"Consumer demand has weakened in recent months, and we expect the demand environment to remain soft," Nestlé's new chief executive, Laurent Freixe, said in a statement. This reflects broader economic challenges affecting consumer behavior, not only for Nestlé but across various sectors. As consumer purchasing power decreases due to inflation and rising costs, it directly impacts sales, leading to the company's lowered outlook and restructuring efforts.
"A very painful reset for Nestlé, unprecedented in recent history," Vontobel analyst Jean-Philippe Bertschy said. This statement encapsulates the drastic measures the company is undertaking to address the backlash from slowed sales growth and past product scandals. Such comments signify a critical period of transition for the company as they work to regain consumer trust and stabilize their market presence.
Nestlé's CFO Anna Manz highlighted that "consumer demand has been subdued." This situation has prompted the company to rely heavily on promotions to invigorate sales, especially after earlier price hikes aimed at countering input costs. The overall hesitance from consumers suggests a cautious approach to spending, which could pose further challenges for Nestlé and similar companies in this economic climate.
The group had already cut its annual sales growth expectations from 4% to 3% in July. The current organic sales growth of 2%, compared to 7.8% over the same period in 2023, clearly indicates a significant decline, reflecting not only Nestlé's struggles but also larger economic uncertainties affecting consumer purchasing habits globally.
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