Nestle's New Chairman Isla Aims to Transform Coffee Giant with Zara Insights

Leadership Changes at Nestle

By John Revill and Helen Reid

Isla's Background and Experience

(Reuters) -Nestle's new chairman Pablo Isla, who helped to turn Zara owner Inditex into a world-leading fast-fashion retailer, can use his expertise in logistics, e-commerce, and consumer trends to try to revitalise the Swiss food company.

Impact on Nestle's Digital Strategy

His jump from dresses and jeans to coffee and KitKats does not seem an obvious move, but Isla's track record at Zara of speedy product launches, appealing to younger consumers, and digital know-how, stands him in good stead for the challenge, Nestle investors and a source at the company told Reuters.

Investor Expectations and Challenges

The 61-year-old Spaniard, who spent 17 years at Inditex as CEO and executive chairman, will take on the chairmanship at Nestle half a year ahead of schedule on October 1, the company said on Tuesday, replacing Nestle veteran Paul Bulcke.

ISLA BROUGHT ZARA INTO DIGITAL AGE

The decision comes just over two weeks after Laurent Freixe was fired as chief executive over an undisclosed relationship with a subordinate, and amid rising investor pressure over declining sales and profit.

Investors are looking to Isla - the first Nestle chairman in 25 years to come from outside the company - to initiate rapid change, alongside newly appointed CEO Philipp Navratil, who previously led Nespresso.

"Philipp Navratil together with Pablo Isla bring expertise to drive the digital agenda of Nestle," a person close to Isla told Reuters.

"Pablo was involved in bringing the digital and shop world together at Inditex and this expertise will drive Nestle's digital efforts in future," this person said, adding that Isla was impressed with Nespresso's digital capabilities.

At Inditex, Isla drove rapid global expansion, lifting sales from 6.7 billion euros ($7.92 billion) in 2005 to 27.7 billion euros ($32.74 billion) in 2021 and boosting the Spanish company's share price eight-fold.

Nestle's shares are currently trading at their lowest since end-2016 and have underperformed rivals like Unilever and Danone.

While Nestle shares have lost 33% over the last three years, Unilever has gained 15% and Danone stock is 52% higher over the period.

ISLA HELPED ZARA CAPITALISE ON ONLINE SHOPPING SHIFT

When Isla joined the board in 2018, Nestle highlighted his extensive retail experience, with expertise in e-commerce, and innovative supply chain models.

At Inditex, Isla opened thousands of stores worldwide and rolled out new technologies to streamline its logistics and bring products into stores more quickly, a competitive advantage for a fast-fashion business. 

One major innovation was integrating radio-frequency identification tags in each garment, enabling the business to track in real time what was selling well, to see what sizes and styles were running low, and to fulfill online orders directly from stores.

His legacy was integrated digital and physical channels that helped Zara gain from consumers' shift towards online shopping, and a supply chain so efficient that Inditex investors call it a logistics company masquerading as a retailer.

Nestle has been making progress with ecommerce in the past few years, a trend which is expected to continue with Isla's appointment.

The Nestle source also said the company aims to use artificial intelligence to improve its supply chain, sales and production.

A spokesperson at Nestle said: "Nestlé has more than doubled the percentage of sales from online in the last five years.... Nestlé now achieves 20.2% of total sales from online, ahead of most key competitors."

CHAIRMAN LIKELY TO BE HANDS-ON MENTOR TO NEW CEO

Isla's track record makes him a strong fit for the Nestle chairmanship, said Guido Stein, who teaches corporate leadership at the IESE business school in Madrid, who anticipates Isla will be a fairly hands-on, "executive", chairman.

"He has a personal style that translates into leadership skills, as he is friendly, demanding and kind. And he leaves room for his colleagues to grow and do their work," Stein said.

Isla, named the world's best CEO by the Harvard Business Review in 2017 and 2018, is also no stranger to navigating complex management dynamics.

At Inditex, Isla took over as chairman in 2011 from founder and owner Amancio Ortega, and then passed the chairmanship on to Ortega's daughter Marta in 2022.

At Nestle, he may have more freedom to make the radical changes investors have said are needed, including restructuring and shedding non-core brands.

CEO Navratil said on Thursday he wants the Swiss food company to move fast and be open to fresh ideas, in his first public comments since taking charge earlier this month.

Isla's experience as a CEO will help him to guide Nestle's new CEO Navratil, the Nestle source said.

"It's good when the chairman knows what the CEO job involves. I imagine there could be a little bit of mentoring and coaching using the chairman as a sounding board, but Navratil will also have the expertise of the rest of the executive board," they said.

($1 = 0.8461 euros)

(Reporting by John Revill, Corina Pons, Aislinn Laing, Helen Reid. Additional reporting by Dave Graham in Switzerland. Editing by Lisa Jucca and Jane Merriman)