Nestlé sees inflation hijack the year

Nestlé, too, was able to raise its full-year forecast after a strong growth last semester. While it was able to raise its prices to safeguard its margins, inflation still rose faster.

Prices up 6.5 %

Nestlé achieved a 8.1 % growth in comparable sales in the first half of the year, which was reason enough to immediately revise upwards its full-year sales forecast: the KitKat maker now expects net sales growth of 7 to 8 %, instead of the previously estimated 5 %.

Like many other food producers, Nestle’s growth was mostly due to price increases in recent months. In the first half of the year, Nestlé raised the prices of its products by an average of 6.5 %. By comparison, food price inflation in Belgium is already 9 %.

CEO Mark Schneider admitted to the Financial Times that his company had no choice but to raise its prices, saying that “we are doing everything we can to protect consumers from rising prices, but we also have to protect our business.” Sales volumes nevertheless still grew by 1.7 %.

Post-pandemic growth on-the-go

Consumers are only making a very limited switch to cheaper products and, in particular, sales on the go rose again after two years of Covid restrictions. Now that people are getting out more, to the office and to restaurants, coffee sales are rising sharply, as are sales of candy bars.

However, Nestlé cannot fully compensate for rising costs with higher prices. The company is cutting back margin slightly: the underlying operating profit margin fell by half a percentage point to 16.9 %, according to Schneider, due to delays between cost inflation and price measures. For the full year, the Purina manufacturer now expects a margin of 17 %.