Nestle reported its greatest nine-month sales rise in 14 years on Wednesday and increased its full-year estimate.
The largest packaged food manufacturer in the world, which makes KitKat chocolate bars and Nescafe, claimed organic revenues increased by 8.5% in the nine months ending in September, excluding the effects of currency fluctuations and acquisitions. The higher pricing intended to offset rising costs were the primary cause of the largest nine-month increase since 2008.
The company’s CEO, Mark Schneider, stated that “we produced significant organic growth as we proceeded to modify prices appropriately to reflect inflation.”
Mid-morning trading saw a 0.2% increase in Nestle stock.
Despite the robust sales, several analysts were concerned that price increases would soon push consumers too far, making some of the company’s items unaffordable in the midst of a cost of living crisis that is driving down industry sales volumes.
According to Chris Beckett, head of equity research at Quilter Cheviot, “you do worry about the pricing power category by category, particularly for discretionary food – nobody really needs a KitKat or an ice cream.” He added that while they were still some time away from the peak cost of living pressure, sales volumes had so far held up nicely.
Mark Schneider, CEO of Nestle, expressed concern about the “difficult” economic climate, which he claimed was affecting many customers’ ability to make large purchases.
Nestle reported sales of 69.1 billion Swiss francs ($69.4 billion) for the nine months that ended in September, exceeding the 68.9 billion francs predicted in a company-gathered consensus of 23 analysts.
Prices climbed more than quantities throughout the time, accounting for 7.5 percentage points of the 8.5% increase in organic growth, while volumes increased by 1 percentage point.
Nestle increased its full-year projection as a result, stating that it now anticipated organic growth of “about 8%” for 2022, up from a prior increase of 7% to 8%.
The Swiss firm also reaffirmed its aim for an operational profit margin in trade of about 17%.
On Wednesday, Nestle also disclosed a plan to acquire Starbucks’ Seattle’s Best Coffee division.
