Nestle works on new range of weight-loss drug companion products as sales miss estimates

By Louis Goss

Nestle on Thursday posted worse-than-expected results for the first nine months of 2023 as the company's CEO said the firm is now working on a new range of goods to "serve as companion products" to weight-loss drugs that pose a threat to the confectionary company's revenue.

The Swiss multinational told investors its revenues had dropped 0.4% year-on-year, to 68.83 billion ($76.59 billion) in the first nine months of 2023, due to unfavorable currency exchange rates and divestments.

The sales figures saw Nestle miss analysts' estimates by 1% with a selection of 20 analysts polled by the Kit Kat seller itself having previously forecast the firm would generate sales worth 69.54 billion.

Nestle shares (CH:NESN) fell 2%. The stock has dropped 7% this year.

Foreign exchange rates caused Nestle's sales to drop 7.4% as the firm's decision to sell its Gerber Good Start baby milk formula brand and close its New York City-based food delivery business Freshly led to a 0.4% drop in revenues.

Meanwhile, the Nescafe maker reported organic growth of 7.8%, driven by an 8.4% hike in prices across its business. Company CEO Mark Schneider said the price hikes helped Nestle "navigate historic inflation levels."

However, Nestle's organic growth rate also underwhelmed, with analysts having previously forecast the firm would post organic growth of 8.5%, according to 20 analysts polled by Nestle.

Nestle's Schneider brushed aside any impact of weight-loss drugs on the company's business so far, as he said the appetite-suppressing medicines will have little impact on sales of coffee and pet food, which account for almost half of revenues.

Schneider, however, told the media that the company is planning to launch a new range of products marketed towards users of weight-loss drugs such as Ozempic, according to Reuters. The announcement follows news Novo Nordisk's (NVO) new drug saw the Danish pharma company overtake Nestle as Europe's most valuable by market cap.

Nestle's underwhelming results follow news the company is planning to shut down its baby milk factory in Limerick, Ireland, by the first quarter of 2026, due to slower demand caused by lower birth rates in China, in a move that will lead to the loss of 542 jobs.

The company on Thursday also said it has "temporarily shut down" a production facility in Israel in response to the conflict that has engulfed the country in recent weeks, according to Reuters.

-Louis Goss

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

10-19-23 0503ET

Copyright (c) 2023 Dow Jones & Company, Inc.