Nestlé’s half-year sales surge 9.2% amid raised prices, bolstered by Nespresso and KitKat brands

28 Jul 2022 --- Nestlé’s total reported sales have risen 9.2% to CHF 45.6 billion (US$47.5 billion), with its Nespresso coffee brand growing at a high single-digit rate and double-digit growth in confectionery, including a notable increase in KitKat chocolate and seasonal products.

The Swiss food giant has become the latest household name to underscore that consumer price increases have failed to offset demand, with sales surging.

Nestlé raised its prices by 6.5% this year; however, the company saw profits soar in the last six months.

The company’s full-year 2022 outlook has been updated, with expected organic sales growth between 7% and 8%. The underlying trading operating profit margin is expected to be around 17%.

Growth in coffee and confectionery
Sales in coffee grew at a high single-digit rate, with broad-based growth across brands and geographies, supported by a strong recovery of out-of-home channels.

The consumer goods giant has become the latest household name to underscore that consumer price increases have failed to offset demand, with sales surging.Confectionery reported double-digit growth, reflecting particular strength for KitKat and seasonal products. Meanwhile, water posted double-digit growth, led by premium brands and a further recovery of out-of-home channels.

Dairy reported mid-single-digit growth, with solid sales developments for coffee creamers and affordable nutrition offerings.

Meanwhile, sales in vegetarian and plant-based food continued to grow at a double-digit rate, driven largely by the company’s Garden Gourmet brand.

By channel, organic growth in retail sales remained robust at 6.7%. Within retail, e-commerce sales grew by 8.3%, building on the growth of 19.2% in the first half of 2021. Organic growth in out-of-home channels reached 29.6%, with sales exceeding 2019.

“Price increases in a responsible manner”
The company’s CEO, Mark Schneider, says in the first half of the year, the company delivered strong organic growth and a significant increase in underlying earnings per share.

“Our local teams responsibly implemented price increases. Volume and product mix were resilient, based on our strong brands, differentiated offerings and leading market positions.”

“We limited the impact of unprecedented inflationary pressures and supply chain constraints on our margin development through disciplined cost control and operational efficiencies. At the same time, investments behind capital expenditure, digitalization and sustainability increased significantly.”

With this, the company “is focused on creating shared value over both the short and long term,” Schneider outlines.

North American growth
Organic growth in North America was close to a double-digit rate, led by increased pricing, strong momentum in e-commerce and a further recovery of out-of-home channels.

Nestlé Professional and Starbucks out-of-home product sales also grew at a robust double-digit rate.

The beverages category, including Starbucks at-home products, Coffee Mate and Nescafé, saw mid-single-digit growth, following a high comparison base in 2021. Sales in premium water grew at a double-digit rate, with solid momentum for S.Pellegrino, Perrier and Essentia.

Frozen food reported low single-digit growth, impacted by a high comparison base in 2021 for frozen meals. Ready-to-drink Nesquik in the US and confectionery in Canada saw double-digit growth, supported by new product launches.

European highlights
Europe reported high single-digit organic growth, reflecting increased pricing, a further recovery of out-of-home channels and innovation.

Starbucks by Nespresso and other Nespresso-compatible capsules saw further market share gains in the retail segment. Culinary reported a sales decrease, impacted by negative growth in pizza and noodles.

Asia, Oceania and Africa
Organic growth in Asia, Oceania and Africa accelerated to a high single-digit rate, driven by increased pricing, a further recovery of out-of-home channels and supply chain execution. The zone saw market share gains across categories, particularly in culinary, portioned and ready-to-drink coffee and dairy.The company’s full-year 2022 outlook has been updated, with expected organic sales growth between 7% and 8%.

South-East Asia posted mid-single-digit growth, with positive contributions from most geographies, led by Malaysia. Nescafé, particularly ready-to-drink offerings and Maggi and KitKat, saw strong demand.

Growth in the Middle East and Africa was close to double-digit, based on strong momentum for affordable offerings in Central and West Africa. Japan reported a mid-single-digit increase based on solid demand for coffee. Sales in South Korea grew at a double-digit rate, driven by Starbucks products. Meanwhile, Oceania reported high single-digit growth, fueled by new product launches, including KitKat Dark Tablet and the relaunch of Nescafé coffee mixes.

Latin America highlights
Sales in Brazil grew at a double-digit rate, with solid momentum for confectionery, cocoa and malt beverages.

Mexico reported high single-digit growth, with substantial sales developments for Nescafé and Carnation.

Sales in Chile grew by double-digits, led by confectionery and coffee. Colombia and the Plata Region also saw strong growth, supported by volumes.

Greater China highlights
The zone reported low single-digit organic growth, impacted by COVID-19-related movement restrictions.

By product category, coffee posted mid-single-digit growth. Starbucks products and Nescafé soluble coffee saw continued momentum. Confectionery recorded mid-single-digit growth, led by strong sales development for Shark wafer chocolate and solid demand for Hsu Fu Chi.

Edited by Elizabeth Green

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