Nestlé hikes prices again as sale volumes drop

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ALBAWABA — Swiss food giant Nestlé announced fresh price hikes on Thursday due to inflationary pressures and consumers curbing buying due to global economic burdens.

Nestlé, the maker of Nespresso capsules, Maggi bouillons, KitKat chocolate bars and Purina pet food, said sales rose by 8.4 percent to 94.4 billion Swiss francs ($102.3 billion) in 2022.

But real internal growth — a measure of sales volumes and consumers’ product choices — was up 0.1 percent year-on-year, much lower than the 5.5 percent it achieved in 2021, suggesting that consumers were buying fewer of its products in a year of “post-Covid normalization” in many of Nestlé’s markets, noted Mark Schneider, Nestle chief executive officer.

“There are a few cost items that have started, on a spot basis, to ease since the autumn — arabica coffee, dairy, some of the energy items — but on a full-year basis we’re still looking at a very bleak picture,” Schneider said. “We still have some repairing to do [on margins] — we are hit pretty hard by inflation.”

"Last year brought many challenges and tough choices for families, communities and businesses," Schneider added.

To compensate for the rising cost of milk, grains and energy the company was forced to raise its prices by 8.2 percent on average last year.

Inflation surged to unprecedented levels, cost-of-living pressures intensified and the effects of geopolitical tensions were felt around the world, the CEO said.

"Continued pricing action is needed to repair some of the damages we've taken from inflation," Schneider said in a conference call.

Schneider told CNBC that demand remained strong despite price rises, and consumers were able to swap to cheaper products in various categories while still buying its brands.

But the group said its sales volume fell 2.1 percent and warned that it would continue to face higher costs.

Nestlé's underlying profit margin fell three tenths of a percentage point to 17.1 percent as net profits fell by 45 percent to 9.27 billion francs in 2022.

Nestlé forecasts a return to profitability in 2023, forecasting its underlying operating margin to come within a range of 17 percent to 17.5 percent, expecting sales growth of between 6 and 8 percent, down from the 8.3 percent registered in 2022.

"Looking to 2023, we expect another year of robust organic growth, with a focus on restoring our gross margin," Schneider said.

Shares in Nestlé closed down 2.53 percent to 107.90 Swiss francs on Thursday.