By Alice Seeley
Nestlé, the world’s largest food and drinks company, has raised prices for North American consumers by 8.5% in the first three months of 2022, according to the company’s first-quarter earnings release on April 21. Consumers in Latin America also saw a major increase, with the price of Nestlé products rising by 7.7%.
“We stepped up pricing in a responsible manner and saw sustained consumer demand,” said Nestlé’s chief executive, Mark Schneider.
Schneider added that prices of products will continue to rise as “cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year.”
Across the world, Nestlé has raised prices by 5.2% as the company attempts to maintain its profit margins. The price increases have yet to cut into revenue as Nestlé reported a 5.4% increase in total sales over the quarter and expects its sales to increase by 5% this fiscal year. However, higher costs could affect the company’s profits. The company forecasts its underlying profit margin this year to be between 17% and 17.5%, compared to 17.4% in 2021.
“Hiking prices to keep things moving in the right direction in the wake of input cost inflation certainly won’t be a course of action management want to have to take,” said Matt Britzman, an equity analyst at Hargreaves Lansdown. “But nonetheless, it’s the position Nestlé finds itself in and doesn’t look likely to go away anytime soon.”
Nestlé’s sales are being helped by the recovery of coffee shops and other businesses as pandemic restrictions are lifted. Still, that effect is likely to stop soon as the company has yet to see any major impact from changes in consumer behavior.
