Nestlé’s annual sales dip, as cocoa prices and weakened consumer demand impact results
pic: Nestle
Nestlé has released its latest annual figures for 2024, with group-wide sales down 1.8% for the year, at CHF 91.3 billion, against a backdrop of notable supply chain uncertainties and weakened consumer demand, writes Neill Barston.
Net profits for the Swiss headquartered business were also down 2.9% for the year, at CHF 10.8bn, though the company reported that its confectionery interests had reported mid-digit growth, which was led by its flagship KitKat brand, as well as other regional offerings.
The company attributed its sales performance downturn to the effects of negative currency exchanges, costs linked to divesting subsidiary businesses, and a slowdown in demand from consumers, who have faced notable retail price increases that have impacted on shopper buying behaviour in many global markets amid shopper spending constraints.
However, the business highlighted that organic growth rates from its own internal activities had increased 2.2% in 2024, citing confectionery and coffee markets as key to developing momentum. Europe, as well as emerging markets remained the strongest performing regions, with performance in the US described as ‘disappointing’ by the company, as organic growth dropped 0.5%.
Significantly, the business observed that inflationary impact on core commodities, including cocoa for its confectionery operations had also had an impact, with prices rising accordingly for many of its key lines.
In response to its performance, the company added that it was moving to restore competitiveness through actions including stepping up investment in its brand communication. It noted that marketing and advertising spend had dipped against figures from 2019, which it is seeking to address through raising its activity in coming months.
In its outlook, the company said that this remained unchanged from previous statements, and that it anticipated organic growth rates would continue to improve as the year continued.
Laurent Freixe, Nestlé CEO, who was appointed to lead the business recently after the unexpected departure of former boss Mark Schneider in August 2024, explained that there remained a number of market tests, but believed that its fortunes would turn around.
He said: “In a challenging macroeconomic context and soft consumer environment, we achieved a solid performance in 2024 in line with our latest guidance. Organic growth was 2.2%, with a return to positive real internal growth of 0.8%, and both strengthened in the second half. Free cash flow improved to CHF 10.7 billion, and the Board proposes an increase in the dividend per share to CHF 3.05.
We have a clear roadmap to accelerate performance and transform for the future. Increasing investment to drive growth is central to our plan. This means delivering superior product taste and quality with unbeatable value, scaling our winning platforms and brands, accelerating the rollout of our innovation ‘big bets’ and addressing underperformers. We are creating the fuel for these growth investments through our new CHF 2.5 billion three-year cost savings program. We are making good progress and have already secured over CHF 300 million of these savings for 2025.
From 2025, we expect our actions to drive an improvement in organic sales growth, with a lower underlying trading operating profit margin in the short term as we invest for growth. While there is macroeconomic uncertainty, we have lots of opportunities ahead of us, and we have the strategy, the resources and the people and team to deliver.”
