By Dominic Chopping

Nestle cautioned that sales growth will moderate this year as higher prices force shoppers to ease spending, after full-year earnings and sales came in just shy of expectations.

The Swiss maker of KitKat chocolate bars and Nescafe coffee said Thursday that it expects organic sales to climb by around 4% this year, slowing from 7.2% growth in 2023 and below expectations of 4.7%, according to a consensus forecast provided by the company.

"Unprecedented inflation over the last two years has increased pressure on many consumers and impacted demand for food and beverage products," Chief Executive Mark Schneider said.

Packaged food producers have spent the last couple of years raising prices of their goods as they pass on higher input costs of items such as ingredients to the consumer, but with inflationary pressures now beginning to ease, the rate of those price increases has begun to subside.

Nestle hiked prices by an average of 7.5% in 2023.

As consumer budgets have remained tight, some shoppers have pushed back against the large price increases, which has sent Nestle's volumes lower.

The company has tried to counter this by pruning its portfolio and reducing the number of products and product variants it produces, optimizing production and freeing up resources for higher-growth, higher-margin products. The positive effects of this started to be felt in both the second half and the final quarter of the year, it said.

Real internal growth--the company's key measure of sales volume--slowed to 0.3% in 2023 as volumes were hurt by soft consumer demand, capacity constraints and a temporary supply disruption for vitamins, minerals and supplements in the second half. Analysts expect real internal growth to increase in 2024, with a company consensus forecasting 2.6% this year.

"Looking to 2024, we are prioritizing volume- and mix-led growth with increased brand support," Schneider said.

Nestle said that following a transformation plan in France, the company is reviewing operating practices in its natural-mineral water operations in several countries as practices at some of its production sites might not be in line with regulations.

French media reports last month claimed Nestle--which has brands including Perrier and Vittel--and other bottled water producers used treatment systems such as carbon filters or ultraviolet filters for their mineral waters, which are prohibited as mineral waters are supposed to be pure.

"Nestle regrets the situation and is currently engaging with the relevant authorities," it said in its earnings report Thursday.

"The company emphasizes that its water products have always been, and remain, safe to drink. In addition, the unique mineral composition of its natural mineral water brands has always been consistent with the label."

Nestle waters contributes around 3.5% to group sales.

The company reported net profit of 11.2 billion Swiss francs ($12.73 billion) compared with CHF9.27 billion the previous year, while sales fell 1.5% to CHF93 billion.

Net profit was expected at CHF11.76 billion, with sales of CHF93.68 billion, according to a company-compiled consensus forecast.

Nestle expects its underlying trading operating profit margin to moderately increase in 2024 from 17.3% in 2023. A company consensus forecasts the 2024 margin at 17.8%.

The company proposed a dividend of CHF3.00 a share, up from the CHF2.95 it paid in 2022, and said it plans to buy back 50 million shares.

Write to Dominic Chopping at

(END) Dow Jones Newswires

02-22-24 0306ET