By John Revill and Oliver Hirt
ZURICH (Reuters) -Swiss food giant Nestle, roiled by the sudden ouster of its CEO, faces a stern challenge with investors and analysts urging it to slim down in a tough consumer market as rivals cut costs and even break up to improve their performance.
The world’s largest consumer goods group installed Philipp Navratil as its new boss this week after firing Laurent Freixe for hiding a relationship with a subordinate, throwing the company into its biggest leadership crisis in decades.
The dramatic move following allegations of favouritism overshadows a wider malaise. Sales growth has stalled, the company’s shares have lost 40% since 2022 and costs have ballooned. Debt levels have climbed past those of rivals such as Unilever.
Now Nestle is hinting at a leaner future, as investors call for a slimmer product portfolio than the 2,000-strong one that ranges from Purina pet food to Nescafe coffee and KitKat chocolate bars, as well as a smaller payroll and cost discipline.
Nestle did not respond to a Reuters request for comment for this article.
The company’s Chief Financial Officer Anna Manz, speaking to investors on Wednesday, cited the 49-year-old Navratil’s ability to propel growth while “driving simplification across the organisation” in his previous job leading Nespresso.
She added the Nestle veteran would bring a fast “pace to change”.
Investors and analysts urged the company to sharpen its focus, which comes as rivals like Kraft Heinz split to unlock potential value and activist investor Elliott Management has taken a $4 billion stake in PepsiCo, calling for a turnaround.
“With a more focused portfolio and targeted acquisitions, Nestle can reignite growth. Size alone is no longer a guarantee of success in food,” said Luzerner Kantonalbank analyst Reto Loetscher.
‘LEANER AND MORE EFFICIENT’
Nestle – whose net financial debt has risen to over three times its earnings before tax, interest, amortization and depreciation (EBITDA), up from around one in 2017, surpassing Unilever’s which has roughly held at two times EBITDA over the same period – is already mulling some sell-offs.
Under Freixe, Nestle had been trying to narrow its focus to about 30 of its 2,000 brands, prioritising products including KitKat, Nescafe and NAN infant formula.
In July, the company said it had launched a review of its underperforming vitamins business that could lead to the divestment of some brands. It is also looking at a sale of its water division or potential partnerships.