Nestlé anticipated to raise prices amid challenging market conditions with annual results
Nestlé is anticipated to raise prices further this year, following increases on flagship ranges including KitKat, as the company noted challenging trading conditions that have impacted on its international operations, writes Neill Barston.
According to the company’s latest annual results, total reported sales increased internationally by 8.4% to CHF 94.4 billion, with its confectionery operations accounting for €8.1 billion of that figure within its global activities.
However, net profit for the group decreased by 45.2% to CHF 9.3 billion, falling some way short of analysts forecasts for its performance, as the business faced considerable headwinds from market uncertainties, primarily from key supply chain challenges. The company confirmed that it would therefore be focusing on restoring gross margins.
Moreover, the Swiss-headquartered firm reported that confectionery posted high single-digit growth, which it said reflected particular success for its KitKat brand – which underwent an 8% price increase last year, with the business reported to be raising prices further, though it has not confirmed by how much. This comes as many regions have faced ingredients inflation prices as a direct result of the ongoing Ukraine conflict, with the UK in particular hit by 16.7% food sector price rises – which were nearly the highest for 40 years.
Mark Schneider, Nestlé CEO, acknowledged there were major challenges for the business, ahead, but in spite of this, he predicted that 2023 would in fact likely to prove ‘another year of robust growth’ for the company.
“Last year brought many challenges and tough choices for families, communities and businesses. Inflation surged to unprecedented levels, cost of living pressures intensified, and the effects of geopolitical tensions were felt around the world.
The entire Nestlé team demonstrated dependability, as we navigated this difficult environment. Organic growth was solid, margins continued to be resilient, and our underlying earnings per share development was strong. At the same time, we ensured access to nutritious products and affordable offerings globally.
During 2022, we also confirmed our longstanding nutrition strategy, with Good for You, Good for the Planet at its heart. We took important actions to further strengthen our industry-leading responsible marketing practices and to provide transparency on the nutritional value of our global portfolio. At the same time, we also advanced the implementation of our climate roadmap.
“Looking to 2023, we expect another year of robust organic growth, with a focus on restoring our gross margin, stepping up marketing investments and increasing free cash flow. Nestlé’s value creation model puts us in a strong position to achieve our 2025 targets and to generate reliable, sustainable shareholder returns.”