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Nestlé Year-over-year Net Profit Plummets by Nearly 50%

Many companies feel the weight of the world’s economic situation. Whereas tech companies lay off employees, food producers have to look for other solutions. Nestlé, currently met with dwindling sales due to rising prices, will cut down on its product range. 

It Is Crunch Time For Nestlé

Most people worldwide know the Nestlé brand. They produce a lot of packaged foods, including KitKat, Cheerios, Coffee-mate, Contrex, DiGiorno, Felix, and Nespresso. It is hard to picture a world where Nestlé doesn’t create something you or the people in your close circles seem to enjoy. Unfortunately, building such a vast empire also creates a lot of strain on the financial department.

One apparent trend throughout the industry is the rising price of resources. More specifically, the company faces soaring costs, forcing them to raise their own product prices by over 10% on average. Unsurprisingly, that results in a lower sales volume, yielding a 2.6% dip in Q4 2022. Naturally, investors and stockholders aren’t happy with this trend, but there is little one can do about the situation.

Consumer products are always in high demand, but they can also be reduced when prices become excessive. As a result, people will find food and snack alternatives. That means buying cheaper coffee pads, trying a more affordable cat food brand, and snacking on things Nestlé doesn’t make. That forces the consumer product giant to cut back on some of its products, at least for now. 

It is a small change for the company. Nestlé stopped selling some products during the COVID-19 pandemic. It will continue that trend and shift resources to products with a notable demand. That includes cutting frozen foods across Canada and several dairy product lines in Brazil. Also, assuming its China sales don’t pick up again, product cuts are expected in that region later. 

Overall Results Are Still Decent

While Nestlé may struggle across certain product lines, the company maintains a strong performance. The year 2022 yielded over $102 billion in reported revenue, a steep increase from 2021. In addition, pet care and coffee products continue to note solid growth. Consumers will prioritize the health of their pets above their own food choices. 

Despite those big numbers, its net profit dropped by nearly 50% compared to 2021. However, last year’s numbers were inflated due to the sale of shares in L’Oreal SA. The company also received a $2.05 billion fine for its involvement in Palforiza. The peanut-allergy drug seemed a safe bet, although doctors and patients aren’t biting the bullet. The next objective may be writing off that big investment, although other options will be explored first.

Although consumers don’t approve of Nestlé’s rising prices, the company will remain committed to the course. However, they will attempt to be more “flexible” regarding price adjustments. That process includes ongoing negotiations with retailers to not burden consumers too much. Whether that’s enough to offset the growing labor costs remains uncertain.