17.07.2024
News
Nestle, the owner of KitKat and Nescafe, says it has raised prices by almost 10% this year
Consumer goods manufacturer Nestle raised prices by 9.8% in the first quarter, explaining it by “significant cost inflation”.
On Tuesday, the Swiss company reported that its sales revenue for the three months rose by 5.6% to 23.5 billion Swiss francs ($26.49 billion), slightly ahead of analysts’ consensus forecasts.
However, sales volumes, referred to as “real domestic growth,” fell by 0.5%.
Last year, the company raised prices by 8.2%, while sales grew by 0.1%.
This happened against the backdrop of consumers’ struggle to cope with the sharp rise in prices for food, basic necessities and other goods. While annual headline inflation in Switzerland fell to 2.9%, it remains at 6.9% in the eurozone and 10.1% in the UK.
Nestle said it continues to see growth in categories, including the Purina PetCare line of food. The coffee segment, where the company owns the Nescafe, Nespresso and Starbucks home coffee shops, saw high single-digit growth, while confectionery sales, which include KitKat, Smarties, Milky Bar and Quality Street, grew by double digits.
The company also reported that there was limited “deterioration in consumer sentiment” related to prices.
Consumer goods firms are raising prices in almost all industries.
In January, Alan Jope, CEO of Unilever, said in an interview with CNBC that the company has experienced “extraordinary input cost pressures” in areas such as agriculture, petrochemicals, energy, transportation and logistics. He also said that he expects companies to have “passed the peak of inflation, but not yet reached the peak of pricing.”
But companies have also faced accusations of raising prices for goods that outpace their production costs, fueling “greed inflation.” Economists point out that corporate profits have remained strong despite the broader economic woes.
Nestlé CEO Mark Schneider said on Tuesday that “portfolio optimization efforts and responsible pricing have helped offset two years of pressure from cost inflation.”
In February, Schneider noted that further price increases were still ahead, telling reporters that the company had experienced a “massive” drop in gross margins of about 260 basis points.
However, in March, Nestle CEO Paul Bulcke told the Swiss newspaper Finanz und Wirtschaft that price pressure was easing.
On Tuesday, Nestle confirmed its forecast for 2023 – 6-8% organic sales growth and 17-17.5% underlying operating margin. Nestle shares rose 1.8% in morning trading.