Question

What are some of the risks that Nestle and its industry (food processing) are facing in the current economic and political environment that could impact their WACC? Research risks using current financial publications (e.g. Bloomberg, The Financial Times, The Economist).

Answer 1

Risks that are faced by Nestle and it's industry in the current economic and political environment as follows-

1. Shrinking of consumer demand as there is a pandemic that has hit the entire globe so the demand of the consumer is going down amid no physical operations of these companieso even if they are related to food and beverages industries, the supply chain are not working and the impact would be visible in coming quarters.

2.these companies are also faced with closure of their supply chain and they are not able to deliver their products to the consumers as businesses are not functional.

3. Shutting down of major factories across globe is another risk that Nestle is exposed to.

4. Many countries are also regulating the prices of its food items and asking the industry to control it in order to give the consumer flexibility during the pandemic to buy these items at a low price so it will impact the books of accounts.

5.lack of digital operations is also hampering the bright prospect of the industry because these industries are not digitally operational and it is losing a wonderful opportunity at the time of pandemic.

6.it is also exposed to political interventions and political risks as the demand has gone down and supply had also gone down so government agencies are taking over the supply chain.