Nestle, a Swiss food and beverage company, has reportedly increased the prices of its products by 9.8% in the first quarter of this year due to rising production costs. This may come as bad news for Nestle product lovers.
The company reported a 5.6% increase in sales revenue in the three-month period, reaching 23.5 billion Swiss francs or US$26.49 billion, slightly above analyst consensus estimates. However, sales volume decreased by 0.5%.
Last year, Nestle raised the prices of its products by 8.2%, which resulted in a 0.1% increase in sales volume. These conditions arise as consumers struggle with high prices of food and other household essentials. While annual inflation has cooled down to 2.9% in Switzerland, it remains at 6.9% in the eurozone and 10.1% in the UK.
Despite these challenges, Nestle remains optimistic about sales growth, particularly in its Purina PetCare and coffee categories, including Nescafe, Nespresso, and Starbucks. In addition, sales of confectionery products such as KitKat, Smarties, Milky Bar, and Quality Street have grown in double digits. The company also stated that it has seen “limited consumer pushback” regarding prices.
According to Unilever CEO Alan Jope in January 2023, operational costs have increased in various areas such as agriculture, petrochemical derivatives, energy, transportation, and logistics.
He also predicted that the company had passed the inflation peak but that product prices had not yet reached their peak. On the other hand, the company has faced allegations of increasing prices due to “greediness.”
Nestle CEO Mark Schneider acknowledged that the company deliberately raised product prices to offset rising operational costs over the past two years. This move is in line with Nestle’s efforts to continue to invest in innovation and sustainability in the long term.
In response to the rising costs, Nestle plans to continue investing in innovation, sustainability, and expansion. The company is committed to reducing its environmental impact and aims to achieve net-zero greenhouse gas emissions by 2050. It also plans to increase the proportion of recycled plastics used in its packaging to 25% by 2025.
Despite the challenges, Nestle’s strong brand portfolio, continued investment in innovation and sustainability, and market-leading positions in various categories are expected to help the company weather the storm and continue to grow in the long term.
