TLDR
- Nestlé is cutting 16,000 jobs globally over two years, about 6% of total workforce
- Cost savings target raised to $3.7 billion by 2027 from previous $2.5 billion goal
- Q3 sales increased 4.3% with real internal growth hitting 1.5%, beating 0.3% forecast
- Stock jumped 8.2% in Swiss trading, largest single-day increase since 2008
- CEO Philipp Navratil promises “ruthless” performance reviews as restructuring begins
Nestlé revealed plans Thursday to eliminate 16,000 positions worldwide as new CEO Philipp Navratil accelerates the company’s turnaround efforts. The cuts represent 6% of the workforce and will roll out over the next two years.
The announcement came alongside stronger-than-expected third quarter results. Sales climbed 4.3% during the period.
Real internal growth reached 1.5%, crushing analyst expectations of just 0.3%. That measure tracks actual sales volumes and has been a major concern for investors.
Navratil took over as CEO last month after Laurent Freixe was removed for hiding a relationship with a subordinate. Chairman Paul Bulcke also departed early, replaced by former Inditex CEO Pablo Isla.
The new CEO wasted no time making changes. “The world is changing, and Nestlé needs to change faster,” Navratil said Thursday.
“This will include making hard but necessary decisions to reduce headcount.”
Investors responded positively to the news. Nestlé stock surged 8.2% in Swiss trading, marking the biggest gain in 17 years.
The Numbers Behind The Cuts
The job reductions break down into two categories. White-collar positions account for 12,000 of the planned cuts.
Manufacturing and supply chain roles make up the remaining 4,000. CFO Anna Manz confirmed layoffs will span multiple regions and departments.
The white-collar reductions alone should generate 1 billion Swiss francs in annual savings. That’s part of a bigger picture.
Navratil increased the overall cost savings target to 3 billion Swiss francs by end of 2027. The previous goal sat at 2.5 billion francs, or about $3.7 billion at current exchange rates.
The CEO left no doubt about his management style. “We are all measured at the same key performance indicators,” he told analysts on a call.
“It will be easy to see who is performing and who’s not. We will be ruthless in assessing our people.”
Continuing Previous Strategy
Navratil comes from within Nestlé’s ranks. He spent over 20 years at the company, most recently leading the Nespresso division.
He plans to stick with the basic strategy his predecessor started. That means more advertising spending and focusing on fewer but larger product launches.
It also includes reviewing and possibly selling underperforming business units. Freixe had already started exploring sales of struggling vitamin brands.
The previous CEO also separated the bottled water business into its own unit to seek a potential partner. Any jobs lost through selling businesses won’t count toward the 16,000 reduction target.
Market Reaction and Outlook
Jean-Philippe Bertschy from Vontobel called the results a step toward rebuilding investor confidence, though still fragile. James Edwardes Jones at RBC Capital Markets praised Navratil’s stated goal of creating a culture that refuses to lose market share.
Jones noted the real internal growth beat was crucial given investor concerns about that metric. Navratil confirmed full-year guidance remains on track.
Year-to-date, Nestlé stock has climbed 19.1% and continues its 25-year streak of dividend payments.
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