Nestle CEO sees full-year revenue growth at high end of forecast

A pedestrian passes a Nestle SA logo at the Nescafe factory, operated by Nestle SA, in Tutbury, U.K., on Thursday, Aug. 23, 2018. European consumer-goods giants ranging from Nestle SA to Anheuser-Busch InBev NV and Diageo Plc are stepping up their response to activist threats by cutting costs, shedding underperforming brands and returning cash to investors. Photographer: Simon Dawson/Bloomberg

Nestle SA Chief Executive Officer Mark Schneider said said sales growth this year should be at the high end of its forecast range as the world’s biggest food company plans to return to volume-led growth.

Sales should rise 7.5% to 8% this year on an organic basis, Schneider told reporters, implying they may beat the consensus, which is 7.6%. First-half revenue gained more than analysts expected as Nestle pushed prices of Purina pet food and KitKat chocolate bars higher.

Like many consumer goods companies, the Swiss maker of Nespresso and Perrier has been increasing revenue through price rises in recent quarters even as volumes falter. With commodity price inflation on a downward trajectory, companies are looking at how they can claw back market share from private-label products and encourage consumers to spend, even as budgets remain tight.

A measure of volume was negative for a fourth consecutive quarter as shoppers balked at higher prices and bought fewer branded products. Schneider said he’s confident that volume and the mix of products sold should improve in the rest of the year as Nestle boosts marketing spending.

The company is also struggling with capacity constraints in the US that are particularly affecting products such as Purina petcare, coffee creamers and Perrier bottled water.

Gross margin, a measure of profitability, should widen in the second half after a decline in the first six months of the year, Schneider said in the statement.

Schneider said he expects to finish the strategic review for Palforzia, a peanut-allergy medicine, in the second half. Nestle is considering several options, and had originally expected to complete the process in the first half. Bloomberg reported earlier this month Nestle is considering selling the business to Swiss health-care group Stallergenes Greer, citing people with knowledge of the matter.

Schneider acquired the maker of Palforzia for $2.6 billion in 2020, making one of his biggest moves into health since taking over in 2017. However, Nestle wrote down the bulk of its value earlier this year after the business underperformed.

Previously the low end of Nestle’s sales growth forecast was 6%.