In a strategic shift, global consumer goods giants Nestle and Danone announced on Thursday their intention to scale back on price increases in 2024. After two years of sharp hikes that prompted consumers to explore more affordable options for basics like yoghurt and coffee, the companies aim to address shopper concerns.
Nestle and Danone’s Shift
Nestle, the world’s largest packaged food company, acknowledged the unprecedented inflationary spike since 1973. CEO Mark Schneider emphasized a considerable reduction in pricing for 2024, shifting the focus towards volume and mix-based growth. Meanwhile, Danone, with brands such as Evian and Activia, noted that while prices would still rise, the trajectory would be less aggressive.
Industry-Wide Price Dynamics
This strategic move follows the recent announcement by British rival Unilever, which anticipates a moderation in price increases. The packaged goods industry has grappled with continuous price hikes for over two years, citing rising input costs triggered by the COVID-19 pandemic and exacerbated by global events such as Russia’s invasion of Ukraine.
Consumer Response and Market Share Concerns
Higher prices have led to consumers seeking alternatives and, in turn, impacted the ability of big brands to compete effectively. Analysts and investors have expressed concerns that companies might be pushing price rises too far. Suggestions have been made for brands to focus on marketing and innovation, aligning with evolving consumer preferences and mitigating market share challenges.
Future Outlook for Nestle, Danone, and Unilever
Nestle anticipates slower organic sales growth of around 4% in 2024, emphasizing a “moderate increase” in its underlying trading operating profit (UTOP) margin. Meanwhile, Danone CEO Antoine de Saint-Affrique acknowledges a world of “slowing-down inflation” but anticipates volatility. Unilever’s CEO Hein Schumacher projects a continuation of inflation in 2024, expecting a return to normal levels between 2.5-3%.
As the industry navigates changing dynamics and addresses cost of living concerns, these strategic adjustments aim to strike a balance between consumer satisfaction and corporate growth.