So when did he lose the board’s confidence?
Nestle declined to comment on Schneider’s departure when it announced it on Thursday and Schneider did not respond to requests for comment, but three sources familiar with the matter told Reuters on Friday that the executive had been fired.
One source said the decision came as Nestle’s board had become increasingly concerned about slowing sales growth and that it was taking longer to come up with and launch new and improved products, slowing down product development.
“Two years ago, Mark Schneider could do no wrong. Now it seems he’s got everything wrong,” Bernstein analyst Bruno Montein said, warning of a downturn in Nestle shares, which are down about 30% from their post-pandemic highs in early 2022.
But “is that a good reason to part ways with a CEO who just two years ago was hailed as the best in the industry?” Montein questioned. Schneider, 58, became the first outsider to lead the maker of KitKat and Nescafe coffee in almost a century in 2017. The company’s shares hit a record high of 129.5 Swiss francs ($152.73) at the start of 2022. That same year, he led a restructuring of the company, changing its board to fit a new regional structure.
While rivals such as PepsiCo and Unilever failed to sustain operating margin growth in the seven years to 2023, Schneider helped Nestle grow its operating margin from 16.5% to 17.3%.
The feat is especially notable given that industry profit margins have taken a hit during the pandemic.
But the board’s concerns about sluggish sales and lack of investment are not unfounded and have come up repeatedly in conference calls with analysts and investors in recent years.
Moderate growth and innovation
Nestle has seen shaky sales growth compared with some of its rivals during Schneider’s roughly eight-year tenure and is losing momentum it gained during the pandemic in 2023 after high prices alienated customers.
Faced with soaring supply chain and raw material costs, the company and others in the consumer goods industry have sharply raised prices, contributing to a global cost-of-living crisis.
Answering questions on the company’s final conference call after the company released earnings in July, Schneider acknowledged that supply chain constraints in 2022 have “diminished energy” for innovation, which he said may have inadvertently made private-label, or company-brand, products more competitive.
It was a new view. Mr. Schneider had previously downplayed the threat to Nestle from private-label competition, saying the company was seeing “limited” signs but that they were likely temporary. “I’m not worried,” he said at the time.
But in the 12 months to mid-June, Nestle’s grocery store market share fell dramatically in Europe from a year earlier, and it also took a hard hit in the United States, according to Nielsen data analysed by Barclays.
Other companies, including PepsiCo Inc. and Unilever Inc., have also lost market share and volumes as a result of rising prices, but these other giants have managed to grow volumes again in recent quarters and have been praised by analysts for fueling their comebacks with innovation and strong advertising.
Nestle initially found it difficult to ease price increases, and even when it did so last year, sales volumes, or “real organic growth,” remained weak.
Schneider’s withdrawal from marketing in 2022, despite a subsequent refocus on advertising, has been repeatedly criticized by investors and analysts.
He himself said that marketing for 2022 was “fairly muted” due to supply chain and production capacity constraints.
His successor, Laurent Fréchet (62, French), started at Nestlé in marketing 40 years ago and later rose to senior positions.
He is considered a food industry insider, with an extensive network of executives and experts both within and outside the Nestlé group in Switzerland, and he was quick to promise that Nestlé would focus on organic growth rather than acquisitions.
