A fresh look at US Petcare; downgrading to Neutral

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A fresh look at US Petcare; downgrading to Neutral

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Nestlé

A fresh look at US Petcare; downgrading to

Neutral

Rating Change: NEUTRAL | PO: 89.00 CHF | Price: 80.67 CHF

No paws for thought: investments needed in US dog food 27 July 2026

North America pet food is Nestlé’s largest category/region cell, at c.13% of sales. Our Equity

category deep-dive shows the group has been losing share in both cat and dog food.

Dog food share losses appear structural, reflecting the consumer shift toward fresh

Key Changesproducts (10% of the category and driving all growth). Following Colgate’s recent launch,

all major Petcare competitors bar Nestlé have a fresh offering. We believe addressing (CHF) Previous Current

this gap is necessary to improve Petcare volume growth from current 2.5% to the 3–4% Inv. Opinion B-1-7 B-2-7

range (consensus is at 3%; 5Y pre-Covid run-rate 3.8%), but would require investments Inv. Rating BUY NEUTRAL

in a category with higher supply-chain costs (Freshpet, the US refrigerated pet food Price Obj. 94.00 89.00

leader, has operating margins 1,000bps below Nestlé Petcare’s). This would dilute 2026E EPS 4.51 4.54

margins at a time when the benefit of input cost deflation in coffee and cocoa is easing. 2027E EPS 4.90 4.86

We therefore downgrade the stock to Neutral. 2028E EPS 5.22 5.13

2026E EBITDA (m) 18,251.6 18,462.7

2027E EBITDA (m) 19,532.2 19,378.2Input cost rebound, margin cushion shrinking

Since we reinstated on Nestlé (Brewing a comeback) cocoa and coffee prices have 2028E EBITDA (m) 20,552.3 20,120.7

rebounded, to the tune of 15% for coffee and by close to 70% for cocoa. At current spot 2026E DPS 3.16 3.15

prices, we estimate the gross margin tailwind from lower input costs in coffee and