Nestlé has announced a strategic plan to cut costs by at least $2.8 billion by 2027 while simultaneously ramping up its marketing and advertising efforts, under the leadership of its new CEO, Laurent Freixe. The company revealed these initiatives during its capital markets day event held in Vevey, Switzerland, on November 19, 2024. This move comes as Nestlé seeks to revitalize its growth trajectory following a challenging period marked by disappointing sales performance under former CEO Mark Schneider.
Laurent Freixe, who has been with Nestlé for nearly four decades, took over as CEO in September 2024 after Schneider was ousted due to a series of weak sales figures. Under Schneider’s tenure, the company made significant cuts to its marketing budget and reduced investment in innovation during the cost-heavy COVID-19 pandemic. These decisions have had lasting repercussions, as consumers increasingly gravitated toward cheaper or more innovative brands that offered better marketing support.
In light of these challenges, Freixe’s strategy marks a decisive shift in direction. He has outlined plans to enhance Nestlé’s advertising and marketing investments to 9% of total sales by 2025, up from 7.7% in 2023. This increase represents an additional commitment to brand visibility and consumer engagement, which Freixe believes are essential for driving growth.
Nestlé aims to achieve cost savings totaling at least 2.5 billion Swiss francs (approximately $2.83 billion) by 2027, alongside ongoing savings of around 1.2 billion Swiss francs. The company has set a medium-term organic sales growth target of over 4% in a normal operating environment, with an anticipated underlying trading operating profit margin of 17%. In contrast, the organic sales growth for the year ending December 31 is expected to be around 2%, reflecting the challenges faced in the current market climate.
Vontobel analyst Jean-Philippe Bertschy commented on the significance of these changes, stating that they represent “a first step in the right direction to restore sales growth.” The additional cost savings are viewed as a critical component of Nestlé’s recovery strategy.
As part of its broader restructuring efforts, Nestlé also announced plans to carve out its water and premium beverages businesses into a standalone global unit starting January 1, 2025. This move is seen as a potential precursor to a spin-off or sale of these divisions, with all options reportedly on the table according to Bertschy. The separation is intended to streamline operations and allow for more focused management of these specific product lines.
Freixe emphasized his commitment to investing heavily in Nestlé’s core brands such as Nescafé and Maggi, which includes soups, sauces, and noodles. “Our action plan will also improve the way we operate, making us more efficient, responsive, and agile,” Freixe stated. This approach aims not only to enhance profitability but also to deliver greater value for all stakeholders involved.
In addition to restructuring and cost-cutting measures, Nestlé is actively increasing its marketing budget for key brands. For instance, KitKat has secured a global sponsorship deal with Formula 1, which Freixe views as an opportunity to elevate the brand’s profile among younger consumers. The marketing budget for KitKat has been raised by nearly 20% this year alone.
“For our brands to win in the market, we need to invest,” Freixe asserted during the announcement. He believes that by generating resources through efficiency improvements and leveraging growth opportunities, Nestlé can restore its competitive edge.
Nestlé’s ambitious plans under CEO Laurent Freixe signal a renewed focus on growth through increased marketing investment and strategic restructuring. By targeting cost savings while enhancing brand visibility and operational efficiency, Nestlé aims not only to recover from recent setbacks but also to position itself for sustainable long-term success in an evolving marketplace.
The company’s commitment to investing in its core brands while navigating regulatory challenges reflects a proactive approach designed to adapt to changing consumer preferences and competitive dynamics within the food industry.
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