Nestlé’s turnover increased by 8.4%. Denis Balibouse / REUTERS
The agrifood giant believes it has room for maneuver to pass on the increase in its costs.
Apply in 2023 the same recipe as in 2022. Nestlé warns: it will have no other choice but to continue to raise its labels to compensate for the increase in its costs which continues. This enabled it to limit the drop in its recurring operating margin last year from 17.4 to 17.1% when it was facing soaring prices for its raw materials (milk, cereals, coffee, etc.).
These price increases also explain almost all of the organic growth in its turnover in 2022 (+ 8.3%), to 94.4 billion Swiss francs (95.7 billion euros). But 2023 will still bring its share of additional costs, energy and logistics, according to the world leader in the food industry. And this while those of 2022 have not yet been fully passed on.
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“Continued price action is needed to undo some of the damage that inflation has inflicted on us,” explained Thursday Ulf Mark Schneider, managing director of Nestlé. The exercise will be tricky. Like its neighbors in the food departments (Unilever, PepsiCo, Coca-Cola, Carlsberg, etc.), the Veveyan giant no longer escapes the effects of inflation on household purchases. So far, its global volumes have continued to increase despite rising prices (1% in the first nine months of 2022). But the trend reversed over the last quarter of the year. In the United States, where a few alerts on the state of consumption have recently been issued, volumes are even down 1.3% over the year.
“No obvious drop in activity”
However, Nestlé still believes it has room for manoeuvre. “This decline is not always directly linked to the increase in pricesargues Ulf Mark Schneider. It is also explained by a very high comparison base in 2021. As well as by the health situation in China , which paralyzed the country, or by our assumed strategy of cutting into our references. In the end, we do not see any obvious sign of a drop in activity. »
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With brands as powerful as Nespresso, Purina, Kit Kat, Perrier, Maggi or Smarties, Nestlé has consistently proven over the past eighteen months that it is among the best positioned to continue raising prices without scaring away its customers. While pressures on purchasing power have reached unprecedented levels, “we will be particularly meticulous about the categories, references and geographies where we will do it”, however tempers François-Xavier Roger, the financial director of Nestlé.
In coffee and animal feed, the most high-end references, whose customers are less price-sensitive, could be affected. Caution, however, on Nespresso, which saw its volumes fall by 1.7% despite a price increase limited to 5.2%. Caution is also required in the United States, where increases have already reached more than 11%. The group will also be attentive in emerging countries, where, according to François-Xavier Roger, “product accessibility is very important”.
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