As consumers become more sensitive to persistently high inflation, Kraft Heinz announced on Wednesday that it would halt further price increases for its quick-fix meals and condiments.
Due to increased promotions and higher prices for commodities like dairy, soybeans, oils, and packaging materials, as well as lower sales, the multinational packaged food company also predicted 2023 profit below Wall Street expectations.
Kraft’s action is similar to PepsiCo Inc.’s announcement last week that it would not increase prices further because it anticipated some consumer backlash in the second half of the year.
However, Coca-Cola Co, Dove Soap manufacturer Unilever PLC, and Procter & Gamble Co. have declared that they will keep raising prices, demonstrating the disparate strategies being used by consumer goods companies to increase sales.
“Consumers are looking for convenient, filling, and nutritious meals, while at the same time paying more attention to the price tag,” Kraft’s chief executive Miguel Patricio said, adding the company would halt fresh price hikes in North America, Europe, Latin America and most of Asia.
Retailers are also increasingly opposing price increases by food manufacturers. Due to differences in pricing with Tesco last year, Kraft temporarily stopped providing some products to the British supermarket chain.
“With the vast majority of 2023 price increases already implemented in stores, pricing will be less of a tailwind throughout the year,” Edward Jones analyst Brittany Quatrochi said.
“This means driving increases in the number of products sold through innovation and adding value to consumers will be increasingly important to sales growth,” she added.
Lower than analysts’ expectations of $2.77 per share, Kraft projected annual adjusted earnings of between $2.67 and $2.75 per share because it anticipates that consumers will become more price-sensitive by the year’s end.
According to the report, sales volumes fell 4.8 percentage points while average selling prices increased by 15.2 percentage points in the fourth quarter.
In contrast to the estimate of $7.27 billion, net sales increased 10% to $7.38 billion.
(Adapted from EconomicTimes.com)