Nestlé, the world's leading packaged food company, faces a significant challenge as rising inflation and price hikes deter consumers from spending. The Swiss giant reported weaker-than-expected results for 2023, with sales falling short of forecasts and growth projections revised downward for 2024.
Nestlé's struggles stem primarily from the relentless grip of inflation. Unprecedented price increases over the past two years, averaging 7.5% in 2023 alone, have pressured consumer budgets, forcing many shoppers to downsize their spending on food and beverage products. This trend, combined with soft consumer demand, has impacted both sales volume and profitability.
Reflecting the challenging market conditions, Nestlé expects organic sales growth to be around 4% in 2024, significantly lower than the 7.2% achieved in 2023 and falling short of analysts' consensus forecast of 4.7%. This revision highlights the company's cautious approach as it navigates the precarious economic landscape.
Recognizing the need for adaptation, Nestlé is prioritizing volume- and mix-led growth. This strategy entails increased brand support and a streamlined product portfolio. The company is reducing the number of products and variants, focusing on high-growth, high-margin offerings. This strategic streamlining aims to optimize production and free up resources, paving the way for future success.
While the company reported full-year net profit of CHF 11.2 billion (approximately USD 12.73 billion), an increase from the previous year, sales fell by 1.5% to CHF 93 billion, both figures missing analyst expectations. This mixed performance underscores the challenges Nestlé faces in balancing profitability and sales growth in the current economic climate.
Adding to the company's concerns is the ongoing review of its natural-mineral-water operations in several countries, following scrutiny in France. This investigation raises questions about potential treatment practices used for bottled water, highlighting the importance of transparency and consumer trust for Nestlé.
