Nestle reported full-year organic sales growth slightly below expectations on Thursday as the world’s biggest packaged food company continued to hike prices, prompting some shoppers to turn to competing brands.
The Swiss firm also said it expects organic sales growth of around 4 per cent in 2024, and a “moderate increase” of its underlying trading operating profit (UTOP) margin. The 2023 UTOP margin was 17.3 per cent, up by 40 basis points in constant currency.
Organic sales, which exclude the impact of currency movements and acquisitions, rose 7.2 per cent in the year ended December 31st, the maker of Maggi stock cubes and Nescafe coffee said. Analysts had on average expected organic sales growth of 7.4 per cent.
However, Nestle’s net profit rose sharply by about 20 per cent to 11.2 billion Swiss francs (€11.8 billion).
The packaged goods industry has for over two years hit shoppers with higher prices, citing higher input costs that started with the Covid-19 pandemic and were exacerbated by Russia’s invasion of Ukraine. Everything from sunflower oil to freight has become more expensive, taking a toll on global supply chains.
Executives have in recent quarters flagged that costs will rise at a slower pace, but also warned that shoppers would continue to pay more because companies still haven't recouped years of damage from higher expenses.
"Unprecedented inflation over the last two years has increased pressure on many consumers and impacted demand for food and beverage products," CEO Mark Schneider said in a statement.
Full-year sales fell by 1.5 per cent to about 93 billion Swiss Francs, missing estimates of 93.68 billion Swiss francs.
Nestle's full-year 7.5 per cent price increases met the average analyst estimate. Real internal growth - or sales volumes - for the period fell 0.3 per cent versus expectations of a 0.1 per cent decline.
Sales volumes in the fourth quarter turned positive, rising 0.4 per cent.
Rival packaged food company Unilever, which slowed price hikes notably in the fourth quarter, also reported a return to higher volumes for that period.
Investors and analysts have raised concerns that companies are pushing price rises too far and recommended that they focus more on marketing and innovation, amid a cost of living crisis that is seeing retailers’ private label brands stealing market share. - Reuters
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