Nestle Expects Sales Growth to Slow This Year — Update

By Dominic Chopping

Nestle reported full-year earnings and sales that were just shy of expectations, and cautioned that sales growth will moderate this year.

The Swiss maker of KitKat chocolate bars and Nescafe coffee said Thursday that it expects organic sales to climb by around 4% this year, slowing from 7.2% growth in 2023 and below expectations of 4.7%, according to a consensus forecast provided by the company.

"Unprecedented inflation over the last two years has increased pressure on many consumers and impacted demand for food and beverage products," Chief Executive Mark Schneider said.

Packaged food producers have spent the last couple of years raising prices of their goods as they pass on higher input costs of items such as ingredients to the consumer, but with inflationary pressures now beginning to ease, the rate of those price increases has begun to subside.

Nestle hiked prices by an average of 7.5% in 2023.

As consumer budgets have remained tight, some shoppers have pushed back against the large price increases, which has sent Nestle's volumes lower.

The company has tried to counter this by pruning its portfolio and reducing the number of products and product variants it produces, optimizing production and freeing up resources for higher-growth, higher-margin products. The positive effects of this started to be felt in both the second half and the final quarter of the year, it said.

Real internal growth--the company's key measure of sales volume--slowed to 0.3% in 2023 as volumes were hurt by soft consumer demand, capacity constraints and a temporary supply disruption for vitamins, minerals and supplements in the second half. Analysts expect real internal growth to increase in 2024, with a company consensus forecasting 2.6% this year.

"Looking to 2024, we are prioritizing volume- and mix-led growth with increased brand support," Schneider said.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

February 22, 2024 02:17 ET (07:17 GMT)

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