Nestle to cut 16,000 jobs, impacting global workforce

Source Credit : CNBC

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.

Shares of Nestle were last seen trading nearly 9% higher. The stock price jump boosted Europe’s food and beverage sector, which was up more than 3.3% on Thursday morning.

Nestle Stock Price

Under its former CEO Laurent Freixe, Nestle had already announced a cost-savings programme worth 2.5 billion Swiss francs ($3.14 billion). This has now been accelerated to 3 billion Swiss 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 (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 underformance 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 turnarounding its losers helped driver better-than-expected third quarter sales, said Jon Cox, head of European consumer equities, at Kepler Chevreux.

“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 that he expects the stock to react very positively.

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 its Dec 2021 peak, and have fallen 9% over the past 12 months.

Nestle has endured a turbulent year, as it saw its CEO Laurent Freixe ousted over an undisclosed romantic relationship on September 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.