Ketchup and baked bean group Kraft Heinz and Reckitt Benckiser, the maker of Dettol, Nurofen and Strepsils, revealed they raised prices by double digits in the spring and that this helped 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 items sold.
The US-based food group, which halted supplies to the UK’s biggest supermarket, Tesco, this spring in a price hike battle, said inflation was “primarily driven by price increases to cushion rising input costs”. .
Sales are now expected to increase by more than 7% this year, compared with about 5% previously expected. Miguel Patricio, Heinz’s chief executive, said the trading environment “remains volatile” but the company is now more resilient and “anticipates and adapts to changing market conditions” by managing inflation through pricing and efficiency.
Reckitt raised its prices by almost 10% in the three months to June 30, saying customers were ready to accept increases on branded items and that further increases were on the way.
The group’s underlying sales rose nearly 12% in the second quarter of the year – beating expectations – as it also benefited from a 40% increase in demand for its US baby formula amid nationwide shortages caused by problems in competitor Abbott Laboratories, which was forced to recall its products.
Reckitt hit a pre-tax profit of £1.7bn after posting a loss on the sale of brands in the previous year, while its total sales rose just over 4% to £6.9bn for the half.
The group now expects sales to rise 8% for its financial year, up from the maximum 4% previously expected. Laxman Narasimhan, its chief executive, said: “Despite the challenging conditions, we are confident about the rest of the year.”
Reckitt said sales were strong despite a challenging supply chain environment “both in terms of logistics availability and certain raw material constraints”.
It added: “We continue to expect our cost of goods sold inflation to remain at the highest levels for the full year based on current commodity prices.”
The evidence of price rises at Reckitt comes after the maker of Marmite and Ben & Jerry’s, Unilever, said it had raised prices by 11% in the spring and forecast growth for the year at the upper end of expectations, driven by further increases.
Brand hikes helped store prices jump this month by the biggest increase since at least 2005, adding pressure on households from rising energy bills and gasoline prices.
Slough-based Reckitt said US demand for baby formula was likely to decline as Abbott’s product became available again, but said it expected a long-term increase in sales of cold and flu products as Covid-19 became endemic.
While sales of the cleaning product Lysol fell significantly, revenue remained more than 50% above pre-pandemic levels as Reckitt said “consumers continue to exhibit increased hygiene behaviours”.
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Matt Britzman, equity analyst at Hargreaves Lansdown, said shoppers may 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.
“It’s a testament to the defensive nature of Reckitt’s portfolio that cleaning and hygiene products are unlikely to be the first things to drop from shopping lists when wallets are stretched,” 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 appear to be rebasing well ahead of pre-pandemic levels.”
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