Nestlé, the global food and beverage titan, is embarking on a significant operational restructuring under its new Chief Executive Officer, Philipp Navratil. This strategic overhaul includes a substantial workforce reduction of 16,000 positions, comprising 12,000 white-collar roles and an additional 4,000 positions slated for reduction over the next two years. This move signals a determined effort to enhance efficiency and accelerate a turnaround for the venerable consumer goods conglomerate.
The accelerated cost-saving initiative, building upon a previous program initiated by former CEO Laurent Freixe, has been elevated. The total savings target has been increased from 2.5 billion Swiss francs to 3 billion Swiss francs (approximately $3.14 billion), with a revised completion deadline of the end of 2027. This aggressive approach to cost management is designed to bolster the company’s financial resilience in a challenging economic environment marked by fluctuating consumer confidence, the impact of U.S. tariffs, and rising raw material costs, particularly for key commodities like cocoa and coffee beans.
Despite external pressures, Nestlé reported a more robust-than-anticipated organic growth rate of 4.3% in the third quarter. A key indicator, Real Internal Growth (RIG), which measures volume and price changes excluding acquisitions and divestitures, returned to positive territory at 0.6%. This rebound is attributed to successful growth investments, including those for its Nespresso and KitKat brands, and is also aided by easier year-over-year comparisons. This positive trend in RIG is a crucial development, particularly following a second-quarter miss that had previously impacted the company’s stock performance. Analysts had anticipated this recovery, citing more favorable comparative periods, the efficacy of Nestlé’s strategic initiatives, and a moderated impact from previous price increases.
However, the company’s performance in Greater China continues to be a notable exception. The region negatively affected overall organic growth by 80 basis points and RIG by 40 basis points. In response to this persistent underperformance, Nestlé has confirmed the implementation of new management and an active execution of a business transformation plan within the region. This targeted intervention aims to address the specific challenges hindering growth in this critical market.
The strategic focus on nurturing successful brands and revitalizing underperforming ones appears to be bearing fruit, contributing to the better-than-expected third-quarter sales. This dual approach is seen as a positive indicator of operational improvement and a sign that the company is successfully navigating its recent management transitions. The market is expected to react favorably to these developments, suggesting a potential turning point for Nestlé’s operational trajectory.
Michael Carter holds a BA in Economics from the University of Chicago and is a CFA charterholder. With over a decade of experience at top financial publications, he specializes in equity markets, mergers & acquisitions, and macroeconomic trends, delivering clear, data-driven insights that help readers navigate complex market movements.