Nestle Expands Coffee Business, Lifts 2022 Organic Growth Guidance

By Giulia Petroni

Nestle SA said Wednesday that it would acquire Seattle's Best Coffee brand from Starbucks Corp. in a move to bolster its U.S. coffee business, and lifted sales guidance after price increases in the first nine months of the year.

The Swiss food and beverage giant plans to acquire the brand for an undisclosed sum, expanding its coffee portfolio. Nestle has a robust presence in the world coffee sector, with brands like Nescafe, Nespresso and Blue Bottle.

In the first nine months, group sales rose to 69.13 billion Swiss francs ($69.49 billion) from CHF63.29 billion, above a company-compiled consensus that forecast the figure at CHF68.91 billion. Organic sales growth was 8.5%, Nestle said. Pricing increased by 7.5%, reflecting substantial cost inflation. In the period, sales in coffee grew at a high single-digit rate.

"We delivered strong organic growth as we continued to adjust prices responsibly to reflect inflation," said Chief Executive Mark Schneider. "The challenging economic environment is a concern for many people and is impacting their purchasing power."

Inflation has been rising around the world, with analysts concerned about companies' ability to pass price increases on to consumers. Nestle said it aimed to keep products affordable while considering the interests of all its stakeholders.

Purina PetCare was the largest contributor to organic growth, with continued momentum for premium brands Purina Pro Plan, Purina ONE and Fancy Feast. Infant nutrition, confectionery and water posted double-digit growth, while prepared dishes and cooking aids registered low single-digit growth following a high base of comparison in the previous year.

For 2022, Nestle now expects organic sales growth of around 8%, from a previous forecast of between 7% and 8%.

The company confirmed underlying trading operating profit margin is seen at around 17%, while underlying earnings per share in constant currency and capital efficiency are expected to increase in the full year.

Write to Giulia Petroni at giulia.petroni@wsj.com

(END) Dow Jones Newswires

October 19, 2022 03:40 ET (07:40 GMT)

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