Nestle:'Unprecedented' Input Hikes In Store

  • June 8, 2011
"In nominal terms, we are seeing unprecedented rises in the price of commodities--we see tremendous volatility and headwinds," Nestle SA head of procurement Kevin Petrie warned during the company's annual investor seminar in Vevey, Switzerland yesterday.

Commodities prices are extremely volatile, with average monthly price variations of 16.4% between 2006 and 2010, versus 12.4% between 2000 and 2005, he said, according to a Wall Street Journal report.

Petrie said that the global commodities boom cycle that began in 2004 could continue until 2024, fed by factors including greatly increased demand from the growing economies of India and China, biofuel production and more buying of commodities by investment funds.

Funds now control about 30% of arabica coffee futures, and one-third of the world's cocoa comes from the politically troubled African Ivory Coast, he reported.

All of which has caused Nestle to create commodities research teams and respond to identified trends far in advance -- working 18 months ahead -- to lessen its exposure to price swings, Petrie said. -- Karlene Lukovitz

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