Nestlé’s Strategic Shift: Portfolio Review and Tax Challenge Emerge

Nestlé finds itself navigating a dual challenge as it executes a significant corporate overhaul. The Swiss food and beverage giant is actively reviewing its portfolio while simultaneously addressing a tax penalty from a key emerging market. This comes as the company's new leadership pushes forward with a stringent efficiency drive.

Since assuming the role of Chief Executive Officer in September 2025, Philipp Navratil has implemented a rigorous cost-cutting strategy. His approach, supported by the efficiency-minded Chairman of the Board, Pablo Isla, who took office in October, marks a decisive shift in corporate philosophy. The era of leniency appears to be over, replaced by a clear mandate for profitability.

Key elements of the current restructuring include:

• A global workforce reduction targeting 16,000 positions.
• An intensified focus on boosting profit margins above 17%.
• A strategic portfolio streamlining, likely involving several divestments.

This leadership duo is signaling that no asset is considered sacred if it does not contribute sufficiently to the bottom line.

Blue Bottle Coffee Faces Potential Divestment

In a move underscoring this new direction, Nestlé is exploring the sale of its premium coffee chain, Blue Bottle Coffee. The company has engaged the investment bank Morgan Stanley to assess a potential exit. This represents a strategic reversal; Nestlé acquired a majority stake in the cult brand in 2017 for approximately $700 million, intending to bolster its physical retail presence.

Should investors sell immediately? Or is it worth buying Nestle?

The fact that Blue Bottle is now under review suggests the anticipated synergies failed to materialize. The potential sale exemplifies the current executive priority: financial performance takes precedence over prestige projects.

Indian Subsidiary Contests Tax Demand

Adding to the company's operational headwinds is a regulatory issue in India. Nestlé's local subsidiary, Nestlé India Limited, is confronting a tax demand from authorities totaling 16.56 crore Indian Rupees, equivalent to roughly €1.8 million.

The demand alleges irregularities related to Goods and Services Tax (GST) compliance spanning the fiscal period from 2018 through 2023. Nestlé India has stated it will pursue legal avenues to challenge the penalty. While the financial impact on the global conglomerate is relatively minor, the situation highlights the persistent regulatory risks inherent in major growth markets.

Transformation Brings Inherent Volatility

Analysts suggest Nestlé's shares may experience near-term volatility as the company undergoes this pronounced transformation. Further write-downs on previous acquisitions cannot be ruled out. Although the tax penalty from India is an unwelcome distraction, it does not alter the fundamental strategic course charted by Navratil and Isla.

The critical factor for investors will be the speed at which the CEO's efficiency measures translate into visible gains in upcoming quarterly earnings reports. Nestlé's ambition to return to its status as a lean cash-generating machine is clear, but the path forward involves navigating turbulent waters.