Nestle CEO Mark Schneider said on Thursday that the global food group behind KitKat, Nescafe and Purina will raise prices again this year. The announcement came after the release of an annual earnings report that showed the company's highest sales growth in 14 years, while higher costs from inflation ate into profit margins.
"Our gross margin is down about 260 basis points - that is massive. That is after all the pricing we have done in 2022," Schneider said during a press conference.
The company raised prices 8.2 percent in 2022, which is higher than the 6.5 percent annual inflation rate in the consumer price index (CPI). While the price hikes didn't hurt overall sales, which rose 8.4 percent, volume was flat. Whether this "volume weakness" persists into this year is the big question facing the company.
Schneider noted that inflation has been more severe in the U.S. than in Europe or China. Prices were up 11.6 percent in North America, compared to 6.4 percent in Europe and 2.5 percent in China, while sales in North America were nearly triple those areas.
He added that inflation has started to slow for some products, but that overall the company's forecast suggests more cost pressure ahead.
“There are a few cost items that have started, on a spot basis, to ease since the autumn — arabica coffee, dairy, some of the energy items — but on a full-year basis we’re still looking at a very bleak picture," he said.