Nestlé Outlines Strategy for Growth amid Challenges

Nestlé SA is undertaking a strategic overhaul to address underperformance and adapt to challenging macroeconomic conditions, company executives revealed during the Nov. 19 investor day presentation. While targeting a 4% organic sales growth in a stable environment, Nestlé’s leadership acknowledged that achieving this goal will take time and require significant changes.

Anna Manz, Chief Financial Officer, highlighted three key hurdles: slowing food and beverage sector growth, inventory reductions by retailers impacting growth by 30 basis points, and a 100-basis-point drag from market share losses. “Consumer hesitancy toward global brands, partly linked to geopolitical tensions, and broader competitiveness issues account for this growth drag,” Manz explained, adding that changes in consumer behaviour typically take 18 to 24 months to materialize.

Nestlé is focusing on revitalizing underperforming areas of its business. While solutions for capacity constraints in creamers are underway, addressing challenges in the European coffee and U.S. pizza segments will require more time and complexity. “We’re being systematic in diagnosing underperformance and swiftly implementing targeted action plans,” said Laurent Freixe, Chief Executive Officer. “In most cases, we aim to fix rather than sell these businesses.” Manz echoed this sentiment, stating that the company is confident in its category growth potential of 3% to 4%, emphasizing the need for consumer-led insights, innovation, and better execution to regain market share.

Nestlé also announced plans to transition its water business, which includes brands like Arrowhead, Perrier, and Pure Life, into a standalone entity under the leadership of Muriel Lienau, Head of Nestlé Waters Europe. This move may involve exploring partnerships to drive performance, as successfully done in other segments. “This structure will enable us to focus on strengthening our leading water brands,” Freixe said.

To support growth and turnaround efforts, Nestlé aims to generate cost savings of 2.5 billion Swiss francs ($2.8 billion) by 2027. Details of the cost-saving initiatives will be shared with the release of the company’s full-year financial results. Additionally, Nestlé plans to overhaul its resource allocation strategy, prioritizing investments in areas with the greatest growth potential. “Future investments will no longer depend solely on previous allocations but will target the most promising opportunities,” Manz stated.

Nestlé’s management is confident in its ability to drive growth through innovation, category acceleration, and a renewed focus on execution. While acknowledging the time needed to implement these changes, Manz expressed optimism: “We have a clear roadmap and are embedding a new level of rigour that will yield long-term impact.” With these strategic shifts, Nestlé aims to strengthen its market position and navigate the complexities of a rapidly evolving global market.

Leave a Reply

Your email address will not be published. Required fields are marked *