Nestle joins long list of firms replacing chief executives in bid to regain investor confidence
Fade Firm Mark The To Images Shoppers As Picture: Began Ceo Nestle To Getty Win Struggled Schneider’s Back Star
Nestle chief executive Mark Schneider’s unexpected exit raised concerns among investors about the outlook for profitability at the world’s largest food company, as it struggles to win back inflation-weary customers to premium brands.
After eight years at the helm of the Swiss maker of Nespresso coffee and Purina pet foods, Mr Schneider will be replaced by Latin America chief Laurent Freixe, Nestle said.
The news came as a surprise given that Mr Schneider was scheduled to appear at three different events next week, including a Barclays “fireside chat” promoted hours before the announcement. Analysts speculated the exit may presage a cut in Nestle’s financial guidance, and the stock fell as much as 4.1%.
The move raises questions around the degree of a second-half recovery in real internal growth, whether the 2025 margin guidance is kept and if there can be any increase in productivity levels, Deutsche Bank analyst Tom Sykes wrote in a note.
Mr Freixe told analysts on a call that the company will return to the topic of updating its financial goals when it holds a capital markets day in November. Nestle currently targets an underlying operating margin of at least 17.5% for 2025.
Mr Schneider is the latest consumer-goods boss to be shown the door as companies struggle to coax shoppers back to premium brands after a period of high inflation and belt-tightening.
Just last week, Laxman Narasimhan lost his job as chief executive of Starbucks after less than two years; he’ll be replaced by Chipotle Mexican Grill chief Brian Niccol. Estee Lauder chief executive Fabrizio Freda plans to retire in 2025, after the cosmetics company ran into trouble in recent months.
Last year, new bosses started at Dove soap maker Unilever, beleaguered infant-formula maker Reckitt Benckiser and Guinness owner Diageo, all of which are trying to win back investor confidence in an environment where interest rates remain high and shoppers continue to keep a tight grip on spending.
“The pandemic, the supply-chain disruptions, 50-year-high inflation, rapidly rising interest rates and the negative consumer sentiment effect have all conspired to create a difficult environment for the average consumer stock,” said Eric Clark, portfolio manager at Accuvest Global Advisors.
Until recently, Mr Schneider was lauded by investors as the chief executive who overhauled Nestle, fending off a 2017 attack from activist investor Third Point. He initiated lucrative disposals of the Swiss company’s skin injectables business, low-margin bottled water brands in the US and some frozen products.
Mr Schneider focused on persuading consumers to pay more for premium versions of existing product lines, developing Nestle’s offering of coffee and pet food, while building up its health and wellness business. Nestle also smoothly navigated the supply-chain struggles many companies faced in the pandemic, thanks to its localized production.
Over the past couple of years, however, Mr Schneider’s star began to fade. Nestle has struggled to win back shoppers after the post-pandemic bout of inflation, repeatedly missing quarterly sales expectations.
Mr Schneider joined Nestle after running pharmaceutical company Fresenius, but his interest in health care did not always work out at the KitKat maker. Last year, Nestle took a $2.1bn (€1.8bn) write-down on its investment in a peanut allergy medicine called Palforzia. The head of its vitamins and supplements business was replaced after IT problems caused supply shortages.
In July, Nestle trimmed its sales growth outlook for the year to at least 3%, lower than the roughly 4% previously targeted. Frozen food in the US proved to be a particular problem area because lower-income consumers are struggling to make ends meet.
Not all the blame lies with the weak consumer, though. Nestle has had problems at its vitamins unit — acquired in 2021 for $5.7bn. It’s also suffered shortages in its water business in the last couple of years. Nestle replaced long-time chief financial officer François-Xavier Roger earlier this year.
Before the CEO announcement, the stock had climbed 22% since Mr Schneider took over at the start of 2017, about half the gain that Unilever posted during the same span.
“Certain things didn’t work; some acquisitions didn’t work,” Nestle chairman Paul Bulcke said on a call with journalists. “But that’s inherent to running a company like this. I’m looking at more of the dynamics of things and moving forward. And I don’t cry over spilled milk.”