San Francisco Frontiers - Nestle overhauls executive team as sales slump

Chief executive Laurent Freixe took over from Mark Schneider on September 1 in a surprise change at the top of the Swiss group, whose brands including everything from Nespresso coffee capsules to Purina dog food and Haagen-Dazs ice cream.

Freixe, a Frenchman who headed Nestle's Latin America unit, was appointed to turn things around following slumping sales and a series of product scandals.

The company reported Thursday sales totalling 67.1 billion Swiss francs ($77.4 billion) for the first nine months of the year, a 2.4 percent drop from the same period last year.

"Consumer demand has weakened in recent months, and we expect the demand environment to remain soft," Freixe said in a statement.

Freixe said Nestle now expects organic sales growth, excluding the impact of currency fluctuations and acquisitions, of two percent this year.

The group had already cut its annual sales outlook from four percent to three percent in July, as consumers moved towards cheaper alternatives following years of high inflation.

The global packaged-food giant and its rivals had logged high sales growth in the past three years as they raised prices to make up for higher costs due to soaring inflation.

Organic sales growth for the first nine months of the year reached two percent, compared to 7.8 percent over the same period in 2023.

Nestle also announced several changes in its leadership structure, including merging its Latin America and North America divisions into a single Americas unit.

Its Greater China region will become part of its Asia, Oceania and Africa zone, among other changes that include a reshuffling of the executive board.

"With these organisational changes, all the leaders of key units driving our performance and our transformation will now report directly to me," Freixe said.

"This is crucial, as we sharpen our focus on consumers and customers and restore investment in our brands and in innovation to expand market share and accelerate our performance," he added.

- 'Huge task' -

Analysts had expected Freixe to adjust the company's sales forecast following the latest earnings statement.

"The outlook revision looks more severe than the already lowered pre-results expectations," said Andreas von Arx, analyst at investment bank Baader Helvea.

The fall in third-quarter sales at Nestle is "broad based" and there is "no quick fix" in sight, he said.

Jean-Philippe Bertschy, analyst at Swiss investment firm Vontobel, said the new CEO was "imposing his stamp" on the company with a "a very painful reset for Nestle, unprecedented in recent history".

For a huge company such as Nestle its bad July forecast "is enormous", he said.

The group has also scrambled to ease any concerns over its Perrier brand after France's food safety watchdog recommended stricter monitoring of sites where Nestle extracts mineral water following the discovery of traces of "faecal" contamination.

The company has since said it has stepped up monitoring of the sites, and Schneider has said the group's water was safe to drink.

"The priority for the new management team now is to bring Nestle back to its roots and to what it does best: marketing and connecting with consumers," Bertschy said. "The task is huge and will take time."

U.Campbell--SFF