Nestle will cut 16,000 jobs, new CEO Philipp Navratil said on Thursday, as the world’s largest packaged food company seeks to cut costs and win back investor confidence.
The jobs being cut represent 5.8% of Nestle’s around 277,000 employees. Navratil said Nestle had raised its cost savings target to 3 billion Swiss francs ($3.77 billion) from 2.5 billion francs by the end of 2027.
U.S. import tariffs are a headwind for Nestle, despite the bulk of the company’s U.S. sales being manufactured locally, while food producers across the board are grappling with fragile consumer confidence and changing habits as people seek to eat more healthily.
“The world is changing, and Nestle needs to change faster,” Navratil said.
UNPRECEDENTED MANAGEMENT TURMOIL
Nestle, whose shares leapt by around 8% in early trading, has experienced an unprecedented period of managerial turmoil, with Navratil replacing Laurent Freixe, who was fired in September as chief executive over an undisclosed relationship with a direct report.
Chairman Paul Bulcke then stepped down early to make way for former Inditex chief Pablo Isla two weeks later.
Navratil said the 12,000 white-collar job cuts over the next two years, in addition to a further 4,000 headcount reduction as part of ongoing initiatives in manufacturing and the supply chain, were part of an efficiency push.
‘FUEL TO THE TURNAROUND FIRE’
The Swiss maker of KitKat chocolate bars, Nespresso coffee and Maggi seasoning has been fighting to reverse stalling sales growth and arrest a share price slide as it battles U.S. import tariffs, while costs have risen and debt levels have climbed, increasing pressure from investors.
Nestle’s quarterly results “add fuel to the turnaround fire,” Bernstein analysts wrote in a note, naming the headcount reduction as a “significant surprise”.
A 1.5% rise in real internal growth – a measure of sales volumes – in the third quarter, well above analysts’ expectations of a 0.3% rise, may offer Navratil breathing space as he looks to make his mark following his sudden promotion.
Navratil said driving RIG-led growth was Nestle’s highest priority.
“We are fostering a culture that embraces a performance mindset, that does not accept losing market share, and where winning is rewarded,” Navratil said.
Strategic reviews of Nestle’s waters and premium beverages business and low-growth, low-margin vitamins and supplements brands are ongoing, the company said.
NESTLE LEAVES 2025 GUIDANCE UNCHANGED
The Swiss company maintained its 2025 outlook. It said organic sales growth should improve compared to 2024 and predicted the underlying trading operating profit margin, which excludes certain non-recurrent expenses, at, or above, 16%. For the medium-term, the forecast is at least 17%.
The margin forecasts include the higher U.S. import tariffs on Swiss goods of 39%, that came into effect in August, Nestle said.
The bulk of the 3 billion Swiss francs in cost savings is due to come in 2026-27, Nestle said, with 700 million Swiss francs in savings expected in 2025 as a whole.
Organic sales, which exclude the impact of currency movement and acquisitions, rose 4.3% in the quarter, Nestle said, above analysts’ estimates for 3.7% growth.
Quarterly sales growth was driven by pricing-led upticks in coffee and confectionery, but Greater China was a drag.
CFO Anna Manz said Nestle had been too focused on driving distribution across China and not enough on building consumer demand.
“So what you see in China is us correcting that and actually to consolidate our distribution and make it more efficient, while we build this consumer demand.”
($1 = 0.7955 Swiss francs)
—Alexander Marrow, Reuters