Nestle stated that it would increase costs by almost 10% this year

April 26, 2023: Nestle increased costs by 9.8% in the first quarter, attributing this to “significant cost inflation.”

On Tuesday, the Switzerland-based firm reported sales revenue up 5.6% in the three months, reaching 23.5 billion Swiss francs, slightly after analysts’ consensus prediction.

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

The company surged costs by 8.2% last year and saw sales volumes increase by 0.1%.

Consumers need help with sharply higher food prices, household basics and beyond. While every year headline inflation comes down to 2.9% in Switzerland, it stays at 6.9% in the eurozone and 10.1% in the U.K.

Nestle said it still increases growth in categories, which include its Purina PetCare range. Coffee in, which owns the Nescafe, Nespresso and at-home Starbucks brands, saw a high single-digit increase. At the same time, confectionery sales, which include KitKat, Smarties, Milky Bar and Quality Street, increased in the double digits.

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

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

But companies have faced accusations of hiking goods prices ahead of their input costs, spurring “reflation.” Economists have noted corporate margins stay strong despite broader economic headwinds.

Nestle CEO Mark Schneider stated Tuesday, “Portfolio optimization efforts and responsible which prices helped to offset the ongoing pressures from dual years of cost inflation.”

In February, Schneider had flagged further price upgrades, telling reporters the company had seen a “huge” decrease of almost 260 basis points in its gross margin.

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

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

Nestle shares increased by 1.8% in trade.

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