Nestle and Unilever both beat revenue expectations

Nestle and Unilever have reported sales that beat estimates as the European food giants pushed through cost increases to combat slowing purchases by pickier consumers opting for quality over quantity.

KitKat maker Nestle said that organic revenue rose 2.3% in the first quarter, compared with the 2% median estimate.

Unilever’s sales growth of 2.9% exceeded analyst predictions of 1.9% as the Hellmann’s mayonnaise provider issued its first results announcement since it rebuffed a takeover approach from Kraft Heinz.

Improved pricing power at both companies provided an early sign of recovery for the food and beverage market after years of deflationary pressure in Europe, slowing sales in China and economic crises in Brazil and Russia.

Higher commodity costs, inflation in Brazil and the fall in the pound since the UK’s vote to leave the EU are contributing to the upward pressure. Nestle shares rose up to 1.1%, yesterday, while Unilever gained up to 1.6%.

Food companies are under pressure to lift costs in order to boost profit margins as potential predators such as Kraft Heinz look for consolidation opportunities.

The US company is backed by private equity firm 3G Capital, known for its pursuit of aggressive profit targets. The challenge facing the industry is that some cost increases are provoking consumers to reduce purchases.

Nestle said higher pricing weighed on shipments in Europe and also at its baby-food unit. Positive aspects of the period for Nestle included accelerating sales in Europe and Asia.

In contrast, growth slowed to a near halt in the Americas region.

Bloomberg

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