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The world’s largest food group Nestlé has warned of further price increases on top of its existing 5%-plus price hikes amid a “sharp” rise in costs.

For the first three months of 2022, the group posted organic growth of 7.6% largely driven by price increases of 5.2% as volumes grew by 2.4%.

The strong top-line performance 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.

However, CEO Mark Schneider said more price action would be necessary through the year on top of its existing price rises to mitigate soaring costs.

“We stepped up pricing in a responsible manner and saw sustained consumer demand. Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year,” he said.

Total reported sales increased by 5.4% to CHF22.2bn.

By product category, Purina PetCare was the largest contributor to organic growth led by its premium brands Purina ONE, Purina Pro Plan and Fancy Feast as well as veterinary products.

Coffee saw high single-digit growth fuelled by continued demand for Nescafé, Starbucks and Nespresso.

Sales in confectionery grew at a double-digit rate, with strong growth for KitKat and gifting products.

Water posted double-digit growth, driven by a further recovery of out-of-home channels and premium brands S.Pellegrino and Perrier.

Dairy reported mid single-digit growth, with strong sales developments in coffee creamers and ice cream as well as premium and fortified milks, while growth in infant nutrition reached a mid single-digit rate, supported by improved sales developments in the Americas and Europe.

Prepared dishes and cooking aids posted low single-digit growth following a high base of comparison in 2021, with continued strong demand for Maggi and Garden Gourmet.

In Norther America, organic growth was 9.9%, with volume up 1.4% and growth largely driven by increased pricing as well as strong momentum in e-commerce and a further recovery of out-of-home channels. The US saw continued broad-based market share gains, led by pet food, coffee and creamers.

In Europe, organic growth reached 6.9%, with solid volume growth of 2.8%. Lantin American saw organic growth of 12.5%, with strong volume growth of 4.7% building on a high base of comparison in 2021.

By channel, organic growth in retail sales was 5.9%. Within retail, e-commerce sales grew by 5%, building on very strong growth of 39.6% in the first quarter of 2021.

Organic growth in out-of-home channels reached 35.6%, with sales exceeding 2019 levels.

Schneider said: “In these first months of the year, the war in Ukraine has caused unspeakable human suffering. We remain focused on supporting our colleagues there and providing humanitarian relief, while standing with the international community in the call for peace.

“Amid this challenging environment, we delivered strong organic sales growth with resilient RIG… The Nestlé team addressed these [cost] headwinds and advanced our long-term strategy and sustainability objectives with agility and determination. We confirm our guidance for the year.”

Full-year 2022 outlook was confirmed with expectations of organic sales growth around 5% and underlying trading operating profit margin between 17% and 17.5%.

Nestlé shares are up 1.4% this morning to CHF123.44 on the news.

Morning update

Online retailer THG said this morning it has received numerous indicative offers for the group in recent weeks, but it has rebuffed talk of a sale as it revealed operating losses of £130m last year.

CEO Matthew Moulding told the stock market this morning: “”I can confirm that the board has received indicative proposals from numerous parties in recent weeks.

“The board has concluded that each and every proposal to date has been unacceptable, failing to reflect the fair value of the group, and confirms that THG is not currently in receipt of any approaches.

“We continue to focus on delivering our exciting growth strategy across a number of large global sectors, and prepare to step up to the premium segment of the LSE at the appropriate time.”

In the year to 31 December 2021 it posted revenue growth of 38.1% to £2.2bn, with trong 58% international revenue participation as US revenues grew to 19% of the group following the acquisition of Dermstore.

Organic growth was positive in both Beauty and Nutrition, despite challenging comparatives, with two-year organic growth in both divisions over 50%, ahead of medium-term guidance.

Returning customers generated 78% of direct-to-consumer group revenues “reinforcing the repeat nature of our digital brands, Ingenuity’s frictionless retailing environment and the enduring nature of consumer channel shift to online”.

Ingenuity revenues were up 41% to £194.3m, with commerce revenues of £45.4m, up 135%.

The group’s measure of gross profit margin at 44.7%, is broadly in line with prior years, with gross profit growth of 33.7% driven by strong underlying trading margins in Nutrition, Beauty and Ingenuity Commerce.

Adjusted EBITDA of £161.3m, at a margin of 7.4% (down from 9.3% last year) reflects FX movements, company investment in talent and infrastructure, increasing raw material costs (principally whey), and freight costs which saw a marked acceleration in the second half of the year..

This led to an operating loss of £137.5m, which THG said was impacted by non-recurring costs related to distribution, M&A related costsand a £53m impairment of THG Experience, THG Luxury and THG OnDemand divisions.

Also updating the market on its first quarter performance in 2022, THG said it has seen “very encouraging consumer demand levels against a particularly challenging comparable global lockdown period in 2021”, with the second quarter starting in line with expectations.

Group revenues were up 16.3% to £520.2m in the quarter.

THG said it “intends to limit the impact of cost pressures on our consumers” by maximising efficiencies, absorbing some of the pricing pressures, and raising prices at a lower rate to underlying input costs.

“We believe the recent and rapid inflationary environment is largely transitory, and THG will, as far as possible, continue to shield consumers from these adverse macro-economic conditions,” it stated.

It said that whilst market commentary cautions continued pressure on consumer spending due to macro-economic factors, at this stage of the year the revenue guidance outlined on 18 January 2022 remains unchanged at 22%-25%.

The board anticipates 2022 adjusted EBITDA to be broadly in line with 2021, with a weighting to the second half given anticipated improvements in costs, primarily expected in the second half across whey commodity prices and business model efficiencies.

An improving commodity market, alongside significant operating investments made during 2021, provide operational leverage for the group to rebuild towards historical adjusted EBITDA margins in the region of 9% to 10% over the medium-term.

Moulding commented: “In our first full year as a public company, 2021 saw us scale revenue and expand our business model, well ahead of targets set at IPO. We delivered a record revenue performance for the year, with group revenue up 38% year-on-year to £2.2bn. On a two-year basis, THG has grown revenues 95%; effectively doubling the size of the business.

“Alongside significant revenue growth, 2021 saw us acquire and successfully integrate a number of complementary businesses, deepening our vertical integration across both Beauty and Nutrition and expanding our reach to consumers across the globe.

“The operational resilience and performance of our Ingenuity infrastructure, especially during our peak trading period was a highlight, as was the opening of our automated warehouse at our ICON technology campus, delivering material improvements and cost savings across our global storage and delivery infrastructure.

“Our technology platform is now powering an expansive list of global brands across a multitude of sectors, and the number of third-party websites has almost doubled during the year.”

THG shares are up 2.3% this morning to 97.1p on the news.

Elsewhere, Premier Foods has announced the appointment of Roisin Donnelly, as an independent non-executive director of the company, commencing 1 May 2022.

Donnelly has over 30 years’ marketing and brand building experience, gained at Procter and Gamble, where she was responsible for a large portfolio of leading consumer brands within the UK, Europe, EMEA and the Americas.

Most recently, she spent twelve years as Chief Marketing Officer, UK and Ireland and then two years in the same role for Northern Europe before leaving the Company in 2016.

She has since served as a non-executive director of Just Eat, Holland & Barrett and Bourne Leisure and is currently a non-executive director of HomeServe and a member of the digital advisory board of Coca-Cola Europacific Partners.

Chairman Colin Day commented: “I am delighted that Roisin will be joining the Board. She brings with her a wealth of highly relevant consumer marketing, brand building and digital experience, both in the UK and internationally. I welcome her to the Board as we continue to pursue our branded growth strategy and path to further value creation.”

Meanwhile, remuneration committee chair Pam Powell will be retiring as a non-executive director at the end of her third term of appointment, at the AGM in July 2022 having served on the board since May 2013.

On the markets this morning, the FTSE 100 has nudged back to 7,626.1pts.

Risers include SSP Group, up 2.4% to 234p, Greggs, up 2.1% to 2,342p and Diageo, up 1.7% to 3,941p.

Fallers include McColl’s, back down 15.7% to to 4p, Ocado, down 1.3% to 1,068.5p and Domino’s Pizza Group, down 1% to 372p.

Yesterday in the City

The FTSE 100 ended the day up 0.4% at 7,629.2pts yesterday.

Naked Wines jumped 16.7% yesterday up to 385p on the back of continued strong trading despite the relaxation of lockdown restrictions.

Other risers included McColl’s, up another 9.9% to 4.8p, Coca-Cola HBC, up 3.1% to 1,620.5p, Deliveroo, up 2.8% to 111.1p, Compass Group, up 2.8% to 1,715.5p, Britvic, up 2.5% to 842p, C&C Group, up 2.4% to 203.2p, and DS Smith, up 2.4% to 322.8p.

Fallers included Ocado, down 5.3% to 1,082p, FeverTree, down 2.7% to 1,690p, WH Smith, down 2% to 1,435p, Nichols, down 1.4% to 1,380p, Tesco, down 1.4% to 266.5p and Sainsbury’s, down 1.2% to 241.9p.

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