Sept 10 - Nestle is taking multiple measures to offset an uptick in input costs that it attributes in part to the conflict in the Middle East, CEO Philipp Navratil said on Wednesday.
Navratil said the Swiss packaged-food giant is responding to rising energy, freight and raw-material costs by raising prices where necessary, reformulating recipes and cutting products that consumers are unwilling to pay more for. He described the company’s cost actions as including persistent efficiency drives and selective product exits, while declining to give detailed examples of the specific items affected.
"Each and every supplier of ours will have some increase in costs," Navratil said. "Some of them will come to us and we will have to mitigate them (the costs), making sure consumers come along if we have to increase prices."
Navratil said the direct sales impact from the six-month-old U.S.-Israeli war against Iran has been limited because the Middle East accounts for only about 2% to 3% of Nestle’s roughly 90 billion Swiss francs in annual sales. Still, he added, the conflict is contributing to inflationary pressures that are showing up in the cost base Nestle faces.
"But you will have primary effects in terms of inflation in what we buy, in terms of input costs," Navratil said.
Beyond price increases and reformulation efforts, Navratil said Nestle is "relentlessly" pursuing efficiency savings and is removing products consumers "are not ready to pay for". He declined to identify which product lines are being cut.
On the corporate-portfolio front, Nestle has recently sold a stake in its bottled water business and is exiting vitamins as management narrows focus on core brands. The company owns more than 2,000 brands, including Nescafe, Maggi and KitKat. Navratil said the review of assets is ongoing and that divestments do not preclude acquisitions.
"That doesn’t mean that Nestle is just divesting things. We are also, as always, open to acquire things that are strategically important," he said, again without providing specifics.
Navratil additionally commented on proposed front-of-pack warning labels in India for sugar, salt and fat. He said food manufacturers should be included in discussions about how such labelling would be applied. Documents and recordings shared in August indicated companies were lobbying against those warnings, and Navratil said Nestle has already removed thousands of tons of sugar, salt and fat from its products.
He argued that any labelling scheme must be implemented the "right way" and should take portion sizes into account.
The U.N. Food and Agriculture Organization has warned that the world could be moving toward another period of food inflation. Its Food Price Index, which tracks monthly changes in a basket of internationally traded food commodities, averaged 131.1 points in July, up from 130.3 in June and the highest reading since January 2023.
Currency conversion noted in company materials shows $1 = 0.8097 Swiss francs.
Navratil’s comments underline how multinational food companies are adjusting product portfolios and pricing strategies in response to cost pressures even when direct exposure to a particular geopolitical hotspot is limited. Nestle’s mix of price increases, formulation changes and efficiency drives aims to balance supplier-driven inflation against the need to keep consumers willing to pay higher shelf prices.
He emphasized that supplier cost increases are pervasive and will need to be managed through a combination of mitigation with suppliers, consumer-facing price adjustments where acceptable, and internal cost-cutting.
Navratil did not provide timelines for the reforms, nor did he name specific suppliers or product lines affected by the cuts. He also declined to give details on potential acquisitions while noting the company remains open to buying strategically important brands.