Product and price must be right before investment in advertising

Nestlé has stressed the importance of “addressing [its] issues in the right order” as it pledges to increase marketing spend to support growth.

The consumer goods business, which owns brands including Nescafé, KitKat and Purina, has pledged to step up the percentage of revenue it invests into advertising and promotion going forward to fuel growth. This is being done under the leadership of CEO Laurent Freixe, who took over at the helm of the business in August 2024.

Speaking to investors today (13 February), Freixe was keen to stress he wasn’t just investing behind the communications lever.

“It is important to address the issues in the right order. For instance, there is no point in increasing marketing spend behind a product without taste preference or where we have the wrong pricing,” he said.

The business is aiming to increase advertising and promotional spend to 9% as a percentage of revenue by the end of this year. This would recover it to the same level as it was back in 2019. In the second half of 2022, this fell to a low of 6.6%. In 2024, this figure was 8.1%.

Investment will be focused behind the most attractive opportunities and where we have robust execution plans.

Laurent Freixe, Nestlé

Freixe was asked by an investor why the company had not further increased advertising and promotional spend last year, given its intention. He stressed that communications is just one area of investment for growth, and that in some areas of its business, Nestlé is focused on optimising product, price and distribution before it invests in promotion.

He stressed that while communications are the most “visible” element of investment, it is not the only growth lever that it is spending behind.

“Investment will be focused behind the most attractive opportunities and where we have robust execution plans,” he said.

Innovation, as well as renovation of existing products, will be one key focus for investment for the business. Under its new leadership Nestlé is taking an innovation approach similar to its consumer goods rival, Unilever.

‘Growth requires investment’: New Nestlé CEO commits to upping marketing spend

Over the past 18 months, the Hellmann’s owner has repeatedly talked about its determination to focus on “fewer, bigger innovations”. Today, Nestlé’s Freixe struck a very similar tone.

“On the innovation, you know that we put the focus on the innovation big bets,” he said.

Reporting its overall 2024 results today, Nestlé said it had achieved “a solid performance” amid a “soft consumer environment”.  The business’s measure of volume growth is its real internal growth (RIG) measure. It returned to real internal growth of 0.8% in 2024, versus a decline of 0.3% in 2023.

Organic growth was 2.2%, versus 7.2% in 2023. Despite increased volumes, a lower rate of organic growth came as rises in pricing moderated. Nestlé increased pricing by 1.5% in 2024, versus an increase of 7.5% in 2023.