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Kraft Heinz warns of more price hikes in 2023 to combat higher costs

06/03/2023 - François-Xavier Branthôme
CEO Miguel Patricio: “An incredible year” for Kraft Heinz

Kraft Heinz is the latest global consumer packaged goods group to report a strong double-digit jump in the fourth quarter of 2022 thanks to hefty price rises. However, the US-based supplier forecast much slower growth and softer profits in 2023 as it remained under pressure from higher costs. It said it would lean further on pricing and efficiencies to ease pressure on margins.

 The group reported a 10.4% rise in organic net sales in the final three months of 2022, resulting primarily from a 15.2 percentage point hike in pricing. However, the inflated prices saw consumers buy less of its goods, sending volumes down 4.8 percentage points in Q4.

Net sales for the quarter ended 31 December 2022 increased 10% to USD 7.4 billion (Euro 6.9 billion), helped by a 53rd week in the financial year compared to 52 weeks in 2021, which was partially offset by currency headwinds. Full-year revenues nudged up a more modest 1.7% to USD 26.5 billion (Euro 24.9 billion), with international sales 8% higher and domestic North America sales, which make up the vast majority of the business, declining 0.1%. Organic net sales for 2022 rose 9.8% year on year as prices increased 13.2 percentage points and volumes fell by 3.4 percentage points.

Net profits soared 131% to USD 2.4 billion (Euro 2.25 billion) as the prior year was impacted by a non-cash write off. CEO Miguel Patricio said 2022 was “an incredible year” for Kraft Heinz, “delivering strong results and ending the fourth quarter with solid momentum that positions us well for 2023”. “The results were even more impressive considering the difficult operating environment, with record levels of inflation and supply chain disruptions, to which our teams responded with agility,” he added.

Late January, specialized food press revealed Heinz has driven through hundreds of price increases across every supermarket in a sign it is passing on rising costs without the high-profile disputes sparked by previous attempts. Almost 500 listings including baked beans, tomato ketchup, and tinned spaghetti shot up in price during the first two weeks of the year, in some cases by over 80%.
Heinz told The Grocer it was continuing to face significantly increased production costs including ingredients, energy, or packaging. “We’re absorbing costs wherever we can. However, we’ve unfortunately had to increase our prices to retailers – a measure that continues to remain a last resort,” said a Kraft Heinz spokesman.

Tomato costs are likely to be a particular source of concern for Heinz with prices increasingly volatile in the past two years. In November, prices in Europe were up 14% year on year, according to EU Commission data, well above the five-year average.

Rising energy prices are also having an effect. Heinz is understood to roll its own cans, a process requiring huge amounts of energy, while it also cooks tomatoes at a high temperature for sterilization.

The group said it expected high single-digit inflation for the year, with more price rises and efficiencies contributing to a margin recovery, which would be invested in technology, marketing and people.

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