Nestle Shares Drop After CEO Exit

By Adria Calatayud and Helena Smolak

Nestle shares dropped after the Swiss food giant said longtime Chief Executive Mark Schneider would leave the company, a management shake-up that comes at a time of slowing sales growth for the KitKat and Nescafe maker.

Shares in Nestle fell nearly 4% in opening trade in Europe, but pared some of the losses as the session advanced to drop 2.2%.

The world's largest packaged-foods group named company veteran Laurent Freixe, head of its Latin America business, as new CEO starting Sept. 1. The move came a month after Nestle cut its sales guidance for the year and said pricing was being pressured by increased promotional activity as shoppers seek cheaper alternatives to branded products.

The new CEO's skillset is more suited to the current environment, Nestle Chairman Paul Bulcke said in a call with analysts Friday. Freixe joined Nestle in 1986 and has served in a variety of roles including head of Europe and the Americas.

"In this market situation you need different qualities, someone who goes out there, connects and motivates people," said Bulcke, also a former CEO of Nestle.

Freixe told analysts that Nestle needs to balance market share and profitability equally, with investments focused on gaining market share.

Analysts said the move by Nestle came as a surprise, and attributed it to challenges the company is facing on several fronts and to its recent share performance.

The company's stock gained 22% during Schneider's tenure, but recent declines sent it to multiyear lows and meant it lagged behind peers. As of Thursday's close, Nestle shares were down nearly 16% over the past year, against a 7.4% fall in the Stoxx Europe 600 Food & Beverage sector index during the same period.

Schneider has in recent years faced investor questions over a series of high-profile problems.

Two children died in 2022 after eating pizza, which was contaminated with E. coli, made by one of Nestle's pizza brands in France. The company is still being investigated over the issue.

Earlier this year, French prosecutors said they were investigating Nestle for flouting rules on how it treated its mineral water.

The CEO change will raise questions about the extent to which Nestle's sales volumes can recover in the second half of the year and whether it will revise its profitability targets, analysts at Deutsche Bank wrote in a note to clients.

Write to Adria Calatayud at adria.calatayud@wsj.com and to Helena Smolak at helena.smolak@wsj.com and

(END) Dow Jones Newswires

August 23, 2024 04:06 ET (08:06 GMT)

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