Nestle to hike wholesale prices for baby food in Russia by 9% as of Sept 4 - paper

MOSCOW. Aug 23 (Interfax) - Food and beverage giant Nestle plans to raise wholesale prices for baby food, including formula (NAN, Nestogen, Nestle and Gerber), as well as breakfast cereal (Nesquik, Cosmostars and Khrutka) and instant cocoa drinks as of September 4, national daily Kommersant reported on Wednesday, citing a letter sent to retail chains.

Similar notices have been sent to distributors to non-chain retailers. Nestle declined to comment.

The company attributed the price hike for baby food to the steep depreciation of the ruble, and the price increase for cocoa drinks also to the growth of world prices for raw materials and sugar. Cocoa bean prices on the commodity exchange in New York reached $3,330 per tonne on August 22, which was up 23% from January. The main growth of sugar prices was seen earlier in the year, but since July 12 wholesale prices have on average fallen to about 60 rubles per kilogram, an industry source told the paper.

The paper reported the Agriculture Ministry as saying that it will "additionally clarify" Nestle's position. The ministry said that generally in Russia the "cost of basic raw materials for baby food and breakfast cereals is stable."

Other baby food producers might follow Nestle's example and also announce price hikes, NEO partner Albina Koryagina said, recalling that prices for baby formula rose 17% in 2022 and continued to climb in the first quarter of 2023.

The other main producers of baby formula in Russia are Danone (Tyoma, Aptamil) and InfaPrim (Nutrilak, Nutrigen, Vinni), Streda Consulting CEO Alexei Gruzdev said. Danone and InfaPrim did not respond to questions, Kommersant said.

JSC Progress, producer of the Fruto Nyana brand, did not comment on the possibility of prices being raised for its own products, but said such a step was "predictable due to the growth of raw material, logistics and personnel costs."

The paper recalled that in 2019 Russian lawmakers called for including baby food in the list of socially important goods, which would have made it possible to set maximum retail prices for it, but the proposal was not implemented.

In order to bolster demand in the face of the price hike, retailers might further increase promotions in the baby food segment, Yakov & Partners director Oleg Shenderyuk said. The share of promotions is already 20%-30% for non-dairy baby food, 30%-40% for dairy and 60% in some other categories, he said.