Why Nestlé’s RGM Strategy Hit a Wall

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The recent news of Nestlé’s 16,000 job cuts is a stark headline. From a Revenue Growth Management perspective, it reveals a pivot the company is making.

This move, announced by a new CEO alongside Q3 results, is the clearest signal yet that Nestlé recognizes it has hit the ceiling on one of its primary RGM levers: Price.

Look at the numbers: Nestlé reported 3.3% organic growth, but this was driven almost entirely by 2.8% in price increases. This leaves an anemic Real Internal Growth of just 0.5% (though this did beat low expectations). This is classic "unhealthy" growth. In RGM terms, you cannot indefinitely pass on input-cost inflation through price hikes without eventually destroying volume and consumer loyalty.

The new CEO, Philipp Navratil, sees this. His mandate is to "drive Real Internal Growth" and be "rigorous in... resource allocation." The 12,000 white-collar layoffs (on top of 4,000 previously announced cuts) are not the goal; they are the funding for a more sophisticated RGM strategy.

This is where Nestlé’s RGM capabilities and strategy begin to diverge from its key FMCG competitors.

"Brute Force" RGM

Nestlé's had become a one-lever engine dangerously over-reliant on brute-force pricing. Faced with historic inflation, the company's primary response was to pass nearly all of it—and sometimes more—directly to consumers. This approach successfully protected margins in the short term, but it came at the steep cost of the most important metric of brand health: Real Internal Growth (RIG), or sales volume. In 2023, this strategy led to negative RIG, meaning Nestlé was selling fewer items. This failure to balance the RGM levers actively trained loyal consumers to seek alternatives, hemorrhaging market share to more agile private labels and competitors who offered better value propositions. The company hit a wall where the pricing lever could no longer compensate for the volume it was destroying, leaving this massive layoff and strategic reset as the only way to fund a new, more balanced strategy focused on winning back consumers.

Comparison of RGM strategy and capabilities

A Shift away from Brute Force RGM

Like other major FMCG players focus on all core RGM pillars (Pricing, Promotion, Assortment, Trade), Nestlé will now move away from its focus on pricing only. It has unique assets in the area of portfolio management and data-driven capabilities that it will now leverage.

1. A Relentless "Premiumization & Pruning" Engine 

Nestlé’s RGM strategy will be about transforming its portfolio.

• What they do: Over the last decade, Nestlé has systematically rotated ~20% of its portfolio, divesting slower, lower-margin businesses (like parts of its water and confectionery portfolio) and doubling down on high-growth, high-margin "champion" categories. The new restructuring plan explicitly continues this, redirecting investment to coffee, confectionery, and premium goods.

• The RGM Impact: This isn't just SKU rationalization; it's category rationalization. They have successfully shifted their mix to the point where premium products have grown from ~11% to over 35% of total sales. This active mix management provides a structural margin lift that pricing alone cannot. While competitors like Unilever are also consolidating brands, Nestlé’s focus on building near-monopolies in premium segments (e.g. in Petcare, Coffee) is a key differentiator.

2. The Nespresso Advantage 

No competitor, not even P&G or Unilever, has a Direct-to-Consumer (DTC) asset at the scale and maturity of Nespresso.

• What they do: Nespresso is more than a coffee brand; it's a closed-loop RGM ecosystem. Nestlé controls the product, the channel, the price, and—most importantly—the first-party consumer data.

• The RGM Impact: This allows them to bypass retailer trade-spend negotiations, test new pricing and promotion strategies in real-time, and build personalized consumer relationships. While competitors fight for margin with retail partners and rely on third-party data, Nestlé's Nespresso division is a high-margin data-science-led-operation, giving them an RGM capability that is almost impossible to replicate.

3. Trading Overhead for an AI-Powered RGM Engine 

This is the heart of the 16,000-job announcement: the 12,000 white-collar roles are being eliminated to fund a fundamental re-architecture of how RGM is done.

• What they do: The layoffs are aimed at "streamlining operations" and "automating processes." Nestlé is aggressively moving to centralize its RGM capabilities, investing heavily in "digitalization end-to-end" and "data and AI" platforms.

• The RGM Impact: This is a clear strategy to replace decentralized, manual, and inefficient processes with an automated, centralized, and intelligent RGM "engine." They are shedding the high overhead cost of legacy roles to invest in the data scientists, platform architecture, and AI-driven tools needed for next-generation RGM. This will allow them to move beyond simple price-setting to dynamic, predictive optimization of pack-price architecture, trade promotion, and mix across all channels.

Conclusion

Nestlé has maxed out the "Price" lever and is now pulling the two harder, more sustainable RGM levers: Mix and Cost.

The 16,000 layoffs are the cost of admission for this new phase. Nestlé is placing a massive bet that future growth is not in having more sales managers, but in having a leaner, data-driven central team armed with powerful AI tools. They are sacrificing short-term stability and significant human capital to build a faster, more intelligent, and—they hope—far more profitable RGM machine than any of their competitors.