Nestlé, the owner of KitKat, Häagen-Dazs and Felix cat foods, raised prices 5.2% in the first three months of this year and said rising costs will soon force another increase.
Mark Schneider, its managing director, said: “Cost inflation continues to rise sharply, which will require further pricing and mitigation actions during the year. »
Nestlé is the latest major brand owner to issue a warning about the impact of rising commodity prices combined with rising energy, fuel, labor and transport costs. Greggs Bakers, consumer goods maker Unilever and fashion chain Next are among those who said more inflation was on the way.
Fears of shortages of grain and sunflower oil from Ukraine as well as petrochemicals from Russia have aggravated existing inflation caused by soaring energy and fuel prices and a rebound in the demand since the easing of pandemic restrictions in many parts of the world.
Schneider said Nestlé experienced “strong organic sales growth” as it raised prices “responsibly” in the three months to reflect significant cost inflation. The company confirmed that it expects to meet its full-year sales and profit targets amid strong consumer demand.
Prices rose the most for Petcare products, up 7.7%, followed by water, up 7.2%, while confectionery rose 3%. Underlying sales, excluding the Russian region where the group stopped sales of non-essential goods, rose 7.6%.
Purina PetCare was the main contributor to underlying growth, with sales up more than 10% in Europe as the pandemic-driven increase in pet ownership continues. Confectionery sales, including KitKats, were up more than 10%.
Matt Britzman, equity analyst at Hargreaves Lansdown, said: “Rising prices to keep things in the right direction following input cost inflation is certainly not going to be a course management will want to take. But nonetheless, that’s the position Nestlé finds itself in and it doesn’t seem likely to go away any time soon. »
He said Nestlé’s sales were being helped by the recovery in cafe and convenience store sales which were affected by pandemic restrictions last year, but that effect is expected to dissipate in the future.
Britzman added that Nestlé had yet to see any real impact from changes in consumer behavior due to the cost of living crisis, which could prompt a move away from international brands in favor of cheaper supermarket branded products. .