- Freixe axed after ‘undisclosed romantic relationship’
- Nespresso head named new CEO
- Fresh uncertainty over strategic direction
Investors in Nestle (NESN:SWX) face further uncertainty following news the Swiss food and drink giant has parted ways with its chief executive for the second time in a year with Laurent Freixe dismissed following a code of conduct breach.
The KitKat chocolate-to-Nescafe coffee maker’s shares cheapened 2.1% to CHF 74, extending one-year losses to 18.5%, on this further sudden change of leadership, with Nestle veteran Freixe removed after a probe revealed an undisclosed romantic relationship with a direct subordinate.
Chairman Paul Bulcke insisted: ‘This was a necessary decision. Nestle’s values and governance are strong foundations of our company. I thank Laurent for his years of service at Nestle.’
FURTHER LEADERSHIP UPHEAVAL
Freixe’s dismissal comes exactly a year after previous boss Mark Schneider abruptly relinquished his role at the world’s biggest packaged food company following an eight-year hot seat stint.
Nestle has appointed insider Philipp Navratil, who has been at the company since 2001 and is credited with accelerating the growth of Nespresso, as its new CEO.
The latest leadership shake-up raises questions over the medium-term direction of Nestle, which faces a challenging consumer backdrop as well as disruption from US tariffs.
Freixe’s sudden exit marks the latest management reshuffle at a global consumer goods and food company this year, including at Nestle rival Unilever (ULVR), drinks group Diageo (DGE) and chocolate maker Hershey (HSY:NYSE).
DYNAMIC PRESENCE
Bigging up the new broom’s credentials, Bulcke insisted Navratil is recognised for his ‘impressive track record of achieving results in challenging environments. Renowned for his dynamic presence, he inspires teams and leads with a collaborative, inclusive management style. The board is confident that he will drive our growth plans forward and accelerate efficiency efforts. We are not changing course on strategy and we will not lose pace on performance.’
However, analysts at Jefferies believe investors will be concerned about Navratil looking to conduct a full review of the group and set his own agenda and targets for the medium term.
‘That could see another review of investment plans and margin targets and portfolio assessment,’ warned the broker. ‘In the meantime, that uncertainty and the lack of consistency at the top of the company are likely to be unhelpful to the share price for now.’
AJ Bell investment director Russ Mould said: ‘While investors might not disagree with the reasons behind Freixe’s departure, it’s hard not to ignore the fact that Nestle now has its third CEO in just two years.
‘There might now be disruption to the company’s turnaround plan as new boss Philipp Navratil gets up to speed, and uncertainty as to whether he will go down the same path as his predecessor.’
Mould added: ‘Nestle has gone through a patchy period in recent years and Freixe was busy trying to refocus the company on its core strengths and making sure it did them better. Freixe knew the business inside out, and part of his work was to restore the culture which previously helped to propel Nestle to great things.
‘While Navratil is also an internal appointment, he will want to put his own mark on strategy and that suggests the clock could be reset when it comes to the turnaround plan.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
