By Joshua Kirby


Nestle lowered its sales expectations for the second time this year as the food giant offers greater discounts to lure back shoppers deterred by rising prices in recent years.

The Switzerland-based maker of coffee, confectionary, breakfast cereals and nutritional supplements now expects organic sales growth of 2% for 2024 as a whole, down from previous targets of at least 3% and before that, 4%. That would imply no acceleration from the first nine months of the year, when sales were 2.4% lower on year at 67.15 billion Swiss francs ($77.59 billion), Nestle said Thursday. At 2% growth, adjusted for currency effects, that was broadly in line with the expectations of analysts, according to a consensus of estimates provided by the company.

"Consumer demand has weakened in recent months, and we expect the demand environment to remain soft," newly appointed Chief Executive Laurent Freixe said.

The results are the first since Nestle unexpectedly jettisoned longstanding chief executive Mark Schneider, replacing him with company stalwart Freixe at the beginning of September. That came amid a weak share-price performance, with shares at the time some 15% lower on year. Freixe has promised to spend on innovation and branding as the group looks to expand sales and market share and win back consumers who baulked at higher prices in recent years, though the company has yet to see any rally in its stock.

Shareholders are likely to be further disappointed by the fresh cut to guidance for the year, said Jean-Philippe Bertschy, an analyst at Swiss investment firm Vontobel.

"The priority for the new management team now is to bring Nestle back to its roots and to what it does best: marketing and connecting with consumers," Bertschy wrote in a note. "The task is huge and will take time."

Nestle had previously managed to compensate for shoppers buying less by lifting their prices, more than making up for heftier input costs. But heavier than usual promotions this year limited that strategy, disappointing investors even as they fuelled real internal growth, an important metric for the company. Nestle is betting that a promotional strategy, as well as brand investment, can lure back shoppers from cheaper private-label competitors to its gamut of products, which range from San Pellegrino mineral water and Nescafe coffee to KitKat candy bars, Haagen-Dazs ice cream and Purina pet foods.

Nestle raised prices by just 1.6% between January and September, compared with more than 10% in the final months of 2022, amid the peak of a worldwide inflation crisis. Over the summer quarter, promotional activity in some areas, such as dairy and pet care, offset more robust hikes in others that aimed to compensate for higher production costs, Nestle said. The company will continue to focus resources on gaining market share, Freixe said.

"For our brands to win in the market, we need to invest," he said.

Separately, Nestle said it would merge its North and Latin America organizations to create a Zone Americas, as part of a structural reshuffle. North America boss Steve Presley will lead the joint team, Nestle said. The group's Greater China team will be merged into Asia, Oceania and Africa.

Executive Vice President Bernard Meunier will, meanwhile, step down from Nestle's executive board next year, to be replaced by coffee-brands chief David Rennie as head of marketing and strategic business units. The coffee segment, excluding capsule maker Nespresso, will be merged into the SBUs, Nestle said, while Nespresso boss Philipp Navratil will join the group executive board.

The changes mean all leaders of key business units will report directly to the group CEO, Freixe said.

"This is crucial, as we sharpen our focus on consumers and customers and restore investment in our brands and in innovation to expand market share and accelerate our performance," he said.

Investor attention will now turn to Nestle's capital-markets event next month, analysts at Jefferies said in a note to clients. The company will come under pressure to offer midterm guidance, and a muted outlook will likely offer a reality check on expectations both for Nestle and for the wider food and consumer-goods sector, Jefferies said.


Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby


(END) Dow Jones Newswires

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