By Richa Naidu
LONDON (Reuters) -Nestle is revamping senior leadership and its operating structure, the food giant said on Thursday, as it cut its full-year sales outlook following weaker than expected nine-month underlying sales growth.
The Swiss company said it now expects 2024 organic sales growth to be around 2% and an underlying trading operating profit (UTOP) margin of about 17%.
In July, Nestle had forecast full-year organic sales growth of at least 3% and a moderate increase in its UTOP margin from 2023’s 17.3%.
New CEO Laurent Freixe said he planned to reduce the size of Nestle’s executive board, merge the company’s Latin America and North America units, and merge its Greater China and Asia, Oceania and Africa businesses, among other changes.
Nine-month organic sales for 2024, which exclude the impact of currency movements and acquisitions, rose 2%, the maker of Maggi stock cubes and Nescafe coffee said. Analysts had, on average, expected growth of 2.5%.
“Consumer demand has weakened in recent months, and we expect the demand environment to remain soft,” Freixe said. He took the helm at the start of September after his predecessor, Mark Schneider, was ousted following several quarters of weak sales volume growth.
Nestle’s nine-month price increase of 1.6% was behind analysts’ average estimate of 1.7%. Real internal growth – or sales volumes – rose 0.5% versus an expected 0.8% increase.
By comparison, analysts expect rival Unilever (LON:) to report a 1% increase in third-quarter underlying prices and 3.2% underlying sales volume growth when it reports next week, according to a company-provided consensus.
“(Our competitors’) input cost dynamics are very different,” Nestle Chief Financial Officer Anna Manz told journalists on a call. “It’s a much easier pricing environment for those competitors.”
Manz pointed to coffee and cocoa, whose prices have touched repeated record highs in the past two years.
Nestle said volumes were also held back by retailers and distributors reducing stocks because people aren’t buying as much, particularly in countries with weaker economies in Latin America.
