Onome Amuge
The announcement of 16,000 job cuts over two years by Nestlé has stirred global attention, but the story runs deeper than a cost-cutting headline. Behind the $3.77 billion savings drive is a company facing internal dysfunction and the urgent task of regaining credibility after leadership crises and a slide in investor confidence.
Philipp Navratil, the freshly minted chief executive of Nestlé , noted that the task ahead is as much about winning back hearts and minds as it is about trimming costs. His statement that “the world is changing, and Nestlé needs to change faster” highlights an urgent cultural reset for the 157-year-old conglomerate, which has in recent years struggled to find its footing in an era of health-conscious consumers, trade barriers, and shareholder impatience.
The scale of the job cuts, equivalent to 5.8 per cent of Nestlé’s global workforce,is one of the largest in the company’s modern history. Yet it comes against a backdrop of internal upheaval that has unsettled employees and investors alike. The ouster of former CEO Laurent Freixe in September, following revelations of an undisclosed relationship with a subordinate, triggered a chain reaction in the boardroom. Just two weeks later, long-serving chairman Paul Bulcke resigned, clearing the path for former Inditex boss Pablo Isla to take the helm.
That double shock created what analysts have described as unprecedented managerial turmoil” in a company once synonymous with steady Swiss conservatism. Navratil’s appointment, unexpected, rapid, and born of necessity, is now the focal point of a corporate recovery story that blends cost discipline with cultural renewal.
The layoff plan, unveiled Thursday, will see 12,000 white-collar roles eliminated over the next two years, supplemented by another 4,000 reductions across manufacturing and supply chain operations. The move, the company stated, is part of a drive to boost efficiency, sharpen resource allocation, and generate CHF 3 billion ($3.77 billion) in savings by 2027, a 20 per cent increase from the company’s prior target.
Navratil’s bet is that these savings can be reinvested into higher-growth categories (coffee, confectionery, pet care, and premium nutrition) while funding innovation and marketing to reignite organic growth. “We are fostering a culture that embraces a performance mindset, that does not accept losing market share, and where winning is rewarded,” he said in a statement.
The approach reflects a philosophical pivot from the slower, incremental changes that characterised the tenure of his predecessors. The new CEO’s mantra of “RIG-led growth”, referring to real internal growth, or sales volume expansion, is considered a signal that Nestlé intends to focus on underlying demand, not merely on price hikes or portfolio shuffling.
That focus appears timely. The company’s third-quarter results, released alongside the restructuring announcement, showed a 1.5 per cent rise in real internal growth, well ahead of analysts’ expectations of 0.3 per cent. Organic sales grew 4.3 per cent, driven by coffee and confectionery, although foreign exchange effects dragged reported sales 1.9 per cent lower to CHF 65.9 billion for the first nine months.
A cost revolution amid global headwinds
Nestlé’s turnaround effort unfolds at a time of mounting external pressures. Higher U.S. import tariffs on Swiss goods, now at 39 per cent, are eroding margins, even as most of Nestlé’s American sales are produced domestically. Meanwhile, consumer confidence across major markets remains fragile, and shifting dietary preferences are forcing packaged food giants to rethink their portfolios.
CFO Anna Manz acknowledged missteps in China, where aggressive distribution expansion failed to translate into sustained demand. “We were too focused on driving distribution and not enough on building consumer connection,” she admitted. The company is now consolidating operations there to rebuild from a stronger, more efficient base.
Emerging markets, however, remain a bright spot, with 5.2 per cent organic growth in the latest quarter compared to 2.1 per cent in developed economies. Analysts say this divergence underscores the importance of strategic discipline in allocating capital to regions with the highest returns, a theme Navratil has made central to his messaging.
“We will be rigorous in our approach to resource allocation. We’ll prioritize opportunities with the highest potential returns, even if that means making hard choices elsewhere,”he said.
For investors, Nestlé’s biggest challenge is restoring the confidence that has ebbed away in recent years amid flatlining margins and rising debt. The company’s share price which jumped roughly 8 per cent following the announcement, indicates the market approves of Navratil’s willingness to act decisively. But the relief rally may prove fleeting if execution falters.
Bernstein analysts described the layoffs as a “significant surprise,” adding that the results “add fuel to the turnaround fire.” Still, they cautioned that the credibility test will be in delivery, not just in design.
Nestlé has reaffirmed its 2025 guidance, forecasting organic sales growth to accelerate from 2024 levels and projecting an underlying operating margin at or above 16 per cent, rising to at least 17 per cent over the medium term. The bulk of the planned cost savings, around CHF 2.3 billion, are expected in 2026–27, with CHF 700 million anticipated next year.
