Jakarta –
Nestlé raised the price of its products by 6.5% in the first half of 2022. The Swiss company now has to grapple with an unprecedented increase in production costs.
The world’s largest food and grocery company admitted that it raised prices the most in North America, increasing prices by 9.8%. Then, followed by Latin America at 9.4%.
Production costs are at their highest. The company admitted that the cost increase occurred evenly from raw material, packaging, transportation and energy commodities.
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“We are limiting the impact of unprecedented inflationary pressures and supply chain constraints on our margin development through disciplined cost control and operational efficiencies,” said CEO Mark Schneider. CNNFriday (29/7/2022).
Despite the higher selling price of its products, the company still recorded an increase in organic sales for several products such as KitKat to Nescafé. In fact, strong demand has driven sales of Purina’s pet food products, which are produced by a subsidiary of Nestlé.
Along with soaring global inflation, producers of food and daily necessities have burdened consumers with rising product prices. Unilever, one of Nestlé’s competitors, also said it had raised the average price of its products by 9.8% in the first six months of this year.
These higher prices could trigger global food insecurity, which was exacerbated by Russia’s invasion of Ukraine in February. The war has pushed the cost of energy and basic commodities to record highs, putting pressure on poor import-dependent countries.
However, there is some good news too. According to the Food and Agriculture Organization (FAO) Food Index, global food prices have fallen for the third month in a row. But food prices were still 23% higher in June compared to a year earlier.
On the other hand, the World Food Program (WFP) estimates that 47 million people have entered the acute stage of hunger as a result of the Ukraine war.
(hal/eds)
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