(News Bulletin 247) – The Swiss agri-food giant has announced the departure of Mark Schneider, who arrived in 2017, and who will be replaced by the Frenchman Laurent Freixe. A managerial change that raises some questions.

Nestlé has been struggling on the stock market for some time. The fifth largest by market capitalization in Europe, the group is down 10.4% since the beginning of the year and 17.7% over a year. Its French rival Danone is doing much better, gaining 4% over the whole of 2024 and 16% over a year, thanks to the deployment of the strategy of its boss Antoine de Saint-Affrique, who arrived in 2021.

Nestlé had lost 5% on July 25, after being forced to lower its sales forecasts for the current financial year, citing a difficult consumer environment.

Was an electroshock needed to get the machine going again? In any case, the Swiss group announced on Thursday evening the departure of its CEO, Mark Schneider, who took over the reins of the company in 2017.

The leader will be replaced on September 1 by the Frenchman Laurent Freixe, currently general manager of the Latin America zone. Having arrived at Nestlé in 1986, the Frenchman had also managed the “Europe” zones from 2008 to 2014, then the “Americas”.

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The time had come for a change

“With his deep understanding of Nestlé’s culture and values, he has led several global initiatives to improve productivity, increase operational efficiency, simplify processes and drive innovation,” Nestlé said in a statement.

At a conference with analysts on Friday morning, Chairman of the Board of Directors Paul Bulcke acknowledged that the change could be “surprising.” “But we agreed that the time has come for a change,” he added, quoted by AFP.

“What has changed so suddenly? The situations are different, the qualities needed are different,” he continued. “Mark [Schneider] did a good job, but I think Laurent [Freixe]” and his 38 years of experience in the group “is perfectly aligned with the strategy.”

The market is still frowning somewhat after this announcement. On the Zurich Stock Exchange, Nestlé shares fell 2.4% on Friday around 11am, after opening down more than 3.7%.

While Nestlé’s recent stock market performance may have disappointed, Mark Schneider’s medium-term performance is more flattering.

Royal Bank of Canada notes that Nestlé shares have underperformed their sector index, the MSCI European Consumer Staples, by 11% over the past year. “But given the context of the 22% outperformance since Mark Schneider was appointed CEO in January 2017, that doesn’t look too bad,” the Canadian bank notes. “It’s true that we’ve heard some investor discontent over the past few months, but we didn’t feel that this would lead to Mark’s departure,” it adds.

Several questions

Royal Bank of Canada says the CEO change raises “questions” that Friday morning’s conference call didn’t necessarily answer.

“The reason why Nestlé suddenly changed its CEO was not entirely clear,” the institution emphasizes.

“We’re still a bit puzzled. The new CEO, Laurent Freixe, has acknowledged that Nestlé is gaining market share in many places, but that he wants to do better. And while we fully understand that he hasn’t had much time to gather his thoughts, his priorities regarding growth in market share and sales, investment in the business and productivity savings don’t seem radical,” Royal Bank of Canada said.

In a note published before the market opened, Deutsche Bank believes that this change of direction is likely to be received negatively by the market. “Question marks will remain as to the degree of recovery of the ‘RIG’ (an alternative indicator of Nestlé’s sales growth, editor’s note) in the second half, the maintenance of the margin range forecast for 2025 and the possibility of an increase in productivity levels,” explains the German bank.

UBS, for its part, points out the age of Laurent Freixe, 62, the age Paul Bulcke was when he handed over the reins of the company to Mark Schneider. This raises a question about the length of his mandate. The Swiss institution wonders, like Deutsche Bank, whether the company’s margin target in 2025 will be maintained and whether cost measures, such as a restructuring, could be announced.

See you in November

“The fact of quickly opting for an internal candidate rather than conducting a prolonged search for a CEO may not be well received by investors,” explains Alphavalue/Baader Helvea. “For us, this can be seen as a message with the intention of stabilizing (the company, editor’s note) in the short term rather than transforming (it) in the long term with new ideas,” continues the independent research office.

Jefferies is less sceptical, judging that “after an increasingly difficult year, it is not a total surprise to see a change of CEO at Nestlé”. The bank recalls that Laurent Freixe was already in the running to take the head of the group in 2016, the board of directors then preferring Mark Schneider, defector from the German health group Fresenius.

Laurent Freixe will have several opportunities to detail his vision and strategy in the coming months. The group will publish its nine-month sales on October 17, and, above all, will organize an investor day in mid-November. “We believe that time is too short for the new CEO to present transformation plans at the next investor day in November,” Alphavalue/Baader Helvea believes.

Since mid-2022, Nestlé has suffered from a severe slowdown in its growth. “In addition, the company has suffered from an unusually high number of negative headlines (Buitoni frozen pizzas in France, bacterial contamination of European mineral water, supply chain problems at Nestlé Health Science, etc.)”, UBS recalled on Friday.