Nestle S.A. has indicated that it is working to manage pricing as U.S. consumers, focused on product affordability, are increasingly opting for larger or more economical pack sizes while avoiding mid-sized options.
Executives at the maker of KitKat chocolate and Nescafe coffee noted that consumers feeling the pinch from inflation are choosing either smaller portion sizes or extra-large, bulk packages.
David Rennie, Nestle's Head of Marketing and Sales, stated that the value-for-money proposition of larger packs is particularly appealing at present. He added that while demand for everyday snacks remains, there is greater interest in smaller pack sizes. Mid-sized products, meanwhile, are being overlooked.
"During tough times, purchasing behavior polarizes. The middle is always the part that gets squeezed," Rennie said in an interview.
Rennie noted that there is not a single market globally where consumers are not feeling financially constrained.
Consumer goods brands are experimenting with different pack formats to retain budget-conscious shoppers, hoping that a broader range of products on store shelves can help revive sales growth, which has recently been under pressure.
Companies like PepsiCo, Campbell's, and Mondelez International have all increased their offerings of smaller, lower-priced product options.
Jeff Hamilton, CEO of Nestle's Americas business, explained that in the U.S., this polarized buying behavior has emerged against a backdrop of growing focus on affordability over the past six months.
"We are definitely seeing pressure on personal spending in the U.S. It has become even more pronounced over the last few months," Hamilton said in an interview.
He stated that the Swiss giant has been adjusting its product mix, pricing, and pack size range to cater to pressured consumers while ensuring the company is positioned for volume growth.
Hamilton added that Nestle's focus is on increasing sales volume—what it terms 'real internal growth'—rather than raising prices.
Taking Nestle's coffee business as an example, consumer prices may depend on the volatile commodity, according to its head, Axel Touzet, who spoke this week. As cocoa bean prices fluctuate, the business will adjust prices up or down based on its costs, while working to manage pricing and offering lower-priced products like instant coffee.
Volume growth is also a key focus for analysts ahead of Nestle's half-year results, due later this month. A major question will be whether the company can achieve its volume targets, wrote Barclays analyst Warren Ackerman in a report.
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