product availability is back to normal. The overall impact of the recall in Q1 was around 90 basis points on organic growth, and about half of this reflected the direct effects of sales returns, temporary stock shortages and the subsequent replenishment. The remainder was driven by lower consumer demand. Our teams have done a great job engaging with health care professionals, retailers and consumers to rebuild trust in our brands. And this is key to supporting a recovery with new consumers recruited continuously as babies enter the category every day. We estimate that our infant formula sales are currently down around 10% or so due to the consumer impact. And we're already seeing early signs of improvement and expect to fully recover by the end of the year. Now turning to guidance. We're pleased with the Q1 growth performance, especially our rig delivery. At the same time, we're clearly facing increased geopolitical and macroeconomic uncertainties. The conflict in the Middle East will have some impact on commodity and distribution costs and possibly on consumer behavior, but it's too early to know the full extent of this. Taking into account the momentum in the business, alongside these uncertainties, our guidance for 2026 remains unchanged. We expect organic sales growth to be in the range of around 3% up to 4% and with accelerating rig compared to 2025, driven by our focused growth plans. Our new top margin, we expect to improve versus 2025 with strengthening in the second half. Lastly, we expect to deliver over CHF 9 billion of free cash flow. And with that, I'll hand over to David to open the Q&A.

Thanks, Anna. So we'll now open the Q&A session. [Operator Instructions] And the first questions come from Tom Sykes from Deutsche Bank.

Firstly, just on the cost saving program. Sorry, I know, it's simple but could you just maybe outline when is the point that you reached the maximum run rate of cost savings? Or rather, when is the point in the year or the next 2 years where you have the biggest delta in cost savings, please? Is that sort of end '26 or is it run rate in '27? And then just on the pivot towards younger consumers, both in your innovations and in your marketing. We can obviously see that in some of the materials. But where on that journey actually are you at the moment? You've obviously spoken before about building out the marketing infrastructure and that taking some time. Could you maybe speak about the level of hiring that you've done there and the changing in the culture of marketing that you've had in the organization, please?

Yes. Thanks, Tom. Look, I'll -- thanks for the questions. I'll give the cost savings one to Anna, and I'll come back on the younger consumers right after.

Sure. Yes. And on the cost savings, Tom, run rate in '27 is when we fully delivered our CHF 3 billion goal. And we're working our way through that, and you will see a sort of progress in a steady way as we work through between now and then.

Good. Thank you, Ana. And look, Tom, on recruiting younger consumers I love the question, and you have seen Anna call out just before some of the actions we're taking in terms of influencers like Dua Lipa for Nespresso where we actually see that we're speaking to a different cohort of consumers, younger consumers, new consumers that have actually never been in contact with Nespresso coming in to our website, to our stores and being interested about the brand. . You've also seen us last already engaging with KitKat and Formula 1. And you have seen probably just a few weeks ago, a viral campaign called the KitKat Highest where actually out of a stolen truck, we made the teammate a huge viral campaign. And this is part of how we want to run marketing. So it's more it's more led by the team. It's more bottom up. It's on tone and it's more viral. And so we're changing this as we speak. We have done a review of all of our agencies of all of our partners. We have a few new people in here that support us here. And it also it links to innovation, how do we innovate and products like cold coffee, the concentrates that have seen ready-to-drink coffee, some of the air fry recipes that we're launching, et cetera. These are all products that cater to a younger consumer and are more fun to use. And that's also how we communicate them. So I think we are on a good track. We're not done yet. This is just the beginning. But expect more of that to come because it is working and it starts to show results, as you can see in our Q1 numbers. Thanks, Tom.

Thanks, Tom. Thank you, Tom. The next question comes from Warren Ackerman from Barclays.

It's Warren here at Barclays. First one is on China. I'm sure you saw the FT article, I was just wondering where -- if you can give us an update in terms of moving to a consumer-led model from distribution push, where are we on inventories? And how are you engaging with the e-commerce channels for the future like Douyin, and should we still expect that inflection in Q2 on easier comps in China? Or is there still any residual issues? I'm just trying to understand how you're feeling at China, there's obviously being reported that there's kind of delays from the border on infant formula because of enhanced cellulite testing. So just your feeling on on that would be great, Philipp. And then second one for Anna.. Just really on pricing, Anna, you're kind of intimating the pricing will fade from here? Can you maybe share a little bit more your thoughts on where that might happen by kind of category and geography. Is it just kind of just roll over pricing, you're not planning to take any new pricing slightly surprised given the kind of inflationary comment that you won't see some new pricing. So yes, the first one, China, second 1 on pricing.

Thanks. I'll start with China. Look, as I say, I mean, we have been making the changes that we promised to make to strengthen the overall business in China. I've been just there a few weeks ago just to meet the teams and look through our businesses. And what the team is doing is redefining the growth model, as you called out as well. So we're relooking at our route to market, our distribution to really drive consumer pull. That obviously includes launching innovation. We have launched HMO. We have launched new variants under title. So we're leaning into innovation, into driving growth into new channels like the snacking channel, for example. As you know, there is a new management team on the ground that is now fully in place to drive this change. and we're correcting the trade inventory and expect that to be done by the end of Q2. There is still some of it to be done, but also expect China to gradually improve during the remainder of the year as we have said. So I see good progress there on all fronts to to bring China back to a consumer pool marketing-led model led by innovation and by good marketing investments. And that includes, obviously, the e-commerce channels like Douyin and the others where the team is launching specific innovations with the right price points that then don't compete with the rest of the off-line channels. And that's exactly part of how we want to move China into a consumer pull into consumer poll model. In terms of your question specific to infant formula and the border, et cetera, remember that infant formula in China, we produce locally. So we have 2 factories in China that are producing for China. So we don't have any issues there. Those factories are running, are back on track. And in China, I saw that myself. The products are back on shelf, and consumers are picking them up. So that performance on infant formal in China should improve more. And as I said, we have also launched innovation during the infant formula situation. We launched HMO under illuma in China during the last few weeks, which should further help the recovery in China. And I'll pass over to Anna on your pricing question. Thanks, Warren.

Sure. So how to think about pricing. In 2025, we took substantial pricing on coffee and cocoa related products, so coffee and confectionery because we saw some very significant input cost increases. And so when we talk about rollover pricing, rollover pricing is largely driven by coffee and cocoa. . Now as you know, we didn't take price to cover all of those input costs in 2025 because we were very focused on getting our price points right for the consumer and making sure that we're driving that consumer demand for the long term. So what you see as we go into 2026 is we get the benefit of that rollover pricing. And we will continue to look as we do across all of our categories where we can and should take pricing because the consumer can sustain it, and it's consistent with our momentum. So as we go into 2026, we will take price in different categories and in different markets. We were clear on that, for example, around pet in the U.S. as we came into the year. And you see that doing that across the board, both across developed and emerging markets category by category. In terms of looking forward and the impact of the Middle East situation, I guess just maybe a minute on that. I see sort of 3 areas of potential impact supply chain disruption, which we're seeing some are already some commodity inflation possibility, which we're seeing some of that we'll need to keep monitoring and the potential knock-on impact on the consumer, depending on how things play out. How we think about those impacts supply chain Look, this is something we're good at. The combination of our scale and the fact that we largely manufacture locally means that when there is global supply chain disruption, normally Nestlé gain share because we are more able to navigate that environment than others, and our teams are all over that. With respect to commodity costs, we will monitor where that goes. And as you've just referenced, we're well practiced on the levers to manage commodity cost increases because we've been doing that heavily on coffee and cocoa through 2025. So you'll see us use those same levers of price pack architecture and making sure that we're delivering for the consumer. And in terms of consumer impact, this is something that we will continue to monitor. We're not seeing too much at the moment aside from maybe in some markets like the Philippines where fuel costs mean that consumers are not leaving home as much. So they're shopping closer to home. And again, this is where Nestlé's proximity to the consumer and our really strong local market leadership is -- means that we're good at adapting to deliver on those changing circumstances.

Thank you, Warren. The next question comes from Guillaume Delmas at UBS.

Two questions for me, please. The first is on Cosi. So strong performance in Q1. Could you maybe unpack a little bit this performance for us. So particularly, is it down to an improved category growth improved elasticity? Or is it very much down to your significant market share gains. And still on coffee, but creamers, can you talk about your performance in the U.S. because it seems you were flagging some soft development in Q1. So if you could shed some light on this. And then my second question, it's on your underperformers. I mean maybe, Philipp, if you can provide a bit of an update on where you are with some of these businesses? It seems in Q1, Gerber was still challenged U.S. frozen also under pressure. So what progress are you seeing? And where would you expect to be at the end of the year for all these businesses.

Thanks, Guillaume. Look, thanks for both the questions. Look, I'll start with coffee. And indeed, we're very happy with our coffee performance, you see 9.3% rate OG 3.5% rig in that category, which is great. I'm particularly happy about the rig coming through. And as Anna just said, we'll have some price increases there. So happy to see consumers buying into our category. Look, this is broad-based, the performance on coffee and it's definitely based on performance across all zones, across almost all markets. and it's strong across all of our brands. So it's Nescafe, Starbucks and Nespresso. Particularly, Nescafe was very strong. That is, again, across the board. It's a soluble coffee, it's cold coffee or under the Nescafe concentrates, ready-to-drink coffee on the Nescafe but then also new launches like Nescafe [indiscernible] also new innovation. So it's really broad-based. So look, we love this category because it's a category that is resilient. It's a daily habit. Consumers have a coffee habit and we are able to cater to consumers at all ages across all economic strata and across the globe through our brands and also through our capability to cater to different price points. So that is really what played out here. And also, we have invested in those brands. So we have invested behind the 3 of those brands and that has definitely paid out. Maybe one thing that is important for U.S. as we have 9.3% growth in the first Q. So don't draw a straight line, so don't extrapolate that into the future because comps are getting more difficult. And also we're lapping, obviously, some pricing we have taken, so take pricing will come down. But really happy with that broad-based portfolio and also with the market share gains that came with that growth in many markets. So that's good. On the creamers part of your question, this is one I'm personally less happy about because obviously, if you look at -- we're doing really well in the U.S. in coffee and coffee made is a product that comes to life in coffee. So coffee made has definitely a huge potential. In the U.S. specifically, we had some operational challenges impacting our supply. That is due to some issues we had in our older factory there. We're working on it. We're on it, and we see great potential. We have a great Coffee-Mate brand with good innovation potential as well tapping into the growth that coffee is showing in markets. So we're working on that -- for it to come back but positive about the underlying strength of the brand and the business we have in the U.S. And your second question then, underperformers. Generally, we're working on our performers to improve the performance. So as you have seen in 2025 since we called out the 18 underperformers we have made progress on all of those. Some of those have actually fully turned around, so they are not issues anymore. Others have improved and others are still stubborn. 2 of them you have called out. So Gerber is among those and Frozen is not an underperformer. I wouldn't call it like that, it frozen is a category that is subdued in terms of growth. But look, we're working on them. On Gerber, specifically, the team is working on innovation on getting the products back on shelf and expect that to improve towards the end of the year in terms of Gerber. In terms of frozen, we have seen market share gains in some of the areas of our frozen business asset. The whole category is subdued there. But again, there, we're innovating into the space. And as I said at the full year, we believe in the category. And so we focused on those underperformance and improvement on some of those underperforming areas have actually also lean into the improved performance in Q1. So also the actions we're taking on those underperformers are starting to work.

Thank you, Guillaume. The next question comes from Callum Elliott at Bernstein.

The first one is on the guidance, please. So a very strong start to the year. Clearly, 3.5% OSG with sort of 4.4% underlying ex formula. And if you just continued at that 4.4% for the rest of the year, you'd be above the high end of your guidance range. You also have, as you said, Philipp, China should get better by the end of Q2. That's probably 50, 60 basis points of contribution you shouldn't have the pet food destocking beyond Q1. So it's another 20, 30 basis points that could get you to 5-plus which makes the guidance look quite conservative. So are you just being conservative in view of the volatile environment? Or is there actually something concrete that you've seen in the business since the start of the war that's making you really expect a genuine slowdown. So that's the first one. And the second one is a bit more strategic. You provided some very interesting data on growth by channel. E-commerce really stands out over 20% of the business now and growing over 15%. So basically, the vast majority of growth is coming from this one channel. So can you maybe talk a little bit about the dynamics of that e-commerce growth across each region. Obviously, it's a very different channel in different parts of the world. Can you touch on sort of market growth in e-commerce versus your own competitive performance? I presume that 15% is a decent amount of share gain. So just what you're doing to drive that and any strategic initiatives to ensure that it can persist.

Good. Thanks, Callum. So I'll pass the guidance to Anna. I'll come back on your specific question on the channels. Thanks much.

Thanks, Callum. So we are pleased with the momentum that we have in Q1 and that the actions that we are taking are fundamentally improving our rig. Equally, it is 1 quarter. And so it needs to be seen in that context. A couple of things to bear in mind as you think about guidance. Firstly, we did take some very significant price last year. and on coffee and cocoa, and we will not be taking price on coffee and cocoa in the context of commodity increases there at the same level. So that is something to bear in mind. Also, you asked are there any sort of specific or obvious significant distorters that we know about. No, there's nothing particularly funny in the Q1 numbers, otherwise, we would have called it out. But the excellent environment is uncertain. And our guidance reflects that uncertainty. And while I feel actually that we're very well placed to navigate whatever the external environment is and gain share because actually, uncertain external environment is something that we generally outperforming because of local manufacturing. And because of our deep market knowledge, our local market teams, we'll have to see how all of this plays out from a consumer perspective. And so we've taken all of that together in reiterating our guidance today.

Thanks, Anna, and I'll come back quickly to your questions on channel so look, e-commerce, also pleased with the performance in e-commerce. This is a growing channel for years now, and it's slowly taking more and more and more of -- in terms of percentage of our sales, and that's broad-based as well. So it's with brick-and-mortar partners but also with pure players and also growing on in our direct-to-consumer efforts, for example, on Nespresso. And this is all -- this is due -- there's a few factors playing into that. So we were able to innovate well into the channel. And that includes the right packs that you have mixed packs, for example, you have the right ultrapack the right pack size that has worked well. And we're also collaborating with many e-commerce partners on supply chain and leaning into retail media, which has been working really well because consumers are on the website or on their phone and then retail MEA in that sense is a good investment, has great returns on investment there. But there's 2 more channels that I see good growth given where consumers are, so discount channels are definitely doing well. That's across the board, U.S. in Europe, particularly strong growth in discount channels as consumers buy more often and maybe with lower tickets, and we're leaning into the same way we lean into the e-commerce channel with the right assortment, rise price and pack architecture there. And the other one, which is worthwhile calling out is convenience, which is, again, playing into that desire of consumers to shop closer to home, to be able to maybe shop daily and that works really well. And that is obviously underpinned by our underlying strength in mom-and-pop stores in emerging markets where we are very well distributed and where the strength of Nestlé's execution and and power of brands really comes to play as we showed in -- at the full year results. So these are the chills where I see growth, but obviously, e-commerce is one of the focus areas, and we're improving as we speak on those channels and customers. Thanks for the question, Callum.

Thanks, Callum. The next question comes from Celine Pannuti at JPMorgan.

So I would like to come back first on the Auto question. You reiterated around 3% to 4%, and you started very strongly in Q1. How is -- Anna, you mentioned that you're not planning to take more pricing in cocoa and confectionery and coffee, but how is the lower cocoa and coffee prices are changing potentially the outcome on the full year on pricing. And I appreciate maybe you don't have a crystal ball about cost inflation, but probably, I'm sure you've done some scenario analysis. So like Q1, it seems will be peak pricing. Please correct me if wrong. And then what should we think about as you look at the RIG comp H1 versus H2 and pricing decelerating? Like, could it be that H2 OSG is slower than H1 OSG. So if you could help on the pace of your growth through the year? And my second question as well on margin outlook. So to what I was saying, we have lower cocoa and coffee prices. Is that going to help in any shape or form in the first half. Are you still expecting gross margin to be down? And you say that margin will be more weighted to the second half, but could we have EBIT margin up in the first half? And then again, on scenario analysis, how should we think about potential cost increases? And where do you see that if there's any way you could quantify, let's say, with oil prices, let's say, $100, what would that mean for you?

Thanks, Celine. I think, Anna, that you're....

Yes. So just to step through those. So starting with pricing. So we did take significant price on coffee and cocoa because we saw significant inflation last year. That rollover pricing will obviously benefit Q1 and then erode as you go through the year. . As I said, we will continue to take price where we feel that we are able to do that. And you see us do that, but it will be on coffee and cocoa more muted because we have less significant commodity increases. Equally, it won't be 0 because we didn't cover all of our inflation last year because we were really focused on delivering for the consumer. So where we see those areas where the consumer can tolerate price, we will obviously adjust. And it is very, very much a by market by category choice that we are monitoring all of the time. So I can't give you an exact shape because this is the power of Nestlé. This is the power of the teams in the market that are looking at the competitive position locally and the promo position locally and they are taking agile decisions based on where the consumer is at a point in time. And frankly, in a macroeconomic environment like this one, that is really, really important. So what that means for the shape of the OG through the year, I won't guide on -- you know the moving pieces of pricing rig and comps. In terms of margin, so putting the Middle East piece to one side for a minute, maybe just the moving pieces around our margin. So yes, we have the benefit of lower coffee and cocoa prices as we move into 2026. But remember, we were hedged. And so that benefit will come through the year weighted towards the end of the year and really, we see the full benefit in 2027. Also remember that tariffs continue. And so in the first half, tariffs are a headwind until we lap the tariff environment as we move into the second half. Of course, we're still focused on cost efficiencies and they come as we find them. So it can be lumpy, but they come through the year. And I've just talked about the pricing piece. So all of that taken together would say that our margin should improve as we move through year, as I said at the full year. Now what are the implications of the situation in the Middle East Well, they're changing daily. And therefore, it is unhelpful to quantify them. But as I said, supply chain disruption, we're managing that absolutely fine. And in many ways, it's we are better at it than many. And so we should outperform the competitive set in that respect. In terms of commodity cost inflation, again, it's varying. It's not just it's not just fuel. We see it on some agricultural commodities, too, particularly the ones that can be used swapped out for fuel. But again, this is currently the normal course of our business. And we're managing movement in commodities all at the time, and we have the playbook to manage that as it happens. So taken all together, that's why we're comfortable reiterating our guidance today, including our margin guidance.

Thank you, Celine. The next question comes from Jeremy Fialko at HSBC.

A couple from me. First one, coming back the guidance. At the full year, there was this ride you put on the guidance saying additional impact from the IMF recurs uncertain and could drive towards the lower end of the range. Now it seems though you've gone through Q1 to what the situation with the recall is, it seems kind of as you anticipated it was going to be. So does that mean you can kind of take away that sort of provided to the guidance, which means you'd be at the lower end of the range, even if you're not doing anything else with the guidance? And then secondly, just on the IMF perhaps you can just go to a bit more detail about which of the markets where you've seen a good recovery you're back to kind of sellout and consumer offtake roughly as it was before? And which of the markets where perhaps it's taking you a little bit longer to get back to where you were previously?

Thanks, Jeremy. I'll have Anna start with your guidance question. I'll come back on IMF recall.

So in the context of guidance, yes, at the full year, we said around 3% up to 4, and we said that there was, at that time, uncertainty around the infant formula recall, which could drive us to the bottom of the range. Our guidance is unchanged. It's still around 3% up to 4. We are now more certain on the infant formula of recall. So we've taken away the sentence that specifically address the infant formula recall equally in the current macro environment in the current geopolitical environment, there's significantly increased uncertainty. And so taken all together, our guidance is unchanged.

Yes. And Jeremy, in terms of the infant formula recall, I mean you have seen us acting quickly on the recall and the teams have been focused on getting the products back on shelf, which is done basically. So we're back on shelf and in consumers' reach with all of our brands. And that's true across all countries. So I would say the statements that we make on infant formula that's certain for all of the countries that we have recalled and have had to recall. And in all of those countries, we have been working closely with health care professionals and institutions, hospitals, et cetera. to make sure products are back on shelf and also our back in their past. And so that has been the focus, and that's true for all of the impacted countries. So no difference there. and we're tracking that. And as I said, we should see that normalizing through the year, and we should recover every day as consumers come into that category every day.

Thank you, Jeremy. The next question comes from David Hayes at Jefferies.

So 2 from us. Just firstly, on the emerging market. strategy and the performance step up. We obviously see India the details there. You spend a lot more money in A&P spend, I think, up 50%, which is clearly working there, great performance from a top line perspective. But just understanding, is that kind of indicative of what you're seeing in terms of allocating more money to those growth opportunities? And I guess if that's working, the A&P spend uplift, could we see it moving up ahead of that sort of 9% of sales level as that kind of gains momentum and starts to reward? And then the second question, just around the growth platform growth versus the core nongrowth platforms. Obviously, you gave that indication of relative performance in the full year. I just wonder whether you can give us that split. I don't think I've seen it at least for the first quarter.

Yes. Thank you, David. Look, exactly. I mean, in performance like India or places like India, this is, you can call India growth platform in itself. And so this is definitely places where we where we will invest the right amount. And you have seen the results that drives. So India definitely is a place where we have great brands. As you have heard Anna talk about, for example, Maggi in India, the importance of Maggi India. We have the route to market, we have the distribution and I set the brands and innovation as well to invest behind. So that is definitely places where we will step up in investment. And you see it definitely shows results. So will that be -- we expect those results coming through going forward. Emerging markets, I have called out emerging markets as a strong performer for but those markets will also be -- and they're already feeling the pressure on the situation in the Middle East. So we'll have to see how the consumer reacts, but we're really well positioned in those markets to win and keep gaining share and keep overperforming and outperforming in those markets. But India is definitely a place that we see a huge potential going forward. On the growth platforms, in general, what you have seen us do, and we have said that since a few months now that we have stepped up the percentage of sales that we're accelerating. So that's now 30% of sales that is accelerated through the growth platforms program, as you can call it. And these are places, as you know, that we see higher structural growth and where we also have the brands and innovation and the capabilities to deliver more growth. And those growth platforms in Q1 have also delivered high single-digit organic growth and they're growing faster than the rest of the company. So what we have started to do is actually working. And I'm happy to see that the step-up from accelerating 10% of sales to 30% of sales is also showing results. So where we put our money, we see the acceleration -- and that is the strategy that we're driving with focus going forward 2026 and beyond as we keep on innovating and delighting consumers across the world.

Thank you, David. We take the next question from Olivier Nicolai at Goldman Sachs.

Two questions, please. First of all, could you comment on the underlying trend you're seeing in PetCare in the U.S? I remember you mentioned at the full year results, some early sign of in [indiscernible]. Are you able to comment on this server since we are in April now. And then secondly, I think, Philipp, in our -- at the beginning of your presentation, you mentioned a few potential disposals. Could you perhaps just summarize the various current process in place in terms of also timing and how advanced they are? I think you mentioned the water the last results, you mentioned the remaining ice cream business. And now obviously, you added the mainstream advance specifically on Blue Bottle Coffee, are you selling the entire business and not only the cafes or are you considering keeping the brand?

Yes. Thank you. Look, the outlying trend on PetCare, I'll give to Anna because she likes to talk about the capital options. So I'll give that to Anna. I'll come back on the disposal specifically.

Yes, I like pets. So yes, this is an area I follow closely. So in the U.S., since post COVID, we've seen an increase in cat adoption because it's much easier to go back to work and have a cat at home than a dog. And so where we are currently is we're seeing cat adoption growing between 2% and 3%, which is strong. And actually, for the first time in a decade, the number of cats or pets in the U.S. has surpassed dogs, which is an interesting data point. So yes, good underlying momentum in PetCare in the U.S. and even more importantly for us, we need the capacity in order to be able to deliver on that opportunity. And as you're seeing the capacity that you've been building coming online through the first half, you're seeing our performance accelerate in the U.S. driven by that performance in wet cat.

Good. And on disposals that you mentioned. Look, on Waters, you have seen us going out and looking for partners. So we're looking at that as we speak. And that business is still -- should expect that to be consolidated by of 2027. So Waters has been launched same for mainstream VMS that we are engaging on that one, so progress on both of those. And as these has been -- these are -- these have been difficult or complicated outs. And so I'm happy with the progress we have made on that. Same on ice cream. So we're progressing on those. I also expect some of those during 2026 as well. And specifically on Blue Bottle, you've seen us -- we sell the whole business, but we also -- you see -- and that has been launched on Nespresso, we have Blue Bottle branded capsules on the press so that are quite successful, and we intend to keep that business sold through Nestlé. But all the cafes are obviously in the perimeter of the sale.

Thanks, Olivier. The next question comes from Jon Cox at Kepler Cheuvreux.

Yes. The question -- I'm going to keep coming back to the guidance question, but maybe catch it in a different way. And, you mentioned this is only 1 quarter, and you've done excluding what happened with formula above 4%, we've had now 3 quarters where you've been 4% and above. . And then in terms of volume mix, again, you exclude formula now suddenly we're at the 2% plus mark on volume mix. Philip, I know you're saying there's still work to be done. I'm just wondering where you think you are in this journey to be able to consistently deliver that somewhere around 2% RIG and the 4% organic, it looks like you're getting pretty close from where I think a lot of us are sitting. Then a couple of more technical questions. Just on formula. You mentioned a 10% sales decline currently, which is obviously a 60, 70 bps headwind based today. I don't sequentially will improve. I wonder what gives you confidence it will improve. And I wonder if you could break out the areas because I guess for example, China, probably were down more than 10%. Europe may be doing a bit better. And then just the last technical question, just on plastics, there's plastic prices that are up quite substantially, shortages a pet in Asia. Just -- can you just remind me where we are on plastics as a share of COGS. I tend to think it's somewhere around 10% plus also. And are you seeing any disruption on plastics in Asia at all at this point? Or do you have sort of long-term agreements, I guess you do anyway. So anything or bit would be helpful.

Yes. Thanks, Jon. I'll pass guidance to Anna. And I'll come back quickly on the infant formula overall and then on plastics as well.

Sure. So with respect to guidance. So yes, we have done 3 quarters now that have had good underlying performance. And we have had quite a lot of price benefit in those 3 quarters. And so what we had said to you is to get to a sustainable 4-plus growth, we needed to consistently accelerate our RIG growth to 2 plus. And you see that the actions that we are taking are working and that our rig performance is improving. And so I think we feel good about that, and it makes us feel comfortable about the delivery of our medium-term guidance. There is a good clear path that the strategy will get us to delivering on that. Of course, we've got to navigate a period of falling price and we've got to continue to accelerate that RIG. And as time goes by, we'll lap stronger and stronger comps, but I think what you can see in our strategy is the actions that we're taking are working and our medium-term guidance is the right one.

Good. And then maybe overall on infant formula. And let me know if that answers the question or we need more specifics on numbers from Anna. But on infant formula, how we see consumers coming back as is what -- the actions we have taken in infant formula are working closely with health care professionals, hospitals, institutions as well, obviously brings trust back into our brands and into the quality of our brands. . Also, it's important to remember the category is such that consumers come into the category and out -- go out of the category every day. This is a category where consumers they stay in the category or use infant form of between 6 to 9 months. And so the game really the -- where we are successful is recruiting every day everywhere in the world when mothers consider feeding their baby with infant formula. So that is how we see this coming back. And we see this already happening. And as said, we are back on shelf. Consumers can pick up our brands and doctors are prescribing those brands to to our consumers. And that is consistent across the world. And as we are on shelf, we see this coming back step by step as we recruit new consumers every day into into our brands. And so -- and when we say we expect this to be back to normal by the end of the year. This is the recovery we're seeing and tracking every month. I don't know if you have specific numbers, Anna, to add...

Maybe one piece of context. So it does vary by geography, but it varies by geography around out of stock. So what we're seeing actually is a very and we look at the sellout data and the consumer data for all of our big markets, actually incredibly regularly. And so what we're seeing is a very consistent trend back once we're back on shelf. And so the markets that have had a slightly bigger impact is where we've been off shelf a little bit longer, and that's more to do with manufacturing and supply. But I think the important point from here is we are back on shelf everywhere now. And so we should see that consistent improvement as consumers come into our brand month-on-month through the And just on -- sorry, I haven't answered the plastics point, should I just did do that one. Yes. So again, this is a place where our scale and strong supply chain network and local presence means that we are not worried about any disruption here. And just to frame it for you, plastics are about 6% of our COGS. .

Thank you, Jon. We have time to take one final question from Jeff Stent at BNP Paribas.

Okay. Thank you, David. Just ONE question, particularly in sort of Asia. There appears to be a lot of work-from-home mandates. And obviously, we know from Covid that your business sort of benefits more when people are at home. So I'm just wondering, has there been any sort of impact of any sort of decent quantum that you can discern from those work from home mandates in Asia.

That's in Asia specifically, Yes. Look, and I'll pass after to Anna because she has spent some time in Asia lately. So look, that's in Asia, we didn't all emerging markets, but specifically in Asia, we when you see first impact of actually people moving less, going less out of home, eating less out-of-home, eating in home and shopping closer to their homes. We obviously are really well positioned in all of those emerging markets because we are really well distributed. All of our brands are really close to where people live and move and then also eat. And obviously, that favors us. We are much more in-home skewed than out-of-home skewed where we sell. And obviously, we love people at home cooking. And and enjoying our products. And so we're well positioned there. And this is where the power the local power and the local execution muscle of Nestlé comes to its best where we really can deliver products close to where people are close to where people shop and close to our people, consumer products, that's where we are at our best, and that has shown through the performance of emerging markets in general but also in Asia, Philippines, Indonesia, India, et cetera. during the first Q. So we are where people are and shop, and that's a competitive advantage that we have. But Anna has seen that firsthand in the Philippines during her recent trip.

Yes. So in terms of in the numbers, the numbers in Q1 have very little impact of these changes at this point. Yes, I was -- I've been in a couple of Asian countries in the last few weeks, including the Philippines, which is perhaps the most impacted at this point where there are fuel shortages, and we are absolutely seeing consumers stay more shop closer to home and all of those things. And this is a moment where Nestlé is really good. And what you've seen us do is focus on our key SKUs, the ones that really matter, the ones that drive the vast majority and make sure that our key SKUs are being prioritized into that mom-and-pop route to market. So we're getting them as broadly and deeply as possible because where consumers are walking to the local shop and purchasing locally, we need to be there with our -- all of our highest training SKUs. And we did that during COVID. And you saw the market share gains that we got in markets like the Philippines and other markets then. And we're deploying all of that learning again in adjusting our route to market where we're already seeing that behavior change, but also preparing for these sorts of behavior changes in some of our other Asian markets. So very much front of mind and something thaT we've got good experience OF and a super route to market to really make sure that we deliver for our consumer, and we're we are where they need us to be at this time.

Thank you, Anna. Thanks, Jeff. I'm afraid that is all the time we have for questions. So I will hand over to Philipp to close.

Yes. Thank you, David. And thank you all for your questions. Let me leave you with a few just closing remarks. I have seen, we started here well with broad-based growth, which was RIG led. Our performance demonstrates that our RIG led growth strategy is delivering in a complex and more and more uncertain environment. We have clear strategic ties, which we are executing with focus and this positions us well to deliver our plans for this year and beyond. Thank you very much for your questions and your continued interest in Nestlé. Thank you very much.