VEVEY, SWITZERLAND — Changing the course of the world’s largest food and beverage company is like turning the world’s largest ship — it takes time. In 2022, Nestle SA embarked on a stock-keeping unit rationalization program to optimize production, improve customer service levels and free resources for more impactful projects. The company’s first-quarter results show the challenges and the potential benefits of the program.

“We continue to work on our portfolio optimization program and can confirm our earlier estimate that this program will have a net negative impact for the first half of this year and a slightly positive impact for the full year 2023,” said Ulf Mark Schneider, chief executive officer, during an April 25 conference call with securities analysts. “We are seeing the first expected benefits come in as planned, in particular higher service levels for the company overall and for our high rotation items, in particular.”

  For the first three months of the year, Nestle generated 23.47 billion Swiss francs ($26.25 billion) in sales, up 5.5% from 22.24 billion Swiss francs the year before. Much of the sales growth came from pricing actions taken during the fourth quarter of 2022 and the first quarter of this year.

Price increases accounted for 9.8% of the sales growth while real internal growth (RIG), which the company defines as the sum of volume and mix, was -0.5%, but ahead of the fourth quarter when it was -2.6%, according to the company.

“In Q1 2023, volume development was impacted by active and deliberate choices to reduce the number of low-growth and low-margin products,” said Francois-Xavier Roger, chief financial officer.

In Nestle’s Zone North America, sales rose to 6.3 billion Swiss francs ($7 billion), up 8.6% from 5.8 billion Swiss francs the year before. Pricing accounted for 12.4% of the sales growth while RIG for the quarter stood at -0.8%.

“The negative RIG still reflects the impact of portfolio optimization as well as Perrier capacity constraints,” Mr. Roger said. “Growth was driven by pricing, strong operational execution and continued momentum in e-commerce.

“By product category, the key growth driver was Purina PetCare. Nestle Professional and Starbucks out-of-home solution reported double-digit growth. Beverages and frozen also saw a robust sales development.”

Management reaffirmed Nestle’s full-year guidance, iterating the SKU reduction program may bear fruit in the second half of the year and noting the normalization of the away-from-home category around the world.