SWITZERLAND – The largest publicly held food company in the world, Nestlé has set up contingency and business continuity plans to deal with the ongoing gas crisis in Europe as rising prices contribute to double-digit cost inflation.
Speaking at an investor event, CFO François-Xavier Roger said input-cost inflation will probably pan out at 14-15% for the full fiscal year, compared with the actual 14% in the opening six months.
While Roger acknowledged Nestlé is not a “heavy user of gas”, the world’s largest food company does have a plan in place, particularly in Europe.
“We have identified about 5% of our global industrial footprint which is potentially at risk – this means around 15 to 16 plants, predominantly in Europe and predominantly in Germany and Switzerland,” he told the audience.
The Swiss multinational said it has two main things that it can do to deal with the ongoing gas crisis and prevailing inflation.
The first one is to convert whenever possible the source of energy from gas to oil; whenever it’s not possible, the company will pile up inventory ahead of the winter to make sure that it can supply our customers.
He added that the shielding steps the business is undertaking will also be extended to its suppliers who are facing rising energy bills and other costs too, by adding a little bit more inventory or looking at alternative suppliers, mainly outside of Europe because outside of Europe “the situation should be okay”.
In addition, Nestlé plans to invest in CAPEX, especially in pet care and coffee, where capacity “constraints” restricted its ability to service pandemic-related demand.
Roger expressed expectations to retain “most” of that business, and increased marketing will feature, too, where he stated that the company is raising the bar, investing significantly more today than in the past.
The company is seeking to invest big time in digitalization, while also investing significantly as well in CAPEX, really investing for growth in the future, he explained.
“That applies to marketing except in H1. [That] was a special case because we had some capacity constraints for some of our products, more specifically pet care in the US, in Europe, coffee to a certain extent, [and] food as well.”
The Swiss food conglomerate anticipates increasing its level of marketing investments and in turn increasing the percentage of sales in absolute value, in H2 over H1 after the issues are outpaced.
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