Nestlé announces gradual increase in food prices in 2023
2023.02.16 12:27
Nestlé announces gradual increase in food prices in 2023
By Tiffany Smith
Budrigannews.com – The world’s largest food company, Nestlé, predicts that the cost of essentials will continue to rise this year, adding to a growing list of consumer giants’ warnings about additional hardship for already-strained households.
In 2022, the producer of KitKat chocolate bars and Nescafé coffee increased prices by 8.2%, but the company claimed that this was insufficient to offset an increase in its own costs, which had reduced its profits.
During a Thursday press conference, Nestlé CEO Mark Schneider stated, “We are still in a situation where we are repairing our gross margin and, like all of the consumers around the world, we have been hit by inflation and now we are trying to repair the damage that has been done.”
Although he declined to specify which of the company’s 2,000 brands, which include frozen food, confectionery, and baby formula, would be affected, Schneider added that price increases will be “very targeted” and only implemented where “input cost inflation justifies that.”
(PG), which manufactures Pantene shampoo and Pampers nappies, has announced additional price increases this year in response to rising commodity, energy, and labor costs.
Even though they have decreased, the prices of raw materials like energy, dairy products, and grains continue to be high. Costs for labor and logistics have also gone up. As a result, retail prices are unlikely to fall anytime soon.
On a call with journalists last week, Unilever’s chief financial officer Graeme Pitkethly stated, “We’re probably past peak inflation, but we’re not yet at peak prices.”
On the same conference call, CEO Alan Jope stated that food prices, including ice cream, will rise significantly in 2023.
In the final three months of 2022, Unilever, which is based in the UK and produces Hellman’s mayonnaise, Knorr stock cubes, and Ben & Jerry’s ice cream, increased prices by 13.3%, marking the company’s eighth consecutive quarter of price increases.
Companies that sell consumer goods must strike a delicate balance. While cost increases are reducing their profit margins, excessive price increases run the risk of alienating customers.
According to Unilever, price increases resulted in a 2.1% decrease in sales volumes in 2022. Similarly, Nestlé attributed a decrease in sales volumes in the second half of last year to pricing in part.
In contrast, Heineken stated that it anticipated selling less beer in Europe this year as a result of “steep” price increases caused by energy costs.
Retailers’ own brands may emerge victorious as consumers attempt to cut back on their grocery bills. For instance, private label sales at Walmart (WMT) have increased significantly, and this pattern is spreading to European retailers.
According to Jope, Unilever had “recently seen share gains by private label in Europe in most categories as the economic situation weighs on shoppers.” [Citation needed]]
Steep price increases have resulted in tense negotiations between consumer goods companies and their retailer customers, in addition to driving customers to private-label products. According to Jope, retailers “demand evidence of the costs we are facing before they will tolerate increases” and Unilever had “robust” conversations with them.
While acknowledging that “intense negotiations are taking place,” Nestlé’s Schneider would not go into detail on Thursday regarding the company’s negotiations with retailers.
He stated, “Everyone has the same goal, which is to protect the consumer from excessive inflation.”
Some branded products have been temporarily removed from shelves as a result of price disputes over the past year.
Tesco (TSCDF) called Kraft Heinz (KHC)’s price increases “unjustifiable” during price negotiations last summer. Tesco is the largest grocery retailer in the UK. Kraft Heinz stopped providing some products to Tesco, including baked beans and tomato ketchup. On Heinz’s most popular lines, prices remained unchanged once the products were restored.
John Allen, Tesco’s chairman, recently stated to the BBC that price increases have also led to “fallout with other suppliers.”
It’s possible that the bosses of supermarkets see these fights as part of their job. Carrefour (CRERF), France’s largest grocery retailer, CEO Alexandre Bompard stated on Tuesday that the company’s responsibility was to negotiate with suppliers and “make sure we limit the increase as much as we can to protect customer purchasing power.”
Bompard went on to say that over the next three years, the company would “significantly increase” its private label share to 40% of sales.
He noted that “trading down,” in which customers purchase less expensive versions of the same product, increased in all of Carrefour’s markets in 2022, including Taiwan, Brazil, Argentina, Spain, and Italy.
