Road to RIG: Nestle maintains optimistic outlook for non-price driven growth despite Q1 setbacks in APAC

Nestle recently released its three-months sales report for Q1 2024, announcing a total year-on-year decrease in reported sales by 5.9% to CHF22.1bn (US$24.2bn) from CHF23.5bn(US$25.7bn) in the same quarter last year. No revenue or profit numbers were released.

This was mostly attributed to the impacts of foreign exchange causing a decrease in sales by 6.7%, but despite this the firm still reported an overall organic growth of 1.4% though this was still led by pricing (3.4% contribution) and not by real internal growth (RIG) which saw a
decrease of -2.0%.

Nestle uses RIG as a measurement of growth generated by volume and product mix/innovation, and considers this normalised growth as opposed to pricing-led growth which is led by price hikes.

Earlier this year, Nestle CEO Mark Schneider had acknowledged price-driven growth as an unsustainable means to long-term growth for the company, and stated that the firm was committed to move back to RIG-led growth in 2024.

The numbers shown in this most recent report have shown some progress towards this, including in the APAC region where both its Zone Asia, Oceania and Africa (AOA) and Zone Greater China showed lower pricing-led growth compared to the previous year.

Zone AOA reported 4.1% price-driven growth and -0.4% RIG in the first three months of 2024 (compared to 9.1% pricing and 1.3% RIG in the same period last year); whereas Zone Greater China reported 1.5% price-driven growth and 2.1% RIG (compared to 3.9% pricing
and -0.8% last year).