Nestle HQ

Shares in Nestlé sank as the world’s biggest food group revealed lower-than-expected sales growth in the first nine months of 2023.

Weary consumers rejected higher prices from the KitKat and Nescafé owner, sending real internal growth (RIG) – the company’s measure of sales volumes – down 0.6% over the period.

Organic sales growth reached 7.8% in the nine months to 30 September thanks to an 8.4% increase in prices.

Total reported sales declined 0.4% to CHF 68.8bn (£63.1bn), missing analyst expectations as currency headwinds depressed the top line.

Analysts at Bernstein calculated Nestlé registered organic growth of 6.1% in the third quarter – which Barclays estimated to come from a 6.3% rise in pricing – leaving total revenues down 4.3% in the past three months.

Nestlé CEO Mark Schneider said the performance in the first nine months had been “strong” and volume recovery was underway.

“We are seeing the benefits of our portfolio optimisation initiatives and increasing marketing investments behind our billionaire brands,” Schneider added.

However, markets reacted negatively, sending shares down 3.4% to CHF 98.75 on Thursday.

Bruno Monteyne of Bernstein attributed the weak growth to “the persistent drag from emerging market currencies and the need for companies to boost their portfolio growth by ongoing disposals”.

Deutsche Bank added that volumes would be positive in Q4 and capacity constraints in the Nestlé Health Science business would improve.

“There is unlikely to be significant changes to consensus,” the investment bank added. “Some may focus on the ‘miss’ but we see the improvement in RIG, including less trading days and including capacity constraints, as a sign of underlying strength.”

Nestlé wasn’t the only global CPG player to report volume weakness this week, as Procter & Gamble reported a 1% drop in its first quarter. However, a 6% rise in net sales to $21.9bn and a 7% jump in organic growth beat expectations and helped shares rise 2.5% in the process.