Nestlé lowers organic sales growth outlook while unveiling organizational overhaul
Nestlé is overhauling senior leadership and organizational structures as the company announces total reported sales amounted to CHF 67.1 billion (US$77.4 billion).
The F&B giant has reset its 2024 organic sales growth to 2%, after adjusting it to 3% in July amid “weakened” consumer demand.
Real internal growth is at 0.5%, impacted by consumer hesitancy toward global brands stemming from geopolitical conflicts.
Among product categories, coffee emerged as the largest growth contributor, supported by the company’s leading brands, Nescafé, Starbucks and Nespresso. Confectionery sales grew moderately, with KitKat, Shark Wafer and key local brands being the main contributors.
Nestlé’s Dairy sales showed negative growth, as a dip in coffee creamers and ambient dairy remained greater than in the affordable milk and dairy culinary solutions sectors.
The Swiss multinational raised the prices of coffee and confections in Q3 to offset increased production costs. These hikes were balanced out by promotional discounts offered on dairy and pet care.
Purina PetCare observed modest growth, driven by a demand for science-based brands such as Purina ProPlan, Purine ONE and Fancy Feast.
Water delivered modest growth, driven mainly by the sustained demand for S. Pellegrino and the launch of Maison Perrier.
The culinary segment also showed negative growth, as demand for frozen food declined across North America. Maggi’s sales remained robust. The category is facing intense competition, specifically frozen pizza.
Emerging markets lead growth
Overall, emerging markets and Europe drove the company’s organic growth, offsetting the slight decrease reported in North America. E-commerce sales rose organically by 9.7%, constituting 18.5% of group sales.
CEO Laurent Freixe.CEO Laurent Freixe, who assumed the role in September, says the company expects the demand environment to remain “soft.”
“Given this outlook and our further actions to reduce customer inventories in the fourth quarter, we have updated our full-year guidance, with organic sales growth expected to be around 2%, in line with the first nine months.”
“We will sharpen our focus on consumers and customers and advance our categories to accelerate performance and gain market share. We will also expand our digital transformation to enhance agility and efficiency. We need to invest for our brands to win in the market.”
Nestlé now expects its underlying trading operating profit margin in 2024 to be around 17%. The company says pricing has normalized since seeing “unprecedented increases” in the last two years, reaching 1.6% in the company’s latest posting.
Organizational changes
As part of the company’s organizational overhaul, Nestlé is introducing changes to the Executive Board and key business functions, effective January 1, 2025.
“Today’s organizational changes will align Nestlé, bringing simplicity and focus. I look forward to sharing more of our plans at our Capital Markets Day in November,” says Freixe.
Key zonal changes include the merging of Zone Latin America and Zone North America to form Zone Americas, which will be led by Steve Presley, currently executive VP and CEO of Zone North America and market head for the US.
Zone Greater China Region will merge into Zone Asia, Oceania and Africa.
“A leaner Executive Board structure and close collaboration of the leadership team at the headquarters will increase simplicity, speed up decision-making and strengthen the momentum behind global initiatives. We will continue to build on the strengths of our Market Heads to ensure consistent in-market execution across the Group,” concludes Freixe.
Meanwhile, Nestlé coffee brands, except Nespresso, will be integrated into the strategic business units organization under the new structure.
