Nestle's Growth Warning Shifts Focus to Costs

Nestlé, the largest consumer goods manufacturing organization in America, has experienced a decline in its growth due to various reasons. Despite expecting a 4.2% sales increase, Nestle's actual sales declined, and it is now earning 13.4 billion profit compared to 88.8 billion previously. The company faces challenges in Brazil, China, and other markets, which have led to a slowdown in consumer demand and profitability reduction. To tackle these issues, Nestlé's management must take efficient initiatives and consider restructuring efforts to overcome risk factors.

Nestlé’s Growth Warning Shifts Focus to Costs
Nestle is considered as the largest consumer goods manufacturing organization of America.
Recently, it is facing a decline in its growth for different reasons. Nestle expected that it would
grow its sale approximate 4.2%, but after calculating its third-quarter result, it was found that it
declined its sales. Now its sale rate is 3.5% which was 3.8 % in 2015. At regular currencies,
prices were rise with just 0.8% year to year for the first four quarters but nestle prices becomes
lower than expected given currency valuations (Wilmot, 2016). Nestle was earning more than
88.8 billion profit every year which reduces ultimately with a decrease in the sale of its products.
Now it is earning 13.4 billion profit. This influences the overall business strategy and market
position of the organization. It takes a various initiative to reduce the effect of sale changes. The
organization did raise prices in Brazil to offset the loss, but it influences the demand of nestle
products in a negative manner. On the other hand, it also faces sales problem in china. The
interest of the consumer in nestles products such as peanut-based protein drinks reduced which
ultimately influences the margin of revenue in the greatest
manner(http://www.nestle.com/assetlibrary/documents/library/documents/financial_statements/
2015-financial-statements-en.pdf). The management of the organization should take efficient
initiatives to tackle with such problem, but it fails. However, management of the organization
also blamed a more general slowdown in consumer demand across developing and developed
markets. This will influence the perspective of investors towards nestle in largest manner. It has
occurred because Nestle does not have the pricing power in its competitive market. This will be
sluggish down consumer demand and profitability of the organization reduced. This could be a
big problem for the organization in future which influences the overall competitive image in the
market. The management of the organization should identify the areas which require scrutiny.

Restructuring Initiatives can be beneficial for the organization to save itself from the selling risk.
Ulf Mark Schneider, who immediately joins Nestle as chief executive putting more efforts to
take aggressive actions. Stalling growth may boost the bond-like attractions of Nestlé’s
expensive shares. This will facilitate organization to overcome its risk factors in an efficient
manner.

References
Wilmot, S. (2016). Nestlé’s Growth Warning Shifts Focus to Costs. WSJ. Retrieved from
http://www.wsj.com/articles/nestles-growth-warning-shifts-focus-to-costs-1476973563
(2015). Retrieved from
http://www.nestle.com/asset-library/documents/library/documents/financial_statements/2015-
financial-statements-en.pdf