Nestlé raised prices in first three months but insist increase was “responsible”

25 Apr 2023 --- Nestlé has continued to hike prices in the first quarter of the year, which has impacted the volume sales of the business, leading to the company to present negative growth in sales in Powders & Liquid Beverages, Water, Milk Products & Ice Cream and Prepared Dishes & Cooking aids – with its Nutrition & Health Science achieving flat volume growth (0.3%).

Confectionery has been the outlier, with the company increasing its chocolate and snack sales by 5.9%. Outside of human nutrition, the company has reported growth in pet food sales – up in volume by 3.5%.

Nestlé has increased prices by 9.8% in Q1, compared to Q1 2022, reaching an organic growth of 9.3%. Signaling general volume of sales has decreased by 0.5%.

“Nestlé delivered strong organic growth in the first quarter, as our teams worked diligently to protect volume and ensure a resilient mix. Portfolio optimization efforts and responsible pricing helped to offset the ongoing pressures from two years of cost inflation,” says Mark Schneider, CEO at Nestlé. 

High inflation has hurt Nestlé’s margins, which has been dealing with higher costs for dairy, cereals and energy.

Over-reliance on unhealthy products?
Last week, Nestlé investors called on the company to rebalance its sales toward healthier products. Investors, coordinated by the NGO ShareAction, expressed their support for Nestlé’s recent nutrition-focused disclosure but said it doesn’t go far enough.

ShareAction says 40% of the company’s sales of everyday foods are high in salt, sugar or fat. 

Nestlé has increased prices by 9.8% in Q1.However, the company’s confectionery, especially KitKat, have been some of the only products that have attracted consumer growth for Nestlé.

Nonetheless, in response to the growing demand for immunity-boosting food and plant-based alternatives, Nestlé is poised to unveil a plethora of NPD linked to wellness, health and nutrition. 

Furthermore, the business has seen “particular strength for healthy snacking products” in the North American market.

Regional overview
While achieving organic growth across regions, Nestlé has reported negative volume growth in North America (-0.8%), Europe (-1%), South America (-0.6%) and Greater China (-0.8%) and positive in the AOA – Asia, Oceania, Africa – zone (1.3%).

Growth in North America was broad-based across brands and categories, with Purina PetCare being the largest growth contributor. Nestlé also saw market share gains in pet food, frozen meals and soluble coffee.

In Europe, growth was supported by price increases, sustained e-commerce momentum and a strong sales development for out-of-home channels. Nestlé also saw market share gains in pet food, confectionery and infant nutrition.

Latin America saw market share gains in various product categories, including infant Nutrition, pet food and portioned coffee. Brazil, Mexico and Colombia reported double-digit growth, with particular strength in confectionery, dairy and Infant Nutrition segments.The company is expanding its frozen pizza business in Europe.

Greater China achieved market share gains in confectionery, pet food and ice cream segments, with Infant Nutrition being the largest growth contributor. 

Growth in zone AOA was driven by price hikes, improved mix and continued momentum of out-of-home channels. Nestlé also saw market share gains in culinary, coffee and ice cream.

Business moves
Nestlé, whose current pizza business in Europe is distributed under the Wagner, Buitoni and Garden Gourmet brands, recently formed a joint venture for frozen pizza brands in Europe with Pai Partners – with the transaction expected to close in the second half of 2023.

“We continued our portfolio management journey with the creation of a joint venture dedicated to the frozen pizza business in Europe. The new partnership provides the best platform to develop the full potential of this business,” underscores Schneider.

Earlier this year, In a long-term agreement, Nestlé and Barry Callebaut partnered to roll out 11,500 hectares of agroforestry, including payments for ecosystem services, in an effort that will protect biodiversity and support the livelihoods of over 6,000 cocoa farmers in Côte d’Ivoire.

In February, Nestlé Professional, Wholesome Crave and The University of Massachusetts Dining Program launched the Purpose-Driven Plant-Based Incubator, a collaboration designed to accelerate and encourage plant-based eating via a system of menus, workshops and student engagement programs.  

By Marc Cervera