Nestle to step up marketing investment; Waters and beverages to become standalone business

Nestle on Tuesday said it will increase investment in advertising and marketing to 9 per cent of sales by the end of 2025. The company also announced plans to make its waters and premium beverages activities a global standalone business from New Year.

Unveiling a plan to fuel and accelerate growth at a Capital Markets Day for investors and analysts, the Swiss group also said it aims cost savings of at least CHF 2.5 billion (£2.25bn) above existing initiatives by end 2027 to fund increased investments.

“Our iconic brands and innovative products connect with people every day, at every stage of their lives. These strengths give us a unique advantage and position us to win in the marketplace. 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,” Laurent Freixe, Nestlé chief executive, commented.

“Our action plan will also improve the way we operate, making us more efficient, responsive and agile. I am confident that we can deliver superior, sustainable and profitable growth and gain market share, while transforming Nestlé for long-term success.”

Nestlé confirmed its 2024 guidance, with organic sales growth of around 2 per cent, underlying trading operating profit margin of around 17 per cent and underlying EPS broadly flat in constant currency. Looking ahead to 2025, the company expects an improvement in organic sales growth compared to 2024, with the underlying trading operating profit margin anticipated to be moderately lower than the 2024 guidance.

Nestle last month lowered its outlook for 2024 to 2 per cent as the company reported falling sales for the first nine months of the year.

The consumer goods major, whose brands range from Nespresso coffee capsules to Purina dog food and Haagen-Dazs ice cream, had already cut its annual sales growth expectations from 4 per cent to 3 per cent in July.

The company on Tuesday said it expects organic growth to be over 4 per cent in the medium term, in a normal operating environment, with an underlying trading operating profit margin of over 17 per cent.

Nestle said the its new action plan will allow it to drive category growth and improve market share performance.

Actions will include targeted investments in winning brands and growth platforms, more focused innovation activities to drive greater impact, and systematically addressing underperformers.

Nestle will step up investment in advertising and marketing to support growth. The necessary resources will be generated through cost savings and growth leverage.

As part of the action plan to drive operational performance, Nestle’s water and premium beverages activities will become a global standalone business under the leadership of Muriel Lienau, head of Nestlé Waters Europe, as of January 1, 2025.

Nestle said the new management will evaluate the strategy for this business, including partnership opportunities.