- Are the food giants realizing that Americans are fed up with rising grocery bills?
- ‘The price will be lower this year than last year,’ said the Nestle boss
- Coca-Cola and Heinz also saw higher prices on sales volume
Food and drink giant Nestle has admitted steep price increases last year have put consumers off buying its products.
The Swiss firm – maker of Nespresso and Nescafe coffee, Purina and Felix pet food, Lean Cuisine and Stouffers ready meals, San Pellegrino water and DiGiorno pizza – said it raised prices last year by 7.5 percent.
That’s an average figure, which means many items are up by double digits.
These steep price increases allowed the Swiss-based company to boost its total sales value, even though it sold fewer products.
As other leading food and beverage companies – such as Coca Cola, Heinz and Ben & Jerry-maker Unilever – reported earnings this month, there was a consistent theme each time (see the box below).
All said they were seeing signs that customers were fed up with the price hike – assuming they sold fewer products after the price hike.
Swiss food giant Nestle CEO Mark Schneider said prices will not rise next year
Nestle makes Nescafe coffee as well as Nespresso coffee pods. Customers buy fewer products from Nestle because of the price increase
Nestle, the world’s largest packaged food company – also behind Nesquick cereal – said today in its earnings update for the last quarter of last year that it will slow price increases in 2024.
Nestle is a pet food leader under the Purina brand, which has seen price increases
Nestle, the world’s largest packaged food company – also behind Maggi stock cubes – said today in its earnings update for the last quarter of last year that it will slow price increases in 2024.
It comes after a two-year hike that prompted many consumers to seek cheaper alternatives for staples like coffee and frozen pizza.
To explain the higher prices, the packaged goods industry cited rising input costs that began with the Covid pandemic, which disrupted global supply chains, and was exacerbated by Russia’s invasion of Ukraine two years ago.
Unprecedented inflation in the past two years has increased pressure on many consumers and affected demand for food and beverage products.
Nestle boss Mark Schneider
‘We haven’t seen this kind of inflation spiking since 1973, 1974,’ Nestle CEO Mark Schneider said on a call with reporters on Thursday.
The Swiss firm sells KitKat chocolate bars around the world, but in the US it only makes a breakfast cereal of that name. Hershey actually sells KitKat bars in America.
With many consumers swapping expensive branded goods for cheaper alternatives, Unilever CEO Hein Schumacher said earlier this month that his company’s ‘competitiveness’ remains disappointing.
This quarter, however, companies said prices will rise in 2024 at a slower rate.
This is because the crippling increases in costs they faced – higher energy bills after Russia’s invasion of Ukraine and bigger wage bills as factories shut down after Covid – have cooled. In some cases, input prices have fallen, which also covers ingredients and packaging such as cardboard and metal.
Nestle makes KitKat cereal, although chocolate bars of the same name are produced by rival Hershey’s under a long-standing licensing deal. Cereal boxes have been hit by price increases
Rising grocery prices are finally cooling off, according to official figures. This suggests that the food and beverage giants have started to slow down raising or even cutting prices.
A new analysis of numbers from the US Bureau of Labor Statistics shows that the annual rate of inflation for household food fell to 1.2 percent in January.
In comparison, eating out increased by 5.1 percent.
The cost of groceries at a faster rate than eating out has put pressure on the likes of McDonald’s and the Cheesecake Factory to cut prices.
‘The problem is that places like McDonald’s used to be cheap food but are now becoming expensive luxury. And customers are tired of perpetual price hikes,’ Neil Saunders, managing director of consultancy GlobalData Retail, told DailyMail.com.
