Nestlé Group announced on Thursday that it is undergoing significant changes in its senior leadership and operational structure.
This development comes as the company revised its full-year sales forecast, following weaker-than-anticipated sales growth over the past nine months.
The packaged food industry has faced persistent challenges in recent years, grappling with rising costs of essential inputs such as sunflower oil, shipping, packaging, grain, and energy.
These cost increases were exacerbated by the COVID-19 pandemic and further intensified by Russia’s full-scale invasion of Ukraine.
With inflation beginning to ease in 2023, many of Nestlé’s competitors have slowed down price hikes to attract consumers who had shifted to more affordable alternatives.
However, Nestlé maintained its pricing strategy for a longer period and also significantly reduced its investment in marketing and innovation, according to analysts.
This strategy contributed to declining sales volumes, and in August, CEO Mark Schneider was replaced following several quarters of underperformance.
This comes after the company lowered its organic sales growth forecast in July to at least three per cent, with expectations for a moderate increase in its UTOP margin from the 17.3 per cent reported in 2023.
“A very painful reset for Nestle, unprecedented in recent history,” Vontobel analyst Jean-Philippe Bertschy said. “It is hard to understand how the company could have expected sales growth of around 4 per cent until July.”
“For a super-tanker like Nestle, the miss in just a few months is enormous.”
New CEO Laurent Freixe said he planned to reduce the size of Nestle’s executive board, merge the company’s Latin America and North America units, and merge its Greater China and Asia, Oceania and Africa businesses, among other changes.
The company last embarked on a restructuring in January 2022, when it was organised into five geographic regions.
Freixe’s challenges include reviving innovation and marketing and winning back investor confidence in core brands, which include Nescafe coffee and Kit-Kat wafer snacks.