Nestlé, one of the world’s largest food companies, is cutting 16,000 jobs—about 6% of its workforce—over the next two years. Under new CEO Philipp Navratil, this restructuring aims to save approximately 1.25 billion dollars annually and help the company compete in a challenging market.
Why the Cuts Are Necessary
Nestlé faces real challenges. Despite some positive results, the company’s sales growth slowed to just 2.2% in 2024, its weakest performance in years. Meanwhile, its stock price dropped 35% since 2022, signaling investor concern.
Rising operational costs and stiff competition in the consumer goods industry have squeezed profit margins. Management realized that without bold action, the company would continue losing ground to competitors.
Where the Cuts Hit Hardest
Most layoffs—about 12,000 positions—affect white-collar workers in management and office roles. Another 4,000 cuts come from manufacturing, logistics, and supply chain operations. This strategy reveals a management principle: sometimes organizational bloat accumulates in administrative layers rather than in production areas. By trimming management, the company aims to speed up decision-making and reduce bureaucracy.
The Bigger Strategy
Restructuring isn’t just about cutting costs—it’s about redirecting resources strategically. Nestlé plans to invest more heavily in high-performing divisions like coffee and confectionery while emphasizing premium products that command higher prices. The company is also reviewing underperforming units like water beverages and supplements, considering whether to sell them off or consolidate operations.
This reflects a crucial business lesson: not all business segments deserve equal resources. Success requires focusing investment where growth potential is strongest.
Taking Care of People
Nestlé states it is committed to treating affected employees with “respect and transparency.” While the company hasn’t detailed its specific support package, severance programs typically offered during workforce reductions may include severance pay scaled to position and tenure, extended health benefits, outplacement services with career counseling, and possible early retirement options for eligible long-term employees. Some workers may have opportunities to transition to other roles within the company.
Such measures—when implemented—can help mitigate hardship for displaced workers while potentially preserving employee morale among remaining staff and maintaining organizational reputation. However, the adequacy and fairness of any severance package depends on its specific terms, the company’s financial capacity, and whether it meets or exceeds applicable legal requirements and industry standards.
Key Management Lessons for Business Students
- Strategic Focus Matters: Not every business line contributes equally to success. Effective management requires honest assessment of which divisions drive real value.
- Costs Have Consequences: When a company ignores rising costs and slowing growth, problems compound. Decisive action, though painful, sometimes becomes necessary to prevent larger crises.
- Organizational Structure Affects Performance: Bloated management layers can slow decision-making and drain resources. Sometimes fewer managers with clearer authority structures work better than hierarchical complexity.
- Communicate Strategy Clearly: Leadership must explain the “why” behind difficult decisions. When employees understand the company’s competitive challenges, they’re more likely to accept necessary changes.
- Treat People Ethically: How companies handle workforce reductions affects their reputation, future hiring ability, and remaining employee morale. Comprehensive support packages demonstrate values beyond mere cost-cutting.
- Balance Short-term and Long-term Thinking: While restructuring focuses on immediate cost savings, the real goal is sustainable growth. Companies must invest in future opportunities even while cutting inefficiencies.
The Bottom Line
Nestlé’s restructuring illustrates how successful companies adapt to changing markets. Management must make tough choices, but those choices should reflect clear strategy, not just panic. Under Navratil’s leadership, Nestlé is betting that efficiency improvements and strategic focus will restore competitive strength. For business students, this case study demonstrates that good management combines financial discipline with human respect, strategic clarity with decisive action, and short-term cost control with long-term growth vision.
