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Nestlé has reported organic growth of over 9% despite a dip in sales volumes as price increases moved towards 10%.

The food giant’s organic growth reached 9.3% in the quarter, with growth across geographies and categories.

This was primarily driven by a 9.8% jump in pricing, reflecting significant cost inflation, while sales volumes were down 0.5%.

Volumes were impacted by capacity constraints and portfolio optimisation actions, Nestlé said, noting that demand elasticity and consumer downtrading remained limited in the context of pricing actions.

Organic growth was 8.6% in developed markets, led by pricing. Organic growth in emerging markets was 10.3%, driven by pricing and positive volume growth.

By product category, Purina PetCare was the largest contributor to organic growth, fuelled by strong momentum for science-based and premium brands Purina One, Purina Pro Plan and Friskies.

Coffee saw high single-digit growth, with positive sales developments for Nescafé, Starbucks and Nespresso.

Sales in confectionery grew at a double-digit rate, with strong growth for Kit Kat and seasonal products.

Growth in infant nutrition reached a double-digit rate, with broad-based contributions across geographies and segments.

Dairy reported high single-digit growth, with strong demand for coffee creamers and affordable fortified milks, while prepared dishes and cooking aids posted high single-digit growth.

Nestlé Health Science recorded low single-digit growth, with continued strong demand for Medical Nutrition and a positive sales development for active nutrition. Despite temporary capacity constraints for Perrier, water posted low single-digit growth led by Sanpellegrino.

By channel, organic growth in retail sales remained robust at 8.7%. E-commerce sales grew by 13.6%, reaching 16.2% of total group sales. Organic growth of out-of-home channels was 17.8%.

Net acquisitions increased sales by 0.3%, largely related to the acquisition of Orgain. The impact on sales from foreign exchange was negative at 4.0%.

Total reported sales increased by 5.6% to CHF 23.5bn.

Nestlé reconfirmed its full-year 2023 outlook, with expectations of organic sales growth between 6% and 8% and underlying trading operating profit margin between 17% and 17.5%.

CEO Mark Schneider commented: “Nestlé delivered strong organic growth in the first quarter, as our teams worked diligently to protect volume and ensure resilient mix. Portfolio optimisation efforts and responsible pricing helped to offset the ongoing pressures from two years of cost inflation.

“We continued our portfolio management journey with the creation of a joint venture dedicated to the frozen pizza business in Europe. The new partnership provides the best platform to develop the full potential of this business.

“Following a strong start to the year, we confirm our full-year 2023 outlook and remain focused on creating value for all stakeholders.”

The group’s shares are up 1.4% on the news to CHF 116.28.

Morning update

Associated British Foods has posted strong double-digit growth in the first half of its financial year, but margins were hit by a reluctance to fully pass on cost inflation at Primark and delays in inflation recovery in grocery.

First half revenues were up 21% at actual exchange rates and 17% at constant currency, in the 24 weeks to 4 March, to £9.6bn.

ABF said “careful” pricing decisions at Primark and the usual delay in recovering inflation in many grocery businesses resulted in lower group margins.

Adjusted operating profit was 3% lower at £684m at actual exchange rates and declined 7% at constant currency.

The group said the lower profitability reflected inflation across raw materials and commodities, in the supply chain, and in energy, which were exacerbated by high volatility and short-term currency movements, particularly in the sterling US dollar exchange rate.

However, as the period progressed, this volatility lessened and some input costs such as freight and cotton fell back to normal levels.

Labour costs have also increased substantially and some costs, while reduced, remain above past norms.

In food, revenues grew by 17% to £5.3bn and adjusted operating profit grew by 4% to £373m at constant currency.

Ingredients performed particularly strongly, and adjusted operating profit rose by 48% at constant currency to £102m driven by good cost recovery and resilient volumes at AB Mauri, its yeast and bakery ingredients business. ABF Ingredients, its portfolio of speciality ingredients businesses, also had a strong period.

In sugar, the adjusting operating profit in the first half was ahead driven by the Illovo businesses in Zambia and Malawi. However, it is expected full year profits will decline, after adverse weather conditions damaged the UK beet crop and as a result sugar production was the lowest seen in decades at British Sugar.

Pricing actions became more evident as the period progressed in grocery but margins declined.

Grocery revenue in the first half was 10% higher than the same period last year, with price increases building during the period to recover cost inflation. Adjusted operating profit was slightly lower, reflecting the decline in margin from 9.6% in the same period last year to 8.2% this year.

Half year sales at Twinings Ovaltine were broadly in line with the same period last year. Allied Bakeries secured significant pricing in the period and the results improved, with the trajectory of its performance “encouraging”. Early indications are that the significant brand investment made in the period by Jordans Dorset Ryvita is having a positive impact.

Its Primark clothing business saw sales grow 19% to £4.23bn reflecting good growth in all countries.

Strong like-for-like sales growth was driven by price and volume, helped by a rise in footfall following the removal of Covid restrictions and new stores performing strongly.

Adjusted operating profit at the division was £351m, with a margin of 8.3%.

CEO George Weston commented: “This period was marked by extreme and volatile inflation in all our businesses. We have taken considerable action to mitigate these costs through operational cost savings and, where appropriate, pricing.

“The performance of our food businesses was resilient in aggregate, underpinned by an exceptional performance at Ingredients. We were very pleased with the improvement in Primark sales, which recovered strongly from the second half of the last financial year and drove operating profit margin up to 8.3%, higher than we had expected.

“Primark has been very successful in this period in attracting new customers with its proposition of good quality merchandise combined with price leadership and well-invested stores. We have had a very strong contribution from new stores opened in the period, and today we are announcing plans for the development of our Primark business in southern states of the US.”

Elsewhere, Ocado Retail, the UK joint venture between Ocado and M&S, has announced it plans to close its Hatfield customer fulfilment centre, the oldest site in the Ocado network.

Under these proposals, the group does not expect any change to the volume of orders fulfilled. Customer orders which are currently fulfilled in Hatfield, some 20% of’s 400k orders per week, will be moved to the company’s high-productivity, next-generation facilities around the UK.

This will include the nearby Luton CFC, which is scheduled to open later this year to take advantage of the continued channel shift to online.

There are currently around 2,300 employees based in Hatfield, and Ocado has now commenced a consultation process with staff on these proposals. Ocado said its priority and focus will be to redeploy as many people as possible to other sites, primarily to the Luton CFC. The consultation is expected to close in summer 2023, with Hatfield operations planned to halt in line with the start of operations at the Luton site.

Ocado explained that over the past decade its newer CFCs had benefited from a raft of new innovations, enabling huge leaps forward in both CFC productivity and customer experience.

The latest generation of robotic CFCs were “consistently achieving well over 200 units picked per labour hour within the facility”, compared to around 150 for the first-generation CFC in Hatfield. The newest sites also have much lower energy usage.

Ocado Group does not expect a material financial impact from the closure of Hatfield to its 2023 financial guidance.

Tim Steiner, CEO of Ocado Group and chairman of Ocado Retail, said: “As the online grocery channel grows, our new, enhanced fulfilment centres and technologies will drive a step change in customer experience and efficiency.

“With this capacity coming online, now is the right time for us to halt operations at our oldest facility at Hatfield and consider our future options for the site. customers will continue to enjoy the same outstanding standard of service throughout the region, which will further improve as the benefits of our new technologies are deployed across the network.

“We have many brilliant Hatfield-based colleagues who have been with us for a long time and are a big part of our journey. We want to keep as much of this talent and experience within the business as possible and expect to retain a large proportion of colleagues impacted by these changes, either in our new Luton CFC or across our wider UK network. We will be doing everything we can to support those affected through the consultation.”

UK private label households goods manufacturer McBride has said its results for the year to 30 June will be ahead of current market expectations.

Against the backdrop of high levels of inflation, it has remained focused on executing its volume, revenue and cost optimisation plans.

New business wins, combined with favourable demand levels for private label products, have meant that output levels are more favourable than expected. Customer service levels have continued to improve significantly, in turn delivering better volumes and supporting opportunities for more strategic partnerships with key customers, it said.

As a consequence, the board now expects full year adjusted operating profit and full year reported loss before tax to be between £5m and £10m, ahead of current market expectations, and for net debt on 30 June 2023 to be £15m to £20m lower than current market expectations.

The group will issue a year-end trading statement on 14 July 2023 and preliminary results are currently scheduled to be announced on 19 September 2023.

UK Coke bottler Coca-Cola Europacific Partners has posted a 14% jump in comparable sales in the first quarter, driven by both pricing and volume growth.

First quarter sales for the group were up 12% to €4,15bn and by 14% on foreign exchange neutral basis.

Comparable volume growth of 4% (Europe up 5% Asia Pacific (API) flat) reflected “solid in-market execution and underlying demand”.

Volume performance in API was hampered by the strategic SKU portfolio rationalisation in Indonesia, offsetting continued trading momentum in Australia and New Zealand.

Out-from-home channel comparable volume was up 5.5%, driven by good underlying demand and the tail end of the effects of the pandemic. Immediate consumption packs continued to recover, reflecting increased mobility, with sales up 9.5% on last year.

Home channel comparable volumes were up 3%.

Revenue per unit case was up 10%, reflecting positive headline price across all markets, alongside favourable pack and channel mix led by the recovery of the OOH channel.

The group said recent trading indicated no significant change in underlying consumer demand.

CEO Damian Gammell said: “We have had an encouraging start to the year, delivering solid top-line growth as consumers continued to enjoy our portfolio of leading brands across a broad pack offering. Our performance reflects great in-market execution with further growth in the home channel and the tail end of continued recovery of the away-from-home channel. This resulted in strong volume growth across our developed markets and albeit early in its transformation journey, Indonesia delivered volume growth in the core sparkling category. Our focus on revenue growth management and our headline price and promotion strategy also drove solid gains in revenue per unit case.

“Although our first quarter has set us up really well for the rest of the year, it is typically our smallest. We are building on this momentum supported by fantastic activation plans. We remain focused on driving profitable revenue growth and solid free cashflow, and I am pleased to confidently reaffirm our full-year guidance for 2023, despite a dynamic outlook. We are confident we have the right strategy, done sustainably, to deliver on our ambitious mid-term growth objectives which, combined with today’s interim dividend declaration, demonstrate the strength and resilience of our business, and our ability to deliver continued shareholder value.”

Finally this morning, retail technology player Eagle Eye has secured a new five-year contract with the John Lewis Partnership for its new pan-partnership loyalty project launching in 2024 alongside Dunnhumby, the Tesco-owned data science and analytics firm, to deliver greater customer personalisation and improved loyalty experiences.

The new five-year strategic agreement brings together Eagle Eye’s existing relationships with John Lewis, first announced in 2017 to improve John Lewis’s digital marketing capabilities, and with Waitrose, subsequently announced in 2019.

Eagle Eye will deliver an omnichannel solution, with the pan-partnership loyalty project aiming to integrate the group’s high street business, online and app touchpoints, building on the success of the My John Lewis and My Waitrose loyalty programmes.

Charlotte Lock, customer director, John Lewis and Pan-Partnership, said: “Today’s announcements show the ambition we have to transform how our much-loved brands can deliver a more personalised experience for customers. With our new partnerships with Dunnhumby and Eagle Eye, we can better help our customers however, whenever and wherever they shop with us.”

Tim Mason, Eagle Eye CEO, added: “We are delighted to have won another multi-year contract with the John Lewis Partnership and look forward to continuing to support them in delivering their loyalty and personalisation strategy. We are excited to be able to collaborate again with Dunnhumby on this new engagement, ensuring their leading data science can be executed at scale by our AIR platform.”

On the markets this morning, the FTSE 100 has dropped 0.4% to 7,880.7pts.

Risers include McBride, up 13.8% to 32.5p, Imperial Brands, up 0.8% to 1,965p and Coca-Cola Europacific Partners, up 0.6% to €56.60.

Fallers include ABF, down 5.4% to 1,957.5p, THG, down 3.5% to 94.6p and Marks & Spencer, down 2% to 161.4p. 

Yesterday in the City

The FTSE 100 opened the week flat at 7,912.2pts.

THG was a major riser again, climbing 9.9% to 98p on speculation the group’s board might be more receptive to a takeover approach from Apollo Global Management than they were when they rebuffed other advances last year.

Other risers included Bakkavor, up 2.9% to 98p, Kerry Group, up 2.5% to €98.85, Domino’s Pizza Group, up 1.4% to 284.8p, Cranswick, up 1.4% to 3,152p, Premier Foods, up 1.3% to 125p and Associated British Foods, up 1.2% to 2,070p.

The day’s fallers included Deliveroo, down 3.4% to 105.0p, WH Smith, down 2.5% to 1,575p, Ocado, down 2.1% to 505.8p, SSP Group, down 1.6% to 250.8p, PayPoint, down 1.3% to 457p and Fever-Tree, down 1.1% to 1,282p.