Nestle ramps up cost-cutting by another £2.2bn in overhaul

KitKat maker Nestle has revealed plans to slash costs by at least another 2.5 billion Swiss francs (£2.2 billion) and spin off its premium water and drink business as part of a turnaround being led by its new boss.

Recently-appointed chief executive Laurent Freixe said the Swiss group will make the mammoth savings by the end of 2027 – on top of an ongoing existing programme to trim costs by 1.2 billion Swiss francs (£1.1 billion).

It said “work has already begun on key initiatives across procurement, commercial investments and structural costs” as it looks to ramp up cost-cutting.

The group’s bosses said at its capital markets day for investors that it did not anticipate significant restructuring.

Nestle has around 270,000 employees across the world.

Mr Freixe said the group will use the savings to help channel spending into advertising and marketing, with investment in those areas being increased by up to 9% of sales by the end of 2025.

I am confident that we can deliver superior, sustainable and profitable growth and gain market share, while transforming Nestle for long-term success

Nestle added that its water and premium drinks arm will become a separate global standalone business as of January 1 next year and its new management team will “evaluate the strategy for this business”, including possible partnership deals.

The firm – which makes a raft of well-known household brands also including Nescafe coffee and Cheerios – maintained recently lowered sales guidance for 2024, but cut its profitability outlook for 2025, saying it was set to be “moderately lower” than the expected result for this year.

The consumer goods giant had already trimmed its sales outlook in July and October after weaker-than-expected sales.

Mr Freixe said: “We will now invest further in our brands and growth platforms to unlock the full potential of our products for our consumers and our customers.

“Our action plan will also improve the way we operate, making us more efficient, responsive and agile.

“This will allow us to deliver value for all our stakeholders.

“I am confident that we can deliver superior, sustainable and profitable growth and gain market share, while transforming Nestle for long-term success.”

Nestle has been slowing down its price increases to help woo cost-conscious consumers.

It said in October it was rising prices but by the slower pace of 1.6% on average globally, down from 2% in the first half, following “unprecedented increases in the prior two years” as it grappled with soaring inflation.

The sector has seen cocoa prices soar, putting pressure on confectionary firms to pass on costs to consumers.

Mr Freixe took on the top role in September when former boss Mark Schneider abruptly quit after several quarters of weak trading.

Last month, the new boss also announced a revamped leadership team and operations structure as he puts his stamp on the business.