In a stunning revelation, Nestle, the giant of packaged food, is set to slice 16,000 jobs as part of a bold initiative led by its new CEO, Philipp Navratil. That's a staggering 5.8% of their 277,000 global workforce! This drastic move aims to cut costs and restore faith among investors who have been watching the company’s performance with growing concern.

The stakes are high, as Nestle has ramped up its cost-saving target from 2.5 billion Swiss francs to a massive 3 billion Swiss francs (about $3.77 billion) by 2027. But what’s driving this urgent need for change? US import tariffs weigh heavily on the company, even though most of its US products are made domestically. Simultaneously, consumers are shifting their eating habits towards healthier options, causing food producers, including Nestle, to reevaluate their strategies.

“The world is changing, and Nestle needs to change faster,” Navratil proclaimed, highlighting the urgency of the situation. This announcement comes on the heels of a significant leadership shakeup, with Navratil taking over from Laurent Freixe, who was dismissed in September amid controversy. The company’s chairman, Paul Bulcke, also resigned early, paving the way for a new direction under former Inditex chief Pablo Isla.

Over the next two years, Navratil plans to implement 12,000 white-collar job cuts and an additional 4,000 job reductions as part of ongoing efficiency improvements across manufacturing and supply chains. With iconic brands like KitKat, Nespresso, and Maggi at stake, Nestle faces mounting pressures from rising costs and debt, not to mention the need to halt a decline in share prices.

The market reacted positively, with Nestle shares soaring approximately 8% in early trading. Analysts noted that this headcount reduction is a significant surprise, underlining the potential for a turnaround. In the third quarter, Nestle reported a 1.5% rise in real internal growth (RIG), hugely surpassing the expected 0.3% increase, which offers some hope for Navratil as he strives to make his mark.

Navratil emphasized that prioritizing RIG-led growth is crucial for Nestle’s strategy moving forward. “We are fostering a culture that embraces a performance mindset, where losing market share is not an option,” he asserted, as the company continues to conduct strategic reviews of its waters and premium beverages business alongside low-growth vitamin brands.

Despite the turmoil, Nestle is unwavering in its 2025 guidance, maintaining an optimistic outlook for organic growth and profitability. They expect improvements in organic sales growth compared to 2024 and aim for their underlying operating profit margin to reach, or exceed, 16%. However, these figures include the impact of the steep 39% US import tariffs that took effect in August.

As the company forecasts the bulk of its cost savings to manifest by 2026-27, with 700 million Swiss francs anticipated in 2025 alone, the challenge remains to stabilize its footing in a rapidly evolving market. With quarterly sales driven by price increases in coffee and sweets, the performance in Greater China poses challenges. CFO Anna Manz acknowledged that the company must shift focus from merely expanding distribution in China to cultivating actual consumer demand.