Nestlé may raise prices after growth forecast cut

The maker of Nescafé and KitKat said it was considering all options – including efficiency savings and price hikes – as a response to rising costs and the weak value of sterling.

The company also warned it might reconsider its UK investment plans owing to the Brexit vote. But a decision wouldn’t be made until after the Brexit deal became clearer.

“Let’s first let the dust settle​ [before making a decision],” ​Nestlé ceo Paul Bulcke told a press conference on October 20. He added that any price raises would be done “responsibly”​.

Nestlé reported 3.3% growth in the first nine months of its financial year. It expected organic growth of 3.5% across the entire year – downgraded by 0.8% since its half-year trading update.

Sales of £54bn​

The manufacturer reported total sales of £54bn (CHF 65.5bn) in its trading update, up 1% from last year. In August, Nestlé was 3.5% up on the previous year.

Bulcke said: “In an environment marked by deflation and low raw material prices, we continued to ​[experience] volume growth, resulting in real internal growth at the higher end of the industry in both emerging and developed markets. Pricing remained soft but increasing.​

“For the full year 2016, considering the current softer environment, we expect growth of around 3.5%, improvements in margins and underlying earnings per share in constant currencies and increased capital efficiency.”​

Nestlé reported its biggest growth (4.5%) in North and South America, driven by its Coffee Mate and Lean Cuisine brands.

Nestlé’s worst performing operating segment​

The lowest growth was recorded in its European, Middle East and North African markets, with organic growth of 2.2%. The company said western Europe delivered positive results despite the deflationary environment, and it’s Nescafé and Dolce Gusto brands were best performing.

“Our growth was broad-based across categories, allowing us to gain or maintain market share in most of our businesses,”​ said Bulcke. “We are making progress in addressing our challenges and driving our different initiatives amidst a generally softer trading environment.​

Meanwhile, manufacturer Unilever​ raised the prices on its products on October 13. The decision reportedly caused a row with Tesco after the supermarket refused the price hikes and subsequently removed Unilever products from its online store.