Nestle beats first-half organic sales expectations

LONDON (Reuters) -Nestle improved its full-year organic sales outlook and reported better-than-expected first-half organic sales, as the world’s biggest packaged food company again raised prices to cope with higher input costs.

Nestle said it is narrowing its full-year organic sales growth guidance to a range of 7%-8% from a range of 6-8%.

The Swiss company, which makes Kit Kat chocolate wafer bars and Nescafe coffee, said organic sales during the period rose 8.7%, beating average estimate 8.1% growth, according to a company-provided analyst consensus.

Nestle’s 9.5% price increases were ahead of the average analyst estimate of 8.7%. Real internal growth – or sales volumes – fell 0.8% versus expectations of a 0.6% decline.

“For the remainder of the year, we are confident that we will deliver a positive combination of volume and mix, an improvement in gross margin and a significant increase in marketing investments,” CEO Mark Schneider said in a statement.

The consumer goods company is one of many – from Unilever (NYSE:) to P&G – that have in the past two years struggled to manage high costs of everything from sunflower oil to packaging. Their problems began with the Covid-19 pandemic and unusual weather patterns hurting agricultural commodities, and have worsened since Russia’s invasion of Ukraine.

By comparison, earlier this week consumer industry rivals reported mixed volume results. Reckitt reported sales volumes for the second quarter were down 4.3%, Unilever’s quarterly volumes were down 0.3% and Danone’s second-quarter volume/mix declined 2.3%.

Analysts and investors have repeatedly expressed concerns that hefty increases in selling prices over the past two years will alienate consumers and push them towards cheaper private label brands.