Nestlé Unveils Plans to Drive Growth and Cut Costs

Nestlé, the world’s largest food and beverage company, on Tuesday unveiled a comprehensive plan to drive growth and cut costs as it faces economic headwinds and changing consumer behaviours.

The company’s CEO Laurent Freixe, who took over in September, laid out a roadmap that includes $2.85 billion in cost reductions, increased investments in advertising, and the creation of a dedicated unit for its premium water and beverage brands.

Freixe’s strategy was presented during the Capital Markets Day at Nestlé’s headquarters in Vevey, Switzerland, marking his first major initiative since he took over two months ago. The plan focuses on appealing to price-sensitive consumers while preserving brand equity and long-term profitability.

Nestlé plans to achieve $2.85 billion in savings by 2027, building on $1.27 billion in ongoing cost reductions. The company aims to increase its organic growth, a metric that excludes currency effects, acquisitions, and divestitures, to at least 4% by 2027, up from the 2% forecast for 2024. However, profitability goals are more modest than those set by the previous CEO, with the underlying profit margin target now at 17%, compared to the earlier range of 17.5% to 18.5%.

In recent years, Nestlé raised prices to offset rising costs in transport, packaging, and raw materials caused by supply chain disruptions and geopolitical tensions, including the war in Ukraine.

These price hikes, however, have driven many consumers toward supermarket private-label brands, reducing demand for premium products. Freixe acknowledged the need to reinvigorate growth while maintaining price competitiveness.

Nestlé plans to ramp up advertising and marketing expenditures to 9% of total turnover by the end of 2025, returning to pre-pandemic levels. The company spent 7.7% of its turnover on advertising in 2023. “For our brands to establish themselves on the market, we must invest,” Freixe emphasised.

New Entity

A key component of the new strategy is the creation of a separate entity for Nestlé’s premium waters (such as Vittel, Perrier, and San Pellegrino) and high-end beverages (including Nesquik, Nestea, and Nescafé).

This entity, set to launch on 1 January 2025, will be led by Muriel Lienau, who currently oversees Nestlé Waters Europe and the new management will evaluate the strategy for this business. This will include exploring partnership opportunities to enable Nestlé’s iconic brands and growth platforms to achieve their full potential.

The move aims to streamline operations and foster growth in these product lines, allowing them to operate with greater focus and agility.

Nestlé’s action plan will allow the company to deliver superior, sustainable and profitable growth. In the medium term, organic sales growth is expected to be at 4% plus in a normal operating environment, with an underlying operating profit margin 17% plus.

Nestlé confirms 2024 guidance, with organic sales growth of around 2%, underlying trading operating profit margin of around 17.0% and underlying EPS broadly flat in constant currency. Looking ahead to 2025, Nestlé expects an improvement in organic sales growth compared to 2024, with the underlying trading operating profit margin anticipated to be moderately lower than the 2024 guidance.

Laurent Freixe said that Nestlé is a strong company with global reach, exceptional demand generation and in-market capabilities. We have a diverse and strategically well-positioned product portfolio, he added.