Shares in Nestlé were under pressure once again this week as the Kit Kat and Nescafe supplier sacked its CEO Laurent Freixe following an investigation into his affair with a direct subordinate.
The scandal plunged Nestlé into turmoil just one year after appointing Freixe as its new boss to replace Mark Schneider and turn around the group’s underperformance.
Nestlé named espresso boss Philipp Navratil as the new CEO on Monday evening to take over from Freixe.
CFO Anna Manz confirmed at an investor conference later in the week that Nestlé staff had complained in May over “improper favouritism” shown by Freixe to the unnamed employee with who he was romantically involved. Freixe, who has spent 40 years at Nestlé, denied the affair and an internal investigation found no evidence to the contrary.
However, complaints continued, leading to a second investigation with help from outside counsel, which ultimately resulted in Freixe being sacked without an exit package.
Nestlé’s share price slumped 2% on Tuesday morning as markets reacted to the news, but jitters quickly steadied throughout the day. The stock now sits higher than the opening price on Monday morning, but remains 15% lower over the past year.
The news left James Edwardes Jones at RBC “shocked”. “We thought of [Freixe] as a Nestlé lifer who would restore the company’s reputation of slightly boring predictability,” he said. “How wrong we were.”
Bernstein’s Callum Elliott added the news marked the latest in a line of “disappointing developments” at Nestlé.
New CEO Navratil reassured investors that he fully embraced Nestlé’s strategic direction, as well as the current action plan in place.
But Elliott noted it was a “meteoric rise to the top job” for someone who was running the group’s Mexican coffee business as recently as 2020. He added, the “seemingly rapid timescale” of the appointment also implied no extensive external search was undertaken.
“We expect, like any new CEO of Nestlé, [Navratil] is likely to ultimately want to put his own stamp on the business,” he said. “This adds an element of uncertainty around the future direction of the business in the near-term, which is unlikely to be helpful toward investor sentiment in our view.”
David Hayes at Jefferies said he expected Nestlé to maintain the same direction and momentum, but he worried Navratil’s “limited exposure beyond coffee” could raise investor concerns around breadth of experience.
HSBC analyst Jeremy Fialko argued picking the new boss from a more recent cohort of internal candidates, rather than the old guard, potentially could result in more stable leadership for the long-term.
He added, despite this distraction, Nestlé could remain on its path to an improved performance.
“Initiatives to address unperforming businesses, push the bigger innovations faster, reduce costs and ensure more consistent execution are likely to be maintained in their current form,” Fialko said. “Over time, we expect Navratil to develop his own plans but, for now, we think he is keen to ensure that those currently in train are properly carried out.”
Fialko added: “Last year, the company had gone through a volatile period with CEO change and below-expectation growth. Yet, with a strategy established and plans underway, we think that both the potential for improvement and the likelihood of Nestlé delivering upon them are little changed. We continue to think that RIG [Nestlé’s measure of volumes] can turn positive over the balance of 2025, which should set the group up for a year of profitable growth in 2026.”
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