Nestlé’s Strategic Overhaul: A Deep Dive into Cost-Cutting and Leadership Shifts

The Swiss food and beverage giant Nestlé is implementing a profound strategic shift, placing a monumental emphasis on cost efficiency. Under the leadership of CEO Philipp Navratil, the company has significantly raised its savings target to 3 billion Swiss francs and announced a substantial reduction of 16,000 positions worldwide within the next two years. This move signals a clear corporate priority: operational efficiency is now taking precedence over growth. The central question for investors is whether this rigorous approach can restore market confidence.

The backdrop for this restructuring is a period of significant instability at the highest levels of the corporation. The year 2025 was marked by unprecedented changes in the executive suite. Laurent Freixe departed from his role as CEO in September after just one year, with the official reason cited as an undisclosed relationship with a direct subordinate. Shortly thereafter, Board Chairman Paul Bulcke also stepped down ahead of schedule. Pablo Isla, the former head of Inditex, assumed the chairmanship and subsequently appointed Philipp Navratil as the new Chief Executive Officer.

This leadership upheaval has left a mark on the company's valuation. Nestlé shares are currently trading at 78.50 CHF, a figure that sits considerably below the 52-week high of 91.72 CHF.

Dissecting the 16,000-Position Reduction

The scale of the workforce restructuring is detailed and far-reaching, affecting approximately 6% of Nestlé's total global employees. The plan is structured as follows:

• 12,000 roles will be eliminated within administrative functions.
• 4,000 positions are set to be cut from production and supply chain operations.
• The cumulative savings goal has been set at 3 billion Swiss francs, to be realized by the end of 2027.

Navratil's strategy to achieve these cuts heavily relies on accelerating automation and digital transformation across the organization. "The world is changing, and Nestlé must change faster," he stated, outlining a vision for a leaner company with streamlined operations. This involves not only internal efficiencies but also a strategic retreat from certain business segments.

Should investors sell immediately? Or is it worth buying Nestle?

A parallel divestment program is underway. The sale of the Herta Foods stake has been finalized, the future of the water business is under review, and mainstream vitamin and supplement brands are slated for disposal. Notably, Navratil has characterized Nestlé's long-held stake in L'Oréal as a "financial investment," subject to regular review.

Operational Performance: A Mixed Bag

The company's most recent nine-month financial results presented a nuanced picture. Organic growth reached 3.3%, primarily driven by price increases in coffee and confectionery products. A more encouraging signal was the improvement in real internal growth—a key metric for actual sales volume—which surprisingly climbed to 1.5% in the third quarter, exceeding market expectations.

However, challenges persist. The Chinese market remains a particular concern. CFO Anna Manz acknowledged that the company's strategy there had overemphasized distribution at the expense of focusing on consumer demand. Correcting this course is expected to create short-term headwinds.

On a positive note, relief has come from revised trade terms. A framework agreement between the United States and Switzerland led to a reduction in tariffs from 39% to 15%, retroactive to November 14. Despite this, Nestlé continues to grapple with high input costs for key commodities like cocoa and coffee, alongside broader consumer caution in several markets.

Looking ahead, the company's mid-term targets include achieving organic growth of at least 4% and an operating margin above 17%. Whether Navratil's radical restructuring will deliver this turnaround will become clearer in 2026, but the initial steps of this ambitious transformation have now been decisively taken.