Nestlé SA NSRGY 0.08% said consumers continued to snap up Nescafe coffee and Purina pet food, even as the packaged-food giant raised prices again to offset rampant cost inflation.
Companies have been grappling with sharp rises in the cost of energy, packaging and transport as the pandemic eases. Russia’s invasion of Ukraine has further stoked the cost of inputs like cooking oil and grains. U.S. inflation hit a 40-year high in March, while consumer prices in the European Union hit a record peak.
On Thursday, Nestlé reported first-quarter results showing shoppers so far haven’t been deterred by its efforts to offset those cost increases. The Swiss company said sales on an organic basis, which strips out currency changes and the impact of mergers and acquisitions, climbed 7.6% in the first three months of the year. That figure excluded its business in Russia, where it has halted sales of some products.
Overall, reported sales rose 5.4% to 22.2 billion Swiss francs, equivalent to about $23.4 billion. Nestlé—which doesn’t give profit figures in the first quarter—said overall prices rose 5.2%, while volumes climbed 2.4%.
Chief Executive Mark Schneider said Nestlé so far had enjoyed “sustained consumer demand,” but that it would raise prices further this year because of the continued sharp increase in inflation.
Price growth was highest in North America, up 8.5%, where volumes rose 1.4%. The company said its Purina pet food brand was the largest growth contributor in the region, driven by upscale brands and online sales.
RBC analyst James Edwardes Jones described Nestlé’s ability to grow volumes despite the sharp acceleration in price growth as “admirable.” Nestlé shares rose 1.5% in early European trading.
The update from Nestlé is the latest indication that shoppers have been willing to stick with big brands despite rising prices.
Procter & Gamble Co. posted Wednesday its biggest quarterly sales gain in decades. However, the maker of Tide detergent and Gillette razors warned that shoppers may yet balk at rising prices for household staples.
French beauty giant L’Oréal SA reported Tuesday strong first-quarter sales, saying consumer purchasing behavior so far had been unaffected by inflation.
Nestlé’s earnings also offered further clues as to how some pandemic-era consumer behavior is shifting, as people return to eating out and living more normally. Nestlé said in North America, its professional business and its Starbucks out-of-home products—both of which supply places like offices and hotels—reported double-digit sales growth.
By contrast, sales of frozen ready meals in North America, which performed well at the height of the pandemic, declined. Nestlé’s vitamins, minerals and supplements business grew only slightly after a strong run through the pandemic amid heightened consumer concerns about health.
In Europe, Nestlé’s said growth in its coffee division, which includes Nescafe instant coffee and Nespresso pods, was roughly flat, following strong growth a year earlier as more people stayed at home. Overall, sales in Europe rose 6.9%, as prices grew by 4.1%. Growth was driven mainly by Nestlé Professional, where sales surpassed prepandemic levels as restaurants and bars reopened.
Nestlé’s Greater China region was a relative outlier, with prices declining 0.5% as its high-margin infant-nutrition business reported a drop in sales. Overall, volumes for the region rose, helped by coffee, culinary products and a rise in sales of Nestlé Professional, despite regional Covid-19-related lockdowns.
Write to Saabira Chaudhuri at [email protected]
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