Another Price Increase Is Coming To Nestlé Products
Hot Pockets, Kit Kats, Coffee-Mate, and DiGiorno Pizza may be completely different food products, but they do have one thing in common: They're all manufactured by Nestlé. They're also all expected to increase in price in the near future. According to Nestlé CEO Mark Schneider (via The Guardian), it's something that can't be avoided. "Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year," Schneider explained in a public statement.
Nestlé products have already gone up by 5.2% within the first three months of 2022, so the outlook isn't exactly bright. With the soaring cost of raw ingredients, labor, energy, transport, and labor shortages, a price hike is the only way Nestlé can continue conducting business, equity analyst Matt Britzman told The Guardian. This could technically mean bad news for Nestle in the long run, as Britzman explains that the more the prices rise, the more likely consumers are to choose supermarket-label generic brands over their loyalty to Nestlé.
Nestlé is still expected to profit this year
Inflation and supply chain issues are affecting the food industry as a whole, but Reuters points out that it's the consumers whose pockets are hurting the most. Such a steep price increase has actually caused Nestlé's profits to grow rather than drop or remain constant. And the share price has also gone up, putting investors in good shape. For consumers, on the other hand, it's a different story. "We stepped up pricing in a responsible manner and saw sustained consumer demand," Nestlé CEO Mark Schneider claimed in a statement shared by Reuters.
But just how "responsible" is it? Nestlé's growth statistics speak for themselves, CNN Business reports. Over the last quarter they increased by 5.4%, and are anticipated to grow by 5% through the end of the year. That's a profit margin of up to 17.5%, which is slightly higher than 2021's, which came in at 17.4%. It could indicate that people are willing to pay top dollar for their Hot Pockets and Kit-Kats, but it could just as well mean that Nestlé has a considerable amount of pricing power.