Nestle sales advance on higher prices for KitKats and pet food

Nestle’s revenue gained as the world’s largest food company pushed prices of Purina pet food and KitKat chocolate bars higher.

Revenue rose 8.7 per cent on an organic basis in the first half, the company said on Thursday. Analysts expected growth of 8.4 per cent. Nestle also raised the lower end of its forecast range for full-year sales growth.

Like many consumer goods companies, the Swiss maker of Nespresso and Perrier has been increasing revenue through price rises in recent quarters even as volumes falter. With commodity price inflation on a downward trajectory, companies are looking at how they can claw back market share from private-label products and encourage consumers to spend, even as budgets remain tight.

A measure of volume was negative for a fourth consecutive quarter as some shoppers balked at higher prices and bought fewer branded products. Chief executive Mark Schneider said he’s confident that volume and the mix of products sold should improve in the rest of the year as it boosts marketing spending.

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Sales should rise 7 per cent to 8 per cent this year, Nestle said. Previously the low end of the range was 6 per cent. Analysts are predicting growth of 7.6 per cent for 2023.

The company is also struggling with capacity constraints in the US that are particularly affecting products such as Purina petcare, coffee creamers and Perrier bottled water.

Gross margin, a measure of profitability, should widen in the second half after a decline in the first six months of the year, Schneider said in the statement.

Nestle said the strategic review for Palforzia, a peanut-allergy medicine, is progressing and that it’s considering several options. The company had planned to finish the review in the first half of 2023.

Schneider acquired the maker of Palforzia in a $2.6 billion (€2.3 billion) deal in 2020 that marked one of his biggest moves into health since taking over in 2017. However, Nestle wrote down the bulk of its value after the business underperformed. – Bloomberg