Nestlé, the world’s largest food and beverage company, has unveiled an ambitious plan to restore growth and competitiveness under its new CEO, Laurent Freixe. The company’s strategy includes a significant boost to advertising and marketing, a major cost-cutting initiative, and the restructuring of its water and premium beverages segment into a standalone global business.
This overhaul comes as Nestlé seeks to recover from weak sales volume growth and lost market share, which plagued the tenure of its former CEO, Mark Schneider. The company aims to regain momentum in a highly competitive market by focusing on operational efficiency, innovation, and brand reinvigoration.
A New Leadership Vision
Laurent Freixe, a Nestlé veteran with 40 years at the company, took over as CEO in September 2024 after Mark Schneider’s leadership fell short of investor expectations. During Schneider’s tenure, Nestlé’s marketing and innovation efforts were scaled back, particularly during the COVID-19 pandemic, leading to stagnant growth. Freixe is determined to reverse this trend by restoring investments in these critical areas and realigning the company’s strategy for sustainable growth.
Freixe stated, “Our action plan will also improve the way we operate, making us more efficient, responsive, and agile. This will allow us to deliver value for all our stakeholders.”
Reviving Marketing and Innovation
A cornerstone of Nestlé’s new strategy is the commitment to increase advertising and marketing expenditure. By 2025, the company plans to allocate 9% of total sales to advertising and marketing, a level not seen since 2019. This marks a significant jump from the 7.7% spent in 2023, a rise of 80 basis points from the previous year.
Analysts view this move as a vital step to restore brand visibility and compete effectively in an environment where rival brands are capturing consumer attention with aggressive marketing and innovative offerings.
Jean-Philippe Bertschy, an analyst at Vontobel, noted, “It is definitely a first step in the right direction to restore sales growth. The additional cost savings is significant.”
Nestlé also plans to reinvest in its core brands, including Nescafé, KitKat, and Maggi. Freixe has emphasized the importance of revitalizing these flagship products to maintain their relevance and appeal to modern consumers.
Cost-Cutting Measures to Drive Efficiency
To fund its growth ambitions, Nestlé aims to achieve cost savings of at least 2.5 billion Swiss francs ($2.83 billion) by 2027. This is in addition to rolling savings of approximately 1.2 billion Swiss francs. These savings will enable the company to reinvest in innovation and marketing while maintaining a healthy profit margin.
Nestlé forecasts medium-term organic sales growth of over 4% in a stable operating environment, compared to the modest 2% growth expected by the end of 2024. The company has set a target for an underlying trading operating profit margin of 17%.
Restructuring for Focused Growth
One of the most notable changes in Nestlé’s plan is the creation of a standalone global business for its water and premium beverages segment, effective January 1, 2025. This restructuring aims to streamline operations and improve focus on these high-potential categories.
While Nestlé has not explicitly stated plans to divest this segment, analysts speculate that the move could pave the way for a future spin-off or sale. Vontobel’s Bertschy commented, “This is clearly a step to spin it off, maybe to private equity; all options are on the table.”
The approach mirrors a trend among major food and beverage companies to consolidate operations around core brands. Rival Unilever, for instance, recently announced plans to spin off its ice cream business while shedding weaker-performing brands.
Investing in Organic Growth, Not Portfolio Pruning
Despite calls from some quarters for Nestlé to reduce its sprawling portfolio of over 2,000 brands, the company has pushed back against the idea. Both Freixe and Chief Financial Officer Anna Manz have reiterated their focus on fixing underperforming businesses rather than divesting them.
“We don’t have a portfolio problem,” Manz stated, adding that the company is committed to investing in organic growth and revitalizing its existing brands rather than cutting them loose.
The Road Ahead: Challenges and Opportunities
Nestlé’s revamped strategy comes amid broader industry challenges, including inflationary pressures, shifting consumer preferences, and intensifying competition from private labels and emerging brands. Shoppers, particularly in price-sensitive markets, have increasingly turned to cheaper alternatives, forcing legacy players like Nestlé to adapt rapidly.
Freixe’s focus on operational agility and innovation positions the company to address these challenges. By boosting marketing efforts, investing in its core brands, and trimming costs, Nestlé aims to regain its competitive edge and capture a greater share of the global market.
However, the success of these initiatives will depend on their execution. The planned investments in marketing and innovation must yield tangible results in terms of consumer engagement and sales growth. Additionally, the restructuring of the water and premium beverages unit will need careful management to avoid operational disruptions.
A Bold Transformation for Nestlé
Nestlé’s comprehensive plan under CEO Laurent Freixe marks a critical turning point for the company. By balancing cost-cutting measures with increased investments in marketing and innovation, the company is laying the groundwork for long-term growth.
Freixe’s leadership brings renewed focus and energy to Nestlé’s operations, aiming to make the company more agile and responsive in an ever-changing market. While challenges remain, the strategic priorities outlined—reviving core brands, carving out focused business units, and achieving efficiency—reflect a bold vision for the future. Investors and industry watchers alike will closely monitor Nestlé’s progress as it strives to reclaim its position as a leader in the global food and beverage industry.
(Source:www.fortune.com)
This overhaul comes as Nestlé seeks to recover from weak sales volume growth and lost market share, which plagued the tenure of its former CEO, Mark Schneider. The company aims to regain momentum in a highly competitive market by focusing on operational efficiency, innovation, and brand reinvigoration.
A New Leadership Vision
Laurent Freixe, a Nestlé veteran with 40 years at the company, took over as CEO in September 2024 after Mark Schneider’s leadership fell short of investor expectations. During Schneider’s tenure, Nestlé’s marketing and innovation efforts were scaled back, particularly during the COVID-19 pandemic, leading to stagnant growth. Freixe is determined to reverse this trend by restoring investments in these critical areas and realigning the company’s strategy for sustainable growth.
Freixe stated, “Our action plan will also improve the way we operate, making us more efficient, responsive, and agile. This will allow us to deliver value for all our stakeholders.”
Reviving Marketing and Innovation
A cornerstone of Nestlé’s new strategy is the commitment to increase advertising and marketing expenditure. By 2025, the company plans to allocate 9% of total sales to advertising and marketing, a level not seen since 2019. This marks a significant jump from the 7.7% spent in 2023, a rise of 80 basis points from the previous year.
Analysts view this move as a vital step to restore brand visibility and compete effectively in an environment where rival brands are capturing consumer attention with aggressive marketing and innovative offerings.
Jean-Philippe Bertschy, an analyst at Vontobel, noted, “It is definitely a first step in the right direction to restore sales growth. The additional cost savings is significant.”
Nestlé also plans to reinvest in its core brands, including Nescafé, KitKat, and Maggi. Freixe has emphasized the importance of revitalizing these flagship products to maintain their relevance and appeal to modern consumers.
Cost-Cutting Measures to Drive Efficiency
To fund its growth ambitions, Nestlé aims to achieve cost savings of at least 2.5 billion Swiss francs ($2.83 billion) by 2027. This is in addition to rolling savings of approximately 1.2 billion Swiss francs. These savings will enable the company to reinvest in innovation and marketing while maintaining a healthy profit margin.
Nestlé forecasts medium-term organic sales growth of over 4% in a stable operating environment, compared to the modest 2% growth expected by the end of 2024. The company has set a target for an underlying trading operating profit margin of 17%.
Restructuring for Focused Growth
One of the most notable changes in Nestlé’s plan is the creation of a standalone global business for its water and premium beverages segment, effective January 1, 2025. This restructuring aims to streamline operations and improve focus on these high-potential categories.
While Nestlé has not explicitly stated plans to divest this segment, analysts speculate that the move could pave the way for a future spin-off or sale. Vontobel’s Bertschy commented, “This is clearly a step to spin it off, maybe to private equity; all options are on the table.”
The approach mirrors a trend among major food and beverage companies to consolidate operations around core brands. Rival Unilever, for instance, recently announced plans to spin off its ice cream business while shedding weaker-performing brands.
Investing in Organic Growth, Not Portfolio Pruning
Despite calls from some quarters for Nestlé to reduce its sprawling portfolio of over 2,000 brands, the company has pushed back against the idea. Both Freixe and Chief Financial Officer Anna Manz have reiterated their focus on fixing underperforming businesses rather than divesting them.
“We don’t have a portfolio problem,” Manz stated, adding that the company is committed to investing in organic growth and revitalizing its existing brands rather than cutting them loose.
The Road Ahead: Challenges and Opportunities
Nestlé’s revamped strategy comes amid broader industry challenges, including inflationary pressures, shifting consumer preferences, and intensifying competition from private labels and emerging brands. Shoppers, particularly in price-sensitive markets, have increasingly turned to cheaper alternatives, forcing legacy players like Nestlé to adapt rapidly.
Freixe’s focus on operational agility and innovation positions the company to address these challenges. By boosting marketing efforts, investing in its core brands, and trimming costs, Nestlé aims to regain its competitive edge and capture a greater share of the global market.
However, the success of these initiatives will depend on their execution. The planned investments in marketing and innovation must yield tangible results in terms of consumer engagement and sales growth. Additionally, the restructuring of the water and premium beverages unit will need careful management to avoid operational disruptions.
A Bold Transformation for Nestlé
Nestlé’s comprehensive plan under CEO Laurent Freixe marks a critical turning point for the company. By balancing cost-cutting measures with increased investments in marketing and innovation, the company is laying the groundwork for long-term growth.
Freixe’s leadership brings renewed focus and energy to Nestlé’s operations, aiming to make the company more agile and responsive in an ever-changing market. While challenges remain, the strategic priorities outlined—reviving core brands, carving out focused business units, and achieving efficiency—reflect a bold vision for the future. Investors and industry watchers alike will closely monitor Nestlé’s progress as it strives to reclaim its position as a leader in the global food and beverage industry.
(Source:www.fortune.com)
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