Nestlé SA reported a fall in sales volumes for the fourth quarter as the maker of Nescafé coffee and Purina pet food raised prices to offset soaring costs and halted sales of some less popular products.
The Swiss packaged-foods giant said Thursday that sales volumes fell 2.6% in the last three months of 2022, with prices rising by an average of 10.1%. Organic growth for the quarter was 7.5%, below analysts’ expectations.
Nestlé shares fell 2.5% on Thursday in Switzerland.
Companies across the consumer-products industry are grappling with how much they can raise prices to offset higher costs for energy, raw materials and transportation, without prompting consumers to cut back on purchases. Nestlé’s peers Unilever PLC and
Procter & Gamble Co.
have both said this year that shopper demand for their products has been dented by higher prices.
Aside from some weakening of shopper demand amid higher prices, Nestlé said its sales volumes had also been affected by an initiative to prune less lucrative products from its portfolio.
Nestlé began halting sales of some slower-growing products during the pandemic to help it cope with supply-chain constraints, and said it had accelerated the effort in the fourth quarter to reallocate resources to more in-demand lines. For example, it recently decided to pull away from its frozen foods business in Canada and some dairy lines in Brazil.
The company also said quarterly sales volumes were hurt by weaker out-of-home sales in China and temporary capacity constraints at its water business in North America.
Overall, for the full-year, Nestlé reported revenue of 94.42 billion Swiss francs, equivalent to about $102.3 billion, up from 87.09 billion francs in 2021. It said growth was driven by strong demand for its petcare and coffee products.
However, Nestlé said net profit fell to 9.3 billion francs from 16.9 billion francs in the previous year when the company benefited from the sale of some of its shares in
Annual profit was partly hurt by impairment charges of 1.9 billion francs related to Nestlé’s investment in peanut-allergy drug Palforzia. The company said late last year that it would explore strategic options for the treatment after lower-than-expected demand from doctors and patients.
Higher costs also weighed on earnings, with steeper selling prices failing to fully compensate for greater expenses.
“Like all the consumers around the world, we’ve been hit by inflation and now we’re trying to repair the damage that has been done,” Nestlé Chief Executive
Looking ahead, Mr. Schneider said Nestlé would have to “stay flexible” on how it adjusts pricing to take account of rising costs and that the company had been involved in “intense negotiations” with retailers.
One potential concern for the year ahead is labor costs, he said. “Everyone is watching to what extent now an inflation that was by and large commodity and energy driven, is now translating into one that is wage driven,” Mr. Schneider said.
For 2023, Nestlé forecast organic sales growth of between 6% and 8%, which it said would likely be driven by higher prices.
Write to Peter Stiff at [email protected]
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Appeared in the February 17, 2023, print edition as ‘Nestlé Sales Take Hit From Rising Prices.’
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