Nestle plans to increase its advertising and marketing efforts while cutting costs by a minimum of $2.8 billion by 2027. The company will also separate its water and premium drinks sectors into a standalone global unit. This strategy aims to drive growth under the leadership of new chief Laurent Freixe.
As part of this plan, the world’s largest food company seeks to achieve cost savings of at least 2.5 billion Swiss francs (approximately $2.83 billion) by 2027. Additionally, it expects to realize ongoing savings of around 1.2 billion Swiss francs.
Nestle predicts that its medium-term organic sales growth will exceed 4% in a typical operating environment. The company also aims for an underlying trading operating profit margin of 17%. In contrast, it anticipates organic sales growth of around 2% for the year ending December 31.
At its capital markets day event in Vevey, the Swiss food giant announced plans to boost its investment in advertising and marketing. By 2025, it aims to allocate 9% of its total sales to support this growth strategy.
In 2023, Nestlé’s advertising and marketing expenses accounted for 7.7% of its sales. This represents an increase of 80 basis points from the previous year, as reported in Nestlé’s latest annual report released this year.
On Tuesday, Nestlé announced its plan to create a global unit for its water and premium beverages businesses, starting on January 1, 2025.
Freixe stated, “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.”
Freixe, who has been with the company for almost 40 years, became the CEO in September. He replaced Mark Schneider, who was ousted after disappointing investors with weak sales volume growth for several months. During Schneider’s tenure, Nestlé significantly reduced its marketing and advertising budget. The company also invested less in innovation as it navigated the costly challenges of the COVID-19 pandemic.
The effects of these decisions continue to impact Nestlé’s revenue. Shoppers have shifted to cheaper, better advertised, or more differentiated brands, which has eroded Nestlé’s market share.
Freixe has expressed his intention to invest significantly in the company’s core brands, such as Nescafe and Maggi, which produces soups, sauces, and noodles.
Last week, Nestle informed Reuters that its KitKat brand secured a global sponsorship deal with Formula 1. The company has also increased the marketing budget for the chocolate wafer biscuit brand by nearly 20% this year.
“For our brands to win in the market, we need to invest,” Freixe said on Tuesday. He added, “We will generate the resources we need through efficiencies and growth leverage.”
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