In his first major announcement since becoming Nestlé’s CEO, Philipp Navratil has stamped his mark with a plan to cut 16,000 jobs.
The reductions will be implemented over the next two years – 12,000 white-collar workers across the group, and 4,000 in manufacturing and within the supply chain, the world’s largest food manufacturer said in its nine-month results presentation today (16 October).
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Commenting on the cuts, Navratil said: “The world is changing and Nestlé needs to change faster. This will include making hard but necessary decisions to reduce headcount over the next two years.”
The Nestlé veteran of 20 years, who took on the CEO role in September after the sacking of Laurent Freixe, laid out a couple of priorities for his forward-looking strategy.
While driving improvements in real internal growth (RIG) – a key Nestlé metric that strips out the effect from pricing on the organic numbers – is front and centre of the plan, the headcount reductions are aimed at cost savings.
Those reductions will boost annual savings to SFr1bn ($1.3bn) by the end of 2027, up from a previous target of SFr500m as part of the so-called fuel-for-growth strategy already in place at Nestlé.
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By GlobalDataHowever, the job cuts will also incur costs for the business, put at “two times annual savings” on a one-off basis.
Navratil outlined the plans: “Driving RIG-led growth is our number one priority. We have been stepping up investment to achieve this and the results are starting to come through. Now we must do more and move faster to accelerate our growth momentum.
“As Nestlé moves forward, we will be rigorous in our approach to resource allocation, prioritising the opportunities and businesses with the highest potential returns.”
Nestlé delivered a nine-month RIG result of 0.6% with a pricing component of 2.8%. Organic growth was 3.3% but reported sales fell 1.9% to SFr65.9bn.
Navratil hinted at market-share losses that he plans to address, along with an emphasis on innovation to drive growth, what was described in today’s statement as “rigorously prioritising growth opportunities”.
The CEO added in his remarks: “We will be bolder in investing at scale and driving innovation to deliver accelerated growth and value creation. We are fostering a culture that embraces a performance mindset, that does not accept losing market share, and where winning is rewarded.”
Previously laid out guidance was left unchanged, as Navratil stuck with the phrasing for an “improvement” in organic growth over 2024 and an underlying trading operating profit (UTOP) margin – another closely watched metric – of “at or above 16%”.
Sequential organic growth “remains positive”, although Nestlé pointed to a challenging comparison base for the fourth quarter.
Meanwhile, the projected UTOP margin factors in “increased negative impact from tariffs currently in place and current foreign-exchange rates”.
Including the financial job reduction impact, total fuel-for-growth savings are now expected to rise to SFr3bn by the end of 2027 from a previous projection of SFr2.5bn.
The six “big bets” strategy was also kept in place.
Freixe had pledged to address underperformers in the portfolio when he took charge and put resources behind those bets outside of Nestlé’s billionaire categories to get to SFr100m in sales annually.
Speaking at the Barclays’ annual investor event in September, CFO Anna Manz said: “We have closed the share-loss drag associated by those underperformers by more than a third in the last six months,” adding that there had been “good momentum” in the first half with SFr200m reached “collectively”.
Nestlé said today that it will now have “increased ambition on innovation, building on the momentum of the six global big bets and broadening our approach, including a step change in consumer insights and marketing capabilities”.
The Barclays’ analyst team provided some initial thoughts today on the plans set forth by Navratil.
“Overall, we would give this a 8.5/10 and think there is enough for investors to start to think that this could be a real line in the sand, after five years of underperformance,” they wrote in a research note.
“A good debut from Nestlé and the new CEO,” the analysts concluded.
