Tuesday, 27 August 2024 Reading time : 2 minutes

The initial stock market reaction to Nestlé's surprising replacement of CEO was quite muted. 

Since the company announced last Thursday that CEO Mark Schneider would have to vacate his chair, the shares have barely moved. On Monday, the equities climbed 0.2% to CHF 89.72, after closing almost unchanged from the previous day (+0.1%) on Friday, the first trading day after the announcement.  

Schneider, who has headed the group since 2017, will be replaced with immediate effect by the current Head of Latin America, Laurent Freixe. With this appointment, the company is responding to growth concerns, as Nestlé Chairman Paul Bulcke explained in an interview with «Le Temps». «We looked at the evolution of market share and asked ourselves whether the group's growth engine and operational execution were still working properly,» said Bulcke. 

The half-year figures published by Nestlé a little over a month ago showed that business was not going well. Earnings were weaker than expected and led the company to lower its growth forecast for the full year. The share price fell by around 5% and has not yet recovered. 

However, the dry spell has been dragging on for some time. Since the beginning of 2022, when Nestlé shares reached a record high of almost CHF 130.00, the company has lost around 30% of its market capitalisation. This puts Nestlé well behind the Swiss market as a whole, which lost 0.3% over the same period, as measured by the SPI.

There are various reasons for the company's woes. Like its rivals, the consumer goods giant is struggling with the effects of inflation. Product prices remain high, especially in the high-priced brand segment, despite easing inflationary pressures, writes Bloomberg. As a result, manufacturers are struggling to compete with discounters and win back customers. In addition to the industry-wide challenges, Nestlé is experiencing setbacks in other areas. Last year, for example, the company had to write off more than USD 2 billion after an investment in a peanut allergy drug turned out to be a failure.

The new CEO is now in charge of getting Nestlé back on track – however, he still has to win over investors.

Reverse Convertible on Nestlé
6.50% p.a. Reverse Convertible on Nestle
Strike: 100%
Swiss Security Number: 135 805 084

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