The food company Thursday said revenue grew 9.8 per cent to 25.7 billion Swiss francs ($25.4 billion) in the first quarter, mostly because the company was able to pass on the rising cost of food to customers but warned that rising food prices made it tougher to sell packaged foods in emerging markets.
Prices went up most sharply on ice cream and dairy products, due to unprecedented increases in the cost of milk powder last year, as well as on pet foods, which are made with corn and soya.
Prices rose an average of 5.6 per cent in the first quarter, compared to 1.8 per cent a year earlier, but Nestle said it was likely to reduce the rate of increases in the remainder of the year.
Roddy Child-Villiers, head of investor relations at Nestle, said, "The company could not continue to keep raising prices at current rates, particularly in emerging markets such as Asia and Africa where people are struggling to afford basic foodstuffs such as wheat and rice. There's only so much money in these people's pockets. we need to be competing very aggressively for our share of their spend." Nestle also said it had been changing the ingredients in some products, such as swapping local grains for wheat in some of its instant cereals.
Biggest increases
Other companies have been taking similar measures, with brewers replacing imported malting barley with locally grown sorghum in beverages in Africa. All large European food companies have been pushing through price increases over the past year, led by Nestle, Danone and Cadbury Schweppes. The biggest price increases have been in dairy products like cheese, ice cream and yoghurt, as well as in edible oils, margarine, cereals and crackers, according to Bernstein Research.
Nestle reported sales growth in all core categories except bottled water, where sales revenues dropped 0.6 per cent. The group attributed some of the decline to tough comparisons with the first quarter of last year, when sales were up 10 per cent, but also said an environmental backlash against bottled water was hurting sales in Italy, France and the US.
"It would be naive to deny there's any impact from this issue," Child-Villiers said. Nestle said it was working with other companies in Europe to bring "reason" to the debate, and that it was planning a marketing campaign in the US to communicate health benefits of water.
In the US, the world's biggest market for bottled water, city governments have been banning bottled water dispensers from their offices, with some switching to filtered water systems amid concerns over the environmental impact of packaging water in plastic. In the UK, restaurateurs have been signing up to a Water on Tap campaign run by the Evening Standard newspaper, which encourages business to offer free tap water.
Richard Hall, chairman of beverage research group Zenith International, said that while concerns over the environmental impact of bottled water were "legitimate", it remained the fastest-growing major beverage category worldwide with sales growth of 6 per cent forecast for this year. Nestle shares fell 1.7 per cent to 505 Swiss francs as the strength of the franc against other currencies lowered group sales, and analysts worried about a slowdown.
Saturday, April 26, 2008
Like many farmers in the heart of Thailand's main rice growing region, Pranee was spurred to grow a rare third crop of the staple grain after supply fears across Asia in the last four months pushed rice prices to historic highs.
"It's a risk, but it is the one golden chance I have," Pranee, 56, told Reuters as she prepared to work on her six hectare paddy field in the province of Suphan Buri, just north of Bangkok. "I have been a farmer since I was born and I've never seen prices rise so high," the mother-of-two said.
But despite their back-breaking work, farmers such as Pranee might be the last to reap profits from high rice prices and the first to pay the bill from high planting costs and the risk that rice prices might tumble before harvest time in around June.
Most Thai farmers missed the chance to profit from prices as high as 17,000 baht a tonne this month because they had to sell most of their crop after harvest in November due to a lack of storage on their own farms.
That same month India imposed a ban on non-basmati rice exports, sparking fears about supply and forcing up prices. Vietnam, the world's number two exporter, then started restricting shipments, leading to a buying frenzy on world markets that has caused prices to double since January.
As a result, producer countries such as Thailand and Vietnam, which between them account for half of all world exports, are growing out extra crops.
Whether Pranee and her neighbours get to see the benefits of their extra work is another matter.
She believes a local miller is still hoarding the rice she sold in November in the hope of selling later to exporters at a higher price - a charge also levelled at millers by the government but denied by the industry.
"I got only 7,000 baht per tonne when I sold my rice," said 42-year-old farmer Kasem Laosittiwaro.
"I will grow another crop but I don't know if I can get 17,000 baht per tonne when I sell my rice in June after the harvest," he said, referring to the current price for white rice paddy sold to millers for processing.
Producing a third crop is not the easy money it might seem at first glance.
The cost of fuel and fertiliser have risen steeply over the last year, pushing many farmers such as Kasem, who failed to get a much higher price for their November crop, deep into debt.
For decades, rice paddy prices have been around 6,000 baht per tonne, propped up by a state minimum price scheme to prevent big fluctuations around harvest time.
This year, the domestic price has surged to 17,000 baht due to strong overseas demand. But most farmers fear they will never be able to get that price, and will struggle just to cover their fixed costs estimated at 5,000 baht a tonne.
"I'm not sure whether I could get any profit from selling prices at these historic highs as my costs have risen, leaving very little profit for us," said 53-year-old Wattana Boonyatim, who invested heavily in seed and fertiliser for his third crop.
In Vietnam, rice farmers are also feeling the pinch of high fertiliser costs which have eaten into their profits.
"This year's profit is not good as fertiliser prices have jumped strongly," Ha Van Duc said at his farm in Vietnam's Mekong Delta.
With fertiliser and rice seed prices almost doubling in the last 12 months, Bangkok has pledged to import 20,000 tonnes of fertiliser. Farmers say this is a drop in the ocean in a country that uses up around 4.5 million tonnes of fertiliser per year.
Farmers are also aware that less fertiliser means less rice.
"Without fertiliser we can not get higher yields which means we suffer losses," said 61-year-old Chin Sudsaward, who had to borrow money for fertiliser.
Another factor playing on the minds of most farmers is the increased cost of land, with landlords seeing the high global prices as a chance to demand higher payments.
In response, farmers want the government to set a floor price of more than 10,000 baht per tonne in case global prices have fallen by the time the third crop is harvested around June.
More from ...... Business
"It's a risk, but it is the one golden chance I have," Pranee, 56, told Reuters as she prepared to work on her six hectare paddy field in the province of Suphan Buri, just north of Bangkok. "I have been a farmer since I was born and I've never seen prices rise so high," the mother-of-two said.
But despite their back-breaking work, farmers such as Pranee might be the last to reap profits from high rice prices and the first to pay the bill from high planting costs and the risk that rice prices might tumble before harvest time in around June.
Most Thai farmers missed the chance to profit from prices as high as 17,000 baht a tonne this month because they had to sell most of their crop after harvest in November due to a lack of storage on their own farms.
That same month India imposed a ban on non-basmati rice exports, sparking fears about supply and forcing up prices. Vietnam, the world's number two exporter, then started restricting shipments, leading to a buying frenzy on world markets that has caused prices to double since January.
As a result, producer countries such as Thailand and Vietnam, which between them account for half of all world exports, are growing out extra crops.
Whether Pranee and her neighbours get to see the benefits of their extra work is another matter.
She believes a local miller is still hoarding the rice she sold in November in the hope of selling later to exporters at a higher price - a charge also levelled at millers by the government but denied by the industry.
"I got only 7,000 baht per tonne when I sold my rice," said 42-year-old farmer Kasem Laosittiwaro.
"I will grow another crop but I don't know if I can get 17,000 baht per tonne when I sell my rice in June after the harvest," he said, referring to the current price for white rice paddy sold to millers for processing.
Producing a third crop is not the easy money it might seem at first glance.
The cost of fuel and fertiliser have risen steeply over the last year, pushing many farmers such as Kasem, who failed to get a much higher price for their November crop, deep into debt.
For decades, rice paddy prices have been around 6,000 baht per tonne, propped up by a state minimum price scheme to prevent big fluctuations around harvest time.
This year, the domestic price has surged to 17,000 baht due to strong overseas demand. But most farmers fear they will never be able to get that price, and will struggle just to cover their fixed costs estimated at 5,000 baht a tonne.
"I'm not sure whether I could get any profit from selling prices at these historic highs as my costs have risen, leaving very little profit for us," said 53-year-old Wattana Boonyatim, who invested heavily in seed and fertiliser for his third crop.
In Vietnam, rice farmers are also feeling the pinch of high fertiliser costs which have eaten into their profits.
"This year's profit is not good as fertiliser prices have jumped strongly," Ha Van Duc said at his farm in Vietnam's Mekong Delta.
With fertiliser and rice seed prices almost doubling in the last 12 months, Bangkok has pledged to import 20,000 tonnes of fertiliser. Farmers say this is a drop in the ocean in a country that uses up around 4.5 million tonnes of fertiliser per year.
Farmers are also aware that less fertiliser means less rice.
"Without fertiliser we can not get higher yields which means we suffer losses," said 61-year-old Chin Sudsaward, who had to borrow money for fertiliser.
Another factor playing on the minds of most farmers is the increased cost of land, with landlords seeing the high global prices as a chance to demand higher payments.
In response, farmers want the government to set a floor price of more than 10,000 baht per tonne in case global prices have fallen by the time the third crop is harvested around June.
More from ...... Business
Global Food Crisis-will it be overcome?
From Esat to West, only concern is whether the current global food crisis will be overcome or million people will die of hunger. Or will there be food war due to short of food that poor nation will just riase war against the riches. We will try to collect all news related to Global Food Crisis and its radical solutions that the rishe to poor nations are thinking how to deal with it.
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