Nestlé’s Restructuring Strategy Delivers Early Results

Nestlé is demonstrating the initial impact of its most significant leadership transition in years. With new CEO Philipp Navratil at the helm, the Swiss food conglomerate has initiated a substantial organizational transformation that's already yielding measurable outcomes within weeks of implementation. The critical question facing investors is whether this early momentum signals a lasting revival or if the company might eventually revert to previous patterns once the initial restructuring phase concludes.

Financial markets responded enthusiastically to Navratil's bold strategic direction, rewarding Nestlé with its most substantial single-day gain since the 2008 financial crisis. The company's stock surged by more than 8%, reaching its highest valuation in several months. This market optimism triggered immediate reactions from financial institutions:

• Berenberg Bank elevated its rating to "Buy"
• Deutsche Bank raised its price target from 81 to 86 CHF
• The current analyst consensus now stands at 87.31 CHF

Quarterly Performance Exceeds Expectations

The third-quarter financial report delivered positive surprises that surpassed even the most optimistic analyst projections. Nestlé achieved organic growth of 4.3%, representing a significant acceleration from the disappointing 2.9% recorded in the first half of the year. More impressively, real internal growth (RIG) climbed to 1.5%, dramatically exceeding the modest 0.3% growth that market watchers had anticipated.

Several key factors drove this performance turnaround:
- Price-driven increases in coffee and confectionery products
- European operations shining with 5.8% organic growth
- The coffee division recording substantial market share gains

Comprehensive Workforce Restructuring

The most striking aspect of Navratil's transformation strategy involves substantial workforce reductions. The company plans to eliminate 16,000 positions, representing 5.8% of its global workforce. "The world is changing, and Nestlé must change faster," the new CEO stated, summarizing his operational philosophy.

The restructuring encompasses multiple dimensions:
- Elimination of 12,000 office-based roles
- Reduction of 4,000 positions in manufacturing and supply chain operations
- Increased cost savings targets rising from 2.5 to 3 billion Swiss francs by 2027
- Initial savings of 700 million francs expected by 2025

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

Four-Pillar Strategic Framework

The former Nespresso chief has implemented a clear strategic framework designed to return Nestlé to sustainable growth:

1. RIG-driven growth as the primary corporate priority
2. Portfolio optimization through consistent strategic focus
3. Performance-oriented culture that rejects market share erosion
4. Efficient transformation achieved through radical cost reduction

"Accepting a culture where we lose market share is no longer an option," Navratil emphasized. The company has already initiated strategic reviews of its water business and vitamins segment.

Challenges and Future Tests

Despite the encouraging start, Nestlé faces ongoing challenges. In Greater China, its second-largest market, sales continued to decline. "We were too focused on distribution rather than building consumer demand," CFO Anna Manz acknowledged critically.

The company reaffirmed its 2025 annual forecast, projecting improved growth alongside profit margins of at least 16%. However, the true test of the transformation strategy remains ahead: Can Nestlé successfully expand its priority products—which have already grown 14% since the beginning of the year—from 7% to 14% of its total portfolio?

The radical restructuring under new leadership is showing promising early results, but whether these short-term gains will translate into sustained growth will become clear in the coming quarters. The foundation has been established—now Nestlé must deliver on its potential.