Swiss food group expects some ‘negative elasticity on volume’ amid further price increases, although FY sales expected to grow 5% YoY
In its Q1 22 financial results, Nestlé has said it has not seen evidence of decreased consumer demand despite its highest product price increase in fifteen years.
Answering analyst questions during its Q2 earnings call this week, the Swiss giant’s CFO François-Xavier Roger said premium product sales had been growing faster than average and there had been no evidence of ‘negative elasticity on volume’ during the first quarter.
“We do expect that there will be some, probably as we progress further in the year and as we raise prices,” Roger said.
I’m not saying that it came as a surprise. But I mean, as we raise prices to levels that we have not seen for at least 15 years, we could have expected probably more,” he added.
He said the level of consumption across its own product suite and other consumer segments had been ‘relatively solid’.
Roger predicted the low impact on consumer spending was down to people saving more during the Covid-19 pandemic and now continue to consume at a relatively high level.
“We see a lot of resilience in the retail channel,” he said. “It’s amazing to see that in Q1 we grew 5.9%, but over a very strong base, 9.2% of organic growth last year. So it’s very resilient.”
On consumer habits, Roger also said the company had observed some new behaviours had continued into 2022, including strong demand for ecommerce, and an increased interest in health and immunity benefits.
He also observed that increased pet adoption and a higher level of working from home than before the pandemic.
“This may explain as well the fact that at-home consumption remains very strong,” Roger told analysts.
During the quarter, Nestlé sales increased by 5.4% year-over-year to CHF 22.2 billion (£18.3 billion).
The company expects sales to grow 5% YoY for the full year.
Earlier in April, Nestlé acquired a minority share in Hamburg-based spice maker Ankerkraut from European investment firm EMZ Partners for an undisclosed amount.
Date published: 26 April 2022