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KitKat and Nescafe owner Nestle says it’s raised prices by nearly 10% so far this year

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KEY POINTS
  • Nestle, the Swiss owner of brands including KitKat and Nescafe, said Tuesday that it raised prices by 9.8% in the first quarter.
  • It reported higher sales revenue but a 0.5% fall in volume despite growth in pet care, coffee and confectionary.
  • CEO Mark Schneider had said in February the company took a gross margin hit last year despite increasing prices by 8.2% and that further price rises were to come.Consumer goods firm Nestle raised prices by 9.8% in the first quarter, attributing this to “significant cost inflation.”

    The Switzerland-based company on Tuesday reported sales revenue up 5.6% in the three-month period, coming in at 23.5 billion Swiss francs ($26.49 billion), slightly ahead of an analysts’ consensus estimate.

    But sales volumes, listed as “real internal growth,” fell 0.5%.

    The company raised prices by 8.2% last year, and saw sales volumes up by 0.1%.

    It comes as consumers struggle with sharply higher prices of food, household basics and beyond. While year-on-year headline inflation has cooled to 2.9% in Switzerland, it remains at 6.9% in the euro zone and 10.1% in the U.K.

    Nestle said it still saw growth in categories including its Purina PetCare range. Coffee — in which it owns the Nescafe, Nespresso and at-home Starbucks brands — saw high single-digit growth, while confectionery sales, which include KitKat, Smarties, Milky Bar and Quality Street, grew in the double digits.

    It also said it had seen limited “consumer downgrading” related to prices.

    Consumer goods firms have been raising prices across the board.

    In January, Unilever CEO Alan Jope told CNBC the company had seen “extraordinary input cost pressure” across areas including agriculture, petrochemical-derived products, energy, transport and logistics. He also said he expected companies were “past peak inflation but not yet at peak pricing.”

    But firms have also faced accusations of hiking goods prices ahead of their input costs, spurring “greedflation.” Economists have noted corporate margins remain strong despite wider economic headwinds.

    Nestle CEO Mark Schneider said in a statement Tuesday “portfolio optimization efforts and responsible pricing helped to offset the ongoing pressures from two years of cost inflation.”

    Schneider had flagged in February that further price rises were to come, telling reporters the company had seen a “massive” fall of around 260 basis points in its gross margin.

    However, Nestle Chairman Paul Bulcke told Swiss newspaper Finanz und Wirtschaft in March that price pressures were easing.

    Nestle on Tuesday reaffirmed its 2023 guidance of 6-8% organic sales growth and 17-17.5% underlying operating margin.

    Nestle shares were up 1.8% in mid-morning trade.

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