Nestlé has outlined its plan to find “at least” $4.3 billion (CHF 2.5 billion) in cost savings by the end of 2027 and spin off its water and premium beverages business into a standalone company from 1 January 2025.
Nestlé CEO, Laurent Freixe, told investors and analysts at its Capital Markets Day the savings will be used to fund increased investments. Advertising and marketing spend will increase to up to nine per cent of sales by the end of 2025 to support growth
“Our action plan will also improve the way we operate, making us more efficient, responsive and agile. This will allow us to deliver value for all our stakeholders. I am confident that we can deliver superior, sustainable and profitable growth and gain market share, while transforming Nestlé for long-term success,” Freixe said.
To achieve the $4.3 billion cost savings, work has already begun on key initiatives across procurement, commercial investments and structural costs, he said.
The company expects organic growth to be four per cent in the medium term, plus in a normal operating environment, with an underlying trading operating profit margin of 17 per cent plus.
In 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.
New CEO making swift changes
Freixe became CEO on 1 September, replacing Mark Schneider who resigned after eight years in the role. Freixe has been at Nestlé for almost 40 years, joining the company in 1986. He has been CEO of its Europe, North America, and Latin America business zones since 2008 and on the executive board for 16 years.
In October, Freixe announced a restructure of its organisational structure and the board. Zone Latin America and North America will merge to become Zone Americas (AMS), Zone Greater China Region will become part of Zone Asia, Oceania, and Africa (AOA), and Zone Europe (EUR) remains unchanged.
From 2025, Nestlé’s reporting will comprise five segments: Zones AMS, AOA, and EUR, Nestlé Health Science, and Nespresso. The company will also continue to voluntarily report sales performance each quarter for North America and for Latin America within Zone AMS and for Greater China within Zone AOA, it said.
Freixe said all key unit leaders “driving our performance and our transformation” will report directly to him.
“This is crucial, as we sharpen our focus on consumers and customers and restore investment in our brands and in innovation to expand market share and accelerate our performance.
Going forward, we are also placing a greater emphasis on Nestlé’s digital transformation into a real-time, end-to-end connected, data- and AI-powered organisation. I am confident these changes will optimally position Nestlé for future success,” he said.
Demerging waters and premium beverages
Nestlé water brands include Acqua Panna, Perrier, S.Pellegrino, and Pure Life. The company said turning the business unit into a global standalone business will “drive operational performance and unlock potential”. New partnership opportunities will be explored in a bid to grow market share for its brands.
Freixe told the analysts call the board thought the brands would be “better managed with one unified leadership and execution in the marketplace”. In terms of what the partnerships might look like, he said the new leadership team will look at options.
“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. Our iconic brands and innovative products connect with people every day, at every stage of their lives.
“These strengths give us a unique advantage and position us to win in the marketplace. We will now invest further in our brands and growth platforms to unlock the full potential of our products for our consumers and our customers,” Freixe said.
