Nestlé Says Further Price Hikes Lie Ahead Amid Rising Cost Inflation

A logo of the world's leading food industry group, Nestlé, is seen at the company's research center in Vers-chez-les-Blanc, Switzerland, on Oct. 9, 2014. (Fabrice Coffrini/AFP via Getty Images)

Nestlé SA predicted on April 21 that more price increases will be required in the future amid rising inflation levels.

The Swiss multinational food and drink company increased pricing for its products by 5.2 percent in the first quarter of 2022, helping to produce organic sales growth of 7.6 percent and beating analysts’ expectations of 5.1 percent.

“In these first months of the year, the war in Ukraine has caused unspeakable human suffering,” Mark Schneider, Nestlé CEO, said in a statement. “Amid this challenging environment, we delivered strong organic sales growth” with resilient real internal growth, he said.

“We stepped up pricing in a responsible manner and saw sustained consumer demand. Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year. ”

Russia’s invasion of Ukraine, which began on Feb. 24, has put pressure on the global economy as the cost of everything from energy to other commodities continues to rise.

Consumer goods companies have in turn had to pass price increases onto customers in an effort to offset rising inflation—currently at its highest level in 40 years in the United States—and supply chain issues, initially exacerbated by the COVID-19 pandemic and further worsened by the conflict in Ukraine.

However, some major retailers in the United States, including Walmart Inc., Target Corp., and CVS Health Corp., have been accused by a nonpartisan watchdog organization of profiteering from rising inflation levels.

Nestlé said the biggest price increases were in North America and the Latin America region, where pricing went up by 8.5 percent and 7.7 percent respectively.

Pet care products saw the biggest price increase of 7.7 percent, followed by water at 7.2 percent and prepared cooking dishes and cooking aids—which include products such as frozen foods and sauces—at 6.4 percent.

Products in the company’s nutrition and health science, confectionary, and powdered and liquid beverages sections saw the lowest price increases, with confectionary prices increasing by 3 percent.

Despite the further price increases expected later in the year, Nestlé is optimistic about the future, stating that it expects organic sales to rise by about 5 percent in 2022, with an underlying trading operating profit margin between 17 percent and 17.5 percent, compared to 17.4 percent in 2021.

Nestlé’s figures exclude Russia after the company announced in March that it was pausing production and sales of several nonessential goods to the country amid mounting political pressure from Ukrainian leaders over the company’s continued presence in the country.

However, Nestlé continues to provide Russian nationals with essential products, such as baby formula and medical and hospital nutrition, but the company said it is not making a profit from those products.

Nestlé earned more than 165 billion Russian rubles (roughly $1.7 billion) in 2020, and the country accounted for just under 2 percent of the company’s revenues in 2021.

Elsewhere on April 21, Nestlé noted that it is one of the few companies that has continued to keep shelves stocked in Ukraine amid the ongoing Russian invasion.

The world’s largest food and beverage company noted that while it was able to largely maintain operations in the west of Ukraine, operations at its factory in Kharkiv have been halted due to heavy shelling.

The food giant has also pledged 15 million Swiss francs (about $15.9 million) in monetary and product contributions to the people of Ukraine this year.