Share price plummets Nestlé's change of boss comes as a surprise - and raises questions

The abrupt change of CEO at Nestlé made headlines on Friday - and caused uncertainty on the stock market. That's why the rumor mill is buzzing. One thing is clear: the new boss now has a big task ahead of him.

The fact that Mark Schneider has to leave immediately is quite unusual for the world's largest food company: most of Nestlé's top managers have worked for the company for many years - in some cases their entire career.

Schneider's predecessor Paul Bulcke, for example, spent almost his entire professional life at Nestlé. And today, the Swiss-Belgian is Chairman of the Board of Directors, although the company was not always so successful at the end of his tenure as CEO.

Schneider is different: although he was still allowed to say a few words on today's analyst call, his successor Laurent Freixe has already taken the helm. However, the reason for the break with Schneider was not communicated. Accordingly, there is speculation on the stock exchange: "He could have been planning a major cut, which could have caused a dispute," said one trader.

One thing is clear: Nestlé's performance has recently been below average. This month, the share fell below the CHF 90 mark for the first time since 2019. Investors are dissatisfied with the company's operating performance. Nestlé was no longer able to build on its success during the coronavirus crisis.

A change of CEO was therefore not entirely surprising in analyst circles. However, it is surprising how quickly this has now taken place.

Question marks in analyst circles

On the other hand, it is hardly surprising that a long-standing Nestlé employee, the former head of Latin America Freixe, is now back at the helm. The 62-year-old Frenchman had already been considered as a candidate for the position in 2017, but now it has worked out for him after all. By contrast, the election of the external Schneider, who had been the hopeful candidate, surprised everyone in 2017.

Freixe has been with the Group for 38 years, including 16 years on the Executive Board, and has already been responsible for three geographical divisions. With his appointment, Nestlé is thus "returning to its roots", according to one analyst. And the company is thus focusing on continuity.

Among analysts, however, the news also raises many question marks. They believe that a 62-year-old CEO can only be intended as a temporary solution. Furthermore, it is not clear what specific measures the new CEO will take "to improve Nestle's ailing results".

Now that the company has already lowered its expectations for the full year, the change of CEO is also creating further uncertainty with regard to the 2024 financial year.

The company's top management is still tight-lipped about the new boss's exact goals. In initial telephone conversations with the media and analysts, Freixe and Bulcke said that the company would concentrate fully on its core brands and products and focus on organic growth. This means that Freixe is likely to hold back on acquisitions and sales, although he did not completely rule them out.

It also became clear during the phone call that Freixe is fully in line with the Chairman. Some experts are even saying that Nestlé now has a kind of dual leadership consisting of Freixe and Bulcke.

Share price weakens

The change unsettled the market, as the share price showed on Friday. Nestlé shares were down a good 1.5 percent shortly after midday and, due to their heavy weight, also kept the overall market, as measured by the leading SMI index, in the red.

Shortly after the stock market opened, however, the shares had fallen by more than 4 percent. The greatest excitement has therefore already subsided.

But now the new CEO must first show investors that he can get the Group back on track. "Even with a new CEO, Nestlé will not be able to solve its challenges in a short space of time," says one analyst. "The company must regain momentum with its brands in order to win back market share and further increase efficiency."

Big goals

And that is exactly what he wants to do. His focus is on increasing market share. With organic growth, he wants to create the means to invest in research and development, but also in productivity, he said.

However, he is also aware of the huge task that lies ahead of him. "It's not easy, because Nestlé is a complex company." It is both the most global and the most local company in the world, said Freixe.