FMCG major Nestle India on Thursday said the cost of key raw and packaging materials is witnessing 10-year highs and continues to surge this quarter, which has impacted its profit from operations. It said the cost outlook for key commodities like edible oils, coffee, wheat and fuel remains firm to bullish.
“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. We are confident of facing this turbulence with strategies of scale, efficiencies, mix and pricing all of which we will deploy judiciously,” Nestle India said in a statement.
The company owns popular brands such as Maggie, KitKat and Nescafe. The FMCG major said strong growth momentum continued in Noodles during the first quarter of 2022. The company follows the January-December calendar year.
Kitkat and Nestle Munch registered double-digit growth each during the quarter. In Beverages, the company said Nescafe Classic and Sunrise delivered double-digit growth, supported by generating demand inputs to leverage the consumption season.
“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. Input costs are expected to be on a bullish trend both globally and locally. Fresh milk costs are expected to remain firm with the continued increase in demand and rise in feed costs to farmers,” the company said in the statement.
Nestle on Thursday reported a net profit of Rs 595 crore for the March 2022 quarter. Its total sales stood at Rs 3,951 crore. The company’s total sales growth and domestic sales growth stood at 9.7 per cent and 10.2 per cent. Profit from operations was at 21 per cent of sales.
Input costs across sectors have been rising due to high inflation across segments due to costlier fuel prices amid the geopolitical uncertainties arising out of the Russia-Ukraine war. Restaurants are also saying that their raw material costs have increased by up to 30 per cent in the past three months.
Last month, Hindustan Unilever Ltd (HUL) and Nestle hiked the prices of products like tea, coffee, milk, and noodles. HUL raised the prices of Bru coffee powder by 3-7 per cent; Bru gold coffee jars were made costlier by three-four per cent; and Bru instant coffee pouches by 3-6.66 per cent. At the same time, the price of Taj Mahal tea also jumped by 3.7-5.8 per cent.
Earlier this month, Presenting the Monetary Policy Committee’s first bi-monthly monetary policy statement for FY23, RBI Governor Shaktikanta Das said feed cost pressures could continue due to global supply shortages, which could also have a spillover impact on poultry, milk, and dairy product prices.
On food prices, he said a likely record rabi harvest will help keep domestic prices of cereals and pulses in check. “Global factors such as the loss of wheat supply from the Black Sea region and the unprecedented high international prices of wheat could, however, put a floor under domestic wheat prices.”
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