Food and drink companies say pandemic recovery is buoying sales but leading to higher costs for ingredients, packaging and transport.
The makers of some of the world’s bestselling food and drink brands warned they would keep raising prices as they grapple with the strongest inflation in years.
Nestlé SA, Diageo DEO +1.08% PLC, Anheuser-Busch InBev SA BUD -4.84% and Danone SA DANOY 6.43% all said Thursday that sales were rising as key markets rebound from the pandemic, but that the recovery was also leading to rapidly increasing costs for ingredients, packaging and transport.
Nestlé said its ice creams had gotten more expensive, spirits giant Diageo has raised prices on brands like Baileys and Casamigos tequila, and Budweiser brewer AB InBev BUD -4.79% is exploring higher prices for its beers. Meanwhile, Danone, which makes Activia yogurt and Evian water, said it would increase prices across all of its categories to try preserve its profitability.
“We do expect price increases to accelerate from what you saw in the first half,” said Nestlé Chief Executive Mark Schneider. “After several years of low inflation, all of a sudden it accelerated very strongly starting in March and is continuing to accelerate.”
Companies across many sectors are contending with rising costs from coffee to aluminum and shipping as the recovery from Covid-19 gains steam. That is leading to higher prices for many goods, pushing U.S. inflation to rise at the fastest pace for more than a decade.
Nestlé said it had raised prices by an average of 1.3% globally in the first six months of the year, driven by North America and Latin America. Prices of its milk-based products and ice cream were up by an average of 3.5%, while its water brands rose 1.6%.
In the U.S., Mr. Schneider said costs for transportation, commodities and packaging were all rising. He also said that labor costs were up significantly, with a tight labor market leading to staff turnover and salary increases. Overall, the company expects input costs to be 4% higher this year.
Nestlé said those costs would weigh on profitability this year, despite the company reporting its strongest first-half growth in years. Nestlé said organic sales grew 8.1% in the period, boosted by demand for Nespresso coffee, pet food and health products. That prompted it to raise sales guidance for the full year.