Nestlé has reported its strongest sales growth in 14 years, with products including KitKat bars, bottles of Perrier and pet food flying off the shelves, after it passed on a hefty 7.5% price increase to consumers.
The world’s largest consumer goods company, the owner of household brands including Nescafé, Purina, Cheerios, Nespresso, Maggi and Quality Street, reported organic sales growth of 8.5% to 69.1bn Swiss francs (£61bn) in the first nine months of the year.
It is the Swiss-headquartered company’s highest rate of organic growth – a measure that strips out currency fluctuations and the impact of newly acquired companies – since 2008.
However, the company, which reported double-digit growth of between 10.7% and 15.1% in its confectionery, water and pet care operations, admitted that the revenue boom was mostly the result of passing on significant price rises to consumers.
Of the 8.5% organic growth, 7.5 percentage points (88%) came from instituting price rises across its portfolio. The rate of what Nestlé calls real organic growth, which reflects the movement in actual sales volumes, accounted for only one percentage point of the total.
“Nestlé reported a good set of results as sales beat expectations thanks to its ability to pass on price rises to customers without it impacting on demand,” said Chris Beckett, the head of equity research at Quilter Cheviot. “How long this continues in the face of challenging economic conditions remains to be seen, however.”
Nestlé’s results show that the rate of price increases continues to soar – third-quarter organic revenue growth hit 9.3% – as the rate of inflation in the UK hit a 40-year high in September for the second time this year because of soaring food prices.
The strong results led Nestlé to raise its full-year guidance, saying it expects organic growth of “about 8%” for the whole year, which would put it at the top end of a range of 7% to 8% previously announced.
“We delivered strong organic growth as we continued to adjust prices responsibly to reflect inflation,” said Mark Schneider, the chief executive of Nestlé. “The challenging economic environment is a concern for many people and is impacting their purchasing power. That’s why we aim to keep products affordable and accessible while considering the interests of all our stakeholders.”
