Nestlé posts 'fantastic growth' as food giant passes on global price hikes to consumers

Procter & Gamble has said it will also raise prices in the US and Danone has warned of price pressures next year

Nestlé is grappling with supply chain constraints as the world economy roars out of a Covid slump.

Nestlé -- the world's largest food firm --  raised its full-year sales target after it reaped the benefits of price hikes on its products ranging from pet food to bottled water with a forecast-beating third quarter.

The Swiss firm, whose shares rose more than 3%, has moved ahead of other consumer companies in passing on higher input costs to consumers, leveraging the strength of its brands such as Purina pet food and Perrier water.

But its rivals are set to follow. Procter & Gamble has said it will raise prices in the US and Danone has warned of price pressures next year, adding to a global inflationary threat testing the resolve of central banks.

Unilever gives a trading update tomorrow. 

Like its peers, Nestlé is grappling with supply chain constraints as the world economy roars out of a Covid slump. But the maker of KitKat bars and Nescafe said prices for its products rose over 2% in the third quarter, helping keep its margin steady at about 17.5% this year, followed by a rise next year.

"The company knocked it out of the park for the third quarter," Kepler Cheuvreux analyst Jon Cox said, saying price rises for Nestlé products were the highest since 2015.

"Most companies with strong brands will be able to pass on prices and I think the market still does not get that," he said.

Nestlé said 12.1% organic growth at its Purina petcare business in the first nine months was fuelled by its higher priced premium ranges and veterinary products.

Bernstein's Bruno Monteyne said the benefits of higher volumes and pricing would only fully show in 2022. "Fantastic growth already before next year’s boost from pricing," he said. 

Reuters