Food

The upbeat quarter provides an early sign that consumer habits acquired during the pandemic, such as drinking more and better quality coffee at home, could continue to benefit the company, even as virus-related restrictions receded in some major markets—a view expressed by Nestlé executives.

While some analysts questioned whether the coffee boom would continue as lockdown restrictions eased, Nestlé said the category was its largest contributor to growth, with all three of its main brands—Nescafé, Nespresso and Starbucks —growing strongly.

The Swiss company has made coffee a priority in recent years, including acquiring the rights to sell Starbucks-branded products in stores. Nestlé said that while sales growth for Nescafé and Nespresso had slowed from its pandemic highs, gains for the brands were still strong and followed a blockbuster comparative period last year.

Nestlé also said other products that have boomed during the pandemic, such as pet food and vitamins, minerals and supplements, had continued to perform well. It said e-commerce sales, another beneficiary since Covid-19 struck, were up 17% in the first nine-months of the year, even as out-of-home sales increased by 23%.

When it comes to coffee beans, what happens in Brazil doesn’t stay in Brazil. In July and August, a bad frost hit the country's coffee-producing region and analysts say Brazil’s bean shortage is already rattling the global coffee market. So how will the frost affect the price of your morning cup? WSJ’s Shelby Holliday spoke to coffee experts around the world to find out. Illustration: Rafael Garcia

“People are returning back to travelling for business and vacation and yet at the same time there’s also more working for home, more in home consumption,” Nestlé Chief Executive Mark Schneider said.

The results, following Procter & Gamble Co. numbers Tuesday, provide further evidence that the world’s biggest consumer goods companies are successfully navigating the supply chain crisis, using their deep pockets and sprawling global operations to keep sales growing. Like its competitors, Nestlé is using the power of its more popular brands to push through price increases to help offset rising commodity prices and higher freight costs.

Nestlé said it increased prices by an average of 2.1% in the third quarter. François-Xavier Roger, Nestlé’s finance chief, told analysts the company expected prices to rise further in the fourth quarter and into next year as input costs continue to get more expensive. Mr. Roger said Nestlé had increased prices of dairy and pet-care products, and expected to do the same with coffee products next year.

Still, the company said its underlying trading operating-profit margin is expected to be around 17.5% for the full year, reflecting an initial delay between the rise in input costs and Nestlé’s ability to raise prices.

On Tuesday, Danone SA, DANOY DANOY >1.78% the owner of Evian water and Dannon yogurt, said it expected inflation from material, logistics and manufacturing to rise to around 9% in the second half of the year, up from around 7% in the first half of the year. P&G, maker of Tide detergent and Crest toothpaste, said it would start charging more for razors and certain beauty and oral care products as costs for everything from warehouse space to raw materials rose faster than the consumer-products company expected.

On Wednesday, Nestlé said its North American business had posted mid single-digit growth in the context of significant supply-chain constraints during the first nine months of the year, while its China business posted low single-digit growth, affected by lower sales of infant nutrition products.

Nestlé shares traded 3% higher and are now up 12% for the year to date.

—Giulia Petroni contributed to this article.

Write to Nick Kostov at [email protected]

Source : https://www.wsj.com/articles/nestle-sales-buoyed-by-coffee-pet-food-11634718530

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