The larger idea of this exercise, the company said, is to drive category growth and improve market share performance. This plan was announced at its Capital Markets Day for investors and analysts on November 19.
Nestlé has forecasted a medium-term organic sales growth of over 4% in a normal operating environment, with an underlying operating profit margin of over 17%.
The company confirmed its 2024 guidance, with organic sales growth of around 2%, underlying trading operating profit margin of around 17% and underlying EPS broadly flat in constant currency.
This is lower than the goal that was set by former CEO Mark Schneider, who had set a goal for trading an operating margin of 18.5%. Further, he had predicted a mid-single-digit growth for 2025.
However, Nestlé has now said the firm expects an improvement in organic sales growth in 2025 compared to 2024, with the underlying trading operating profit margin anticipated to be moderately lower than the 2024 guidance.
As part of this plan, the company will make targeted investments in its winning brands
and growth platforms, which will drive greater impact, and systematically address underperformers.
Nestlé has also said that it will step up investment in advertising and marketing to 9% of sales by the end of 2025 to support growth.
The necessary resources will be generated through cost savings and growth leverage. In addition to the ongoing programmes, Nestlé aims to deliver incremental cost savings of at least CHF 2.5 billion ($2.8 billion) by the end of 2027.
Nestlé said in a statement that work has already begun on key initiatives across procurement, commercial investments and structural costs.
“Nestlé is a strong company with global reach, exceptional demand generation and in-market capabilities. We have a diverse and strategically well-positioned product portfolio. Our iconic brands and innovative products connect with people at every stage of their lives. These strengths give us a unique advantage and position us to win in the marketplace,” CEO Laurent Freixe said.
“We will invest further in our brands and growth platforms to unlock the full potential of our products for our consumers and customers. Our action plan will also improve the way we operate, making us more efficient, responsive and agile. This will allow us to deliver value for all our stakeholders. I am confident that we can deliver superior, sustainable and profitable growth and gain market share while transforming Nestlé for long-term success,” he said.
The carving out of the water and premium beverages business is a part of the plan to drive operational performance and unlock potential. This standalone business will be led by Muriel Lienau, Head of Nestlé Waters Europe.
The new management will evaluate the strategy for this business, which will include exploring partnership opportunities to enable Nestlé’s iconic brands and growth platforms to achieve their full potential.
Nestlé will also accelerate its digital transformation to be a real-time, end-to-end connected enterprise, powered by data and artificial intelligence.
