Nestle’s sales fall due to high prices

Sales at Nestle decreased by 1.5 per cent in 2023 due to inflation. In North America, sales decreased by 1.3 per cent to CHF 26 billion, reflecting soft consumer demand, capacity constraints and the winding down of the frozen meals and pizza business in Canada. Net divestitures reduced sales by 1.7 per cent, as a result of the divestment of a majority stake in Freshly as well as the disposal of the Gerber Good Start infant formula brand in 2022.

Organic growth was 7.3 per cent in North America, largely driven by pricing as well as continued momentum for e-commerce and out-of-home channels. Nestle gained North American market share in pet food, coffee and frozen meals.

By product category, Purina PetCare was the largest growth contributor, with broad-based demand across segments, channels and brands, particularly Purina ONE, Purina Pro Plan and Friskies. Sales for Nestle Professional and Starbucks out-of-home continued to grow at a double-digit rate, led by new customer acquisition. The beverages category, including Starbucks products, Coffee mate and Nescafe, posted mid single-digit growth. Nido growing-up milks posted strong double-digit growth. Confectionery in Canada recorded high single-digit growth, driven by KitKat and Aero. Water saw low single-digit growth, based on a strong sales development in the fourth quarter. S.Pellegrino and Acqua Panna posted double-digit growth, which more than offset the impact of capacity constraints for Perrier. Growth in frozen food was negative, impacted by soft consumer demand and the winding down of the frozen meals and pizza business in Canada. In the U.S., growth in frozen food was close to flat, supported by Stouffer’s, Jack’s and Tombstone.

Pricing and mix also helped to offset cost inflation and a significant increase in advertising and marketing expenses.

Company CEO Mark Schneider said, “Unprecedented inflation over the last two years has increased pressure on many consumers and impacted demand for food and beverage products. In this challenging context, we delivered strong organic growth and solid margin improvement with increased marketing and other growth investments. Our free cash flow generation returned to historical levels.

“Looking to 2024, we are prioritizing volume- and mix-led growth with increased brand support, as we enhance value for consumers through active innovation and renovation, premiumization, affordability and more nutritious options. We will continue to focus capital allocation on our fast-growing billionaire brands, which enables us to deliver dependable growth while enhancing brand loyalty.”

For 2024, Nestle expects organic sales growth around four per cent and a moderate increase in the underlying trading operating profit margin. Underlying earnings per share in constant currency is expected to increase between six and ten per cent.