Nestle beats quarterly sales estimates on sharp price hikes

LONDON (Reuters) – Nestle reported slightly better-than-expected first-quarter sales on Tuesday, as the world’s biggest packaged food company increased prices to offset tepid sales volume.

The Swiss company, which makes Maggi stock cubes, Kit Kat chocolate bars and Nescafe coffee, said sales rose 5.6% to 23.5 billion Swiss francs ($26.48 billion) in the quarter ended March 31, beating average estimate of 23.27 billion francs in a company-provided analyst consensus.

Nestle increased its prices by 9.8% during the quarter but sales volumes – which the company calls real internal growth – edged down 0.5%.

“Portfolio optimization efforts and responsible pricing helped to offset the ongoing pressures from two years of cost inflation,” Nestle CEO Mark Schneider said in a statement.

Consumer goods companies from Unilever (NYSE:) to P&G have raised prices sharply for the last two years to battle rising commodities and supply chain costs that squeezed margins during the pandemic and only grew worse when Russia’s invasion of Ukraine sent energy expenses to record highs.

Some shoppers – particularly those in Europe – have balked at the higher prices, prompting lower sales volumes across the industry as people bought less or traded down to cheaper brands. To be sure, many consumer companies are still seeing resilient demand for their products, especially from U.S. shoppers.

Rival Unilever, which posts results later this week, said earlier this year the industry was past “peak inflation, but not yet past peak pricing.”

P&G, which makes Tide laundry detergent, Pampers diapers and Gillette razors, last week reported a 10% increase in average prices across its categories during the quarter, and a 3% decline in volumes.

Investors said consumer goods companies should start easing price increases as supply chain costs decline, worried that further hikes could hit market share and margin growth.

($1 = 0.8873 Swiss francs)