Ajit Karn
Zurich: Nestle, a Swiss food company, and Pernod Ricard, which owns Absolut vodka and Jameson whisky, both announced new price hikes today because of inflation. This comes at a time when people all over the world are having trouble paying for the cost of living.
Nestle makes Nespresso capsules, Maggi bouillons, KitKat chocolate bars, and Purina pet food. In 2022, the company’s sales went up 8.4% to 94.4 billion Swiss francs, which is 95.5 billion euros or $102.3 billion.
But its real internal growth, which is a measure of sales volume, was only up 0.1% from one year to the next. This is much less than in 2021, which suggests that people were buying less of its products.
Mark Schneider, the CEO of Nestle, said, “Families, communities, and businesses had to face a lot of challenges and make hard decisions in the past year.”
“The effects of geopolitical tensions were felt all over the world,” he said, referring to the effects of Russia’s invasion of Ukraine. “Inflation rose to levels that had never been seen before, cost-of-living pressures grew, and geopolitical tensions were felt everywhere.”
Last year, the company raised its prices by an average of 8.2% because the price of milk, grains, and energy went up.
Schneider said in a conference call that we need to keep changing prices to fix some of the damage caused by inflation.
Last week, the British consumer goods company Unilever, which makes things like Magnum ice cream, Cif surface cleaner, and Dove soap, said that its sales would go up in 2022 even though it had raised prices by an average of 11.3%.
But the group said that its sales dropped by 2.1% and warned that its costs would continue to rise.
Nestle’s real profit margin went down a little to 17.1%.
Net profits dropped by 45 percent to 9.3 billion francs in 2022, but comparing 2022 to 2021 is misleading because Nestle sold shares in L’Oreal in 2021, which made 2021 earnings higher.
The board of Nestle suggested a dividend of 2.95 francs per share, which is 0.15 francs more than before.
If nothing out of the ordinary happens, the company expects sales to grow by between 6 and 8 percent in 2023. This is less than the 8.3 percent growth seen in 2022.
It wants to keep or even increase its underlying trading operating profit margin, so it has set a target range of 17.0 to 17.5 percent.
– Pricier liquor –
Pernod Ricard, a French spirits company with brands like Beefeater gin, Martell cognac, and Havana Club rum, made a net profit of 1.8 billion euros ($1.9 billion) in the six months leading up to December. This was a 29 percent increase from the same time period in 2021.
In the same time period, sales went up 19% to 7.1 billion euros because prices went up by 10%, and more price hikes are on the way.
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“Costs were very high in the first half,” said Helene de Tissot, the company’s chief financial officer. She told AFP that glass, shipping, and ingredients like grains and rectified spirit are more expensive.
One of the group’s biggest costs is sending bottles to Asia and the United States.
“To protect our margins, we significantly raised our prices,” De Tissot said. He added that prices would have to go up as long as production costs were high.
