Recently, the Chief Executive of the world’s biggest food group Nestle, Mark Schneider said that the ripple effect of high cost of production propelled by global inflation is responsible for the rise in prices within the year.
Schneider confirms that the ripple effect of inflation has affected the company’s profit margin causing its 2022 profit to miss market forecasts as planned.
Rivals have said they anticipate a more positive pricing outlook for shoppers in 2023 while Schneider insist on the rise inorder to offset the impact of increased commodity prices and that remains bad news for consumers, whose spending power has already been hit by inflation at multi-decade highs.
According to him, despite the fact that the company experienced some price changes by raising prices by 8.2% last year, that did not fully offset the impact of increased costs for ingredients on margins.
“Our gross margin is down about 260 basis points which is considered to be massive. That is after all the pricing we have done in 2022,” Schneider told reporters. Consumer goods producers increased prices to cope with surging costs for almost all raw materials after Russia’s invasion of Ukraine compounded pandemic-related supply chain logjams. But they face a challenge in how much they can increase prices before even affluent shoppers decide enough is enough.
Schneider said that, in most cases, the impact to volumes did not signal consumers trading down to cheaper private label products.
While a business analyst pointed out that net profit fell to 9.3 billion Swiss francs, missing expectations for 11.6 billion francs, although the consensus forecast did not account for the impairment at Nestle’s Aimmune subsidiary last year, analysts said.
Also Unilever also is not left out as the inflation hits them also and have disclosed its plan to increase prices for its daily products and will ease by the second half of the year.