- Schneider pays price for lacklustre performance
- Nestle forced to slow price increases
- No quick fix for Freixe
Shares in Nestle (NESN:SWX) cheapened 2.5% to CHF 87.3 on Friday as investors digested news of the abrupt departure of Mark Schneider, who is being replaced as CEO of the world’s biggest packaged food company by Laurent Freixe following eight years in the hot seat.
The Swiss multinational enjoyed a boom during Covid lockdowns as shoppers bought its food and drinks to consumer at home, but the KitKat chocolate bars-to-Nestle instant coffee maker has struggled of late.
On 25 July, Nestle nudged down its full year 2024 sales outlook, warning it had had to moderate price hikes with cash-strapped customers becoming more price conscious.
Under Schneider’s leadership, Nestle’s shares hit their highest level in January 2022 before hitting a downward trajectory since May 2023.
Year-to-date, Nestle shares are down 12%, underperforming the 25.5% rise delivered by rival Unilever (ULVR).
NO QUICK FIX FOR FREIXE
Schneider has decided to relinquish his roles as CEO and a board member after eight years leading Nestle, during which he has focused on high growth categories such as coffee, pet care and nutritional health products.
On 1 September, the baton passes to Nestle veteran Laurent Freixe, the Frenchman who joined Nestle in 1986 and has been on the Swiss company’s executive board for 16 years and accelerated growth in his most recent role as CEO of ‘Zone Americas’.
Freixe, who plans to focus Nestle on organic growth rather than acquisitions, commented: ‘There will always be challenges, but we have unparalleled strengths, such as iconic brands and products, an unmatched global presence, leading innovation and execution capabilities, and above all, exceptional people and teams. We can strategically position Nestle to lead and win everywhere we operate.’
THE EXPERT’S VIEW
AJ Bell investment analyst Dan Coatsworth said it is not a huge surprise to see Schneider head out the door given the company’s uneven performance in recent times.
‘Schneider’s strategy of focusing on core areas like pet food, coffee and nutritional products had largely been successful during the first part of his tenure but over the last year the situation has deteriorated – partly thanks to an uncertain backdrop but also as a result of problems of Nestle’s own making,’ observed Coatsworth.
‘The botched integration of a new IT system was never going to reflect well on Schneider and the company also faces a probe by the French authorities over the potential use of illegal purification methods on bottled mineral water.
‘The immediate share price reaction might suggest the market would have preferred an outsider to come in and shake up Nestle rather than someone who has held senior positions at the company for years.’
Coatsworth added: ‘Freixe will face the same challenges as his predecessor and counterparts at rival consumer goods firms – how to persuade shoppers, particularly in the West, back to premium brands after a period when households have been tightening their belts and trading down to cheaper alternatives.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Tom Sieber) own shares in AJ Bell.
