Nestle feels heat from price wars

KITKAT maker Nestle warned that supermarket price wars are taking their toll on business after a slump in annual profits, writes Laura Chesters.

The Swiss consumer goods giant, which also makes Perrier bottled water and Nescafe coffee, said sales for the year rose 4.2pc to £63bn.

But profits tumbled from £6.4bn in 2014 to £3.8bn last year.

Chief executive Paul Bulcke bemoaned a ‘challenging environment’ and warned that 2016 would see ‘even softer pricing’ in what would be good news for customers but bad news for the firm.

‘I don’t see, in Europe at least, an environment where you are going to have a very easy time increasing your prices because retail is anxious, they are paranoid,’ he said.

Kepler Cheuvreux analyst Jon Cox said: ‘Its comment that pricing will be even softer in 2016 versus 2015 will send a chill through the whole sector.’

Nestle, which has been forced to offer healthier products as consumer habits change, was also been hit by a food contamination scandal in India.

Despite issues in Asia it said sales in China had shown ‘increased momentum towards the end of the year’.

Nestle raised its dividend as expected to 2.25 Swiss francs per share, but did not propose the new share buyback programme some analysts had hoped for.