Nestlé (NESN.S), the world’s largest packaged food producer, announced it will lay off 16,000 people. New CEO Philipp Navratil explained that this move is part of the company’s strategy to reduce costs and regain investor confidence.
The cuts represent 5.8% of Nestlé’s 277,000 employees. Navratil raised the previous target of 2.5 billion, stating that they aim to save 3 billion Swiss francs by the end of 2027.
“The world is changing and Nestlé needs to change faster,” said Navratil, aiming to create a productivity-focused culture within the company.
Storm in Management
Nestlé has experienced an unprecedented management crisis in recent months.
Following the dismissal of former CEO Laurent Freixe due to an inappropriate relationship, chairman of the board Paul Bulcke also resigned early and was replaced by Pablo Isla.According to Navratil’s plan, 12,000 office workers and 4,000 people from production and the supply chain will be laid off in the next two years.
“Fueling the Transformation Fire”
KitKat, Nestlé, the producer of brands like Nespresso and Maggi, is struggling to reverse declining sales growth. Rising costs, debt levels, and US import tariffs are increasing investor pressure.
Analysts stated that the latest quarterly results “fueled the transformation fire”, describing the 16,000-person reduction as a major surprise.
The company’s sales volume (RIG) increased by 1.5% in the third quarter, exceeding expectations.
This performance provided short-term relief in the Navratil transformation process.2025 Targets Unchanged
Nestlé announced that it is maintaining its 2025 outlook. Organic sales growth is expected to increase compared to 2024, and the operating profit margin is expected to be 16% or higher. The medium-term target is at least 17%.
The majority of savings will occur in the 2026-2027 period; A savings target of 700 million Swiss francs is aimed for in 2025.
Organic sales increased by 4.3% in the quarter, exceeding the analyst expectation of 3.7%. Growth came mostly from price-driven increases in the coffee and chocolate categories, while the large Chinese market remained weak. CFO Anna Manz stated that they have shifted to a “demand generation instead of distribution” strategy in China.
