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Nestle, Absolut owner to hike prices again amid high costs

Company raised its prices by 8.2% on average last year

By AFP - Feb 18,2023 - Last updated at Feb 18,2023

A logo of the world's leading food industry group Nestle is seen on October 9, 2014, at the group's Research Centre in Vers-chez-les-Blanc above Lausanne (AFP photo)

ZURICH — Swiss food giant Nestle and liquor group Pernod Ricard, owner of Absolut vodka and Jameson whiskey, announced fresh price hikes on Thursday due to inflation even as consumers across the world face a cost-of-living crunch.

Nestle, which makes Nespresso capsules, Maggi bouillons, KitKat chocolate bars and Purina pet food, said sales rose by 8.4 per cent to 94.4 billion Swiss francs (95.5 billion euros, $102.3 billion) in 2022.

But its real internal growth — a measure of sales volumes — was up just 0.1 per cent year-on-year, much lower than in 2021, suggesting that consumers were buying fewer of its products.

"Last year brought many challenges and tough choices for families, communities and businesses," Nestle Chief Executive Mark Schneider said.

"Inflation surged to unprecedented levels, cost-of-living pressures intensified and the effects of geopolitical tensions were felt around the world," he added, referring to the fallout from Russia's invasion of Ukraine.

The company raised its prices by 8.2 per cent on average last year as the cost of milk, grains and energy rose.

"Continued pricing action is needed to repair some of the damages we've taken from inflation," Schneider said in a conference call.

Last week, British consumer group Unilever, which makes Magnum ice cream, Cif surface cleaner and Dove soap, also reported rising sales in 2022 after raising its prices by 11.3 per cent on average.

But the group said its sales volume fell 2.1 per cent and warned that it would continue to face higher costs.

Nestle's underlying profit margin fell slightly to 17.1 per cent.

Net profits fell by 45 per cent to 9.3 billion francs in 2022 but the comparison with 2021 is deceptive since the disposal of shares Nestle held in L'Oreal boosted 2021 earnings.

Nestle's board proposed a dividend of 2.95 francs per share, a 0.15-franc increase.

For 2023, the company expects sales growth of between 6 and 8 per cent when excluding exceptional changes, down from the 8.3 per cent registered on this basis in 2022.

It hopes to hold, if not improve, its underlying trading operating profit margin, setting a target range of between 17 and 17.5 per cent.

 

Pricier liquor 

 

French spirits giant Pernod Ricard, whose other brands include Beefeater gin, Martell cognac and Havana Club rum, posted a net profit of 1.8 billion euros ($1.9 billion) for the six months to December, up 29 per cent from the same period in 2021.

Sales were up 19 per cent to 7.1 billion euros in the same span thanks to a 10 per cent price hike, with more increases looming.

"Costs were very high in this first half," chief financial officer Helene de Tissot told AFP, adding that glass, logistics and ingredients such as grains and rectified spirit are more expensive.

Shipping bottles to Asia and the United States is one of the group's biggest expenses.

"To protect our margins... we raised our prices significantly," De Tissot said, adding that prices would have to go up as production costs remain high.

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