Philippe Navratil, the newly appointed CEO of Nestlé, revealed on Thursday that the company plans to eliminate 16,000 jobs in an effort to reduce costs and regain investor confidence.
This move equates to about 5.8% of Nestlé’s total workforce of around 277,000.
Navratil has increased the company’s cost-cutting target to 2.5 billion Swiss francs (approximately $3.77 billion) by 2027.
Despite most of its sales being generated domestically, Nestlé faces challenges from U.S. import tariffs. Moreover, the food industry is dealing with shifting consumer habits as many people lean towards healthier options, creating a challenging market environment.
“The world is changing, and Nestlé must adapt more rapidly,” Navratil remarked.
While Nestlé’s stock saw an 8% increase in early trading, the company has faced significant challenges, including a period of management turmoil. Navratil takes over after the dismissal of Laurent Fréchet in September due to an undisclosed relationship with a subordinate.
Shortly after, Chairman Paul Bourque resigned and was succeeded by Pablo Isla, the former chief executive of Inditex.
Navratil indicated that 12,000 positions will be cut over the next two years, targeting white-collar roles, along with an additional 4,000 jobs in manufacturing and supply chain areas as part of ongoing efforts to improve efficiency.
“Adding Fuel to the Fire of Improvement”
The Swiss company, famous for products like Kit Kat, Nespresso, and Maggi, is working to boost sales growth which has recently faltered due to U.S. tariffs and other rising costs, all while managing increasing debt levels.
Analysts from Bernstein commented that Nestlé’s quarterly results “add fuel to the fires of a turnaround” and characterized the job cuts as “a major surprise.”
The firm’s internal growth rate jumped 1.5% in the third quarter, significantly outpacing the anticipated 0.3% increase expected by analysts. This impressive figure could provide Navratil some breathing room as he embarks on this new phase.
Navratil emphasized that prioritizing growth driven by the real internal growth (RIG) is essential for Nestlé’s future.
The company is also conducting a strategic review of its water and premium beverage segments, as well as its vitamin and supplement brands, which have shown low growth and margins.
2025 Guidance Unchanged
Nestlé has maintained its guidance for 2025.
It anticipates improved organic sales growth compared to 2024 and expects an underlying operating profit margin—excluding certain non-recurring expenses—to exceed 16%, aiming for at least 17% in the medium term.
The profit margin forecast accounts for a 39% increase in U.S. import duties on Swiss products that began in August.
The company projected that the majority of the CHF3 billion in targeted cost savings would materialize in 2026-2027, expecting to save CHF700 million overall in 2025.
Organic sales, which disregard currency fluctuation effects and acquisitions, rose 4.3% in the quarter, surpassing the analysts’ expectation of a 3.7% increase.
This sales growth was largely driven by rising prices in coffee and confectionery but was somewhat hindered by challenges in Greater China.
Chief Financial Officer Anna Manz pointed out that the focus on distribution in China had overshadowed building consumer demand.
“They are addressing this by streamlining distribution while simultaneously boosting consumer demand,” Manz explained.
(1 dollar = 0.7955 Swiss Franc)
