The price of Nestlé products increased by a total of 6.5% in the first half of this year due to “significant and unprecedented cost inflation”, according to its latest financials.
The supplier, known for food and drinks brands including KitKat, Nescafé and Cheerios, published its half-year results last week.
The results showed that a 6.5% increase in prices contributed to a 9.2% rise in reported sales and a growth of 8.1%. Price rises were highest in North America, at 9.8%, compared with 4.9% in Europe. However, the firm said it expected profit margins in Europe in particular to take a hit as “significant cost inflation more than offset pricing, growth leverage and disciplined cost control”.
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Chief executive Mark Schneider said: “We limited the impact of unprecedented inflationary pressures and supply-chain constraints on our margin development through disciplined cost control and operational efficiencies.”
Nestlé said, overall, it expects sales to increase by 8% this year, up from the anticipated 5%, but that profit margins were set to be at the lower end of expectations, at 17%.
Editor in chief of finance.co.uk Laura Rettie stressed: “Firms are making the difficult decision to choose between passing on the increase in expenses to their customers, making less profit or decreasing the quality or quantity of goods or services – known as skimpflation. This isn’t about greed for many businesses – it’s about survival.”
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