Nestléfaces difficulties due to price increase tactics
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In the world of finance, Nestle S.A., a global powerhouse in the food and beverage industry, is currently grappling with a short-term downturn. As of mid-August 2025, the company's shares (ticker: NSRGY) are on a negative trajectory, with a recent decline of 1.15% to $92.27 on July 25, 2025, and a predicted support level around $88.70 [1].
However, from a fundamental perspective, Nestle remains a robust company with a broad and diverse product portfolio spread globally. The stock is currently trading near $99.38 (August 18, 2025) with a large market cap of about $257.5 billion, a Price/Earnings normalized at 19.21, and a solid dividend yield of around 3.68%. Nestle is recognized for its geographic reach and brand diversity, which help buffer operational and market shocks [2].
Recent reports suggest that the poor sales figures and profitability issues at Nestle are the reasons for the former CEO's ousting in August [4]. The company has been criticized for not easing up quickly enough on price increases as inflation has cooled, compared to its competitors [5]. Additionally, concerns about health need to be seen in the context of Nestle's increasing emphasis on health and nutrition [6].
The trouble with IT last year and an uncomfortable regulatory investigation in France over allegations related to the purification of bottled mineral water are contributing factors to Nestle's tumbling targets [7]. Nestle is "counting the cost" of pushing up prices of its most popular brands beyond the reach of "increasingly squeezed customers" [8]. Underlying sales for Nestle increased by an unexpectedly weak 2% in the first nine months of this year [9].
Nestle's shares are down 14% in a year and close to their cheapest valuation in 10 years, at 18.4 times forward earnings [10]. The company's profitability is under pressure, with margins weakening [11]. A potential solution to improve Nestle's profitability could be a "hefty spend on sales and marketing", possibly funded by selling some of its 20% stake in L'Oréal [12].
Despite these challenges, Nestle's regional variants, such as Nestle India Ltd, show slightly positive movement in local markets [3]. Nestle's sales guidance has been cut again, expecting a 2% increase for the full year, the lowest rate since the turn of the century [13]. However, the group still has competitive advantages such as distribution clout, buying power with suppliers, and diverse household-name brands that underpin pricing power [14].
The company faces the medium- and long-term challenge that its portfolio is full of foods that may go out of fashion due to growing concern over rising rates of obesity [15]. Nestle's poor numbers have been discussed by Sian Bradley in The Times and Aimee Donnellan for Breakingviews [16].
Investors should weigh near-term technical challenges against the company's solid fundamentals and long-term prospects. While the short-term outlook may be uncertain, Nestle's robust portfolio, significant global scale, reasonable valuation metrics, and dividend income support a medium to long-term positive outlook.
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- Personal finance enthusiasts may find it interesting to analyze Nestle's financials, including its market cap, price-to-earnings ratio, and dividend yield, as part of their investment strategy, despite the short-term downturn.
