Nestle: Sales below estimates in the first nine months

Nestle: Sales below estimates in the first nine months

Nestle posted lower-than-expected sales for the nine months as higher product prices drove consumers away from shelves. However, the company expects sales volume to grow again by the end of 2023.

It should be noted that due to both the pandemic period and the war between Russia and Ukraine, the company has been forced to raise prices due to rising costs on raw materials and more, which it uses for its products. Typically, price increases have reached 8.4%.

Nestle CEO Mark Schneider said he is “optimistic that sales volumes will pick up again in the second half of the year”, adding that prices “will be better evaluated by product type and country”.

In the nine months organic sales, which exclude the impact of exchange rates and acquisitions, were up 7.8% while analysts’ forecasts had expected a rise of 8.1%.

Nestle also reaffirmed its full-year outlook, giving organic sales growth of between 7% and 8%.

In the wake of the results, Nestle’s stock is down close to 2% ahead of Wall Street’s open.

Concerns about product prices and consumption for Nestle as well.

As early as the end of the summer, food multinational bosses were already signalling that there would be no major food price rises until the end of this year at a time when households are under pressure to meet supermarket costs. Yes, inflation will persist, with the Fed assuring that interest rates will remain high as long as needed as an antidote, but price increases will be more modest in the period ahead.

Kraft Heinz CEO Miguel Patricio then asserted in the context of the release of the latest results that “the good news is that we’re done with pricing.” Unilever’s chief financial officer, Gremé Pitkettli, said that “we have passed the peak of inflation”, with the rate of price growth moderating amid the rest of the year.

Nestle’s Mark Schneider was similarly placed, while Danone’s Antoine San-Afric spoke of a slowdown in increases over the next quarter. These groups include in their portfolios some of the best-known products on supermarket shelves, such as Philadelphia cheese and Kraft Heinz’s Heinz tomato sauce.

The prospect of a cessation of food and detergent price increases in supermarkets would be a positive development for consumers. However, the increases that took place in the first half of the year will not be reversed. According to the findings of a survey by analyst firm Jefferies quoted by the Financial Times, consumer goods companies increased prices by an average of 11% in three consecutive quarters up to July, when price rises slowed to 9.7%.

Executives in the consumer goods market have expressed fears for their profitability as consumers, under the weight of price pressures, have made significant spending cuts.