Nestlé projects slower sales growth

Nestlé forecast the slowest full-year sales growth in more than a decade as food companies worldwide struggle against consumer resistance to price increases.
Nestlé projects slower sales growth

Revenue will gain about 3.5% on an organic basis in 2016, the Swiss company has said, abandoning a goal for an increase of about 4.2%.

Growth in the consumer-goods industry is “relatively fragile,” CFO Francois-Xavier Roger said.

The shares fell 1% in Zurich trading. Nestlé recently lost its rank as Europe’s biggest company to Anheuser-Busch InBev.

Food companies have found higher prices have backfired amid lacklustre consumer demand. Like at Unilever, Nestlé’s attempts in Brazil have cut into volume, even as the country’s weak currency raises the cost of raw materials.

The volatile markets are heaping pressure on Ulf Mark Schneider, who replaces CEO Paul Bulcke next year.

“It may get worse before it gets better,” wrote Robert Waldschmidt, an analyst at Liberum Capital. “Investors can hold out hope that the worse it gets, the more likely incoming CEO Schneider will take aggressive actions.”

After Nestlé’s pricing growth fell to a record low in the first half, the company said it’s more important to keep boosting shipments rather than lifting prices.

Volume rose 1.9% in the third quarter, while rivals Danone and Unilever recently reported declines. Mr Roger said Nestlé’s hedging reduces the need to pass recent increases; “consumer demand was much softer than expected,” naming markets such as Europe, the US, Brazil, and China.

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