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VEVEY, SWITZERLAND — Executives of Nestle SA selectively will pull back the throttle on raising prices. In the third quarter pricing was 6.3%, said Francois-Xavier Roger, chief financial officer.
“We will continue to price where needed but not to the same extent as we have already done lately,” he said in an Oct. 19 earnings call to discuss financial results for the year’s first nine months. “Pricing that happens now will be more targeted by category, brand and country, particularly for those commodities that have increased recently such as robusta (coffee), sugar and cocoa.”
Over the first nine months, total reported sales for Vevey-based Nestle dipped 0.4% to 68.83 billion Swiss francs ($77.11 billion) from 69.13 billion Swiss francs. Foreign exchange had a negative impact of 7.4%, and net acquisitions had a negative impact of 0.8%. Organic sales growth was 7.8% due to a positive pricing impact of 8.4%.
Nestle may take pricing actions in the confectionery category because of the high prices for cocoa and sugar, Mr. Roger said.
“We will have selective price increases as well in some geographies, and more specifically where we are experiencing currency depreciation,” he said. “Just in terms of pricing, it’s not that we see a lot of pressure to go down either, so let’s not go to the extreme, but it is clear that our market globally is moving from a phase of supply constraint over the last couple of years with less promotional intensity to a phase today where it’s more about generating demand with an increase in promotional activities.”
The price of dairy components has come down by 25% since the beginning of the year, he said.
“We do have some adjustment there, which is the reason why you may have seen that pricing is actually softer than maybe some of you would have thought. In emerging markets, this is largely the consequence of dairy prices going down. So, we do adjust by businesses.”
Over the first nine months of the year, Purina PetCare was the largest contributor to Nestle’s organic growth. Purina One, Purina Pro Plan and Felix all increased by double-digit percentages.
KitKat fueled double-digit growth in confectionery. The launch of ready-to-drink Starbucks items in Southeast Asia and Oceania boosted Coffee to high single-digit growth. High single-digit growth also came in dairy, led by coffee creamers and affordable fortified milks, and infant nutrition. Prepared dishes and cooking aids posted mid-single-digit growth behind strong demand for Maggi.
Nestle Health Science and Water had low single-digit growth. In Nestle Health Science, a sales decline in vitamins, minerals and supplements partly offset momentum in medical nutrition. In Water, temporary capacity constraints for Perrier had a negative impact.
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