(Bloomberg) -- Nestle SA sold fewer of its products in the fourth quarter as price hikes turned consumers off branded products, a signal the world's biggest food company is reaching the limit on its pricing power.
Volume dropped 2.6%, declining for a second consecutive quarter, the maker of Nescafe coffee said Thursday. The stock were little changed in early trading.
Consumer-goods companies face the challenge of raising prices without driving shoppers away. While Nestle's volumes only started to fall in the second half, rival Unilever Plc has had drops throughout the entire year. Nestle drove through a 10% increase in pricing in the fourth quarter.
Before 2022, the last time Nestle's volume was negative was in the first quarter of 1999.
The biggest decline was in North America, where fourth-quarter volume retreated 4.9% as Nestle pruned its portfolio and as demand from restaurants moderated.
Nestle also said it aims for better profitability in 2023 after higher raw material and shipping costs led to the weakest margins in four years.
The underlying operating margin should be in a range of 17% to 17.5% this year, the KitKat maker forecast. The margin was 17.1% in 2022.
What Bloomberg Intelligence Says:
Nestle must invest in new product initiatives and marketing to restore volume-mix growth in 2023, which may not be easy given that prices need to rise again on continued input-cost pressure as favorable hedges end. This could skew growth to 2H, though Nestle's brand pricing power enabled it to maintain 2023 organic sales growth targets of 6-8% and flat operating margins of 17-17.5%.
— Duncan Fox, BI consumer-products analyst
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--With assistance from .
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