Nestle shares dip 1% as MD sees commodity headwinds in 2022

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After gaining for two days, shares of fast-moving consumer goods company Nestle India were trading one percent lower at Rs 20,118.75 on the BSE on Tuesday. 

Sentiment for the stock took a beating after the company’s chairman and managing director, Suresh Narayanan, reportedly said Nestle may face commodity headwinds in 2022 due to rising global coffee prices and higher milk prices in India.

Narayanan said 2022 appears to be a difficult year. Even as there is an increase in milk prices, opening up of the economy will lead to higher economic activities and a surge in demand which will in turn trigger escalation in prices,  he added, as per reports.

Also Read |  Explained: What’s the latest controversy around Nestlé food products

The beverage maker will try to mitigate inflationary pressure and remain “judicious” about passing on costs to consumers as it chases volume-led growth, Narayanan added.

Globally, coffee prices are going up significantly, supply-side disruptions in cocoa, the oil complex, and packaging materials have led to cost escalation of 4-5 percent. There is going to be a spectre of food inflation that will haunt us, the managing director pointed out.

Also Read |  Nestle India Q2 results: PAT rises 11% YoY in June quarter to Rs 539 crore

Some analysts had highlighted that any slowdown in domestic consumption or a rise in key input prices could have an impact on earnings estimates for the FMCG company.

As compared to the Nifty FMCG index that has gained 21 percent Year to Date, Nestle’s stock has risen only 9.5 percent YTD.

Meanwhile, these management comments come at a time when consumers are shifting to trusted brands, and Nestle’s strong product portfolio of brands in the packaged foods and beverages space gives confidence to investors.

Catch LIVE market updates here.

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