Friday, February 17, 2023, 07:25
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Food products on the store shelf PHOTO Unsplash
The world’s largest food group, Nestle, will increase the prices of its products further this year, after more expensive ingredients caused annual net profit to miss analysts’ expectations, reports CNBC.
He declined to comment on the planned level of price increases, which he said were needed to offset the damage caused by rising commodity prices.
For consumers, whose purchasing power has already been eroded by inflation that has reached multi-decade highs, the price hikes are likely to add to worries about the family budget.
The maker of Nescafe instant coffee and KitKat chocolate bars raised prices by 8.2% last year, but this did not fully offset the impact of rising ingredient costs on margins.
“Our gross margin is down about 2.6 percentage points, that’s a lot. This is after all the price increases we made in 2022,” Schneider told reporters.
Price adjustments may vary by market. The US and UK still face strong inflation, while it has slowed in markets such as China and Europe, he said.
In an interview with CNBC in Switzerland, Schneider said: “We’re watching with interest in quite a few markets to see if inflation, which has been largely driven by energy and commodities, turns into wage-driven inflation.
A lot of countries negotiate their annual contracts at the beginning of the year, so it’s something we’re watching with interest, like everyone else.”
Europe was the main source of impact on the company’s margin last year, with an impact of approximately 1.9 percentage points.
Nestle is targeting organic sales growth, which does not include the impact of currency fluctuations – in the range of 6-8% in 2023.
In 2022, the company’s sales increased by 8.4% to 94.4 billion Swiss francs (102.31 billion USD).
Schneider told CNBC that demand remained strong despite the price hike, and consumers were able to switch to cheaper products across categories while still buying its brands.
Coffee and pet care products, the company’s “growth engines,” are “holding up extremely well,” he said.
“We also see continued trends toward premium pet food in all advanced markets, and these trends typically do not slow or stop during periods of economic uncertainty,” he added.
Net profit to shareholders fell to 9.27 billion Swiss francs, below estimates of 11.58 billion francs, although forecasts did not take into account the impairment of Nestlé’s Aimmune unit last year, analysts said.
