Nestlé put prices up by 8.2% globally in 2022.
REUTERS/Denis Balibouse
Food and drinks conglomerate Nestlé says it will continue putting up prices in 2023.
Nestlé put prices up by 8.2% globally in 2022, rising to 11.6% in North America.
The company said “gravity” will eventually mean its competitors have to do the same.
Nestlé, the world’s largest consumer food company, which owns brands such as Nesquik and Nescafé in the US, says it will continue hiking its prices in 2023.
“Inflation has left its mark on gross margins and profit margins,” CEO Mark Schneider told investors. “And clearly, some repairing still needs to be done.”
The Swiss conglomerate said at its fourth-quarter earnings call on Thursday that the price increases would be targeted rather than across the board.
Nestlé put prices up by 11.6% in North America in 2022, and 8.2% globally. Pet care, prepared dishes, cooking aids, milk products, and ice cream had the largest price increases globally.
“In 2022, pricing became the largest contributor to growth,” CFO François Roger said, meaning that price increases led to more growth in revenues as sales growth declined.
Nestlé execs said that the company put up prices because of cost inflation, though they noted that higher prices and operating efficiencies weren’t enough to fully offset inflation in most product categories. Poor weather, Russia’s invasion of Ukraine, and rising wages have all contributed to higher input costs. In the US, the consumer price index – a measure of inflation – grew by 6.4% in the year to January, rising to 11.3% for food for at-home consumption, federal data shows.
Consumer goods giant Unilever said in its earnings call earlier in the month that while it had thought its sales had grown overall, this was entirely down to price increases, and that sales volume had actually fallen.
“I have no regrets about the pricing action that we have taken,” Nestlé’s Schneider told investors on Thursday.
“We’ve been moving early with pricing, which I think is the right thing to do,” Schneider added. “Sooner or later, gravity will catch up with some of our competitors. And hence, at that point, that situation will correct itself because they will also then have to take pricing action or live with permanent reductions in their profitability.”
Nestlé’s upcoming rises will be justified by data “otherwise retail partners and consumers will simply not accept price increases,” Schneider said.
“I don’t think it’s helpful to our shareholders to now speculate on how many rounds of pricing there will be” in 2023, he added. “This is highly specific by market and category.”