What's going on?

Nestl�, the world�s biggest food company, saw its shares fall almost 3% on Thursday after it said that its sales in 2017 grew at their slowest pace in at least 20 years. It�s just one of many big packaged foods makers struggling to adapt to consumers� changing tastes.

What does this mean?

The Swiss company claims that it�s �moving in the same direction as consumers� as it buys up fast-growing brands like Blue Bottle Coffee and focuses on fresher, healthier food options � but its declining revenue growth suggests that the turnaround is taking a while. This was the first major set of results for Nestl�s new CEO, but last year�s weak sales and, crucially, tepid guidance for this year are already testing investors� patience. Meanwhile, Nestl�s management is under pressure from a major activist investor to do better � which will ensure scrutiny of its performance remains high.

Why should I care?

The bigger picture: Producers of �consumer staples� (like packaged foods) are getting squeezed on both sides.

While Amazon makes it harder for retailers to raise their prices, the prices of many commodities have increased in recent years � making it more expensive to produce staples, but harder to increase revenue. This has squeezed margins in the industry. Interestingly, Nestl� was actually able to protect its margins last year, but that was partly thanks to a slashing of marketing budgets (which won�t help future sales).


For markets: Shares of consumer staples companies have massively underperformed over the past year.


Stock prices of consumer staples companies are down over the past year, while the overall market is up more than 20% [tweet this] (the data is based on US companies, although the trend is global). Every company is essentially trying to do the same thing � acquire fast-growing brands and focus on healthier products � but it�s tough to turn around a supertanker as rapidly as consumer tastes have changed.