Nestle fell short of expectations as it reported full-year earnings and sales, cautioning that sales growth is expected to moderate this year. The Swiss company, known for KitKat chocolate bars and Nescafe coffee, anticipates organic sales to increase by around 4% in 2024, a decrease from the 7.2% growth seen in 2023 and below the consensus forecast of 4.7%.
Impact of Inflation on Consumer Demand
Chief Executive Mark Schneider highlighted the challenges posed by unprecedented inflation in recent years, which has added pressure on consumers and affected the demand for food and beverage products. To cope with rising input costs, packaged food producers have raised prices of their goods, including Nestle, which implemented an average price hike of 7.5% in 2023.
Response to Changing Consumer Behavior
As consumers faced budget constraints, some pushed back against sizable price increases, leading to lower volumes for Nestle. In response, the company has streamlined its product portfolio and reduced the number of products and variants to focus on higher-growth, higher-margin offerings. This strategic shift has already shown positive results in the second half and final quarter of last year.
Outlook for 2024
Despite a challenging year in 2023, Nestle aims to prioritize volume- and mix-led growth in 2024, with a focus on increased brand support. Analysts anticipate real internal growth to rebound, forecasting a 2.6% increase this year after a modest 0.3% growth in 2023.
In conclusion, Nestle remains committed to adapting to changing consumer behaviors and market dynamics to drive sustainable growth in the coming year.