Nestle sales increase by 5.4% despite potential inflation
Nestle SA’s first-quarter sales growth of 5.4% was driven by double-digit growth in the sales of confectionery, water, and pet care products. Nestle’s pricing strategy became more complex in the quarter due to the increased inflationary pressures caused by Russia’s invasion of Ukraine.
Compared to the first quarter of the previous year, which saw total reported sales of 21.09 billion Swiss francs, the current quarter’s sales were 22.24 billion Swiss francs ($23.31 million). Sales were down 0.8% as a result of foreign exchange, and 1.3% were negatively impacted by net divestitures. The price went up to 5.2% to account for inflation in costs.
Due to unfavorable trade conditions and the company’s choice to concentrate on vital foods in the nation, Nestle now excludes Russia from its organic sales growth, as stated by Chief Financial Officer Francois-Xavier Roger during an April 21 results call.
“Compared to 2021, the impact of cost inflation is anticipated to be significantly higher in 2022,” he stated. “We now anticipate an even greater inflationary impact as a result of the war in Ukraine than we did when we spoke with you in February.”
Ulf Mark Schneider, chief executive officer of Nestle, stated that it is now more challenging for executives to provide inflation projections due to the war.
“It’s a very volatile environment, and I believe the company is fully focused on navigating this unique situation where we have significant input cost inflation. Of course, we also have to take responsible pricing action, but sharing detailed forecasts is difficult in this environment,” he stated. “And it’s actually week by week, day by day.”
He supported Nestle’s choice to carry on with its food sales in Russia.
“As you can imagine, it’s very difficult for a food company to tell them to stop supplying food, just as it’s difficult for a pharmaceutical company to stop producing drugs or a hospital to stop taking in patients,” Mr. Schneider stated. Furthermore, being present locally is never only an economic opportunity for us. It additionally entails what I refer to as substantial rainy-day obligations for the communities we support.
In the quarter strong growth for KitKat and gifted products lifted confectionery sales. Water sales rose as out-of-home channels and premium brands S. Pellegrino and Perrier continued to recover. Purina PetCare, led by the brands Purina One, Purina Pro Plan and Fancy Feast, as well as veterinary products, was the largest contributor to organic sales growth.
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Sales growth was in the high single-digit percentages in coffee behind demand for Nescafé, Starbucks and Nespresso. Dairy achieved mid-single-digit sales growth thanks to strong sales in coffee creamers, ice cream, and premium and fortified milk. Supported by improved sales developments in the Americas and Europe, infant nutrition sales growth was at a mid-single-digit rate.
Nestle Health Science saw high demand for medical nutrition and healthy-aging products in achieving mid-single-digit growth. Prepared dishes and cooking aids had low-single-digit sales growth with strong demand for Maggi and Garden Gourmet.
“Sales remained above pre-pandemic levels, but categories with higher at-home consumption, like culinary and dairy, saw softer growth over a high base of comparison,” Mr. Roger stated. “In contrast, categories like candy and water that saw a substantial rebound over a low base of comparison were those with greater exposure to out-of-home channels and on-the-go consumption.”