On 1/9, Nestle announced the dismissal of CEO Laurent Freixe after just one year in the role, due to his undisclosed relationship with a subordinate. This move plunges the Swiss food giant into a leadership crisis as it grapples with slow revenue growth and a declining share price.
Nestle's July report revealed a 1.8% increase in first-half revenue compared to the same period last year, reaching 44.2 billion Swiss francs. However, this figure fell short of analysts' projections of 44.6 billion francs. The strong Swiss franc in the first half of the year partially contributed to this discrepancy.
Nestle's core businesses, coffee and chocolate, are facing weakened consumer demand due to US import tariffs. Chief Financial Officer Anna Manz stated that while tariffs had a minimal impact on profits in the first half of the year, the impact from tariffs and raw material costs is expected to increase in the latter half.
The company has also been plagued by internal issues for several years. The unsuccessful integration of an information technology system into its healthcare division, which produces functional foods, resulted in months of supply shortages. In July, Nestle initiated a review of this division following disappointing first-half sales, which could lead to the divestiture of some brands.
Nestle's stock fell 0.7% on 2/9. The stock has lost nearly a third of its value in the past five years, significantly underperforming its European competitors. Under Freixe's leadership, the company's shares plummeted 17%, further disheartening investors.
 |
Former Nestle CEO Laurent Freixe (left) and Chairman Paul Bulcke at the April shareholders' meeting. Photo: Reuters |
Former Nestle CEO Laurent Freixe (left) and Chairman Paul Bulcke at the April shareholders' meeting. Photo: Reuters
Freixe, 63, lost his position just over a year after his predecessor, Mark Schneider, departed due to his inability to revive Nestle. In June, the group also announced that Paul Bulcke, CEO from 2008 to 2016, would step down as chairman in 4/2026. He will be succeeded by Pablo Isla, former CEO of Spanish fashion retailer Inditex.
"Losing two CEOs and a chairman in just over a year is unprecedented for Nestle. The new CEO needs to revise the business model and boost sales. He needs to pursue mergers and acquisitions and focus more on emerging markets," said Ingo Speich, Head of Corporate Governance and Sustainability at Deka, one of Nestle's top 30 investors.
Freixe's dismissal followed a Nestle investigation into his romantic relationship with a direct report, a violation of company policy. The information was brought to light by an employee through the internal Speak Up channel. Freixe initially denied the relationship to the board, prompting the company to launch an investigation with the assistance of law firm Baer & Karrer.
Freixe will not receive any severance pay, Nestle told Reuters. In a statement, Bulcke thanked Freixe for his 39 years of service at Nestle but said the dismissal was "necessary".
Swiss law does not prohibit romantic relationships between senior executives. However, most large companies, including Nestle, require such relationships to be disclosed. If a conflict of interest arises, one of the individuals must change positions.
Freixe's replacement is 49-year-old Nespresso CEO Philipp Navratil, a rising star within the group. Nespresso is a Nestle subsidiary that sells coffee and coffee machines.
An investor among Nestle's top 20 shareholders expressed disappointment with Freixe, while viewing Navratil's appointment as an opportunity for more ambitious reforms. The investor believes the new CEO needs to streamline operations, cut costs, particularly personnel costs, and improve sales.
Overall, Navratil will face a range of challenges, from the impact of US import tariffs and the gloomy global economic outlook to declining investor confidence after years of poor performance.
Furthermore, the forced departure of a senior leader due to a code of conduct violation poses a significant reputational challenge. Jean-Philippe Bertschy, an analyst at Vontobel, noted that one of the new CEO's top priorities will be to "get Nestle out of the current negative news cycle".
Russ Mould, Investment Director at AJ Bell, predicts continued instability for the company. "While Navratil is also a Nestle insider, he will undoubtedly want to make his own strategic mark. Restructuring plans may therefore be reset from scratch," he said.
Ha Thu (via Reuters)
