Ketchup and baked bean group Kraft Heinz and Reckitt Benckiser, the maker of Dettol, Nurofen and Strepsils, have revealed they raised prices by double digits in the spring and this helped drive better-than-expected sales .
Heinz said prices rose 12.4% in the three months to June 26, helping it achieve a 10% rise in sales despite a 2.3% drop in the number of ‘sold items.
The US-based food group, which halted deliveries to Britain’s biggest supermarket Tesco this spring in a price hike battle, said inflation was “primarily driven by increases in prices to mitigate rising input costs.”
Sales are now expected to rise more than 7% this year compared to the 5% forecast previously. Heinz chief executive Miguel Patricio said the business environment “remains fluid” but the company was now more resilient and was “anticipating and adapting to changing market conditions” through managing inflation through pricing and efficiency.
Reckitt raised its prices by almost 10% in the three months to June 30, saying customers were willing to accept increases on branded items and that new rises were on the way.
The group’s underlying sales rose almost 12% in the second quarter of the year, ahead of expectations, as it also benefited from a 40% rise in demand for its baby formula in the US amid a national shortage caused by the problems of rival Abbott. Laboratories, which was forced to withdraw its products.
Reckitt made a pre-tax profit of £1.7bn after making a loss on the sale of brands the previous year, while its total sales rose just over 4% to £6.9bn free during the semester.
The group now expects sales to rise 8% for the year, up from the 4% peak previously forecast. Laxman Narasimhan, its chief executive, said: “Despite the difficult conditions, we are confident about the rest of the year.”
Reckitt said sales had been strong despite a challenging environment in its supply chain “both in terms of logistics availability and certain raw material constraints”.
He added: “We continue to expect our cost of goods sold inflation to remain in the low-teens throughout the year, based on current commodity prices.”
The evidence of price rises at Reckitt comes after Marmite and Ben & Jerry’s maker Unilever said it had raised prices by 11% in the spring and forecast growth for the year higher end of expectations driven by new hikes.
Brand hikes helped shop prices soar this month by the biggest amount since at least 2005, increasing pressure on households from rising energy bills and petrol prices .
Slough-based Reckitt said US demand for infant formula was likely to decline as Abbott’s product became available again, but said it expected a long-term increase in product sales to to the cold and flu as Covid-19 became endemic.
While sales of cleaning product Lysol fell significantly, revenue remained more than 50% above pre-pandemic levels, as Reckitt said “consumers continue to exhibit heightened hygiene behaviors “.
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Matt Britzman, equity analyst at Hargreaves Lansdown, said shoppers might not be thrilled by the higher prices, but he was impressed by Reckitt’s ability to sell more items despite the high rate of inflation.
“This is a testament to the defensive nature of Reckitt’s portfolio, cleaning and hygiene products are unlikely to be the first things to be left off shopping lists when portfolios stretch,” he said.
“The performance of key brands Dettol and Lysol continues to support the argument that increased hygiene awareness is here to stay. Sales may be down from the astronomical highs of recent years, but both products they appear to be falling well ahead of pre-pandemic levels.