By Maitane Sardon

Nestle posted higher sales that slightly beat analysts' expectations as the world's largest food maker managed to pass on double-digit price increases for its coffee and chocolate products in some markets.

The Swiss maker of KitKat chocolate bars and Nescafe coffee is pursuing a turnaround after a consumer pullback led it to cut guidance twice last year and prompted the company to shift its strategy. Nestle said last year that it would focus on fewer but stronger product launches and boost marketing investments, but high costs for key ingredients combined with weak consumer demand and tariff uncertainty cast a cloud over its plans.

Nestle on Thursday confirmed its guidance for the year, saying the impact of current tariffs on consumers, currencies and commodity prices remains unclear for now.

The company said organic sales rose 2.8% in the first quarter, ahead of a company-compiled consensus of 2.5%. This marked an acceleration from the 2.2% growth rate it posted for last year, which was the company's weakest annual organic sales growth in more than a quarter of a century.

The increase in sales mainly came from higher prices in Nestle's chocolate and confectionery and coffee businesses, with pricing contributing 2.1% to overall sales growth. The volume of products sold, or real internal growth, contributed 0.7% to sales growth and came just shy of analysts expectations of 0.8%.

Nestle's coffee and chocolate confectionery segments, which account for around 30% of the group's total sales, have in recent months faced increasing pressure from the rise in prices for key ingredients like cocoa beans and coffee. Some analysts warned that high costs for raw materials combined with subdued demand were likely to squeeze the company's margins in 2025.

While both categories have shown resilience over the past 20 years, big food companies like Nestle face the risk that consumers or retailers push back on high prices, leading to a drop in sales.

The confectionery business--which includes brands like Smarties and Milkybar-- delivered organic growth of 8.9%, while sales at the coffee business--which makes Nescafe, Nespresso and Starbucks-branded products--grew 5.1% organically.

Nestle's overall reported sales increased 2.3% to 22.60 billion Swiss francs ($27.20 billion), compared with 22.09 billion francs a year earlier and beating consensus of 22.50 billion francs.

The company said it still expects organic sales growth to improve this year, with increased investments driving growth. It sees the underlying trading operating profit margin--its preferred profitability metric--at 16% or more.

Nestle's first-quarter figures show a solid start to the year and are a sign the company is moving in the right direction, albeit slowly, Baader Helvea analyst Andreas von Arx said in a note to clients. Stifel analyst Cedric Norest said the company's turnaround plan remained a "show-me story" until there was evidence that it was delivering on its targets.

Shares in Nestle were down 0.5% in European morning trade, but have lost 30% over the past three years, hurt by sluggish sales growth and the unexpected departure of former chief executive Mark Schneider in August.

Write to Maitane Sardon at maitane.sardon@wsj.com

(END) Dow Jones Newswires

April 24, 2025 06:19 ET (10:19 GMT)

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