CAGNY 2025: Day 4

We are in the home stretch! On the last day of CAGNY, we heard from 高露洁 , 欧莱雅 , CELSIUS and 雀巢 – a powerhouse line-up that allowed us to end the week with quite a bang.

Insight to Plan – From strategy to resource allocation

While all of these companies participate in consumer goods and face many of the same external factors (e.g., consumer demands like health & wellbeing, macroeconomic pressures, technology disruption) each of them faces distinct conditions – and, naturally, had distinct focus areas and priorities that, yes, are contextualized by the categories in which they play, but are also strongly driven by unique strategies, relative market position and leadership direction. In a lot of ways, it’s a tale of two cities. We heard from a company that is over 200 years old, and a company that is just over 20 years old. A company that reported 2024 revenues of about $1B and a company that reported 2024 revenues of about $100B. Luxury products for the affluent and daily products made affordable in still-emerging markets. Dominating share and a fierce fight in a competitive market (sometimes, both at the same time).

Certain strategic messages stood out to me from each company:

• Colgate-Palmolive Chairman, President & CEO, Noel Wallace, addressed both market leadership and brand strength to drive growth, and also brought EVP & GM, Colgate-India, Prabha Narasimhan, on stage to share the company’s application of their strategic approach to winning in this critical growth opportunity in emerging markets.
• L’Oréal CEO Nicolas Hieronimus’s headline was “We do only beauty, but all of beauty” – parlaying impressive market leadership, brands and science-and-tech-based R&I for continued growth in the categories where they compete, while investing in new spaces to conquer (geographies, consumer clusters and beauty futures/ tech)
• Celsius Chairman, President & CEO, John Fieldly, and CMO, Kyle Watson, were, of course, all about expansion (including the acquisition of Alani Nu), and continuing to increase awareness, consumption frequency and occasions. Fun fact? The combined companies accounted for 50% of total energy drink category growth in 2024 (!)
• Nestlé’s Global CEO, Laurent Freixe, and Zone Americas CEO, Steve Presley, communicated intense focus on driving and growing the core business, end-to-end – a virtuous cycle of productivity gains driving investment in innovation and brand building, yielding market share gains and profitable growth - i.e., growth funded by the generation of CHF2.5B in cost savings. Consistently, we heard the message about the company’s hyper-local relevance being powered by its global enterprise scale and central discipline.

Innovate to Scale – Inventing the consumer offering

No matter how old or young a company or category is, our industry doesn’t stay still – and innovation consistently must target the consumer trends that matter most. Inarguably, one of the most prominent and growing consumer trends is the desire for health and wellbeing.

If you’re not familiar with Celsius, you might be surprised to hear that this energy drink company fits natively in the health and wellbeing theme. Founded in gyms and by health nuts, Celsius was a counter to the historically sugar-heavy energy drink for young male thrill-seekers, and instead targeted those who wanted to “live fit”. Celsius boasts a collection of ingredients clinically proven to increase metabolism and burn calories and fat. Since then, innovation has focused on format and segmentation/ extension into new occasions, formats (supplements, on-the-go hydration).

The intensity (and personal nature) of consumers' health and wellbeing demands has driven increased investment in science-based R&D – in fact, over time, I see R&D becoming more and more central to companies’ overall strategies. Science-based is no longer the provenance of pharma or consumer health companies – or put differently, every consumer is seriously thinking about their health, and every company needs to pay attention.

My research team regularly conducts an analysis of patents filed by food, beverage, beauty and personal care companies; over the past five years, healthcare has been a fast-growing and very popular topic for consumer goods companies. Note: This goes far beyond “healthy food” – that is, I’m not talking about gluten-free or low cal or alternative sweeteners, but food as a therapeutic for a medical condition. It’s fascinating.

Often coupled with this focus on science is a focus on technology, and digital technologies remain a frequently patented topic as well. This includes consumer devices, but has also frequently targeted diagnostics to help consumers understand their personal health conditions. Of late, I’ve seen investments extend into understanding qualitative or even emotional questions. (My favorite is the patent I found on machine learning to understand pet family relationships.)

Colgate-Palmolive has long been an active player and leader in health, and Mr. Wallace spoke of the continued science-based innovation in their core line-up, distinguishing products like Colgate Total, Elta MD and Sanex. The company extends these proprietary R&D platforms across product lines – for example, in Total Mouthwash.

The company has also continued to progress their capabilities with technology – for example, with the development of a gen AI product ideation tool. Mr. Wallace gave the audience a good laugh by showcasing potential new products specifically ideated for CAGNY members.

L’Oréal always has some of my hands-down favorite science + tech innovations – turbocharged by their truly impressive innovation ecosystem.

The company has identified new areas of beauty to address, including:

• L’Oréal’s Longevity Integrative Science: 15 years of research and 38 publications, yielding 267 identified biomarkers of longevity
• The 15Bn beauty supplements market, growing at >7% over the long term – for example, BioRewind, a skin health dietary supplement that mitigates the impact of age, diet and environment
• Devices (e.g., Perso, Hapta, Cell BioPrint, Colorsonic and AirLight Pro) addressing multiple human desires including personalization, sustainability, inclusivity and pro-quality experiences at home
• Aesthetics: Development in SkinCeuticals and participation/ investments in clinics and Galderma

Nestlé has the largest number of priority patents among the food and beverage players we analyze, and the company’s new growth platforms also predominantly targeted health & wellbeing: Weight management and GLP-1 companions, women’s health, healthy longevity and affordable nutrition. All of these are exciting areas of opportunity – significant, growing and (in at least some of the cases) perennially ignored consumer needs. This R&D extends to core areas as well. For example, Mr. Freixe talked about scaling up their R&D in pet therapeutics and supplements – areas which represent material future growth. He also shared their strengths in protein, where they have ~300 R&D professionals with expertise in patented technology that allows them to structure proteins to achieve the highest protein concentration, and tailor them towards specific consumer needs/ medical conditions – for example, boosting athlete recovery, GLP-1 diets, and treating malnutrition. The company currently has protein products representing CHF2B in annual sales, and growing in the high single digits.

Engage to Advocate – Winning engagements with consumers and customers

Consumer and customer engagement is our industry's bread and butter, so, of course, this was a significant part of the discourse. In today’s discussions, this meant brand building (as it did most of the week).

The starting point of brand building is well-illustrated with Celsius, whose goals, as mentioned above, are increasing brand awareness and driving consumption through recruitment, frequency, occasions and distribution. Brand awareness shows lots of headroom for growth, and the company is utilizing ~ 3000 brand ambassadors who take individual responsibility for driving the brand into the communities they manage. As CMO Kyle Watson said: “Social media is culture”. On the frequency point, the company is also seeking to insert the brand into daily routines – for example, pairing with meals. Helping this objective is their 2022 distribution deal with PepsiCo, which dramatically expands their reach – including, recently, into food service outlets like Subway.

Of course, brand building in long-established brands is a must-do – and often yields the most attractive ROI. Classic examples of this were explained in Nestlé’s plan to scale existing winners, brands and channels. Nestlé is already the world’s coffee leader, and this remains an attractive category, with new consumers entering and a growing number of need states. Out-of-home and ready-to-drink were highlighted, and Mr. Freixe also talked about the extension into refreshment (a far larger category than hot coffee) as well as indulgence and snacks. Even brands who have been around for a very long time have further scaling potential; KitKat is 90 years old this year, and yet still is one of the fastest growing brands – both in the company and in the category; Mr. Freixe highlighted continued growth through mindful snacking, amplified experiences, and new formats (e.g., tablets – which are very popular in many countries). And, finally, additional channel expansion is still an opportunity, with eCommerce, C-store and value retail presenting attractive potential.

Nestlé’s focus on the core also translated into big bet innovation in key brands, and Mr. Freixe shared the six areas the company is targeting.

Mr. Presley talked about one of these – Nescafé espresso concentrate and its strong early success – and what impressed me was this: Nestlé has made some substantial and well-publicized investments in “newer” coffee areas – for example, Nespresso and Starbucks retail. However, at the same time, the company has not stopped innovating in its venerable Nescafé brand – and, as it turns out, this continued innovation is paying off – including with new recruitment. 2/3 of sales volume was incremental to the brand, and it notably overindexed with Gen Z consumers.

One more point: Data/ AI / digital underpin these all efforts, of course. In his discussion of eCommerce, Mr. Presley said that, at Nestlé, “product superiority” is not just product, but “the consumer experience of that product, and using technology to unlock that” – i.e., personalizing content at scale with gen AI, deploying AI agents to make the consumer journey seamless, and using e-SRM to have the right pricing model. This extends to the B2B commerce space, of course, and Nestlé generated 10% higher conversion of sales and 8% sales lift for customers they brought to these platforms.

Colgate-Palmolive also wove AI throughout their consumer and customer engagement. Mr. Wallace spent significant time outlining the many ways they have been using data and AI to drive ROI. For example:

• Optimizing digital media performance: Solving the complex and messy landscape of digital media, by aggregating and integrating unstructured and structured data across all platforms, and giving real-time insights to marketers around the world.
• Retail media: The opportunity to drive category growth with retailers with the tools in place to make sure the retail media spend is working for the company. This means tracking, measuring and optimizing, partnering to target new audiences, and (I was really excited to first hear about this from the company last year) clean rooms for shared data with retailers for shared growth.
• AI for promo optimization: Proprietary tool that aggregates all the promotional history of a given retailer and runs billions of scenarios to optimize investments.
• Digital shelf, including gen AI content that generates 2x the engagement; overall measurement and optimization of digital shelf is codified and automated, driving 36% improvement since 2022.

Ms. Narasimhan also talked about how this set of capabilities applies well to market-specific opportunities and challenges in India. For example: Access to dentists in this market is relatively limited, so Colgate-Palmolive launched an AI-generated dental report, where consumers can take pictures of their teeth and receive assessments and recommendations on their phones. Technology also helps with the fragmented nature of trade in the market: The company covers 1.7 million outlets through 5000 distributors, making it impossible for a human being to individually interact with each of them. Technology comes to the rescue. Through a handheld device, each of the 1.7 million outlets can receive recommendations on what to sell, based on their history and the macroenvironment around that outlet. Today, this model generates 30 million recommendations every month. This tech-enabled model also works for self-service, and enables the 1200 merchandisers supporting this channel; the company uses machine learning and image recognition to provide them with recommendations for improving assortment and execution.

It's hard to beat L’Oréal’s powerhouse marketing and brands, and their story is well known. I will be brief and just highlight that the company has also been bold – and excited – about embedding AI across multiple areas. Since 2020, they have focused on increasing marketing productivity. Mr. Hieronimus discussed their BETiq tool to optimize marketing and promotions. This tool now covers 45% of ad and promo optimizable investments, and will increase this coverage to 60% of investment in 2025.

The company also uses AI in creativity with their proprietary CREAITECH gen AI content lab. The company positions CREAITECH as a "safe space for GenAI experimentation", a capability that scales the transcreation of content for 37 brands across the globe – and also serves as a mechanism to upskill L’Oréal marketers. One of the questions I get a lot from executives when talking about the scale use of AI is the concern about worker adoption: Will their people be willing to use the tools and change their ways of working? As Mr. Hieronimus said about BETiq, “The good thing is that our teams want to use it, which is always a good demonstration that it works.”

Plan to Deliver – Delivering on the promise

Let's talk about what it takes to deliver on the brand promise.

The CHF2.5B of recurring cost savings Nestlé committed is not going to generate itself; this fuel for growth comes from several areas, including procurement. The company is in the process of consolidating and aggregating spend, as well as using AI to power procurement and supplier management. Finally, digital tools are being applied to e-sourcing and automation. The company is also seeking operating efficiencies in manufacturing and logistics.

In times of continued uncertainty, we all think about resilience – and L’Oréal pointed out that their global R&I and operations footprint drives both intense consumer intimacy and also risk balancing, no matter what’s going on in individual markets. While they recently built their most advanced distribution center in the world in China, they also continue to invest in manufacturing their most important products in multiple locations around the world.

Capacity still matters. With half of cat food in the wet format, Colgate Palmolive has invested in a newly commissioned wet plant in Tonganoxie – which also enables the production of variety packs – a key driver for growth.

Similarly, Celsius acquired Big Beverages Contract Manufacturing at the end of last year to boost their innovation and production capabilities.

Enablers: Attract to Belong, Architect to Run and Execute to Value

A few snippets from the day on how to enable success...

• On people: We all saw the announcement of the organizational alignment at Nestlé (e.g., Zone structure and reporting lines, reorganization of Waters and premium beverages, and focus on digital and sustainability). In the breakout room following their session, one of the analysts started by commenting on how clearly human the leadership team is, and then asked how Mr. Freixe feels Nestlé’s 277,000 workers have responded to the changes over the past 6 months. Mr. Freixe thanked the analyst for the question, and described how he sent an email to all employees outlining their new strategy. He went on to share that that he received a universally positive response (and many personal messages), which gave him great confidence that the company would pull together to execute on this vision.
• On digital core: There was a relatively higher level of discussion on AI today compared to past days, starting with Colgate's multiple examples (which I have addressed above). Obviously, this requires investment in data and technology infrastructure, and this is constant drumbeat in our industry. L’Oréal, for example, shared that the company is harmonizing their IT from (20+ systems to 1) to drive agility and scale across the globe.
• As Celsius builds scale, the company increasingly embeds the fundamentals of operational excellence. CFO Jarrod Langhans shared a number of initiatives, including: Setting up a COE to drive innovation, global procurement, supply chain and global marketing; technology and AI tools to drive sales and profit; and shaping a talent strategy that supports their growth.

And that brings us to the end of CAGNY! As always, I’d like to hear your thoughts, so please put these in the comments (or feel free to DM me). And tune back in next week, where I will provide an end-to-end recap on what I heard… and what I didn’t hear.

In case you missed it, check out my posts on CAGNY 2025: Day 0, CAGNY 2025: Day 1, CAGNY 2025: Day 2, CAGNY 2025: Day 3 and CAGNY 2025: What didn’t we hear?