Nestle to hike prices of Maggi, KitKat, Nescafe in India?
FMCG giant Nestle India said on Thursday the cost of key raw and packaging materials was seeing 10-year highs and continued to surge this quarter, impacting its profit from operations. The company reported a 1.25% drop in its net profit to Rs. 594.71 crore for the first quarter ending March 31, 2022, primarily because of rising input costs, PTI reported.
Why does this story matter?
Nestle India owns popular brands like Maggi, KitKat, Nescafe, and Nestle a+ Nourish milk. Last month, prices of several of these brands were already hiked, with Maggi noodles witnessing a 9-16% rise. The price of the 70gm Maggi Masala noodles packet increased by Rs. 2. While Nescafe Classic Coffee Powder's price was raised by 3-7%, that of a one-liter milk carton increased by 4%.
Price of commodities may firm up
"Cost outlook for key commodities like edible oils, coffee, wheat, fuel remains firm to bullish while costs of packaging materials continue to increase amid supply constraints, rising fuel, and transportation costs," stated Nestle India. "Input costs are expected to be on a bullish trend... Fresh milk costs are expected to remain firm with the continued increase in demand and rise in...costs to farmers."
Key raw and packaging materials cost witnessing 10-year highs
Nestle India's CMD Suresh Narayanan stated, "As highlighted in previous quarters, cost of key raw and packaging materials are witnessing 10-year highs, and costs continued to surge this quarter, which has impacted profit from operations." "Continued inflation is likely to be a key factor in the short to medium term," he added. However, the CMD asserted, "We are confident of facing this turbulence."
Nestle's domestic sales see double-digit growth
Speaking about the growth in domestic sales, Nestle India said it was "broad-based and largely driven by volume and mix." It achieved double-digit domestic sales which "demonstrates the strength of our brands, consumer resonance, and the resilience of the team and our partners," Narayanan said. However, the company also witnessed a 1% fall in export sales "largely due to change in product mix."
Nestle India performed well in small towns, villages
During the March quarter, Nestle India performed well in small towns and villages and has seen strong growth in smaller town classes and urban groups, too. On its e-commerce performance, Narayanan said the channel grew by 71% and accounted for 6.3% of domestic sales. "We will continue to leverage e-commerce further through meaningful shopper insights, data analytics, speed, sharp communication, and customization," he added.
In March, HUL had hiked prices of several products
Last month, Hindustan Unilever Limited (HUL) increased the prices of several cleaning and personal care products. These included Surf Excel Matic, Comfort fabric conditioner, Dove body wash, and Lifebuoy, Lux, and Pears soaps. The prices of Bru coffee powder and Taj Mahal tea were also hiked. The company had said it was witnessing significant inflationary pressures but was confident about navigating the inflationary environment.
Prices to be increased by Nestle India soon?
Owing to the rising input costs and raw and packaging material costs, Nestle India is expected to increase the prices of several popular products like HUL, said reports. These may include Maggi noodles, KitKat chocolates, Nescafe coffee powders, and Nestle a+ Nourish milk.
Impact of Russia-Ukraine war on inflation
The Russia-Ukraine war has significantly affected input costs owing to an upward rise in fuel prices. Meanwhile, supplies of sunflower oil, palm oil, and soybean oil were also hit, which has resulted in surging costs. Notably, most companies use palm oil for manufacturing soaps, and shampoos. Moreover, restaurants also claim their raw material costs rose by 30% in the past three months.
