Nestlé, the world's biggest packaged food company, lowered its sales outlook, noting it had to slow its pace of price hikes earlier than it would have liked as consumers have become increasingly cost-conscious.
Nestlé's shares fell 4.3% in early trade.
It now expects full-year organic sales to climb at least 3%, down from about 4% previously. First-half sales also came in slightly under analysts' expectations, increasing 2.1% compared with an average estimate of 2.5% growth in a company-provided consensus.
"There is value-seeking behaviour among consumers. There is pressure, especially at the low-income range," CEO Mark Schneider said in a media call.
He named North America, Europe and China as places where Nestlé and some other consumer goods companies are observing this trend.
Price Hikes
The Swiss company increased its prices by 2%, less than the 3% expected by analysts and marking a continued slowdown in price hikes.
Price hikes across the sector have moderated after years of spiking prices to preserve profits and absorb higher materials costs as companies prioritise regaining sales volumes lost to cheaper brands.
The pricing miss is likely to make investors worry about 2025 margins and raises questions on "brand strength" for Nestlé and the broader sector, Jefferies analyst David Hayes said in a note to clients.
The maker of KitKat bars, Nespresso coffee, and Maggi seasoning managed to increase its volumes in the first half with real internal growth (RIG), a sales volume metric, up 0.1% compared with a consensus estimate that it would shrink 0.5%.
"Across the spectrum of Nestlé's categories, in terms of quality of category, pricing looks bad," Bernstein analyst Bruno Monteyne said in a note.
"RIG matters, but at what cost?" he said. He added that the weakest price hikes were seen in coffee and pet food, which are typically Nestlé's strongest sellers while commoditised categories, such as milk products and prepared dishes, saw price declines in the second quarter.
Nestlé's underlying trading operating profit was CHF 7.8 billion ($8.8 billion), in line with a company-provided consensus.
