Sector News

Nestlé Reorganizes Business Units

September 29, 2014
Food & Drink
Nestlé SA on Friday said it is shaking up its organization to set up a new business excellence division and expand its European operations zone, as the Swiss food giant looks to overcome sluggish growth there and in the Americas.
 
The Vevey, Switzerland-based company, the world’s largest foodmaker by revenue, said it would transfer operations in North Africa, the Middle East, Turkey and Israel from its Asia, Oceania and Africa zone into an expanded Europe zone.
 
It said it would also set up a business excellence division that will be led by former Nestle Americas chief Chris Johnson to oversee the company’s efficiency programs.
 
Laurent Freixe, who previously led Europe, will take over in charge of Nestle in the Americas, and he will be replaced in Europe by Luis Cantarell, who was head of Nestle Health Science.
 
Nestle Chief Executive Paul Bulcke said the changes were being implemented to better use Nestle’s scale to gain efficiencies.
 
“The company aims to better leverage its scale and skills, and serve its markets and businesses more effectively and cost efficiently,” Nestle said.
 
The move is similar to a reorganization by Swiss pharmaceuticals giant Novartis, NOVN.VX +0.68%  which earlier this year said it was trying to improve profitability through the creation of Novartis Business Services in order to reduce the $6 billion of expenses it oversees.
 
Nestle’s shake-up comes as the company struggles with slow growth, particularly in Europe. The maker of such well-known brands as Nescafé coffee and KitKat chocolate bars reported sales growth of 4.7% for the first half of 2014, below its long-term target of 5% to 6%. Rivals Unilever UN +0.86%  NV and Danone SA BN.FR -0.44%  have also struggled.
 
Europe is an important market for Nestlé, generating nearly one fifth of its 92.2 billion Swiss francs ($96.9 billion) in revenue last year. But the region has been Nestle’s weakest performing area this year. Organic sales, which cut out the effect of currency fluctuations and acquisitions, barely increased in the region in the first six months of the year.
 
Analysts remain skeptical about future growth opportunities on the continent, where manufacturers have been unable to increase prices because of weak economic development.
 
By John Revill
 

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