KitKat sweetens Nestle sales with Easter, Valentine's Day comeback

In a quarter that saw Nestle's (NESN.S) overall sales volumes dip, the KitKat maker's candy business was a sweet spot as consumers celebrated Valentine's Day and an early Easter with largely reduced concerns over the spread of COVID-19.

Confectionary sales volumes - which Nestle calls real internal growth - grew about 6% even as most other units' sales declined. Nestle, which also sells Smarties and Quality Street chocolates, hiked prices sharply by 7.6% to drive organic confectionary sales up by 13.5%.

"Omicron last year probably weighed on seasonal sales of confectionary around Valentine's Day," Bernstein analyst Bruno Monteyne said, adding that Easter was one week earlier this year, pulling more sales of Nestle's candy eggs into the first quarter.

The company on Tuesday reported earnings and sales growth as it raised prices to offset higher commodities and supply chain costs.

Inflation and a cost-of-living crisis prompted by higher energy costs have hurt sales volumes in most categories across the industry. But candy and other items like cosmetics and alcohol tend to be resilient in times of economic downturn due to a phenomenon called the "lipstick effect", where shoppers buy themselves small, special treats instead of big-ticket items.

Nestle, the owner of the Milkybar and Aero candy brands, said confectionery in Canada, Europe and the Asia-Oceania-Africa region recorded double-digit growth, led by KitKat and in some cases, seasonal products. In Latin America, confectionery was the largest growth contributor to sales, driven by KitKat and seasonal products.