Nestlé is overhauling its business to drill down on its fastest-growing brands, eliminate its underperforming water unit and cut costs by $2.8 billion by 2027.
The moves were announced by Nestlé’s 80-day CEO, Laurent Fraix. Frakes said in a Capital Markets Day presentation on Tuesday that he aims to “accelerate Nestlé” and make growth the focus of his investments in the coming years.
Frakes, who has been with the consumer giant for nearly 40 years, emphasized the Swiss company’s “less is more” approach — from its innovation to where it invests. The company owns 31 brands with “billionaire” status, as they bring in annual sales of 1 billion Swiss francs.
Freixe says his plan with Nestlé is to “build on our existing winners” by focusing on these billionaire brands.
“Growth is fundamental,” the CEO said at Nestlé’s headquarters in Vevey, Switzerland.
To that end, Nestlé is making big changes, including increasing advertising and marketing spending to 9% of total sales by next year, bringing spending back to pre-pandemic levels. It will also spin off its bottled water business, which includes brands such as San Pellegrino and Perrier.
Overall, the company will cut costs by $2.8 billion by 2027.
Nestlé’s business has been battered since the pandemic, as it has raised prices in response to inflation amid reduced consumer spending. The company has underperformed rivals such as Danone and Unilever, undercutting growth forecasts and struggling in a competitive consumer market.
Nestlé’s sales suffered due to boycotts in some Middle Eastern markets, which eventually led to the ouster of former chief Mark Schneider.
Frakes lowered the company’s organic sales growth target for this year to about 2% — the slowest annual rate in at least two decades.
Nestlé shares are down more than 22% since the start of the year.
Still, Nestlé has many strengths in its broad portfolio in 188 countries, including Nespresso, Maggi, KitKat and Purina.
“Neslé has underinvested in the demand generation sector over the years, which is not the best idea to drive growth and market share. That is changing,” Frakes told investors.
The CEO predicted that the pet care and snack businesses will also have huge potential in the coming years, as will the health and wellness category, which caters to the nutritional needs of longevity and weight loss. does Nestlé has insisted it can offset the boom in slimming drugs with health supplements, creating products dedicated to people taking weight-loss drugs.
According to Reuters, Vontobel analyst Jean-Philippe Bertschy said several steps to improve Nestlé’s business are “definitely the first step in the right direction for a recovery in sales growth.” “Additional cost savings are significant.”
