Nestlé to up confectionery prices to restore growth

Nestlé: Price increases due to currency and commodity challenges

Nestlé plans to increase its pricing for confectionery products to restore growth to the category.

Nestlé confectionery sales dropped 12.7% to 2,747m Swiss francs ($3.1bn) in the first quarter (Q1) as a later Easter harmed sales.

“In confectionery, the overall performance in the first quarter suffered from the timing of festivities – most notably Easter and to some extent the Chinese New Year,” Wan Ling Martello, CFO at Nestlé, said in an earnings call.

“We expect comparable growth to come back in the course of the year with an element of increased pricing due to both currencies and commodities.”

Higher commodity prices

She said that overall commodity prices were expected to be higher in the single digit range this year compared to the last which would have an impact on pricing.

Cocoa butter prices in March 2014 neared the record highs seen back in October 2013 and were up 65% on the previous year, according to Mintec.

Confectionery performance

The later Easter affected Nestlé in Brazil, its largest confectionery market globally, and in the UK where the firm has a strong chocolate business. Instead, Easter sales will feature in Q2 figures. 

Martello said that the recently launched Butterfinger Cups was performing well in the US. She also noted a strong performance of premium brands in Europe and developed Asian markets such as Japan, where the firm recently launched Kit Kat Baked.

Ukraine instability

“Recent developments in Ukraine have contributed to a slowdown in Eastern and central Europe,” she added.

Ukraine has been reported to be on the brink of civil war as pro-Russian separatists clash with the interim government in the East of the country.

“In Eastern Europe the growth was driven primarily by Russia,” said Martello.

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