Nestlé predicts commodity price increases in 2023

Nestlé has warned that prices of basic items could rise in 2023 as the company grapples with rising costs.

Prices increased by 8.2% in 2022 and the increase in costs made it difficult for Nestlé to keep up. These increases also led many households to limit their spending on popular Nestlé products such as Nespresso pods and chocolate bars.

CNN quoted CEO Mark Schneider, who said in a media call that Nestlé “is still in a situation where we are recovering our gross margin and, like all consumers around the world, have been hit by inflation, and now we are trying to reverse the damage that has been done.” Like the Financial Times notes, Unilever faced a similar problem in 2022, with consumers buying fewer products thanks to unprecedented price increases. As a result, Nestlé is cutting off less popular product lines – including entire brands – to combat these issues and focus on the most successful products.

Price increases of raw materials, labor and logistics have played a role in price increases. Unfortunately, these costs are not likely to drop any time soon. Consumer goods companies are challenged by the dichotomy between balancing rising prices too aggressively and driving customers away. While shoppers may be looking for cheaper options, some retailers are capitalizing on the trend by cutting grocery bills. Walmart’s brand, for example, has experienced strong growth in Europe, and supermarket executives may increasingly turn to private label products to combat rising costs.

As it is the largest food group in the world, consumers worldwide are likely to feel Nestlé’s warnings of further price hikes. In addition, the company’s struggle to manage rising costs underscores the challenges many consumer goods companies face in the current economic climate.