The perfect storm for Nestlé: can the company get out of the crisis

September for Nestlé began with a change of management, the company fired CEO Laurent Freixet. The 63-year-old Frenchman started working at Nestlé 40 years ago in marketing positions and then rose to the top management position. The reason for the dismissal was Freixet's relationship with his subordinate, which according to the company's business code is unacceptable, the press release said. The adultery became known through the internal communication channel Speak Up, through which employees can report violations, writes Reuters.

Freische was fired without any payout; no "golden parachute" was provided by the company, which is unusual for such cases, Fortune writes.

The CEO position was taken by Philippe Navratil, who headed Nespresso's coffee division. Freische has only been in his position for a year, before that the company was led by Mark Schneider since 2017, he was fired in August 2024, Reuters wrote.

But it's not all reshuffling within Nestlé: Paul Boulke - he and lead independent director Pablo Isla oversaw the internal investigation into Freische - will step down as head of the board in April 2026. Isla will take his place. Reuters cites among the reasons for the departure of Bulcke, who was also previously Nestlé's CEO, the loss of investor support amid falling sales and stock prices, as well as loyalty to previous CEO Schneider during the failed attempts at a post-pandemic recovery. Bulcke had worked at Nestlé for 50 years and rose from marketing intern to the very top.

This is the second time in 12 months that Nestlé's board has appointed a CEO on an emergency basis instead of conducting a thorough search for a replacement under an interim leader, JPMorgan said in a note issued in early September. The loss of two CEOs and a chairman in one year is of historic proportions for Nestlé, said Ingo Speich, head of corporate governance and sustainability at Deka, one of Nestlé's top-30 investors. Reuters writes that the reshuffle has plunged the Swiss food giant into its deepest leadership chaos in decades.

Regardless of the moral component of Laurent Freixet's dismissal, the problem is that neither he nor his predecessor Mark Schneider have been able to lead Nestlé out of the crisis it has been in for several years. Nestlé shares on the Swiss stock exchange have lost a third of their value over the past five years.

Mark Schneider in 2017 became the first outside person in Nestlé's history to lead the company. He has seen the company's efficiency improve - its operating margin rose from 16.5% to 17.3% in the seven years to 2023. Competitors PepsiCo and Unilever failed to do so, Reuters wrote

Nestlé shares rose more than 20% in the first two years of the pandemic as consumers bought up its products due to the looming uncertainty, The Telegraph writes.

For 2022, Nestlé reported sales growth of 8.4% to CHF 94.4 billion. Organic growth (excluding mergers and acquisitions and exchange rate fluctuations) amounted to 8.3%. Net profit, meanwhile, plummeted 45.2% to 9.3 billion francs.

The boom was followed by a downturn. The Telegraph points out that the company faced difficulties primarily due to rising prices for everything from fuel to ingredients. Nestlé responded by raising prices and reducing the volume of packaging for some products - the shrinkflation effect.

Already for 2023, the company reported a 1.5% decline in sales to 93 billion Swiss francs. Organic growth amounted to 7.2%, less than a year earlier, mainly due to price increases, while actual sales declined slightly (by 0.3%).

In 2024, sales fell 1.8% to 93.4 billion francs - coupled with a dramatic decline in organic growth, it was just 2.2%.

The situation was exacerbated by rising raw material prices. Nestlé's two main commodities - coffee and cocoa - reached record levels in 2024.

Another blow to the business of one of the world's largest manufacturers of sweets and chocolates has come from the "Ozempic" revolution and the general craze for healthy eating.

Nestlé has been actively trying to adapt to the new reality - last year, for example, it launched the Vital Pursuit product line for consumers of GLP-1-based products (Ozempic and others). The products are enriched with protein, fiber and vitamins, and their portions correspond to the appetite of a person taking weight-loss drugs. Nestlé is also developing its Health Science division, which deals with nutritional supplements - its sales fell by 0.4% (to CHF 3.2 billion) in the first half of 2025.

When Freische took the helm in 2024, Barclays analysts wrote about the state of the company's affairs: "Nestlé relaxed during the COVID-19 pandemic (like many other companies in the food industry) and should have done a better job of strengthening its brands. High prices masked the flaws for a while, but as they declined, market share problems became more apparent."

Freische promised to emphasize organic growth and the "six big bets". He decided not to spread across all 2,000 brands of the company, but to focus on the growth of a few segments. These include NAN Sinergity infant formula, Nescafé Espresso concentrate, Maggi stir-fry seasonings, Nestlé Choco Trio cookies, Purina Gourmet Revelations cat food and Nescafé Dolce Gusto Neo home coffee machines. The company also identified 18 key "lagging" categories (including, for example, Milo chocolate-flavored malt powder and frozen foods) and began working to remedy them.

In its latest report, the company wrote that total sales in the "six big bets" exceeded CHF 200 million in the first half of 2025. The gap with the market in the 18 lagging categories has narrowed by a third, Nestlé CFO Anne Manz said in early September.

Nestlé has also rolled out its Fuel for Growth cost-saving program, which aims to save CHF 2.5 billion by the end of 2027. In its Q1 2025 report, the company said it is implementing the program mainly through procurement savings and efficiency improvements.

In addition, the company is reducing production in the EU. For example, by mid-2026, Nestlé will close the plant in Neuss, Germany, which produced products under the Thomy brand. There are also plans to cut back at plants in the English city of York, the Czech town of Krupka and production facilities in France.

Nestlé launched a review of its vitamin business in July and said it did not rule out selling several brands as sales in the first half of the year fell short of expectations, Reuters wrote. The vitamin business generates about 1 billion Swiss francs in annual revenue.

Nestlé said in a release about the appointment of new CEO Philippe Navratil that he has no plans to change strategy. But that's exactly what disappointed investment analysts, Investing.com wrote. CFO Anne Manz suggested that Navratil is unlikely to discuss strategy until Nestlé releases its third-quarter results on Oct. 16.

While the new CEO has said he "fully supports" the company's strategy and action plan, many long-term investors will likely need to hear more from someone who is relatively unknown to the market before they will tune in more positively, Deutsche Bank analysts wrote in early September.

JPMorgan analysts also wrote about the new CEO's limitations: "We are disappointed that the new CEO is so far 'locked in' to his predecessor's strategy when the market doubts its performance," they wrote.

JPMorgan notes that the company has risks to its plans for this year, which could limit the stock's momentum. In addition, they believe Nestlé is likely to face headwinds to gross margin improvement as prices for its key raw materials - coffee and cocoa - have risen.

The average target price for Nestlé shares, according to Yahoo Finance, is 86.1 francs. This is almost 17% higher than the closing price on August 11. Out of 22 analysts, the majority (12) recommend holding the company's shares.

This article was AI-translated and verified by a human editor