Nestlé in Zurich retreats after unexpected change of CEO

(Il Sole 24 Ore Radiocor) - The abrupt change at the helm of Nestlé is greeted with some nervousness on the Zurich Stock Exchange. The Swiss food giant's stock is among the weakest in the Smi index and the share price has lost around 10% since the start of the year. On the eve of the trading day Nestlé announced that CEO Mark Schneider will leave the company at the end of August. The current head of Latin America, the French Laurent Freixe, has been appointed to succeed him as of 1 September, but will be operational immediately.Leading the group since 2016, the German-American Schneider has stepped down from his duties and will also leave the board, Nestlé indicated, without further details.

For traders, the changing of the guard is unexpected, some go so far as to describe it as 'a lightning strike'. As the architect of the Vevey-based giant's reorganisation, the 58-year-old Schneider has helped refocus the group's portfolio on high-growth categories, notably coffee, pet products and nutritional health products. His predecessor and current chairman of the multinational Paul Bulcke praised "his significant contribution" and "his exceptional and resolute leadership in times of crisis" in a statement released on the eve of the event. But this departure, as sudden as it is sudden, "is unprecedented" in the group's history, Vontobel analysts note.

The top management changes had so far been organised and pre-announced well in advance. Vontobel points out that the pressure on Schneider has probably increased in recent quarters due to lower than expected revenues, which led the company to revise its targets downwards. Nestlé ended the first half of 2024 with revenues down 2.7% to EUR45bn, impacted by divestments and currency effects, and is now targeting growth for the year of 3% versus the previously forecast 4%. Underlying earnings per share at constant currencies are expected to rise around 5%, up from 6-10% so far.

According to traders, Freixe's arrival marks a return to basics for Nestlé, as he is an internal choice and a manager who already has a good relationship with Bulcke. The 62-year-old Freixe has been a member of the multinational company's executive committee for 16 years. He joined Nestlé France in 1986 and after working in Hungary and Spain, he managed the Europe region from 2008 to 2014 and then took charge of the Americas region. After the creation of Nestlé's new geographical structure in 2022, the manager was appointed to head the Latin America area. "I have known Laurent for a long time and consider him a talented leader with an excellent sense of strategy, extensive industry experience and expertise, and a deep understanding of markets and consumers. He has demonstrated his ability to deliver results in difficult market conditions, said President Bulcke.

In a conference call held on the eve of the event, Freixe outlined the general lines of the strategy he intends to follow. The new CEO believes that the group should go back to the 'basics', focusing in particular on Nestlé's traditional segments and brands. Acquisitions are not ruled out, but are not the priority. Analysts have not changed their ratings on Nestlé for the time being. Bernstein maintained its 'neutral' recommendation with an unchanged price target at CHF 105. Ubs and Jp Morgan also remained on 'neutral', both with a target price of CHF 95, as did Rbc but with a target price of CHF 96. According to Jefferies analysts, Freixe is 'a familiar face to investors, not only because of his experience leading the Europe and Americas Zone, but also because he was a candidate during the last change of CEO, when the company had opted for an external profile'. Freixe's appointment "seems to us to be a sign of the board's willingness to rebuild the culture of Nestlé," added the experts, who also expect new indications on the outlook for 2025, probably at the Investor Day on 19 November.