Nestle plunged into turmoil as CEO fired over undisclosed relationship

Nestle CEO Laurent Freixe has been fired after an investigation into an undisclosed relationship with a subordinate.

ZURICH — Nestle has fired its CEO Laurent Freixe after just one year in the job after an investigation into an undisclosed “romantic relationship,” ousting its second CEO in a year and throwing the Swiss food giant into the deepest leadership chaos in decades.

Freixe is replaced by Nespresso chief Philipp Navratil, a rising star at the world’s biggest packaged food company, which has seen slowing sales in its main businesses since the pandemic.

Shares of Nestle, the maker of Nescafe coffee and KitKat chocolate bars were down one per cent following Freixe’s sudden dismissal, which comes a year after the predecessor Mark Schneider was axed for underperformance.

The dismissal of Freixe follows an investigation into an undisclosed romantic relationship with a direct subordinate which breached Nestle’s code of business conduct, Nestle said late on Monday.

The company said concerns about a possible relationship were raised by staff via internal company hotline, although an initial investigation was unsubstantiated. Freixe had initially denied the relationship to the board, a company spokesperson said.

When staff concerns persisted, Nestle said it ordered an investigation overseen by Chairman Paul Bulcke and Lead Independent Director, Pablo Isla, with the support of independent outside counsel. Swiss media reported that Swiss lawyers Baer & Karrer helped with the inquiry.

Freixe, who spent 39 years with Nestle, will receive no exit package following his departure, the company told Reuters.

“The loss of two CEOs and a chairman in a year is of historic proportions for Nestle,” said Ingo Speich, Head of Corporate Governance and Sustainability at Deka, a top-30 Nestle investor.

“The new CEO needs to fix the business model and bring volumes back. He needs to do better M&A and focus more on emerging markets.”

The Nestle veteran’s abrupt removal comes a year after Schneider’s ouster and two and a half months after longstanding chair Paul Bulcke announced he would step down in 2026 in one of the most turbulent periods in the company’s 159-year history.

In a short statement Bulcke thanked Freixe for his years of service at Nestle, but said the dismissal was a “necessary decision.”

Freixe was not immediately available to comment when contacted via email.

Stability sought

Nestle’s shares, a bedrock of the Swiss stock exchange, have lost almost a third of their value over the past five years, underperforming European peers.

Freixe’s appointment failed to halt the slide, with the company’s shares shedding 17 per cent during his leadership, disappointing investors.

In July, Nestle launched a review of its underperforming vitamins business that could lead to the divestment of some brands after first-half sales volumes missed expectations.

“The market did not particularly like Freixe, and the restructuring goals were also put on the back burner,” said Maurizio Porfiri, chief investment officer at trading firm Maverix.

“Another fresh start is needed, and it is time for more stability to return to the management at this global corporation,” he told Reuters.

Freixe’s dismissal was featured on the front page of Swiss newspapers, with Neue Zuercher Zeitung noting that Nestle had lost its “legendary stability” where CEOs stayed for years before eventually becoming chairmen.

The latest change is likely to leave questions unanswered about Nestle’s mid-term direction and “keep a lid on the equity story until we hear more about Mr. Navratil’s plan,” JPMorgan analysts said in a research note.

Analysts said the news of Freixe’s ouster was unlikely to reassure investors because it was the second time in a year that the company had appointed a new boss without carrying out a thorough search for a replacement.

The note also expressed concern that incoming CEO Navratil looked as though he would be “boxed in” by Freixe’s turnaround strategy for now at a time when the market remained unconvinced.

Patrik Schwendimann, an analyst at Zuercher Kantonalbank, said the CEO could lead to “paralyzing uncertainty,” at Nestle, although the switch could also accelerate the company’s recovery.

“At first glance, the Swiss Philipp Navratil is a good Swiss compromise between the two predecessors Mark Schneider and Laurent Freixe,” Schwendimann said.

(Writing by Dave Graham and John Revill; additional reporting by Oliver Hirt, Editing by Andrea Ricci, Muralikumar Anantharaman and Louise Heavens)