Nestle Plans Price Hikes After Beating Gloomy Projections In 2021

Food group Nestle is confident of defending its profit margins against mounting cost pressures this year, planning more price increases after they helped it beat sales and earnings expectations in 2021, Silke Koltrowitz reported for Reuters.

Photo Insert: Nestle headquarters, Vevey, Switzerland

Consumer goods companies are grappling with surging costs for commodities, energy, transport, and labor, prompting rival Unilever last week to warn of a drop in margins as it struggles to lift prices enough to offset the extra expenses.

"It is a safe assumption that our input cost increases for 2022 will be higher than 2021, that is something that we have to reflect in our pricing," Nestle CEO Mark Schneider told reporters on Thursday, declining to give a precise inflation forecast in a super volatile environment.

"There is almost no place in the company that is exempt of inflation now," he said.

Nestle, which has added more high-value products alongside staples such as Nescafe instant coffee and Maggi bouillon cubes, is confident it can keep raising prices without losing too many customers.

It recently bought a majority stake in protein powder maker Orgain to boost its health science business that grew 13.5% last year. Its Starbucks coffee sales were also up over 17%, showing that buyers of these products are ready to pay more.

Nestle stepped-up price increases throughout the year to 3.1% in the fourth quarter and said it would continue this year while seeking efficiencies in the business. It expects a broadly stable underlying trading operating profit margin of 17.0%-17.5% after delays between cost inflation and price hikes saw it dip to 17.4% last year.

"Is this (margin guidance) conservative? Yes, it is because being conservative in a volatile environment with significant inflation around us and uncertainty about what will happen later this year is the right way to approach it," Schneider said.

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