# Inflation trade? Nestle reaps benefits from higher prices Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-10-20 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Nestle Raises Full-Year Sales Target After Forecast-Beating Third Quarter Meta Description: Switzerland-based Nestle surpassed expectations with price hikes on products like Purina pet food and Perrier water, leading to a forecast-beating third URL: https://financedigest.com/inflation-trade-nestle-reaps-benefits-from-higher-priceshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2021-10-20t052451z2lynxmpeh9j06irtroptp4nestle-results-1736837538594-compressed.jpg) By Silke Koltrowitz ZURICH (Reuters) – Nestle raised its full-year sales target on Wednesday after the world’s largest food group reaped the benefits of price hikes on its products ranging from pet food to bottled water with a forecast-beating third quarter. The Switzerland-based 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. The maker of KitKat bars and Nescafe will increase [prices](https://www.financedigest.com/syngenta-4q-profit-falls-as-raw-material-prices-increase.html "Syngenta 4Q profit falls as raw material prices increase") further in the final quarter and in 2022 when input costs are expected to increase even more than the 4% rise seen in 2021, Chief Financial Officer Francois-Xavier Roger told investors. Its rivals are [set to follow](https://www.financedigest.com/inovus-medical-set-major-expansion-following-six-figure-investment.html "Inovus Medical set for major expansion following six figure investment"). Procter & Gamble, has said it will [raise prices in the United States and Danone has warned](https://www.financedigest.com/deutsche-post-raises-annual-dividend-warns-of-challenging-2023.html "Deutsche Post raises annual dividend; warns of challenging 2023") of price pressures next year, adding to a global inflationary threat testing the resolve of central banks. Unilever gives a trading update on Thursday. Our industry, in general, is not an industry that is in normal [times pinched by inflation,”](https://www.financedigest.com/love-in-a-time-of-inflation-how-much-will-valentines-day-set-you-back.html "Love in a time of inflation: how much will Valentine’s Day set you back?") Chief Executive Mark Schneider said, adding the industry should be able to maintain its financial performance even if the inflationary cycle extended beyond 2022. Like its peers, Nestle is grappling with supply chain constraints as the [world economy](https://www.financedigest.com/at-chinas-largest-trade-fair-exporters-worry-about-world-economy.html "At China’s largest trade fair, exporters worry about world economy") roars out of a COVID-19 slump. The company said in a statement [price increases should help keep its margin](https://www.financedigest.com/explainer-oil-price-surge-changes-ecb-narrative-only-at-the-margins.html "Explainer-Oil price surge changes ECB narrative only at the margins") steady at about 17.5% this year, followed by a moderate margin improvement in the mid term. But Schneider played down prospects for an improvement as early as [next year](https://www.financedigest.com/novartis-to-spin-off-generics-business-sandoz-next-year.html "Novartis to spin off generics business Sandoz next year"), citing rising input costs since the summer. There is no guidance or commitment for 2022 to [increase margins,”](https://www.financedigest.com/omv-q3-retail-and-commercial-margins-increased-q-q.html "OMV: Q3 retail and commercial margins increased q/q") he said. Nestle raised its full-year organic growth guidance to 6%-7% from 5%-6% previously, after organic sales rose 6.5% in the [third quarter](https://www.financedigest.com/greek-residential-property-price-recovery-picks-up-in-third-quarter.html "Greek residential property price recovery picks up in third quarter"), composed of 2.1% price hikes and 4.4% volume growth, and beating forecasts https://www.nestle.com/investors/analysts-consensus. Roger said volume growth was [expected to slow](https://www.financedigest.com/dollar-set-for-weekly-loss-amid-expectations-fed-will-slow-hikes.html "Dollar set for weekly loss amid expectations Fed will slow hikes") somewhat as the pandemic-related boost to at-home consumption waned. Nestle shares, up 8% this year, climbed 3.2% by 1318 GMT, exceeding the 1.6% rise across the [European food](https://www.financedigest.com/european-food-delivery-shapes-up-with-getirs-gorillas-buy.html "European food delivery shapes up with Getir’s Gorillas buy") sector. The company knocked it out of the park for the third quarter,” Kepler Cheuvreux analyst Jon Cox said, [saying price](https://www.financedigest.com/buy-off-plan-to-beat-stalling-house-prices-and-falling-rental-yields-says-jean-liggett.html "“Buy off-plan to beat stalling house prices and falling rental yields” says Jean Liggett ") rises for Nestle products were the highest since 2015. Most companies with strong brands will be able to pass on [prices and I think the market](https://www.financedigest.com/german-residential-property-market-faces-risk-of-price-drop-diw-study.html "German residential property market faces risk of price drop – DIW study") still does not get that,” he said. Nestle said growth at its Purina petcare business was fuelled by its [higher priced](https://www.financedigest.com/vhs-tapes-selling-for-46000-higher-than-original-price.html "VHS tapes selling for 46,000% higher than original price") premium ranges and veterinary products. Vontobel analyst Jean-Philippe Bertschy said Purina was Nestle’s “star performer”. Bernstein’s Bruno Monteyne said the benefits of [higher volumes and pricing](https://www.financedigest.com/wall-street-seen-opening-higher-but-u-s-recession-priced-in.html "Wall Street seen opening higher but U.S. recession priced in") would only fully show in 2022. [Strong coffee sales](https://www.financedigest.com/indias-tata-motors-jumps-to-a-7-month-high-on-strong-q4-jlr-sales.html "India’s Tata Motors jumps to a 7-month high on strong Q4 JLR sales") were also a driver for Nestle, with its Starbucks-branded products posting 15.5% growth in the first nine months. Out-of-home consumption of food and drinks, which took a hit during the pandemic, recovered further, Nestle said. (Reporting by Silke Koltrowitz; Editing by John Revill and Edmund Blair) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---