Nestlé to Slash 16,000 Jobs as New CEO Speeds Up Turnaround

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break.

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1:02Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. You know, let's get our consumer preferences straight here. I'm a Coke person. They put Pepsi in front of me. I'm just as happy. Same thing on the chocolate front. I identify, as a kid, say, as a Hershey R person, but he put a Nestle's Crunch in front of me. Boom. I'm very happy. I don't know about either of those.

1:39I'm snobby, and I like European chocolate or Japanese chocolate. I don't like this Nestle stuff. All right. Well, I mean, now John was just reporting a slashing 16 ,000 jobs. I went to the DES function. They have 277 ,000 jobs, so not that big. But let's check in with Duncan Fox. He covers all the consumer staple stuff over there in the UK and Europe. He's at Bloomberg Intelligence. They had pretty good numbers, Duncan, but they're still this new CEO is taking some some headcount out. Talk to us about what you learned at Nestle. Well, he certainly grabbed the headline with with sort of 16 ,000 headcount companies.

2:16As you said, it's six percent of the overall headcount. So it's not huge in the context of the group. But I think the main thing today was that there was not a nasty surprise in that. So he's had the second, he's the third CEO in a year. And obviously the chairman left about a month ago as well. So I think there was fears that maybe there was something underlying in the business that was going wrong. So the one and a half percent organic growth, albeit not huge, is a relief. And I think that's why the shares have really bounced today rather than the wonderful headline of the job cuts. Tell us a little bit more about this new CEO strategy overall.

2:54I'm curious whether he is rolling out something new completely, or is he just kind of doubling down on the existing strategy that his predecessor had laid out? I think he's doubling down. Excuse me. I think there's no doubt they were trying to become a lot more focused on their key brands. But he's sort of broadened that out to the sort of the broader category. So rather than just looking at, say, cold coffee with Nescafe, he's putting it out to the whole of the coffee brands that they have. So he's definitely being far more aggressive on trying to make sure that the market share on their key brands goes up rather than sort of flat or down.

3:33And it looks like he's probably pulled forward some job cuts as well and pushed them into the year to 2027 rather than sort of keeping them maybe for later in sort of 28 and 29. So, yes, he's definitely, I think, accelerated the process that was probably being discussed anyway in the business. Duncan, I'm just looking at the stock here. And over the last five years, Nestle's compounded annual return has been about negative 2.5 % per year, lagging the Swiss index here. What's the story? What's the challenge for a company like Nestle with such a great brand? Well, it's such a big, big company in the food industry.

4:13It's got to innovate very, very quickly or it's going to die. they did quite a bit of vegan innovation about two three years ago unfortunately pretty much every one of those products failed because they just didn't taste very good and i think to be honest that was the industry had the same problem not just neslai you've then got thread of glp1 drugs coming through so they pushed out a whole new bunch of products on that so that you can have them in conjunction with uh with the drug that you do your using so that you don't lose muscle mass and actually be malnourished. So there's a lot of things they need to do, but they've probably not done them quickly enough.

4:54And that's part of the problem when you're such a huge company. You've got to make sure that innovation comes out straight away. You're first to market. It's at the right price. And then you can win. And when you've had inflation that's been sort of 15%, 20%, two or three years on the trot because of costs, it's very, very difficult to get that right and get the pricing right so that we, the consumer, buys it consistently. And that's not just nothing. That's an industry issue which they have to address. Stay with us. More from Bloomberg Intelligence coming up after this. This is Special Agent Regal, Special Agent Bradley Hall.

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6:50You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Well, United Airlines reported better than expected earnings, citing demand for international travel and premium customers. United CEO Scott Kirby joined Bloomberg earlier this morning, breaking down 2025's earnings outlook. The first three quarters were really good for United in a lot of macro volatility that happened for the aviation industry. That demonstrates the resilience of our revenue diverse, brand loyal business model.

7:28But you look to the fourth quarter, it's even more exciting because as the economy is starting to get back to a solid footing, at least for aviation, demonstrates a lot of upside. We think we're going to be able to grow earnings for the full year, even in this environment. So it really is creating value for all of our customers. All right. That was United CEO Scott Kirby, a graduate of the United States Air Force Academy. He joined Bloomberg earlier today, breaking down the results for the company. Let's check in with George Ferguson. He covers the airlines and aerospace companies for Bloomberg Intelligence.

7:59George, what'd you make out of the United numbers here today and some of the commentary from Mr. Kirby? Market looks pretty saturated. So what's that mean? A lot of capacity in the marketplace and fares are falling. So if you look at yields at all United's markets, they're falling year over year. So the price paid per mile flown is falling anywhere from sort of two-ish percent in domestic up to mid single digits in international. Atlantic was a bright spot in prior quarters. Again, down I think it was roughly around five percent if I recall correctly. so they put enough capacity in that marketplace that fares are starting to fall.

8:40United grew at like 7 % during the quarter capacity. It's pretty aggressive in an economy that's growing, I don't know, 2 % to 3%. So I think that to Scott Kirby's benefit there and Delta as well, the full-service carriers are really having a good time of it lately. Loyalty programs are really putting some wind in their sales. Premium is still outperforming basic economy, although it seems like we're seeing the revenue growth from premium about the same as capacity growth, maybe a little bit less, which tells me there's a little bit of price weakness maybe starting to show up in that premium world, and basic economy is still underperforming.

9:28That means Scott's competitors are going to get are going to get banged up in the in the budget world. Right. Competitors that are not named Delta specifically. You got it. United is always mentioned in the same breath as Delta, but kind of as an also ran in comparison to Delta. What would United need to do to beat Delta at this premium premiumization strategy? You know, Delta really gets a lot of revenue and more than United out of this, you know, the co-branded credit card agreement. I think, you know, one Delta is sort of in there with American Express. It's got, you know, maybe American Express lives in its own special world of credit cards.

10:09I don't know. It feels, you know, to me, I think most of the maybe younger consumers carrying around things like visas and MasterCards. I don't know, but it seems like that agreement with American Express really drives a lot of revenue for Delta and I think is a big differentiator. And I think Delta has used that as well as sort of, you know, their premium seating and lounges to put some distance. But when you look at the revenue number, it's all about that credit card agreement with Amex. I'm so glad you bring this up because my current obsession is to look on Reddit and look at people who are talking about Amex Platinum versus the Chase Sapphire Reserve.

10:44these partnerships with credit card companies, building loyalty for these passengers. How costly is it for Delta to maintain this relationship with Amex? How costly is it for United to maintain its relationship with Chase? I think it's not costly. I think it's lucrative for them, right? Because it seems to me that the American consumer, I don't know that I fully understand this, but it feels like people go out and buy the credit card for the airline they love. They go put all their groceries, all their Starbucks, all their dinners out on that card, take those points, accrue them for their summer vacation, pay$500 so they get lounge access.

11:23They're not like Paul Sweeney, just get lounge access because of who he is, so they've got to pay for it. And so they're willing to spend and hold that card. And the credit card company is sort of taking down those, what, 4 % or 5 % per transaction and buying those miles for the consumer. You know, those miles are, some of them do waste away. People don't use them in time. Others, right, the airline provides you the opportunity to get a seat. They don't put all the, you know, they don't put all sort of benefit travel in one airplane, right? They give you the opportunity in airplanes that aren't sold out to get benefit travel.

12:00So that kind of, you know, juices up their load factors. They upgrade you if they have space. So I think it's super lucrative for the airlines. It's really important what credit card deal you cut right now for your bottom line. How much do the airlines talk about this with analysts on their earnings calls, the intricacies of this? So you're hearing, I mean, look, nobody likes to give away the total intricacy, right? Because, you know, they make it hard for us to figure out what the wastage numbers are, you know. But you can see how this flows to the bottom line quite well. But Delta and United talk about it a lot because it really works for them.

12:38Or maybe I should say talk about it the most in the industry because it really works for them. I think it's telling that we do hear the budget, low-cost carriers talking about their loyalty programs, too. But they just pale in comparison. They typically don't give us numbers, but they pale in comparison with what can get done up at Delta and United. Stay with us. More from Bloomberg Intelligence coming up after this.

13:05You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's switch gears and take a look at tech. We can't stray too far from tech, given that it's the driver of this stock market rally. And today is, once again, the best performing sector as well, up nine tenths of one percent. led by the chip makers. And in large part, that is because Taiwan Semiconductor Manufacturing, TSMC, has raised its outlook once again.

13:41And I say once again because it did it not so long ago. Mandeep Singh is Bloomberg Intelligence's senior tech industry analyst and joins us now. So it seems like very little is stopping TSMC's momentum. Yeah, and look, it's the AI demand that gets reflected in TSMC's margins, like gross margins nearing 60 % for a fab maker. I mean, look at Intel in its glory days. They were around 60 to 65 % gross margin. So clearly TSMC is kind of hitting its stride from a gross margin perspective. But I think when it comes to TSMC, it's obvious to everyone, regardless of whether the accelerator is a GPU or a Broadcom custom chip, everyone has to go to TSMC to manufacture the chip.

14:31And you want to be in that sort of position because you don't want to pick, okay, is NVIDIA demand going to sustain through 2030? And everyone is kind of trying to reach that point where they have a substitute for NVIDIA. So even if there is a substitute, you still go to TSMC. And that's where I feel they are in an envious position when it comes to the mode that they have developed. Is ASML the direct competitor to TSMC? No, ASML is one of their suppliers. So TSMC's CapEx goes to ASML. And TSMC, by the way, they raised their revenue outlook. They also raised their CapEx because they're saying we need to expand capacity to fulfill all the demand that the 26 gigawatts that OpenAI has signed up for in the last one month.

15:25Yep. they need more capacity at TSMC and they need to buy more ASML equipment. So I think it's that chain where TSMC suppliers also benefit because of that insatiable demand. Okay, so TSMC plays this critical role in the supply chain. And I guess the idea is to get Intel to become kind of like a TSMC. How long of an effort is that going to be? I mean, this is not something that can be done before the end of President Trump's term, is it? Well, so the way things work in the semiconductor manufacturing world is you go, you know, step by step. And Intel, for the longest time under Pat Gelsinger, tried to jump, you know, three steps and directly go from like 12 nanometer to five nanometer.

16:10I see. That didn't happen. So you really have to go step by step. And that's where Intel has struggled because there is no shortcut That you become a leading node manufacturer overnight, even if you buy the best ASML equipment, it doesn't happen that way. And you need that expertise both on the human talent side as well as the latest equipment, which is where Intel faltered. So I don't see a shortcut. But that being said, there are parts of that AI chip ecosystem where Intel may get some business if the government pressures, you know, all the hyperscalers and these guys to say, OK, you have to use Intel capacity because we want to onshore manufacturing.

16:52And that should help Intel. All right. Let me ask my question another way. Yeah. Who is the competitor to TSMC? Is there a viable competitor to TSMC today? Well, so Intel is the closest competitor on the foundry side. So that's not very close. It's not very close. You have some Chinese foundry competitors, too, which China wants to be self-sufficient in everything they do when it comes to the chip side, from accelerators to manufacturing. They have their own foundry, but it's the same problem. Even if you switch to internal foundry, they are way behind in terms of leading node manufacturing. How did we get here?

17:29How did we get to a place, if I'm the global, if I'm an Apple or whatever, how did I let my industry get to the point where I have to depend upon one supplier? Well, Apple helped them get there because before this AI wave happened, smartphones is where you needed the latest manufacturing capabilities. And Apple, I mean, clearly they had such a big ramp when it comes to their smartphone install base. And they did the entire thing in Asia with the help of TSMC and Foxconn. So it's really led by Apple. Why are we here? They're chasing growth. I mean, that's what you do. You go for the most efficient way possible.

18:04And that was DSMC. I pretend that I know about technology. No, these are great questions. These are fantastic. I mean, I'm like John Tucker territory. Wait a second. Fortunately, we have Mandeep here with us. Mandeep, very quickly, just tell us about what's going on with Apple's AI efforts, because every day it seems to be some other executive who was doing something AI at Apple has moved on. Yeah. And so Apple is great at making hardware, but when it comes to AI and LLMs, they have missed the boat. And right now the researchers are saying Meta or Google has a lot more compute to offer in terms of, you know, being a researcher.

18:42And that's where, you know, all the deals that OpenAI is doing, that Meta is doing, it's basically getting the compute for the researchers, not for deploying AI, but for the researchers. So it's a great magnet for all the researchers to come in and, you know, use that compute. Stay with us. More from Bloomberg Intelligence coming up after this.

19:04You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. The nice, sleepy, old transportation company, J.B. H.T., J.B. Hunt, big, big trucking company, which is really, I think, a great bellwether for just kind of where the economy is or how's commerce out there. You can track it by talking to some smart people who cover the whole logistics space like Lee Clasgow for Bloomberg Intelligence. Lee, talk to us about J.B.

19:39Hunt. For those of our listeners and viewers that don't know J.B. Hunt, tell us what this company does and why it's important. Yeah, sure. They're actually more than just a trucking company. They're really a diversified transportation provider, and they have a lot of different businesses. Trucking is one of their businesses, their truckload business. And they also do, and it's their biggest and most profitable, is their intermodal business. So that is a container that will start on a truck and then goes on a rail, and then it's finally delivered by a truck. And they also, in addition to that, they have a final mile business.

20:13So think of getting your exercise equipment or furniture delivered to your home. They have a freight broker business, which is kind of it brings together capacity providers and shippers. It's a non-asset business. And they also have a dedicated business. So a lot of companies will kind of outsource their fleet to companies like J.B. Hunt. So their hands are in a lot of different parts of the freight markets. And to your point, they are a bellwether because they do touch on so many different modes and industries. Who's their competitor? Who's their biggest competitor in doing all this? Or is the market kind of split up based on geographic location?

20:57Sure. Well, there are companies that are similarly set up to J.B. Hunt, like a Schneider. Those are those orange trucks that you see on the road. But like a Werner trucking company has a big dedicated business. C.H. Robinson is a huge brokerage business. Hub Group is another intermodal marketing company that does the intermodal stuff. So they have a lot of different competitors within the market. But some of the largest publicly traded trucking companies besides J.B. Hunt, Werner, and Schneider are Heartland and Knight Swift are some of the large truckload carriers. And there's a whole subsegment of less than truckload, which J.B.

21:37Hunt plays very little. And it's only they're playing in their brokerage business. So, Lee, based on your history covering the trucks, how do you look at them and their business models as it's kind of reflective of maybe how the U.S. economy is going? Well, you know, what I would say is, you know, their stock is on fire right now. And that's really driven the fact that they outperformed in the third quarter. A lot of that has to do with them doing company-specific, company-driven cost-cutting measures. So it's not so much about the macro. It's kind of more about, you know, what is J.B. Hunt doing?

22:11And they've, you know, increased their productivity or reduced costs for around$20 million, which added 16 cents to the bottom line and helped fuel that beat. You know, what I would say, though, to the macro is we are pretty interested in management's comments on the peak season. So, you know, they are expecting a peak season this year, maybe not a very strong one. But, you know, we're going into the peak season and think it's going to be pretty muted. We still kind of think that. But, you know, we'll see how it ends up playing. You know, our thoughts are the consumer is weakening. Consumer confidence is going down.

22:46And you had a lot of pull forward demand. And, you know, what J.B. Hunt would say is some of that freight just got to the ports and now it needs to move inland. So we'll see what transpires. But, you know, we're not expecting a very robust peak season this year. Paul, what were you saying earlier about turnover for J.B. Hunt drivers? Yeah, the turnover is super, super high in the trucking industry. Lee, talk to us about the state of the of that part of the business, just, I guess, attracting and retaining drivers. Yeah, so it's really interesting. I'm going to pivot a little bit because, you know, with the new with people, they're not so new anymore with the Trump administration.

23:21They're really focused on enforcing rules that are already on the books. And so, you know, there are certain standards that drivers have to have to understand and read the English language. And they are really going out there and kind of enforcing those rules. You know, we had Werner's CEO, Derek Leathers, on our podcast. They do a podcast, by the way, called Talking Transport. There you go. Available wherever you get podcasts. Very good on that. Anyway, and he said that, you know, that could impact 5 to 15 percent of supply. And truckload rates have been really depressed over the last three years.

23:56We've been in a freight recession. A lot of that has to do with the fact that there's so much capacity out there. And this could take some of that capacity out. Also, there's something the DOT issues non-domicile CDLs. They are stopping doing that. And any non-domicile CDLs that try to get renewed are probably not going to get renewed. So that's actually the driver's license, right? Yeah, for non-U.S. citizens. So you're going to see that kind of leave the market as well. And that could be the catalyst to tighten the market. And we don't think it's going to flip on a dime. It's going to be gradual.

24:32And that is a good thing because the capacity that's been out there, the slack capacity, has been really stubborn to get out of the market. What are the prices or what are the wages for a truck driver? I'm just curious, given all the challenges that you just explained. Yeah, well, most truck drivers get paid by the mile. I don't really know what the latest rate is. I think it's like 50 cents a mile or something like that. And so, you know, that's how they tend to get paid by the mile. And, you know, being a truck driver, Paul, as you mentioned, there is a lot of turnover. A lot of that has to do with people get into the industry not really knowing what to expect.