Nestlé warned of further price increases this week, on top of the existing 5%-plus price hikes this year, but analysts were buoyed by the fmcg giant’s continued organic growth.

For the first three months of 2022, the world’s largest food group posted organic growth of 7.6%, largely driven by price increases of 5.2% – but volumes also grew by 2.4%.

Nestlé said this overall growth was broad-based across most geographies and categories, driven by increased pricing, continued momentum in retail sales and a further recovery in out-of-home channels.

CEO Mark Schneider said more price action would be necessary, on top of existing price hikes, to mitigate soaring costs. However, he pointed out its “responsible” stepping up of prices had not dented sustained consumer demand.

Total reported sales increased by 5.4% to CHF22.2bn (£17.9bn), driven by petcare, retail coffee brands Nescafé and Starbucks, double-digit confectionery sales and a strong recovery in water sales as out of home rebounded.

Organic growth in retail sales remained strong at 5.9%, while out-of-home channels bounced back by 35.6%, with sales exceeding 2019 levels.

Barclays noted weakness in the performance of its Health Science division, US frozen meals and notably its Nespresso brand, as coffee consumption shifts back out of home. Nevertheless, the broker suggested the stronger than expected quarter could herald earnings upgrades in the next quarter. “This set of results signals the balance they are achieving across their channels and product categories,” it said.

Jefferies added: “The year has got off to a strong start, confounding our bearishness. The story of the quarter is one of notably strong acceleration in pricing (particularly in the US) and the persistence of Nestlé’s ‘goldilocks’ economy of simultaneously strong retail and out of home.”

Nestlé shares were up 0.9% by Thursday lunchtime at CHF122.88, up 15% year on year but down around 5% since January.

One consumer giant that did upgrade full-year expectations this week was Procter & Gamble, which did so after posting double-digit organic growth in the first three months of 2022. However, it also warned it was facing higher costs amid soaring global inflation.

In the three months to the end of March, P&G posted net sales of $19.4bn (£14.8bn) – an increase of 7% year on year and up by 10% on an organic basis despite a 5% increase in pricing.

It raised top-line growth forecasts for the year, but said earnings would be at the lower end of current expectations due to a further $400m of costs adding up to a $3.2bn headwind for the year.

Global Data commented: “Procter & Gamble moved fast to offset rising commodity costs having announced price increases in early 2021 and it is now reaping the benefits.”

P&G shares closed up 2.7% on Wednesday at $163.65, setting a new record share price high.

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