Why Nestlé’s CEO has been in the office every day since COVID-19 hit
In 2017, Mark Schneider became Nestlé’s first “outsider” CEO in nearly a century. Since then, he’s been on a dealmaking kick, transforming the company from a consumer goods stalwart into a health, wellness, and nutrition empire. We talked with Schneider about leading the world’s largest food company through a global crisis and how the pandemic is changing the way we eat.
This edited Q&A has been condensed for space and clarity.
Leading the lockdown
Let’s start with COVID, since that’s what everyone is thinking about these days. Nestlé was one of the first companies to halt employee travel back in February. What sparked that decision?
Schneider: The first few weeks of February, like everyone else, I was at the edge of my seat just watching. We had firsthand experience through our extensive Chinese operations, which is the second-largest market for Nestlé after the U.S.
There’s one specific date that made the difference for me: Friday, Feb. 21. A colleague e-mailed me some pictures from northern Italy where people were panic buying. One look, and it was very clear: This is out of control, and we will no longer be able globally to contain it. This is when several emails went out to the entire company, saying, “Get your inventory levels up, no matter what. Don’t try to be smart—just be sure that we’re fully prepared, because you don’t know exactly which raw material might be in short supply or which supply chain might be under fire.” We knew that in this context, uninterrupted supply of food and beverage was going to be key. People wanted to see the shelves stocked. And some of the initial panic buying was exactly because people were doubting that.
On Feb. 25, we went out with the travel restrictions. I was actually on the road in the U.S. That was my last big cross-border trip. I wanted to be sure that I was the first one to comply with these rules.
How do you see the pandemic changing the industry long-term?
The biggest shift clearly was from out-of-home consumption to in-home consumption. And that is against the prior trend, because for years people had started to consume more food and beverage out-of-home. Around the world, apartment sizes, kitchen sizes, pantry sizes have been shrinking because people consume more and more on the go and on the road. And now all of a sudden, you have this crash reverse¹.
It’ll take some years for things to return to a pre-crisis level. I think it will take a vaccine that will give people peace of mind.
Candy man no more
You’ve done something like 50 deals² since becoming CEO, including selling off the U.S. confectionery business. Are those simply business decisions or are they also about the kinds of products that you want to sell as a company?
It’s dealmaking that positions the company with a portfolio that’s higher growth, higher margin, and appeals more to health and sustainability—themes that we have been patiently pursuing over many years. If you want to sum it up, my tagline is, “Good for you, good for the planet.” I think these are two very appealing consumer propositions these days.
Plant-based meat alternatives are what we call a no-compromise sector, and we’ve been very active there.³ We are providing plant-based alternatives that taste the same, offer better nutritionals, and have a much better environmental footprint. That to me is sort of the lighthouse, but obviously the same principles apply to quite a few of the categories we’re in.
We knew that uninterrupted supply of food and beverage was going to be key. People wanted to see the shelves stocked.Mark Schneider
You’ve also announced that you’re exploring a sale of the U.S. water business. What’s driving that?
Nestlé was one of the pioneers when it came to the global bottled water business. Since the late 1980s, when the world was still busily debating who’s going to win the cola wars, we were betting on water as a healthy form of hydration. To make water available in a safe and convenient manner to lots of people, I think that was a very worthwhile endeavor and something we stand strongly behind.
A major part of our U.S. water business is in a segment that is quite undifferentiated and that is basically purified water and regional spring water. We see a better opportunity in premium waters and also what we call functional water, which has micronutrients added for some additional health benefits.⁴
Bottled water is an area that’s gotten a lot of criticism over its use of plastics.⁵ Has that played a role in your decision?
We have sustainability concerns that we need to face and overcome. We don’t want to run away from anything. But with these two segments, the functional water and premium waters, you are at a better price point that allows you to also go for more ambitious environmental solutions like better and more interesting container strategies.
Single-use plastic has seen a resurgence during the pandemic. Will sustainability still be a consumer priority post-COVID-19?
It’s understandable that people used more single-use plastics when they
had nothing else at their disposal. But just because the crisis happened
doesn’t mean we have more time on this. If anything, we’re facing a
steeper challenge because all this money that went into addressing the
pandemic is going to be missing in the public domain when it comes to funding these other challenges and hence, the degree of difficulty has
gone up, unfortunately.
You used to spend something like 50% of your time on the road. Is that changing how you think about leadership and working with your teams all over the world?
All the long-distance stuff had to be replaced by virtual meetings. But staying as close as possible to the people at the front line of the business has not changed. I toured our Swiss factories in March when we were in a rush to keep them safe and keep up supply.
I spent some time on the shop floor to learn firsthand, what is the best practice and how is it being implemented—but also to signal to our frontline workers, “Look, if we tell you that this is a safe place, then I’ll be here with you. I’m not cheering you on from the safety of my home office—I’m actually here with you because I believe this factory is a safe place to work.” That messaging and giving people that comfort and being with them physically, that’s one of those principles that I just wanted to uphold.
The wife of one of the workers at a factory I visited was pregnant and eight weeks from her due date. She kept telling her husband every morning, “If you go to that factory and get infected, you may miss the birth of your first child.” He turned to me and asked, “Is it safe to come here?”
I’m not cheering you on from the safety of my home office—I’m actually here with you because I believe this factory is a safe place to work.Mark Schneider
What did you say?
I told him I was here because I wanted to make it as safe as humanly possible. I can’t give blanket assurances, but I wanted to be sure that no stone was unturned if we sent hundreds and thousands of people to work every day. The same thing here when it comes to headquarters. Switzerland never had a hard lockdown. We never shut down this headquarters building. I did not miss a single day of work here. I’ve been down to the entrance to review the entry procedures probably 10 times, just to be sure we get it absolutely right. Canteen operations, each and every elevator. To this day, I go around with my smartphone taking pictures to then share with the building people to be sure we have all these details ironed out.
Powering through a pandemic
Some of your competitors threw out their guidance for the year, but Nestlé did not.⁶ Why not?
It was important to me that one of the ways as a company we can contribute to stability is by fully meeting our commitments. In Europe there was a debate that some companies should delay or reduce the dividends. We didn’t do that, because it’s someone else’s income. We stayed away whenever possible from taking government support because we were able to do this ourselves. We were giving people idled by some temporary lockdowns job security; where we have had to impose short-term shutdowns, we paid full wages for up to 12 weeks.
How long do you feel like we’re going to be operating under the constraints of the pandemic?
I hope I’m not coming across as too pessimistic, but it’s very clear to me that until there is a vaccine and it’s widely applied, we’re going to be in this strange limbo situation where you loosen up a little bit, and a few weeks later, you get punished with cases up again. And yet, you can’t stay in lockdown for 12 to 18 months. You have to somehow adapt and loosen up a little bit, then tighten a bit again. I believe this is the way we will have to live in 2020 and probably for most of 2021. This is why it was so important to me that we find ways where we can go about our jobs and lead our lives as much as possible with an acceptable risk level. We can’t just all go into hibernation until it’s over.
Between the lines
1. Sale of food, U.S.
May 2019, food away from home: $75.1 B
May 2020, food away from home: $48.5 B
May 2019, food at home: $68.5 B
May 2020, food at home: $74.6 B
2. Wheeling and dealing
Schneider has promised to replace 10% of Nestlé’s portfolio by 2021. His deals so far include joint ventures for its lunch meat and U.S. ice cream businesses, the purchase of vitamin maker Atrium, and a stake in coffee chain Blue Bottle.
3. Plant power
Nestlé acquired Sweet Earth in 2017 and released its plant-based Awesome Burger last year. The company also launched the soy protein–based Sensational Burger in Europe in 2019.
4. Back to the well
Nestlé may put U.S. water brands like Poland Spring on the block, but is doubling down on premium lines like Perrier and S. Pellegrino.
5. Plastic, not so fantastic
Nestlé has come under fire from environmental group for the use of plastic in its packaging. The company has committed to making 100% of its packag-
ing recyclable or reusable by 2025 and to reduce its use of virgin plastics by
one-third by 2025.
6. Nestlé stock performance
After a rough spring, Nestlé’s stock is trading near all-time highs.
Nestlé 12-month stock price change: +10.9%
S&P 500 food, beverage, and tobacco index: -0.8%
A version of this article appears in the August/September 2020 issue of Fortune with the headline “The Conversation: Mark Schneider.”