Nestlé is undergoing a significant restructuring as it grapples with disappointing sales figures and a weakened market outlook. On Thursday, the Swiss food giant revealed plans to revamp its senior leadership and operating structure, cut its full-year sales forecast, and report a disappointing nine-month organic sales growth that fell short of analysts’ expectations.
The company now anticipates organic sales growth of just 2% for 2024, alongside an underlying trading operating profit (UTOP) margin of approximately 17%. This is a notable reduction from its earlier forecast in July, which projected at least 3% growth in organic sales and a modest increase in the UTOP margin from the previous year’s 17.3%.
For the nine months ending in September, Nestlé’s organic sales grew by only 2%, falling short of the average analyst expectation of 2.5%. Despite its strong portfolio that includes beloved products like Maggi stock cubes and Nescafé coffee, the company has struggled to lift sales volumes amidst ongoing price hikes, which increased by 1.6%—slightly below the anticipated 1.7%.
“Consumer demand has weakened in recent months, and we expect this trend to continue,” stated new CEO Laurent Freixe, who stepped into the role just last month after Mark Schneider’s ousting due to several quarters of disappointing sales volume growth.
Freixe’s restructuring plans include downsizing the executive board, merging the Latin America and North America divisions, and consolidating the Greater China operations with the Asia, Oceania, and Africa units. These moves aim to streamline operations and better adapt to changing market dynamics.
In contrast to Nestlé’s challenges, analysts expect rival Unilever to report a 1% increase in underlying prices and a robust 3.2% growth in underlying sales volume when it announces its results next week. This divergence highlights the competitive pressures facing Nestlé as it seeks to regain its footing in a challenging market landscape.
As Nestlé navigates these changes, all eyes will be on how effectively it can adapt to shifting consumer demands and improve its sales trajectory moving forward
