Nestlé is making money from the soaring cost of commodities, with the Swiss multinational forcing consumers to absorb the higher price of its food products containing milk, cocoa, coffee and cereals.

The maker of popular brands such as Kit Kat and Perrier signalled “outstanding organic growth” in the first two months of this year. By the end of the year it expects to deliver an extra SwFr8 billion (£3.9 billion) in revenue.

The forecast of exceptional annual sales growth of 7.5 per cent after just two months of trading is highly unusual and caused the shares to race upwards, initially gaining more than 4 per cent.

Nestlé and rival Unilever are shrugging off the burden of higher prices of raw materials, such as dairy products, cereals and vegetable oils, by using their marketing clout to force the rises on to retailers and consumers. The remainder of the price inflation is being offset by making internal cost savings.

Nestlé said: “The group was forced to advance price increases for finished goods in order to partially absorb the higher input costs . . . this accounts for a strong pricing element in the organic growth for the first two months of 2008.”

Julian Hardwick, consumer goods analyst at ABN Amro, said that the big food companies were reaping the rewards of a strategy that focuses on fast-growing products and investment in emerging markets. “They have managed to pass on higher prices and [have] been able to maintain their margins,” he said.

Last month Unilever announced fourth-quarter sales growth of more than 6 per cent and referred to an “increasing contribution from price”. The Anglo-Dutch firm said that half of its underlying sales growth came from price increases and forecast that underlying growth this year would be at the top of its 3 per cent to 5 per cent range, along with further improvements in margin. Nestlé topped that yesterday, saying that organic growth in 2008 would be above the target of between 5 per cent and 6 per cent and that it expected to repeat last year’s advance of 7.4 per cent.

Both companies have insisted that their rapid expansion has not been achieved at the expense of good business practice. Moreover, Nestlé promised to deliver a further improvement in its operating margin, which rose last year by half a percentage point to 14 per cent, and to maintain the upward pressure on prices.

Peter Brabeck-Letmathe, the chief executive, said that Nestlé would maintain “our strategy to respond immediately to exceptional cost evolutions in the commodity markets”.

Nestlé is heavily exposed to dairy costs – chocolate and infant formula milk powder are a big part of the business – and it has seen the price of milk powder rise 35 per cent during the past year. Dairy prices worldwide have been on a rising trend for several years because of increased consumption in the Far East and droughts in the southern hemisphere. Nestlé said that it expected the increases in the cost of raw materials to abate in the first half of the year and that prices may fall in the second half.

Mr Brabeck-Letmathe said that Nestlé would be “delivering once again an improvement in the Ebit margin in constant currencies”.

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