July 25 (Reuters) - Nestle, the world's biggest packaged food company, lowered its sales outlook on Thursday, noting it had to slow its pace of price hikes earlier than it would have liked as consumers have become increasingly cost-conscious.
Its shares fell 4.3 per cent in early trade.
It now expects full-year organic sales to climb at least 3 per cent, down from about 4 per cent previously. First-half sales also came in slightly under analysts' expectations, increasing 2.1 per cent compared with an average estimate of 2.5 per cent growth in a company-provided consensus.
"There is value-seeking behaviour among consumers. There is pressure, especially at the low-income range," CEO Mark Schneider said in a media call.
He named North America, Europe and China as places where Nestle and some other consumer goods companies are observing this trend.
The Swiss company increased its prices by 2 per cent, less than the 3 per cent expected by analysts and marking a continued slowdown in price hikes.
Price hikes across the sector have moderated after years of spiking prices to preserve profits and absorb higher materials costs as companies prioritise regaining sales volumes lost to cheaper brands.
The pricing miss is likely to make investors worry about 2025 margins and raises questions on "brand strength" for Nestle and the broader sector, Jefferies analyst David Hayes said in a note to clients.
The maker of KitKat bars, Nespresso coffee, and Maggi seasoning managed to increase its volumes in the first half with real internal growth (RIG), a sales volume metric, up 0.1 per cent compared with a consensus estimate that it would shrink 0.5 per cent.
"Across the spectrum of Nestle's categories, in terms of quality of category, pricing looks bad," Bernstein analyst Bruno Monteyne said in a note.
"RIG matters, but at what cost?" he said. He added that the weakest price hikes were seen in coffee and pet food, which are typically Nestle's strongest sellers while commoditised categories, such as milk products and prepared dishes, saw price declines in the second quarter.
Nestle's underlying trading operating profit was 7.8 billion Swiss francs (US$8.8 billion), in line with a company-provided consensus.