KitKat chocolate bars, manufactured by Nestle SA, arranged in London, U.K., on Monday, July 26, 2021. Nestle report their half-year results on July 29. Photographer: Hollie Adams/Bloomberg via Getty Images
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Nestle said Thursday it will cut 16,000 jobs as the firm’s new CEO, Philipp Navratil, looks to accelerate a turnaround at the consumer goods giant.
In a bid to improve operational efficiency, the firm said it will cut 12,000 white-collar jobs and a further 4,000 roles will be reduced over the next two years.
“We are transforming how we work,” Navratil wrote in a LinkedIn post summarizing the company’s earnings report. “We are evolving and will simplify our organization and automate our processes.”
It’s unclear how Nestle plans to incorporate more automation into its corporate offices, but company spokesperson Chiara Valsangiacomo told CNBC that the initiative is “much broader” than replacing roles with artificial intelligence. Other companies, primarily in the tech sector, have slashed jobs as they turn to AI to replace human labor. So far this year, more than 17,000 job losses have been specifically tied to AI, according to a recent report from Challenger, Gray & Christmas.
Shares of Nestle closed 9.3% higher on Thursday. The stock price jump boosted Europe’s food and beverage sector, which was up more than 4.2% at the end of the session.
Under its former CEO, Laurent Freixe, Nestle had already announced a cost-savings program worth 2.5 billion Swiss francs ($3.14 billion). This has now been accelerated to 3 billion francs by the end of 2027.
The company posted a better-than-expected organic growth rate of 4.3% in the third quarter as it battles an uncertain consumer outlook amid U.S. tariffs and an increase in raw material prices, such as cocoa and coffee beans.
Notably, real internal growth, or RIG, returned to positive territory in the third quarter — up 1.5% — as the maker of Nespresso and KitKat saw growth investments pay off, also helped by easier comparisons.
A miss on RIG in the second quarter had led to a sharp underperformance of Nestle shares. Ahead of the results, analysts at HSBC had already expected RIG to return to positive territory “owing to easier comparatives, incrementally greater benefits from Nestle’s own actions plus reduced elasticity effects from price increases.”
However, the company’s business in Greater China continued to underperform, with the region negatively impacting organic growth by 80 basis points and RIG by 40 basis points. Nestle added that “new management was now in place and it was executing its plan to transform the business.”
The firm’s strategy of focusing on winners and turning around its losers helped driver better-than-expected third-quarter sales, said Jon Cox, head of European consumer equities, at Kepler Cheuvreux.
“Overall, it is extremely positive and certainly looks operationally as if the company has turned the corner with the better performance while the management upheaval over the summer fades into the background,” Cox said, adding he expects the stock to react very positively.
Turbulent year
The Vevey, Switzerland-based consumer goods giant has come under pressure from investors as its operating and share performance have trailed peers.
Its shares are off more than 40% from their December 2021 peak, and have fallen 9% over the past 12 months.
Nestle’s shares
Nestle has endured a turbulent year, as it saw its CEO Freixe ousted over an undisclosed romantic relationship on Sept. 1.
His successor, Navratil is the former CEO of the company’s Nespresso business. He has pledged to “fully embrace the company’s strategic direction, as well as the action plan in place to drive Nestle’s performance,” and vowed to “accelerate execution and to drive the value creation plan with intensity.”
Only two weeks later, Nestle saw itself forced to accelerate Chairman Paul Bulcke’s departure, owing to pressure from institutional shareholders over his handling of Freixe’s allegations.
Bulcke, also a former CEO of Nestle, stepped down from his role earlier than planned, handing over the reins to Vice Chairman and Chairman-elect Pablo Isla, a former Inditex CEO, who was set to take over after Nestle’s AGM in April 2026.
Analysts say the new leadership duo will need to earn back trust from investors.
“Many long term investors … would have to hear more from someone who is relatively unknown to the market before becoming more positive,” Deutsche Bank analysts wrote in a September note.
While the initial focus will be on recovery in volume growth and its Chinese business, longer-term investors will be keen to receive updates on the partial sale of Nestle’s struggling water unit as well as its underperforming vitamins business, along with plans for its 20% stake in L’Oreal.
“Now we must do more and move faster to accelerate our growth momentum,” Navratil said Thursday in a statement on the company’s earnings.
“As Nestle moves forward, we will be rigorous in our approach to resource allocation, prioritising the opportunities and businesses with the highest potential return.”
— CNBC’s Amelia Lucas contributed reporting for this story.
Correction: Jon Cox is head of European consumer equities at Kepler Cheuvreux. An earlier version misspelled the name of the firm.
