Nestle: Cost inflation eats into KitKat maker’s profit as it tumbles 45 per cent to £8.4bn

KitKat and Nescafe coffee maker Nestle has revealed its net profits tumbled by 45 per cent as cost inflation led the global food and drink giant to hike up the prices of its products.

The Switzerland-headquartered company, which owns some of the world’s biggest food brands, said its net profits fell to 9.3 billion Swiss francs (£8.4 billion) in 2022, down from 16.9 billion Swiss francs (£15.2 billion) in 2021.

The decline comes despite the group pushing up the prices of its products by 8.2 per cent throughout the year.

The price rises drove up the group’s total reported sales by 8.4 per cent to a massive 94.4 billion Swiss francs (£85 billion), from 87 billion Swiss francs (£78 billion) a year earlier.

But real internal growth, a measure of the volume of sales, edged up by just 0.1 per cent, meaning shoppers spent more money on broadly the same amount of products.

In its key market in North America, real internal growth slipped by 1.3 per cent over the year, and weakened further in the last three months of the year with a decline of 4.9 per cent.

Purina PetCare, Nestle’s pet food and health business which runs brands such as Felix and Bakers, was the biggest driver of organic growth, the company said.

Sales of coffee grew at a high single-digit rate, while its Starbucks products including ground coffee grew by 13 per cent to reach 3.6 billion Swiss francs (£3.2 billion).

And sales of KitKats were particularly strong during the year, as well as home cooking brand Maggi.

The group has raised the prices of its products throughout the year as inflation surged to “unprecedented levels”, Nestle’s chief executive Mark Schneider said.

Schneider said: “Last year brought many challenges and tough choices for families, communities and businesses.

“Inflation surged to unprecedented levels, cost-of-living pressures intensified, and the effects of geopolitical tensions were felt around the world.

“Looking to 2023, we expect another year of robust organic growth, with a focus on restoring our gross margin, stepping up marketing investments and increasing free cash flow.

“Nestle’s value creation model puts us in a strong position to achieve our 2025 targets and to generate reliable, sustainable shareholder returns.”

Press Association –  Anna Wise