The food company is growing, but not as much as expected. The stock market reacts with uncertainty.
All eyes are on him: Laurent Freixe took over the management of Nestlé in September.
Edgard Garrido / Reuters
A visit from the boss is a rather rare phenomenon for the staff of the Nestlé food company. But that is exactly what is said to have happened in the past few weeks. According to reports, the new CEO Laurent Freixe traveled to various Nestlé branches to pick up the employees, as the saying goes.
This is well received internally: Freixe is a popular boss. He is considered a Nestlé man with Nestlé DNA who speaks the Nestlé language. But how do you look at the struggling food multinational from the outside?
On Thursday, Nestlé presented the figures for the first nine months of 2024. And once again expectations were disappointed: Nestlé grew by 2 percent on its own, but three quarters of this was price increases. Analysts had also hoped for organic growth of 2.5 percent. In total, Nestlé had sales of 67.1 billion francs in the first nine months.
This means that the company can no longer achieve its previous growth targets for the 2024 financial year. Back in July, the then boss Mark Schneider had to reduce the forecast value from 4 to 3 percent. Now there is another adjustment, down to 2 percent. The operating profit margin falls to 17 percent (2023: 17.3).
“Consumer demand has weakened in recent months and we expect the environment to remain subdued,” CEO Laurent Freixe is quoted in the statement. For most consumers, food prices are still high – despite falling inflation, Freixe later explained in a call with analysts. “We have to invest more heavily again in order to gain market share.”
Share price behaves volatile
The stock markets initially reacted with uncertainty to the latest figures. The share fell by more than 2 percent shortly after trading started on Thursday and was quoted below 82 francs for a short time. However, it recovered over the course of the morning and was even one of the biggest winners in the SMI.
In view of the latest figures, Jean-Philippe Bertschy from Bank Vontobel speaks of a “very painful setback for Nestlé, which is unprecedented in recent history”. It is difficult to understand how the company could have expected sales growth of 4 percent by July and now had to downgrade this expectation so much. “For an industry giant like Nestlé, this misconduct in just a few months is enormous.” Bertschy also asks whether Nestlé has now reached its lowest point.
Things have been going haywire at Nestlé for a long time. The share price has remained just above the 80 franc mark for months. The turbulence led to the sacking of then-boss Mark Schneider at the end of August. Now a long-time Nestlé man, Laurent Freixe, is supposed to take care of things.
Freixe’s announcements remain vague
Freixe has been working for the company for 38 years and during this time, among other things, he managed the most important regions of America and Europe. It is said in many places that no one in the company has as much operational experience as he does.
So far, Freixe has only vaguely explained how he wants to get Nestlé back on track. When he took office, he declared that he wanted to go “forward to basics”. Translated, this means that Nestlé wants to return to its old strengths. According to Freixe, this includes regaining market share, strong marketing and a focus on customers. He confirmed these goals again on Thursday.
Freixe is likely to announce something specific on Capital Markets Day in November. Of particular interest is the question of how the group plans to deal with the bad investments of the past few years and what it intends to do in the area of poorly performing divisions such as water and frozen food.
Nespresso boss new to the group management
Nestlé also announced on Thursday that it would restructure its corporate management. Freixe plans to reduce the size of the committee by abolishing the additional zones that were created just a few years ago. The Latin America and North America zones will be merged. Likewise, the Greater China zone will again become part of the Asia, Oceania and Africa (AOA) zone. In addition, Nespresso boss Philipp Navratil will join the group management and will now report directly to the CEO.
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