Nestle is raising prices and reviewing its product portfolio as higher energy, freight and raw material costs linked to the Middle East conflict put pressure on margins
Nestle is raising prices, reformulating products and dropping items from its portfolio as the global food major grapples with higher energy, freight and raw material costs linked to the conflict in the Middle East, according to a Reuters report.
Nestle Chief Executive Officer Philipp Navratil told Reuters that the company had seen limited direct impact on sales from the six-month-old US-Israeli war against Iran, with the Middle East accounting for only about 2 per cent to 3 per cent of the company’s roughly USD 11 billion in total sales.
The bigger concern, Navratil said, was the conflict’s indirect impact on inflation, particularly through higher costs being faced by Nestle’s suppliers. Those increases could eventually feed into the company’s own input costs.
Nestle plans to address the pressure through a combination of cost efficiencies and higher prices, while assessing how much additional cost consumers are prepared to absorb, Navratil told Reuters.
The company is also reformulating some products, pursuing efficiency savings and discontinuing products where consumers are unwilling to pay higher prices. Navratil did not disclose which products are being reformulated or removed.
The developments come as food manufacturers globally face renewed inflationary pressures. The United Nations Food and Agriculture Organisation’s Food Price Index averaged 131.1 points in July, up from 130.3 in June and its highest level since January 2023.
Portfolio Under Review
Nestle, which owns more than 2,000 brands including Nescafe, Maggi and KitKat, is also reshaping its portfolio as part of Navratil’s efforts to sharpen the company’s focus on its core businesses.
The company has recently sold a stake in its bottled water business and is exiting its vitamins business. However, Navratil indicated that the portfolio review would involve more than disposals.
Nestle remains open to acquisitions where it sees brands that fit its strategic priorities, he told Reuters, without identifying potential targets or disclosing any transactions under consideration.
The strategy comes as food companies face a difficult balance between protecting margins and maintaining consumer demand amid elevated input costs. Passing higher costs on to consumers can protect profitability but risks weakening volumes, particularly in price-sensitive markets.
Nestle On India’s Food Labelling Debate
Separately, Navratil said food manufacturers should engage with policymakers over India’s proposed front-of-pack warning labels for products containing high levels of sugar, salt and fat.
Reuters reported in August, citing documents and recordings it reviewed, that companies had lobbied against the proposed warning labels.
Navratil said Nestle had already removed thousands of tons of sugar, salt and fat from its products. He added that any proposed labelling framework should be appropriately designed and should consider portion sizes when presenting nutritional information to consumers.
