The Swiss multinational, known for a variety of popular brands including Nescafé and Cheerios, reported a disappointing 2% increase in underlying sales for the first nine months of 2024.
The company now anticipates an overall underlying sales growth of approximately 2% for the year, which is below its earlier projection of at least 3%.
This marks the second time the consumer goods giant has adjusted its sales outlook, having previously reduced it in July from an estimated 4%.
These sales challenges arise even as Nestlé has been moderating price hikes, responding to indications that consumers are increasingly turning to less expensive, non-branded options due to elevated prices in recent years.
Laurent Freixe, the new CEO, stated, “Consumer demand has weakened in recent months, and we expect the demand environment to remain soft.”
Additionally, the company has lowered its profitability forecast for the underlying trading operating profit margin to around 17% for 2024, compared to earlier expectations of a slight improvement from last year’s 17.3%.
While Nestlé continues to raise prices, the average global increase has slowed to 1.6%, down from 2% in the first half of the year, following “unprecedented increases in the prior two years” amid rising inflation.
The company noted that in the third quarter, price increases in confectionery and coffee due to higher input costs were somewhat counterbalanced by promotional activities in the pet care and dairy sectors.
Nestlé attributed some of the sales pressure to “consumer hesitancy towards global brands, linked to geopolitical tensions” in certain markets.
Mr. Freixe assumed the CEO position in September after the unexpected departure of former CEO Mark Schneider, following several quarters of disappointing performance.
On Thursday, the new CEO unveiled a restructured leadership team and operational framework as he begins to influence the company's direction.
The changes involve plans to reduce the size of Nestlé’s executive board, consolidate the Latin America and North America divisions, and merge the Greater China operations with those in Asia, Oceania, and Africa.
Chris Beckett, head of equity research at Quilter Cheviot, commented, “Nestlé is still a strong company, but it is currently facing some difficulties.
“The new chief executive is initiating a comprehensive internal reorganization aimed at steering the business back on course.
“It may have become somewhat insular, so a reset is a prudent approach to take.”