Nestle CEO says Middle East conflict driving inflation, higher supplier costs

Nestle's CEO Philipp Navratil has revealed that the Middle East conflict is driving inflation and increasing supplier costs. In an interview with Reuters on September 9, Navratil explained that the company is raising prices, reformulating products, and eliminating items that consumers are unwilling to pay more for. Although the conflict has not directly affected sales, it is contributing to inflationary pressures faced by suppliers, he added.

The conflict accounts for about 2 to 3 percent of Nestle's total sales, with the Middle East representing a relatively small portion of the company's 90 billion Swiss francs in revenue. Navratil noted that while direct sales impacts have been limited, the company is experiencing increased input costs. He also mentioned that Nestle is pursuing efficiency savings and eliminating products that consumers are not willing to pay for.

The UN Food and Agriculture Organization (FAO) has warned that the world may face another bout of food inflation, with the FAO Food Price Index averaging 131.1 points in July, up from June's 130.3 and the highest reading since January 2023. Nestle, which owns over 2,000 brands such as Nescafe, Maggi, and KitKat, recently sold a stake in its bottled water business and is set to exit vitamins as part of CEO Navratil's efforts to streamline the company's focus on core brands.

Navratil also stated that Nestle may buy brands as it periodically reviews its portfolio. Regarding a separate issue, Navratil called for food manufacturers to participate in discussions over proposed front-of-pack sugar, salt, and fat warning labels in India, arguing that labeling should be done correctly and reflect portion sizes.