Nestle ushers in new leadership era as chairman exits early

By John Revill and Shubham Kalia

ZURICH (Reuters) - Nestle Chairman Paul Bulcke will step down early and hand over to former Inditex chief Pablo Isla on October 1, accelerating a changing of the guard at the Swiss food giant after an unprecedented period of managerial turmoil.

The decision comes just weeks after Laurent Freixe was abruptly fired as chief executive over an undisclosed relationship, and clears the way for new CEO Philipp Navratil and Isla to take full charge of the company that has struggled in recent years as sales growth stalled and debt rose.

Questions were raised about Bulcke's position by analysts and shareholders following the revelations about Freixe's romantic relationship with a subordinate, which led to his ouster just a year after he had taken the reins.

"Investors wanted a fresh start, with a new CEO and a new chairman to write the next chapter," said Jean-Philippe Bertschy, an analyst at Bank Vontobel.

He added that Bulcke had been under enormous pressure in the past few weeks and months to step aside. The recent turmoil around Freixe was likely the final straw.

"Nestle investors now want the company to deliver on its targets, especially to accelerate sales growth," he said. "One of the new chairman's top priorities will be to reshuffle the board, which should also take full responsibility for the poor performance of the past years."

Nestle added that Isla and Navratil were both committed to an organic growth strategy that will "leverage efficiencies" to invest behind Nestle's strong portfolio and brands, which range from KitKat chocolate bars to Nescafe coffee.

'THE RIGHT MOMENT TO STEP ASIDE'

In a brief statement, Bulcke said the Vevey-based company was well positioned for the future as he moved forward the handover that had previously been scheduled for April next year. Bulcke had been chairman since 2017 and before that was CEO from 2008 to 2016.

"This is the right moment for me to step aside and accelerate the planned transition," Bulcke, who will take on the role of honorary chairman, said in a statement, adding the new leadership would bring a "fresh perspective." 

Investors and analysts have said incoming chair Isla showed strong leadership at Zara owner Inditex.

Freixe was sacked following allegations of favouritism towards the employee with whom he was allegedly romantically involved, but that turmoil overshadows a wider malaise.

Nestle faces a stern challenge with investors and analysts urging it to slim down in a tough consumer market as rivals cut costs and even break up to improve their performance.

Sales growth has stalled, the company's shares have lost over 40% since 2022 and costs have ballooned. Debt levels have climbed past those of rivals such as Unilever .

Nestle said in June that Bulcke would step down next year, a move that followed rising investor unease over the firm's share price performance, leadership issues and concerns that its corporate governance model was out of date.

Bulcke's shareholder backing had also been declining.

In April, he was re-elected with 84.8% shareholder support, below the level chairs usually get in Switzerland. In 2017, he received almost 96% backing.

(Reporting by Shubham Kalia in Bengaluru and John Revill in Zurich; Writing by Dave Graham; Editing by Shilpi Majumdar, Adam Jourdan, Mark Potter and Matthew Lewis)