Nestlé Portugal sensitive to increased market prices

 In Companies, Financial results, Inflation, News

Nestlé Portugal says it is aware of increases in overall food retail prices practised in Portugal.

However, it can not guarantee that prices on some of its products may not increase in the future as an indirect consequence of the conflict in Ukraine, despite the fact the company locally does not buy cereals from Eastern Europe.

The company recognises “huge increases in energy costs and raw materials” as among the reasons for higher retail prices for products such as coffee, some foodstuffs and pet foods in the overall market which may over time, affect the company’s own pricing policy.
The company’s Managing Director Paulo Fagnoni said at a presentation last week of its 2021 results that overall, the company saw its costs increase by 15%.
The company in Portugal reported an increase in total sales of 9.3% to €625 million for 2021, +60 million on 2019.
Fagnoni said that the “huge increases in costs in the overall market were for different reasons” from increased costs of raw materials to energy and admitted that costs could continue to rise.
However, Fagnoni said that the company was making efforts to absorb some of the costs. “Internally we’re doing all we can to try and avoid passing these costs onto the consumer”, he said.
And although Nestlé Portugal does not buy cereals from the regions affected by the war, the company is “identifying areas where savings can be made across all activity areas to avoid increasing costs”.
Despite increases in the price of raw materials such as coffee, cocoa and cereals, Fagnoni said the company could not pass on all of these increases in the price of the retail product. The “big challenge will be identifying synergies and areas where savings can be made”.
And while the cereals used by Nestlé are purchased directly in Portugal, Spain and France, the lack of Russian and Ukraine production would put pressure on producers worldwide to try and fill the gaps in supply to meet demand.
Supplies of sunflower oil ( much of which comes from Eastern Europe), which is used in food production, were at risk and had already required the company to change or adapt Nestlé recipes. The fact that it is impossible to plant crops in areas affected by the conflict in Ukraine means that the impact on future supplies and prices of raw materials could be even greater.
“It is clear that the world situation will change and global demand will increase” said Fagnoni, pointing out that the Portuguese were very faithful to the brand. The company says it will constantly monitor the economic and social situation, and stressed it could not accurately forecast how the economic and social situation would unfold in the future given current economic and political uncertainties.