Nestlé’s CEO Mark Schneider Ousted Amid Concerns Over Sales Growth and Innovation
Mark Schneider, Nestlé’s former CEO, was removed after board concerns over weak sales growth and slow product development. His tenure saw margin growth but was marred by challenges in innovation.
Bollywood Fever: Mark Schneider, the recently ousted CEO of Nestlé, successfully led the world’s largest food company through the COVID-19 pandemic, grew margins despite supply chain challenges, and executed a significant reorganization. However, questions linger about when and why he lost the board’s confidence.
On Thursday, Nestlé announced Schneider’s departure without commenting on the reasons behind it, and Schneider himself did not respond to requests for comment.
However, three sources informed Reuters on Friday that the decision to remove Schneider had been made.
One source revealed that the board’s decision stemmed from growing concerns over weak sales growth and delays in product development.
“Two years ago, Mark Schneider could do nothing wrong; now he seems to get it all wrong,” noted Bernstein analyst Bruno Monteyne.
He highlighted that Nestlé’s stock has dropped approximately 30% since its pandemic peak in early 2022.
Monteyne questioned whether this was a valid reason to part ways with a CEO who was recently celebrated as the best in the sector.
Schneider, 58, became the first outsider in nearly a century to lead Nestlé in 2017. Under his leadership, the company’s stock reached a record high of 129.5 Swiss francs ($152.73) at the start of 2022.
That same year, he led an overhaul of the company’s structure, changing its executive board to align with a new geographic strategy.
While many competitors struggled to sustain operating margins during the pandemic, Schneider grew Nestlé’s margins from 16.5% to 17.3% over seven years, a remarkable achievement considering the industry-wide pressures.
However, despite these successes, concerns about Nestlé’s sluggish sales volumes and underinvestment persisted and were frequently raised by analysts and investors.
Sluggish Growth and Innovation Challenges
Throughout Schneider’s nearly eight-year tenure, Nestlé experienced inconsistent sales growth, particularly when compared to some of its competitors.
The momentum gained during the pandemic was lost in 2023 when the company alienated shoppers with steep price hikes.
Like the rest of the consumer goods industry, Nestlé raised prices significantly to combat rising supply chain and raw material costs, contributing to a global cost-of-living crisis.
During his final earnings call in July, Schneider acknowledged that supply chain constraints in 2022 had left “less energy” for innovation, inadvertently benefiting private label competitors.
This marked a shift from Schneider’s earlier dismissal of the threat posed by private label goods.
Previously, he had expressed minimal concern, suggesting that any competitive advantage gained by private labels would be temporary.
However, data from Nielsen, analyzed by Barclays, revealed that Nestlé’s market share had significantly declined in Europe and the U.S. by mid-2023.
While other companies like PepsiCo and Unilever managed to regain market share and sales volumes through innovation and strong advertising, Nestlé struggled to achieve similar results.
Schneider’s decision to scale back marketing in 2022, due to supply chain constraints, faced repeated criticism from investors and analysts.
Despite attempts to renew marketing efforts, Nestlé’s volumes—referred to as ‘real internal growth’—remained weak.
Schneider’s successor, Laurent Freixe, a 62-year-old Nestlé veteran, has pledged to refocus the company on organic growth rather than acquisitions.
Freixe, who started with Nestlé 40 years ago in marketing, is seen as a seasoned insider with a broad network of industry connections.
His appointment signals a strategic shift as Nestlé seeks to address the challenges that led to Schneider’s departure.
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