Nestle CEO joins line of consumer bosses felled by rising living cost

LONDON - Nestle chief executive officer Mark Schneider is the latest consumer-goods boss to be shown the door as companies struggle to coax shoppers back to premium brands after a period of high inflation and belt-tightening.

After eight years at the helm of the Swiss maker of KitKat, Nespresso coffee and Purina pet foods, Mr Schneider will be replaced by the company’s Latin America chief Laurent Freixe, Nestle said on Aug 22.

Mr Schneider is not alone. Just last week, Mr Laxman Narasimhan lost his job as CEO of Starbucks after less than two years; he will be replaced by Chipotle Mexican Grill chief Brian Niccol. Estee Lauder CEO Fabrizio Freda plans to retire in 2025, after the cosmetics company ran into trouble in recent months.

In 2024, new bosses started at Dove soap maker Unilever, beleaguered infant-formula maker Reckitt Benckiser Group and Johnnie Walker whisky distiller Diageo, all of which are trying to win back investor confidence in an environment where interest rates remain high and shoppers continue to keep a tight grip on spending.

While retailers like Walmart and Target have adapted to more price-conscious shoppers, in part by pushing their offering of cheaper private-label goods, companies like Nike have fallen behind.

“The pandemic, the supply-chain disruptions, 50-year-high inflation, rapidly rising interest rates and the negative consumer sentiment effect have all conspired to create a difficult environment for the average consumer stock,” said Mr Eric Clark, portfolio manager at Accuvest Global Advisors.

Until recently, Mr Schneider was lauded by investors as the CEO who overhauled Nestle, fending off a 2017 attack from activist investor Third Point. He initiated lucrative disposals of the Swiss company’s skin injectables business, low-margin bottled water brands in the United States and some frozen products.

Mr Schneider focused on persuading consumers to pay more for premium versions of existing product lines, developing Nestle’s offering of coffee and pet food, while building up its health and wellness business. Nestle also smoothly navigated the supply-chain struggles many companies faced in the pandemic, thanks to its localised production.

Over the past couple of years, however, Mr Schneider’s star began to fade. Nestle has struggled to win back shoppers after the post-pandemic bout of inflation, repeatedly missing quarterly sales expectations.

In July, Nestle trimmed its sales growth outlook for the year to at least 3 per cent, lower than the roughly 4 per cent previously targeted. Frozen food in the US proved to be a particular problem area because lower-income consumers are struggling to make ends meet.

Not all the blame lies with the weak consumer, though. Nestle has had problems at its vitamins unit – acquired in 2021 for US$5.75 billion. It also suffered shortages in its water business in the last couple of years.

“Schneider did a good job when he came in making changes to the portfolio,” said Mr Donny Kranson, a portfolio manager at Vontobel Asset Management. “More recently, however, the company has had some struggles, some self-inflicted and some a function of the external environment.”

The stock has climbed 22 per cent since Mr Schneider took over at the start of 2017, about half the gain that Unilever has posted during the same span. The Anglo-Dutch rival’s prospects have improved under new CEO Hein Schumacher, even as Nestle has started to fall behind. BLOOMBERG