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Nestlé Sales Grow to Strongest in 14 Years on Price Hikes

Swiss food giant Nestlé SA saw its sales grow to its strongest in 14 years in the first nine months of the year and raised its full-year outlook as the company experienced no customer loss after its significant price increase.

The world’s largest food maker reported on Wednesday that its organic sales, which exclude factors including currency fluctuations and new acquisitions, were up 8.5% to CHF69.1 billion ($69.4 billion) in the nine months ending September 30.

That was the highest nine-month growth since 2008, as higher prices helped offset surging costs.

Of the 8.5% growth, 7.5 percentage points represented instituting price rises, while the actual organic growth in the period, which reflects movement in actual sales volumes, represented one percentage point.

The positive results led Nestlé to raise its full-year outlook, estimating organic growth at around 8% for the year, potentially putting it at the top end of the previously stated 7%-8% range.

Shares in Nestlé shed 0.1%, having climbed 0.2% in mid-morning trade on Wednesday.

Nestlé’s Price Hike Challenge

While Switzerland-based Nestlé posted strong sales growth, some analysts expressed their concerns about the possibility that price increases would later discourage consumers.

Such a move may lead the company to price some of its products beyond what customers can afford amid a cost-of-living crunch weighing on the industry’s sales volume.

The company increased pricing for its products by 7.5% as it continued to pass the effect of substantial input cost inflation on to customers. That has curbed Nestlé’s demand elasticity, with consumers thinking twice about their purchases of a few items.

Equity research head Chris Beckett said sales volumes had persevered so far, although still far from the peak cost of living squeeze.

Nestlé Chief Executive Mark Schneider also worries about the challenging economic environment that he sees weakening many customers’ purchasing power.

Inflation in the eurozone reached a record of 10% in September, while the US consumer price index (CPI) was up 8.2% in the same month, making it more challenging for consumers to make their money last, which is already being further spent on fuel bills and mortgage payments.

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