Nestlé has warned that more price rises could be on the horizon as it continues to battle steep inflation.
The parent company of bestselling food and drink brands including Kit Kat, Shreddies and Nescafé said it has already increased prices by more than 5% over the first three months of 2022, but is expecting to hike prices further as the year goes on.
Mark Schneider, chief executive of the Swiss food group, said: “Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year.”
He added that Nestlé also saw “sustained customer demand” despite the jump in prices.
The group reported a 7.6% increase in organic sales over the three months to March, driven by a 5.2% increase in pricing and 2.4% rise in volumes.
It revealed that prices jumped most sharply in North America, which saw an 8.5% increase, while European shoppers witnessed an average 4.1% rise.
The company said it expects overall sales to grow by around 2022 this year despite the potential for further inflationary headwinds amid the war in Ukraine.
Matt Britzman, equity analyst at Hargreaves Lansdown, said: “Hiking prices to keep things moving in the right direction in the wake of input cost inflation certainly won’t be a course of action management want to have to take.
“But nonetheless, it’s the position Nestle finds itself in and doesn’t look likely to go away anytime soon, which adds pressure to the group’s volume-led strategy.
“So far, volumes have still been able to move in the right direction aided by the recovery in out-of-home channels that saw demand drop off while restrictions were in place last year. That’s a tailwind that will unwind but management remain confident they can deliver on full-year targets nonetheless.”
Britzman also pointed out that Nestlé’s portfolio contains strong brands which will help hold volumes steady despite price rises, while a significant R&D budget means new products will keep the offering fresh.
“We’re yet to see any real impact from consumers with respect to changing behaviours in the wake of a cost-of-living crises when it comes to branded products,” he said.
“Nestlé’s the latest business to point to premium product ranges as the main growth drivers – that seems to be the place to be right now.”