The Swiss multinational’s third-quarter report today presented an unsatisfactory overview, highlighting lower-than-anticipated sales primarily driven by declining consumer demand.
For the first nine months of the year, organic sales remained stagnant at 2%, largely propelled by pricing adjustments of 1.6%.
These results underscore the challenges faced by the packaged food sector in recent years, as it grapples with escalating commodity costs, transport, and energy hurdles exacerbated by the COVID-19 pandemic and the ongoing conflict in Ukraine.
This marks recently appointed CEO Laurent Freixe’s first financial update since replacing Mark Schneider earlier this year.
“Consumer demand has weakened in recent months, and we expect the demand environment to remain soft,” Freixe stated this morning.
Nestlé’s Organic Sales Projected to Decline
“Given this outlook and our further actions to reduce customer inventories in the fourth quarter, we have updated our full-year guidance, with organic sales expected to hover around 2%, consistent with the first nine months.”
This revision follows a downgrade in July, predicting organic growth of at least 3%, while underlying trading operating profit margins fell slightly to 17%, down from 17.3% in 2023.
Amid the dismal forecast, shares dipped by 2.2%, and stock prices have decreased by 17% year-to-date.
Nevertheless, Freixe remained optimistic about the business’s potential to recover, expressing confidence in its tools and product portfolio.
“Nestlé is uniquely positioned to win in our industry, given our global scale, broad portfolio of iconic brands, and innovative products that connect with consumers every day and at every stage of their lives,” Freixe noted.
The company aims to “build on these strong foundations,” focusing on customer and consumer engagement while driving market share by advancing within its categories, supported by investments.
“For our brands to win in the market, we need to invest,” he reiterated. “We will generate the resources we need through efficiencies and growth leverage.”
Nestlé’s Q3 Sales Performance in Europe
In Europe, performance was slightly better than overall business trends, with organic growth reaching 3.3%. This improvement was fueled by higher pricing at 2.5%, despite a sales decline of 1.8%, totaling CHF 13.9 billion.
Top-performing segments within Europe included pet food and portioned coffee, while confectionery and water faced setbacks.
Simplifying its leadership structure will enhance the company’s growth ambitions. The Latin America and North America zones will merge into one Americas zone, overseen by Steve Presley.
Meanwhile, the Greater China region will combine with Asia, Oceania, and Africa, led by Remy Ejel, with David Zhang stepping down from the executive board but remaining chairman and CEO of the Greater China territory.
The European unit structure will remain static, while leaders of the key units report directly to Freixe as he emphasizes enhancing performance in crucial markets.
“A leaner executive board structure and close collaboration within the leadership team at headquarters will increase simplicity, expedite decision-making, and strengthen momentum,” Freixe concluded.
