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Nestlé has raised its full-year sales outlook after better-than-expected price-driven growth in the first half of the year.

For the six months to the end of June the world’s largest food group posted organic growth of 8.7%, driven wholly by a 9.5% rise in pricing as volumes were down 0.8%.

Nestlé said the volume declines were affected by portfolio optimisation and capacity constraints, stating that overall demand elasticity was limited in the context of pricing actions.

Overall growth was broad-based across most geographies and categories. In developed markets, organic growth was 8%, led by pricing with negative volumes, while in emerging markets, organic growth was 9.6%, driven by pricing and flat sales volumes.

By product category, Purina petcare was the largest contributor to organic growth, with strong momentum for both wet and dry offerings.

Coffee saw high single-digit growth, with positive sales developments across brands and a continued recovery for out-of-home channels, while infant nutrition posted double-digit growth, with broad-based contributions across brands and geographies.

Confectionery also recorded double-digit growth, fuelled by a strong sales development for Kit Kat.

Dairy was up single-digits along with prepared dishes and cooking aids, while, despite temporary capacity constraints for Perrier, water posted mid single-digit growth led by S.Pellegrino and Acqua Panna.

Total reported sales increased by 1.6% to CHF46.3bn as foreign exchange and the strong Swiss franc decreased sales by 6.7%.

Underlying trading operating profit margin was 17.1%, up 20 basis points on a reported basis and 30 basis points in constant currency. 

The overall trading operating profit margin increased by 120 basis points to 15.9% on a reported basis, reflecting one-off items in the prior year.

Underlying margins were up in North America and China, but compressed in Europe as input inflation continues to outstrip pricing recovery in the region.

Underlying earnings per share increased by 11.1% in constant currency and increased by 4.1% on a reported basis to CHF2.43.

CEO Mark Schneider commented: “We pursued our strategic priorities with discipline and focus in a fast-evolving consumer environment. Based on the strong performance in the first half of the year we upgrade our organic sales growth outlook for 2023. At-home consumption post-Covid has now normalised, removing a growth drag on some of our categories. Out-of-home channels continue to see strong growth momentum.

“For the remainder of the year, we are confident that we will deliver a positive combination of volume and mix, an improvement in gross margin and a significant increase in marketing investments. Combined with ongoing portfolio management and optimisation as well as the continued implementation of our sustainability initiatives, we are well-positioned to grow and to generate value for our stakeholders.”

As a result of the strong first half, the group has edged up organic sales growth guidance to a range of 7% to 8% (from a previous 6%-8% range).

Underlying trading operating profit margin is expected to be between 17.0% and 17.5%.

The group’s shares were up 1.6% in early trading to CHF107.14.

Morning update

Britvic has announced the acquisition of ready-to-drink iced coffee player Jimmy’s Iced Coffee as it posted its third quarter results this morning.

The brand, founded in 2010, has a “uplifting brand personality, refreshing range of products, differentiated packaging and multi-channel presence”.

In the year to June 2023, it generated a retail sales value of £17m, up 43% on the previous year and is the fastest0growing RTD iced coffee brand in the UK.

Britvic said the UK ready-to-drink iced coffee category was both large and fast-growing, with a retail sales value of £280m last year, an annual increase of 15.3%.

Britvic intends to further accelerate the growth of Jimmy’s through the utilisation of Britvic’s market-leading customer relationships to drive new listings and increase distribution, while increasing cost efficiency through Britvic’s supply chain expertise and procurement capability.

Simon Litherland, Britvic CEO, commented: “We are thrilled to welcome Jimmy’s Iced Coffee to our portfolio of much-loved Britvic brands. The focus on innovation, great taste with fewer calories, and fully recyclable packaging makes Jimmy’s a perfect fit for Britvic. We have a long track-record of acquiring and developing brands, and I am confident in our ability to quickly expand our position in the iced coffee category – which is an exciting and fast-growing market segment.”

Jim Cregan, co-founder of Jimmy’s Iced Coffee added: “We are so delighted with this deal which is the culmination of 12 years of monumental hard work by my sister and I. We have poured our heart and souls into making this business what it is today and we feel so fortunate that Britvic is now able to take Jimmy’s to places about which we could only dream.

“We are excited to watch the next chapter of the journey unfold and look forward to Jimmy’s Iced Coffee becoming even more well known and enjoyed.”

The group also announced the acquisition of the Extra Power energy drink brand in Brazil from GlobalBev.

It said this South American acquisition marks an important extension of Britvic’s Brazilian operations, consistent with Britvic’s strategy to accelerate and expand its presence across Brazil.

With 42% market share in its core regions near Brasilia, it said Extra Power enabled access to the fast-growing, high-margin energy category. In addition, the acquisition includes a warehouse in Brasilia that will enhance Britvic’s supply chain efficiency across its wider portfolio and route to market into Brazil’s Centre-West region.

In the year to December 2022, the acquired portfolio generated R$118m of net sales, growing 26% on the previous year.

Britvic’s group performance in its third quarter was “robust”, with volume growth and positive price/mix resulting in overall revenue growth of 9.9% against the prior year.

In Great Britain, revenue grew 10.1%, with volume growth in both retail and hospitality channels, as well as the impact of revenue growth management actions in response to inflationary pressures.

In Brazil, revenue declined 1.9%. In the core soft drinks business, positive price/mix continued to drive margin improvement though had a small impact on volumes, and there was a continued reduction in exports from the Be Ingredient fruit processing business.

Other International revenue increased 13.3%. Ireland revenue benefited from positive price/mix and volume growth, while in France, strong price/mix more than offset soft volumes.

Full year revenue and EBIT are anticipated to be within the range of current market expectations.

Litherland added: “Trading in the quarter has been strong, with revenue increasing 9.9%, driven by positive price/mix and volume growth. Consumer demand for our portfolio of leading family favourite brands remains buoyant ahead of the key summer trading period, as we continue to offer consumers great quality and value at affordable prices.

“We expect to deliver full-year revenue and profit within the range of current market expectations.”

Elsewhere, Ocado Group has announced that Luke Jensen has notified the board of his intention to retire and will step down from the board and CEO of Ocado Solutions with effect from 30 September 2023 to focus on external non-executive director positions.

Jensen has been CEO of Ocado Solutions since 2017 and a member of the board since 2018.

Ocado said he has played an instrumental role in building the Ocado Solutions business globally. From signing the first international partnership with Bon Preu in 2017, to the most recent agreement with Lotte in Korea, Ocado Solutions is now partnered with 12 of the world’s biggest food retailers.

John Martin, current non-executive director at Ocado, will be appointed as CEO of Ocado Solutions on 1 September 2023, allowing a period of time for a thorough handover from Jensen before he retires at the end of September 2023.

On appointment into this role, Martin will cease to be a member of the board and will step down as chair of the audit committee and as a member of the people committee.

Ocado CEO Tim Steiner said: “Over the last six years, Luke has played a key role in our transformation into a global technology solutions business. He leaves our Solutions business in a strong position to drive future growth, having recently established a global regional structure, with the appointments of regional presidents and the creation of a global Partner Success organisation. We wish him well and thank him for his contribution to Ocado. Luke will be supporting the transition over the coming months.”

Jensen added: “I am proud and honoured to have played a part in the transformation of Ocado from a UK retail company to a global leader in technology solutions. With the rollout of its latest innovations underway, Ocado is better placed than ever to support its partners to win in their markets, and to forge new partnerships with leading grocers across the globe. I wish Ocado every success for the future.”

On the markets this morning, the FTSE 100 is back up 0.2% to 7,692.1pts.

Early risers include Kerry Group, up 2.2% to €91.14, McBride, up 2.1% to 34.5p and Domino’s Pizza Group, up 1.6% to 347.6p.

Fallers include Ocado, down 10.9% to 855.8p on this morning’s news, Naked Wines, down 3.3% to 74.3p and Hotel Chocolat, down 0.5% to 113.4p.

Yesterday in the City

The FTSE 100 edged back for the first time in seven trading days, falling 0.2% to 7,676.9pts.

Fallers included Virgin Wines, down 3.2% to 30p, Greencore, down 2.8% to 86.5p, McBride, down 1.9% to 33.8p, Diageo, down 1.7% to 3,399.5p and Reckitt Benckiser, down 1.1% to 5,878p.

Ocado continued to surge following the news of its IP settlement earlier this week, jumping a further 24.8p to 960.4p.

Other risers included Just Eat Takeaway.com, up 6.4% to 1,467p, Nichols, up 4% on its trading update to 1,040p, THG, up 3.8% to 102.8p, Domino’s Pizza Group, up 2.7% to 342p, Naked Wines, up 2.7% to 76.8p and Cranswick, up 2% to 3,400p.

Grocery retailers were also on the up, with Sainsbury’s up 2% to 286.3p, Marks & Spencer up 1.8% to 205.7p and Tesco up 1.3% to 263.3p.

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