Nestlé chairman Paul Bulcke to step down early after CEO’s ouster

The 71-year-old said Freixe’s dismissal, which came after two probes into his behavior, was “a necessary decision” in line with Nestlé’s values and governance. But amid media speculation, a Nestlé spokesperson denied Bulcke had sought to shield Freixe during the initial probe.

The scandal had raised issues of accountability and judgment for investors including Christopher Rossbach, chief investment officer of J. Stern & Co.

“Pablo Isla will be the first external chair of Nestlé. He has a tremendous opportunity to improve board experience, accountability and governance,” Rossbach told Bloomberg. “He also has a tremendous responsibility to address the issues that led to the leadership issues and enable Nestlé to return to the paragon of growth and value creation it has been throughout its history.”

As chairman, Bulcke presided over unprecedented management turmoil for a company that had only three CEOs between 1981 and 2016. He spearheaded the selection of both Freixe and before that Mark Schneider, who was also pushed out after nearly eight years as Nestlé struggled to revive growth. Philipp Navratil, a veteran of the Nespresso coffee empire, was appointed CEO this month.

Working at Nestlé since 1979, Bulcke has served in numerous management roles across the globe, and as CEO for almost nine years before becoming chairman in 2017. Nestlé’s stock climbed about 44% under Bulcke’s tenure as CEO, but some of the company’s recent struggles trace back to his strategic decisions.

During his time as CEO, Bulcke helped push Nestlé into new areas such as skin health, while Schneider then bulked up the health science unit with acquisitions. These proved distractions as Nestlé’s core food business lost market share during the Covid pandemic and the inflation surge that followed.

New Chairman

Isla was the former CEO of Inditex SA, the Spanish apparel multinational and owner of the Zara fashion brand, from 2005 to 2011, and chairman of the same company from 2011 until 2022. He has served on Nestlé’s board since 2018.

The Spanish executive, 61, is credited with expanding on Inditex founder Amancio Ortega’s vision, boosting revenue and international reach to turn the company into the world’s largest seller of apparel.

Isla had a great track record with Inditex and there is an element of continuity which will bring comfort to some investors, according to Ketan Patel, a fund manager at the family office Whitefriars. “But overall, this is a distraction which management and investors will want to move on from and focus on the business,” he said. “The share price is off 40% from its 2022 high.”

The management turnover does come at a difficult time for Nestlé, which has had recent missteps including a $2.1 billion writedown on an investment in a peanut allergy medication. Then IT problems caused shortages at its vitamins and minerals unit. Like other makers of branded goods, it has also struggled to keep consumers coming back to its products as private-label food and household items have gained popularity.

“Pressure on the chairman has intensified in recent months and reached a peak in recent weeks. Given the share-price decline, a decisive break became necessary,” said Vontobel analyst Jean-Philippe Bertschy, who added that Nestlé’s new leadership team will have to urgently try to restore investors’ confidence.

Before he was fired, Freixe’s strategy emphasized making fewer but larger bets on key brands, supported by increased advertising investment and a cost-saving program. He separated its waters unit and was seeking an outside investor for it, and had also kicked off a strategic review of the group’s vitamins business.

Navratil said he embraced the strategic direction of the company when he took on the top job. Bulcke said Tuesday that it was the right time to step down now to allow Isla and Navratil to accelerate the planned turnaround of the company with a “fresh perspective.”