Nestle overcomes cost pressure
Confectionery-to-coffee giant Nestle today reported strong sales growth as price increases helped to offset rising input costs.
The Swiss group, which makes Nescafe and Kit Kat, said sales rose by 7.2% in the first nine months of the year led by strong growth from its coffee brands and pharmaceutical products.
The group, which has bases in Croydon and York in the UK, said that confectionery sales, including Quality Street, Smarties and Aero, enjoyed accelerated growth compared to the half year stage following a strong performance in the UK, France, Germany and Latin America.
The company warned earlier in the year that it would have to raise prices in an attempt to recoup rising ingredient costs, particularly milk, coffee and cocoa.
Prices were 2.7% ahead in the three months to the end of September, up from 2.1% in the half year. Turnover for the nine months rose 9% to 78.7bn Swiss francs (€47bn).
The company said the price increases reflected its commitment to profitable growth regardless of market circumstances. It warned that agricultural markets looked set to remain tough into the next year, adding that it expects to continue to raise prices to pass on the higher costs to customers.
The growth in confectionery, despite the higher costs, echoes comments from Diary Milk maker Cadbury earlier this month when it said it had benefited from a surge in chocolate sales in the poor summer weather.
Pharmaceuticals enjoyed 10% growth, while coffee and other powdered drinks were 10% ahead on the back of strong Nespresso sales and the launch of Nescafe Dolce Gusto in Europe. Nescafe Protect, a new soluble coffee with a higher antioxidant content sold mainly in Asia, also performed well.
Pet care, including food brands Purina and Bakers, also enjoyed strong growth during the period.
Ice cream sales dropped back, due to steep price rises in the Americas - reflecting the increasing cost of milk, while a cool summer in western Europe, including the UK, also hit sales.
The foods giant, which also makes Shredded Wheat and Perrier, said it remained confident of achieving above-target organic growth and sustainable margin improvement over the full year, despite the tough cost environment.
