Nestle is undergoing significant changes in its senior leadership and organizational structure as it grapples with weaker-than-expected sales growth. The Swiss food giant, famous for brands like Nescafe and Maggi, announced the revamp following a cut in its full-year sales forecast due to disappointing nine-month results.
Nestle's newly appointed CEO, Laurent Freixe, who took over in September, is spearheading the restructuring. Among his planned changes are reducing the size of the executive board, merging the company’s operations in North America and Latin America, and consolidating its Greater China unit with the Asia, Oceania, and Africa divisions. These moves reflect his intention to streamline operations and respond more effectively to evolving market conditions.
Freixe’s leadership comes at a pivotal moment for the company. Nestle’s revised outlook for 2024 now projects organic sales growth of around 2%, a downward revision from the previously forecasted growth of at least 3%. This shift in expectations stems from slower consumer demand and challenges in key markets. The company also anticipates an underlying trading operating profit (UTOP) margin of 17%, down from the 17.3% margin recorded in 2023.
The announcement of the structural overhaul came alongside disappointing sales figures. Nestle reported that organic sales—excluding currency fluctuations and acquisitions—grew by only 2% for the first nine months of 2024. This fell short of analysts' expectations of 2.5% growth. Real internal growth, a measure of sales volume, rose just 0.5%, compared to the anticipated 0.8%.
The weakened consumer demand has played a central role in Nestle's softer performance, especially in regions like Latin America where economic instability has reduced consumer purchasing power. Freixe acknowledged the challenging environment, noting, "Consumer demand has weakened in recent months, and we expect the demand environment to remain soft." The sluggish demand has also affected retailers and distributors, who have been reducing their stock levels due to declining sales.
In comparison, Nestle's competitors, such as Unilever, are expected to report stronger performance. Unilever is forecasted to announce a 1% increase in third-quarter underlying prices and a 3.2% growth in sales volumes, according to a company-provided consensus. Nestle’s Chief Financial Officer, Anna Manz, highlighted the disparity, explaining that input cost dynamics for competitors like Unilever are more favorable. Nestle, on the other hand, is facing rising costs for key commodities like coffee and cocoa, which have both hit record highs in recent years.
Nestle's price increases of 1.6% for the nine-month period fell slightly below analysts' expectations of 1.7%, further contributing to the underperformance. This slower price growth, combined with weaker volumes, has put pressure on Nestle to adjust its strategy and look for ways to improve efficiency.
Despite the current challenges, Freixe’s leadership and organizational changes may position Nestle for a stronger recovery in the future. By consolidating its operations and reducing complexity, the company aims to adapt more nimbly to global economic shifts and the evolving demands of consumers. As Nestle navigates through this period of transition, the success of these strategic changes will be crucial in determining its ability to regain momentum in a competitive market.
(Source:www.business-standard.com)
Nestle's newly appointed CEO, Laurent Freixe, who took over in September, is spearheading the restructuring. Among his planned changes are reducing the size of the executive board, merging the company’s operations in North America and Latin America, and consolidating its Greater China unit with the Asia, Oceania, and Africa divisions. These moves reflect his intention to streamline operations and respond more effectively to evolving market conditions.
Freixe’s leadership comes at a pivotal moment for the company. Nestle’s revised outlook for 2024 now projects organic sales growth of around 2%, a downward revision from the previously forecasted growth of at least 3%. This shift in expectations stems from slower consumer demand and challenges in key markets. The company also anticipates an underlying trading operating profit (UTOP) margin of 17%, down from the 17.3% margin recorded in 2023.
The announcement of the structural overhaul came alongside disappointing sales figures. Nestle reported that organic sales—excluding currency fluctuations and acquisitions—grew by only 2% for the first nine months of 2024. This fell short of analysts' expectations of 2.5% growth. Real internal growth, a measure of sales volume, rose just 0.5%, compared to the anticipated 0.8%.
The weakened consumer demand has played a central role in Nestle's softer performance, especially in regions like Latin America where economic instability has reduced consumer purchasing power. Freixe acknowledged the challenging environment, noting, "Consumer demand has weakened in recent months, and we expect the demand environment to remain soft." The sluggish demand has also affected retailers and distributors, who have been reducing their stock levels due to declining sales.
In comparison, Nestle's competitors, such as Unilever, are expected to report stronger performance. Unilever is forecasted to announce a 1% increase in third-quarter underlying prices and a 3.2% growth in sales volumes, according to a company-provided consensus. Nestle’s Chief Financial Officer, Anna Manz, highlighted the disparity, explaining that input cost dynamics for competitors like Unilever are more favorable. Nestle, on the other hand, is facing rising costs for key commodities like coffee and cocoa, which have both hit record highs in recent years.
Nestle's price increases of 1.6% for the nine-month period fell slightly below analysts' expectations of 1.7%, further contributing to the underperformance. This slower price growth, combined with weaker volumes, has put pressure on Nestle to adjust its strategy and look for ways to improve efficiency.
Despite the current challenges, Freixe’s leadership and organizational changes may position Nestle for a stronger recovery in the future. By consolidating its operations and reducing complexity, the company aims to adapt more nimbly to global economic shifts and the evolving demands of consumers. As Nestle navigates through this period of transition, the success of these strategic changes will be crucial in determining its ability to regain momentum in a competitive market.
(Source:www.business-standard.com)
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