KitKat maker Nestle hikes prices but sales still sweet

KitKat maker Nestle has hiked the prices of its products by almost 10% in the past year to offset rising costs.

The world's biggest food firm, which also makes Buxton water and Nescafe coffee, increased prices by 10.7% in Europe and 12.4% in North America.

However, Nestle still enjoyed a 5.6% rise in global sales to 23.5bn Swiss francs (£21.3bn) in the first three months of 2023.

It comes as UK shoppers continue to search for cheaper supermarket foods.

Research firm Kantar said own-label sales in UK supermarkets were up 13.5% year on year, with the very cheapest value lines soaring by 46%, as households look to manage their budgets.

The search for cheaper goods has seen more customers turn to discount chains such as Aldi and Lidl, Kantar said.

The rate of food price increases slowed slightly in April, but consumers are still paying 17.3% more than this time last year, the figures showed.

"It's important to remember, of course, that falling grocery inflation doesn't mean lower prices, it just means prices aren't increasing as quickly," said Fraser McKevitt, head of retail and consumer insight at Kantar.

Many households are feeling the impact of rising prices in recent months, and inflation is also hitting the margins of businesses.

However, during times of economic hardship, sales of confectionary and other items such as cosmetics and alcohol, tend to be resilient due to a theory called the "lipstick effect", where shoppers buy themselves small, special treats instead of big-ticket items.

Nestle said sales of its confectionary worldwide increased in the past three months despite it increasing the prices of its more than 2,000 brands, which cover coffee, pet care, baby food, drinks, cereals and prepared dishes.

In the UK, the Swiss firm is best known for KitKat and Smarties, cereals such as Shreddies and Cheerios, Nescafe and Nespresso coffee, fizzy drink San Pellegrino, and Purina pet food.

"Nestle's showing just how important it is to have a strong suite of brands, which have allowed the consumer giant to push through some pretty hefty price hikes with little impact on volumes," said Matt Britzman, equity analyst at Hargreaves Lansdown.

Kantar's Mr McKevitt said shoppers now would be looking ahead to the three bank holidays in May, including for the Coronation of King Charles III, which could boost grocery sales.

"During the week of the Platinum Jubilee last year they were £87m higher than the average in 2022," he said.