Nestlé's new chief faces tough job to boost sales and health image
Nestléʼs fresh CEO Laurent Freixe confronts weak sales growth and health concerns about the companyʼs products. He must revive consumer interest in Nestlé brands while steering the food giant towards healthier options and growth areas
Laurent Freixe‚ Nestlés new boss‚ is facing some tricky issues. The food giants third-quarter results showed weak top-line growth‚ leading to another cut in guidance. To fix this Freixe needs both quick and long-term solutions.
The numbers explain why Mark Schneider the former CEO‚ left so fast in August. In the nine months ending September organic sales grew just 2% year-on-year. This is below the 3% forecast for 2024 made in July (which was already lower than before). Now Freixe has cut growth expectations for this year to 2%. The long-term goal of mid-single digit organic revenue growth might be at risk too. Also‚ the companys profit margins dropped from 17.3% to 17%.
Nestlés value has been showing problems for a while. Before these results‚ it was trading at 17 times 2024 earnings‚ way below its 10-year average of over 22 times. This multiple is now lower than rival Unilever. To fix this soon‚ Freixe must get people excited about Nestlé products like Cheerios KitKats and Perrier water. This will need lots of money for sales and marketing‚ but he could get some by selling part of its 20% stake in LOréal.
For the long term‚ Freixe has a bigger problem: his shelves are full of foods that might go out of style. Nestlé said last year that a third of its main products wouldnt be seen as “healthy“ by the Health Star Rating system. Western governments havent cracked down on ultra processed food yet‚ but rising obesity rates suggest they might do so more.
Freixes long-term fix is clear enough. Despite high input prices his at-home coffee segment was the biggest growth contributor in the first nine months through brands like Nescafé Starbucks and Nespresso. To grow this he could look at targets like privately owned Lavazza coffee chains. Such a deal might cost over 4 billion euros based on Starbucks 2023 multiple.
That and cash deals pushing Nestlé more into pet care (another growth area) would push net debt above 3 times EBITDA. But if Freixe doesnt think big picture‚ Nestlés future will suffer. And if he doesnt do a huge marketing push its market share right now could shrink
