Nestle slows price hikes in bid to win back cost-squeezed shoppers

The maker of household brands from KitKat to Cheerios said it had cut its outlook for sales growth this year as a result.

Nestle has said it has had to slow the pace that it is hiking prices (Nestlé/PA)

Nestle has said it has had to slow the pace that it is hiking prices amid signs that consumers have ditched brands for lower-cost alternatives.

The maker of household brands from KitKat to Cheerios said it had cut its outlook for sales growth this year as a result.

The Swiss consumer giant said it had seen “pricing come down faster than expected” over the first six months of 2024.

While it is still raising prices, it suggests that Nestle has had to ease back  hikes in response to pressure on consumers.

Prices across its brands still rose by 2% globally between January and June, compared with the same period a year ago.

But over the past three months, price rises slowed to 0.6% as it reacted to the market.

It is considerably lower than the 7.5% increase in global pricing over 2023.

The company said that it was “prudent” to adjust its outlook for the year, and was now forecasting sales growth of at least 3%, down from its previous estimate of around 4%.

Coffee brands were the biggest driver of organic sales growth over the latest period, led by its top brands Nescafe, Nespresso and Starbucks.

It also enjoyed continued strong sales of its chocolate products such as KitKat, Smarties and Quality Street, and its premium pet care brands including Purina.

On the other hand, it said demand for its frozen food division remained under pressure as consumer demand continued to weaken and it faced competition from cheaper alternatives.

Nestle’s frozen food brands include DiGiorno pizza, Stouffer’s frozen dinners and Hot Pockets sandwiches.

The company generated total reported sales of 45 billion Swiss francs (£40 billion), down 2.7% from the 46.3 billion Swiss francs (£41 billion) reported this time last year.

But it hailed a return to volume growth, meaning that the total number of products it sold increased as well as the value.

As input costs have come down and inflation has returned to central bank targets, consumers are now less understanding of large increases in pricing

Chris Beckett, analyst for Quilter Cheviot

Mark Schneider, Nestle’s chief executive, said it planned on further driving sales growth by “launching innovations that address consumer trends and growing our large iconic brands”.

Analysts suggested that major food and drink companies like Nestle were facing a “reality check” as the benefits of elevated pricing wears off.

Chris Beckett, head of equity research at Quilter Cheviot, said: “As input costs have come down and inflation has returned to central bank targets, consumers are now less understanding of large increases in pricing.”

He said Nestle was doing well where shoppers are prioritising “quality items” such as its confectionery, coffee and pets products.

But it has struggled more in areas where its products have seen prices drop considerably since the highs seen two years ago, he said.