Nestle shares fell on Thursday after the worldâs largest food seller reported a sharper-than-expected drop in its full-year sales, caused by cost conscious customers balking at higher prices. Â
The Swiss company reported a 0.3% drop in its closely-watched real internal growth (RIG) metric â which measures the volumes of products it sells â following its decision to push ahead with price hikes that drove customers away from its products.Â
âUnprecedented inflation over the last two years has increased pressure on many consumers and impacted demand for food and beverage products,â Nestle CEO Mark Schneider said.Â
The Kit Kat seller increased its prices by 7.5% throughout 2023 in line with its efforts to push up its profit margins, which have fallen over the past two years as inflationary pressures have increased the costs of the ingredients it uses, including cocoa.
Nestleâs
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Switzerland listed shares fell 4% on Thursday having fallen by 13% over the previous 12 months.Â
The slump in Nestleâs real internal growth saw the company fall short of analystsâ expectations, following forecasts it would see the key metric increase by 0.1%, according to 21 company watchers polled by Nestle itself.Â
Nestleâs reported sales also fell 1.5% to 93 billion Swiss francs ($ 106 billion), even as the Nescafe maker increased its gross profit margins to 45.9%, up from 45.2% in 2022, in line with plans to achieve gross margins of 50% in the longer term.Â
Foreign exchange rates had a further 7.5% negative impact on Nestleâs sales following a surge in the value of the Swiss franc.
Looking ahead, Nestle outlined plans to focus on increasing its volumes, as it predicted it would achieve organic sales growth of 4% throughout 2024 while also making moderate increases to its profit margins.Â
âLooking 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,â Schneider said.Â
