Nestle CEO joins consumer executives hit by rising cost of living

LONDON – Nestle Chief Executive Mark Schneider is the latest consumer goods executive to face the sack as companies struggle to entice customers back to premium brands after a period of high inflation and belt-tightening.

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

Mr. Schneider is not alone. Just last week, Mr. Laxman Narasimhan was fired as CEO of Starbucks after less than two years; he will be replaced by Chipotle Mexican Grill CEO Brian Niccol. Estee Lauder Chief Executive Fabrizio Freda plans to retire in 2025 after the cosmetics company has been in trouble in recent months.

In 2024, new bosses began working at Unilever, which makes Dove soap, struggling infant formula maker Reckitt Benckiser Group and Diageo, which makes Johnnie Walker whiskey, all of which are trying to regain investor confidence in an environment where interest rates remain high and consumers continue to control spending.

While retailers like Walmart and Target have adapted to the needs of more price-conscious customers, in part by promoting cheaper private-label goods, companies like Nike have been left behind.

“The pandemic, supply chain disruptions, 50-year highs in inflation, rapidly rising interest rates and negative sentiment have all conspired to create a challenging environment for average consumer stocks,” said Eric Clark, portfolio manager at Accuvest Global Advisors.

Until recently, Mr. Schneider was praised by investors as the CEO who revolutionized Nestle by fending off activist investor Third Point in 2017. He spearheaded lucrative divestitures of its Swiss skin-injectable 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, expanding Nestle’s coffee and pet food offerings while building its health and wellness business. Nestle also navigated the supply chain challenges that many companies have faced during the pandemic with local manufacturing.

But over the past few years, Mr. Schneider’s star has begun to fade. Nestle has struggled to win back customers after the inflationary blow that followed the pandemic, repeatedly failing to meet quarterly sales expectations.

In July, Nestle lowered its sales growth forecast for the year to at least 3 percent, down from a previous target of about 4 percent. Frozen foods have proven particularly problematic in the U.S. as lower-income consumers struggle to make ends meet.

But it’s not all the fault of a weak consumer. Nestle has struggled in its vitamins unit – acquired in 2021 for $5.75 billion – and has also suffered from deficiencies in its water business over the past few years.

“Schneider did a good job when he came in to make changes to the portfolio,” said Donny Kranson, portfolio manager at Vontobel Asset Management. “But recently the company has had some challenges, some of its own making and some due to the external environment.”

The shares have risen 22 percent since Mr. Schneider took over in early 2017, about half the profit Unilever posted in the same period. The Anglo-Dutch rival’s prospects have improved under new CEO Hein Schumacher, even as Nestle has begun to lag. BLOOMBERG