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Nestlé announces leadership shake-up amid sales slump

Nestlé’s new CEO lowered sales growth expectations for 2024 and announced a leadership reshuffle on Thursday in what one analyst described as a “painful reset” for the global food giant.

Chief executive Laurent Freixe took over from Mark Schneider on September 1 in a surprise change at the top of the Swiss group, whose brands include everything from Nespresso coffee capsules to Purina dog food and Haagen-Dazs ice cream.

Freixe, a Frenchman who headed Nestlé’s Latin America unit, was appointed to turn things around following slumping sales and a series of product scandals.

The company reported Thursday sales totalling 67.1 billion Swiss francs ($77.4 billion) for the first nine months of the year, a 2.4 per cent drop from the same period last year.

“Consumer demand has weakened in recent months, and we expect the demand environment to remain soft,” Freixe said in a statement.

Freixe said Nestlé now expects organic sales growth, excluding the impact of currency fluctuations and acquisitions, of two per cent this year.

The group had already cut its annual sales outlook from four per cent to three per cent in July, as consumers moved towards cheaper alternatives following years of high inflation.

The global packaged-food giant and its rivals had logged high sales growth in the past three years as they raised prices to make up for higher costs due to soaring inflation.

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Organic sales growth for the first nine months of the year reached two per cent, compared to 7.8 per cent over the same period in 2023.

Nestlé also announced several changes in its leadership structure, including merging its Latin America and North America divisions into a single Americas unit.

Its Greater China region will become part of its Asia, Oceania and Africa zone, among other changes that include a reshuffling of the executive board.

“With these organisational changes, all the leaders of key units driving our performance and our transformation will now report directly to me,” Freixe said.

“This is crucial, as we sharpen our focus on consumers and customers and restore investment in our brands and innovation to expand market share and accelerate our performance,” he added.

‘Huge task’
Analysts had expected Freixe to adjust the company’s sales forecast following the latest earnings statement.

“The outlook revision looks more severe than the already lowered pre-results expectations,” said Andreas von Arx, analyst at investment bank Baader Helvea.

The fall in third-quarter sales at Nestlé is “broad-based” and there is “no quick fix” in sight, he said.

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Jean-Philippe Bertschy, analyst at Swiss investment firm Vontobel, said the new CEO was “imposing his stamp” on the company with a “very painful reset for Nestlé, unprecedented in recent history”.

For a huge company such as Nestlé, its bad July forecast “is enormous,” he said.

The group has also scrambled to ease any concerns over its Perrier brand after France’s food safety watchdog recommended stricter monitoring of sites where Nestlé extracts mineral water following the discovery of traces of “faecal” contamination.

The company has since said it has stepped up monitoring of the sites, and Schneider has said the group’s water was safe to drink.

“The priority for the new management team now is to bring Nestlé back to its roots and to what it does best: marketing and connecting with consumers,” Bertschy said. “The task is huge and will take time.”

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