The new boss of Nestlé wants to tackle the complexity of the company in order to restart growth and profitability. Brands in difficulty must be relaunched and activities in drinks and mineral water grouped into a separate unit.
“There is a lot to do, but I am confident,” said Frenchman Laurent Freixe on Tuesday in Vevey, at the headquarters of the multinational, adding in front of an audience of analysts that he wanted to “do better with less”.
Nestlé files 400 patents and launches a thousand innovations each year, a figure that must be halved. “We want to focus on less innovation (…), we are determined to spend better,” he insisted.
In the immediate future, the producer of Nespresso coffee capsules, San Pellegrino mineral water and Kitkat chocolate bars wants to tighten its belt, planning to make savings of at least 2.5 billion francs. by the end of 2027, in addition to previous cost reduction initiatives of 1 billion per year.
Mr. Freixe, who took charge of the group at the beginning of September replacing Mark Schneider, assured that these cost reductions will be reinvested in the business, strengthening successful brands and seeking new areas of growth. A significant portion of cost reductions must come from procurement.
Asked about possible job cuts, the boss indicated that these measures will not be accompanied by “significant restructuring”.
“We do not have a problem with our portfolio (of brands), we can do more to push growth, protect and strengthen our market share,” stressed financial director Anna Manz, warning however that this “will take time “. To bounce back growth, the group wants to return to pre-Covid levels in terms of investments, she insisted.
Advertising and marketing spending will thus be increased by up to 9% of sales by the end of next year, in order to support growth. “The necessary resources will be generated through cost savings and growth leverage,” the company detailed.
Nestlé also wants to take control of low-performing activities, which the group largely wants to “repair rather than sell”, according to Laurent Freixe. Among the businesses in difficulty, he cited the Creamers and Frozen Food units in the United States, Nespresso in Western Europe and Waters.
Activities with waters (San Pellegrino, Perrier, Nestlé Purelife, Henniez and Vittel in particular) and high-end drinks will be grouped together in a separate unit, whose headquarters will be in Paris. Muriel Lienau, who heads the Nestlé Waters unit in Europe, will have responsibility from the start of 2025. “We will explore partnerships and all options,” continued the CEO.
For the latter, the slowdown in growth “is not structural, the fundamentals are healthy”.
Make your mark
These measures should make it possible to revive the growth and profitability of the world number one food company. Nestlé confirmed that it anticipates organic sales growth of around 2% for the entire current financial year, after 7.2% in 2023 and 8.3% in 2022. At the end of July, the group lowered this objective to “at least 3%”, compared to 4% previously.
The recurring operating margin should rise to around 17.0%, compared to 17.3% in 2023 and 17.1% the previous year, while recurring earnings per share should remain stable over one year.
In 2025, the group expects an improvement in unspecified organic growth, accompanied by a “moderate” decline in recurring current operating profitability.
In the medium term, the company targets organic revenue of at least 4% and an underlying operating margin of at least 17%.
“The new general director Laurent Freixe has made his mark with a clear project and financial objectives,” underlined Vontobel analyst Jean-Philippe Bertschy. “What still seemed impossible at the start of the year is now possible under new leadership,” added the expert.
“No big surprise,” said Andreas von Arx, of Baader Helvea, stressing that “Nestlé believes that by returning to its ‘old ways’ it will improve” interest in an investment.
On the Swiss Stock Exchange, investors pocketed their profits. Around 2:10 p.m., Nestlé shares fell 2.3% to 76.42 francs, in a flagship SMI index down 1.04%.
This article was automatically published. Sources: ats/awp
