Nestlé and Unilever have had a disappointing first half of the year: sales are lower than expected as consumers seek lower prices and do not simply return even after the inflation spike.
Prices hiked too fast
Nestlé’s half-year sales did actually climb 2.1 %, but analysts were expecting + 2.5 %. Unilever’s sales growth of 3.9 % also scored below the forecast 4.3 %. Both FMCG giants immediately lowered expectations for the full year: Nestlé is now counting on 3 % growth, Unilever is slightly more positive with a growth target somewhere between 3 and 5 %.
Inflation continues to trouble brand manufacturers: Nestlé in particular says it had to slow its pace of price increases earlier than desired as consumers dropped out. CEO Mark Schneider said that consumers are looking all too often for discounts as especially those on lower incomes still feel the pressures of the cost-of-living crisis.
Invest and slim down
Unilever also faced a boycott in response to the war in Gaza, but it still managed to raise sales volumes and margins came in higher than expected. CEO Hein Schumacher saw that a slowdown in inflation is allowing customers to return to strong brands like Knorr. However, he fears that margins will grow less in the second half of the year.
The two FMCG giants promise to invest more in their brands, but they will be doing so in a vert different manner. While Nestlé wants to launch more new products, Unilever instead wants to do “fewer things better.” Unilever is reorganising to focus fully on its thirty main brands. It has already laid off 7,500 employees and is preparing to divest its ice cream operations as well.
A third industry giant, Reckitt Benckiser, announced just last Wednesday that it plans to sell its ailing food business and dispose of another portion of household products by the end of 2025.
