KitKat-maker Nestle warns of further price hikes ahead to protect margins from rising costs

Nestle, the maker of KitKat chocolate bars and Nespresso coffee, has warned that rising costs will force it to raise prices again this year.

The food group, which also includes the Nesquik breakfast ceral brand in its stable of goods, said its price action to date had helped organic sales rise more than expected in the first quarter.

The measure, which strips out the impact of things like currency swings, rose 7.6% during the first three months of the year on the back of a 5.2% hike in its prices to offset costs in its supply chain.

The company said: “Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year.”

While food costs have been rising as a result of COVID pandemic-linked global supply chain disruption, Russia’s war in Ukraine has forced up the costs of many core foodstuffs and energy prices since.

Inflation is rising globally and currently stands at a 30-year high in the UK, squeezing household spending power.

Nestle – among a host of consumer brands to lift prices – indicated that it did not expect demand to be too heavily dented, however.

The Swiss-based firm told investors it was targeting an operating profit margin of up to 17.5% this year on organic sales growth of around 5%.

Its core measure of sales growth would be achieved, the company said, despite its decision to suspend the sale of the bulk of its products in Russia in retaliation for the war.

The company, which had faced a backlash over its initial decision not to include KitKats in its initial sales ban, relented a month ago under pressure from Ukraine’s president Volodymyr Zelenskyy.

It revealed last year that the Fawdon plant in the UK – which has been making products including Rolos and Fruit Pastilles since 1958, would close by the end of 2023.