Major Workforce Restructuring Announced
Nestlé’s newly appointed CEO Philipp Navratil has reportedly initiated substantial workforce reductions, cutting approximately 12,000 positions according to recent reports. This represents nearly 6% of the company’s global workforce of 277,000 employees. The announcement came during Navratil’s first results presentation since taking leadership of the KitKat manufacturer last month, with sources indicating the move aims to address shareholder concerns about performance and valuation.
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Financial Performance Shows Positive Signs
The Nestlé leadership transition appears to be showing early positive results, with the company reporting a 1.5% rise in real internal growth that significantly exceeded analyst expectations of 0.3%. According to the analysis from Breakingviews, this metric is closely monitored by investors as it captures both sales volume and product mix. The Swiss-based company is also reportedly accelerating its cost-cutting initiatives, raising its savings target from 2.5 billion to 3 billion Swiss francs over the next two years.
Market Response and Competitive Positioning
Investors responded positively to the announcements, with Nestlé shares experiencing a nearly 9% increase following the news. Data from LSEG reportedly shows the company now trades at 18 times forward earnings, positioning it above competitor Unilever but still slightly below French rival Danone. Analysts suggest this represents progress in closing the valuation gap that emerged after inflation pressures drove consumers toward cheaper alternatives to major brands. The company’s operating margin has reportedly remained around 17% over the past two years.
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Broader Strategic Transformation Ahead
Sources indicate that the workforce reductions represent just the beginning of a more comprehensive strategic overhaul. According to reports, Navratil is considering divesting underperforming product lines to create a leaner, more profitable organization. The company is currently investing in 18 low-growth products that account for approximately 20% of total revenue, including Gerber baby food in the United States and soluble coffee in Europe. Analysts suggest these investments are already showing results, with sales declines stabilizing and making potential divestitures more feasible.
Potential Divestitures and Future Focus
The strategic review could extend to Nestlé’s frozen food division, which analysts previously told Breakingviews could be worth approximately $15 billion. Proceeds from such disposals would reportedly be redirected toward the company’s nutrition and health science unit, which produces brands including Vital Proteins and Nature’s Bounty. Although this division currently represents less than 20% of total sales, it demonstrated strong growth of 5.6% in the last quarter, significantly outpacing the wider group’s 1.5% growth rate. Industry observers suggest that focusing on faster-growing health segments could help Nestlé regain its premium valuation.
Leadership Transition and Industry Context
The strategic shifts come during a period of significant leadership transition, with Navratil assuming the CEO role last month. The Swiss food giant, which operates in a highly competitive global market, is navigating consumer shifts toward value alternatives while maintaining its portfolio of iconic brands. According to industry analysis available through Breakingviews trial access, the company’s approach reflects broader trends in the consumer goods sector where companies are streamlining operations and focusing on high-growth categories. The full impact of these strategic moves will become clearer as Navratil’s transformation plan continues to unfold, with additional updates expected in coming quarters.
This report is based on analysis from Reuters Breakingviews and the company’s official sales release. For comprehensive financial commentary and real-time analysis of global business developments, follow Reuters content licensing opportunities.
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