Nestle To Push For Price Hikes Due To Inflation

Nestle chief executive Mark Schneider said the world’s biggest food group would push for price increases this year after price hikes in ingredients contributed to lower 2022 profits.

Schneider did not specify the planned level of price increases but explained that it was necessary to offset the damage caused by commodity price increases.

“Our gross margin is down about 260 basis points – that is massive. That is after all the pricing we have done in 2022,” Schneider said.

Price adjustments will likely vary depending on the markets.

“We have some markets, like the U.S. and the U.K., where we see strong continued inflation, and other markets like China and like here in Europe…where inflation is more muted,” Schneider said.

The packed goods industry has also raised its prices to deal with the surging costs for almost all raw materials.

It had already disrupted the supply-chain bottlenecks caused by the pandemic, and Russia’s invasion of Ukraine caused price hikes for energy and other commodities.

Schneider also said inflation affected logistics, and although prices for arabica coffee and dairy products have eased, they remain high.

Schneider added that sales volumes and mix rose by 0.1% in 2022, along with the 8.2% price increase, which brought Nestle’s full-year organic sales growth to 8.3%.

Nestle said it has a target range of 6-8% for its organic sales growth in 2023.

“The big positive news is the outlook – the 6-8% organic sales guidance is far better than consensus currently, which is just 5%,” an analyst at Kepler Cheuvreux, Jon Cox, said.

“I continue to believe Nestle and the food sector are in for a multi-year period of high top-line growth as we get pricing back following the deflation in the five years to COVID, which was the aberration,” Cox said.

Source: Inquirer.net