Nestlé streamlines operations amid soft demand
In its nine-month sales report, Nestlé recorded a 2.0% organic growth, with real internal growth (RIG) inching up to 0.5% (versus 0.1% in HY24) and pricing at 1.6%. Sales were down 2.4%, hit by unfavorable foreign exchange rates and divestitures. FY24 growth outlook – set previously at 4% and downgraded to 3% in HY24 – was further downgraded to 2% as the company expects consumer demand to remain soft.
Nestlé also announced the first operational and executive changes since the departure of former CEO Mark Schneider in September. The firm is merging Zones Latin America and North America into a single entity, Zone Americas (AMS); while Zone Greater China will become Zone Asia, Oceania and Africa (AOA).
In terms of personnel, Head of Strategic Business Units (SBUs) and Marketing and Sales, Bernard Meunier is stepping down from the executive board to lead strategic projects for the group. He will be succeeded by head of Nestlé Coffee Brands, David Rennie. Nespresso head Phillipp Navratil is joining the Board, reporting directly to the CEO; and Nestlé Health Science remains under the leadership of Anna Mohl.
Zone Europe will continue to be led by Guillaume Le Cunff; while the new Zone AMS will be led by Steve Presley (formerly CEO of Zone North America) and Zone AOA will be helmed by Remy Ejel, with David Zhang (formerly CEO of Greater China Region) stepping down from the Board.
The organizational changes form part of the company’s efficiency drive, through which it’s aiming to generate resources to re-invest into the wider group.
Laurent Freixe, Nestlé CEO, said: “A leaner Executive Board structure and close collaboration of the leadership team at the headquarters will increase simplicity, speed up decision-making and strengthen the momentum behind global initiatives. We will continue to build on the strengths of our Market Heads to ensure consistent in-market execution across the group.
“Nestlé is uniquely positioned to win in our industry, given our global scale, broad portfolio of iconic brands and innovative products that connect with people every day and in every stage of their lives. Building on this strong foundation, we will sharpen our focus on consumers and customers and advance our categories to accelerate performance and gain market share.
“We will also expand our digital transformation to enhance agility and efficiency. For our brands to win in the market, we need to invest. We will generate the resources we need through efficiencies and growth leverage. Disciplined in-market execution will drive Nestlé’s virtuous circle to sustain profitable growth over time, and we have exceptional people to make this happen.
“Today’s organizational changes will align Nestlé, bringing simplicity and focus. I look forward to sharing more of our plans at our Capital Markets Day in November.”
Coffee remains biggest growth contributor; dairy - in negative growth
Similarly to HY24, coffee was the largest growth contributor in terms of organic growth by product category, with mid single-digit growth supported by Nescafé, Starbucks and Nespresso.
Dairy posted negative growth as a decline in coffee creamers and ambient dairy more than offset growth for affordable milks and dairy culinary solutions, the company said.
Infant nutrition sales grew at a low single-digit rate, supported by continued momentum for NAN, Lactogen and human milk oligosaccharides (HMOs) products.
Water delivered mid single-digit growth, underpinned by continued momentum for S.Pellegrino and a recovery in Perrier.
By channel, organic growth in retail sales was 1.9%; organic growth in out-of-home was 3.4% and e-commerce sales grew by 9.7% to 18.5% of the group’s total sales (up from 18.1% in HY24).
Underlying trading operating profit margin is expected to be at around 17.0%. Underlying earnings per share growth in constant currency is expected to be broadly flat.
