Nestlé announces 6.5% price hike amid lower profit expectations

The announcement of the 6.5% price hike was made in its reporting (Thursday 28 July) of half-year results for 2022, where Nestlé’s sales rose ahead of expectations driven by the price increases, analysts said, increasing 9.2% to 45.6bn Swiss francs ($71.73bn) in the half year, although net profit decreased by 11.7% to 5.2bn francs.

Mark Schneider, the chief executive of Nestlé, said: “Our local teams implemented price increases in a responsible manner. Volume and product mix were resilient, based on our strong brands, differentiated offerings and leading market positions. We limited the impact of unprecedented inflationary pressures and supply chain constraints on our margin development through disciplined cost control and operational efficiencies.​

Price rises were highest in North America, at 9.8%, compared with 4.9% in Europe. The company said profit margins had taken a hit in Europe as “significant cost inflation more than offset pricing, growth leverage and disciplined cost control​”.

Nestlé said it now expected to increase sales by 8% this year, up from the 5% anticipated, but profit margins were set to be at the lower end of expectations, at 17%.

A spokesperson for Nestle’s York factory, where KitKats are still made, said: "Like every manufacturer, we are experiencing significant increases in the cost of raw materials, including energy, packaging and transportation, making it more expensive to manufacture our products.​

"We are doing everything we can to manage these costs in the short-term, but in order to maintain the highest standards of quality, it is sometimes necessary to make minor adjustments to the price of our products."​

Laura Rettie, editor in chief of Finance.co.uk, said: “Sadly this is just another in a long line of businesses that are being forced to hike their prices. Consumers have been somewhat protected by energy price rises due to Ofgem’s energy price cap, but businesses have faced the full force of natural gas price increases over the past year. ​

“Many small businesses just scraped by during the pandemic, only to be hit with massive rising costs this year. 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”.​

Nestlé, which also makes Smarties, had already increased prices by 3.1% in the last three months of 2021.