For decades, Nestlé was the Swiss watch of consumer staples: precise, predictable, and prized by investors who liked their dividends reliable and their surprises rare. The past 18 months have broken that spell. A leadership carousel, bruising regulatory headlines in France, and tepid volume recovery have converged into a question that would have sounded absurd a few years ago: what, exactly, is going wrong at the world’s biggest food maker?

The immediate drama is governance. In early September, Nestlé abruptly fired Chief Executive Laurent Freixe after an internal probe found he failed to disclose a relationship with a direct report—an infraction boards everywhere now treat as a bright red line. Within days, investors were pressing for an accelerated succession at the top of the boardroom, arguing that the episode capped a period of instability and misjudgment. The company, which only last summer moved long-time CEO Mark Schneider aside and elevated Freixe, now has another new chief, Philipp Navratil, while the chair, Paul Bulcke, is slated to hand the gavel to Pablo Isla, the former Inditex boss who joined Nestlé’s board in 2018. The choreography—two CEO changes in just over a year and a coming chair transition—has shaken a culture that once marketed continuity as a virtue.

Governance critics aren’t just focused on an HR scandal. They point to a structure that can drift into insularity. Nestlé has long followed a de facto model in which former CEOs become chairmen; Bulcke’s own path mirrored that of predecessors Peter Brabeck and Helmut Maucher. It’s a familiar pattern across European blue chips, but in Nestlé’s case several top shareholders publicly questioned whether the arrangement dulled the board’s appetite for change as growth slowed and volumes turned negative in 2023–24. The company’s decision to nominate Isla—a heavyweight outsider by Nestlé standards—to succeed Bulcke was a nod to those concerns, even before Freixe’s exit turned a governance debate into an urgency.

Performance has provided little cover. In the first half of 2025, Nestlé posted 2.9% organic growth, almost entirely price-led; real internal growth came in at just 0.2% and turned negative in the second quarter. The company kept margins sturdy, but net debt ticked up by about CHF 4 billion in the half as working capital swung against it. That picture—pricing doing the heavy lifting while units lag—can only last so long in a world where shoppers have become conditioned to trade down and where retailers’ private labels have grown up into three-tiered, credible competitors. It is precisely the moment when investors expect a board to be crisp on strategy, ruthless on portfolio, and rigorous on succession.

Then there is the reputational overhang. In France, a Senate inquiry and subsequent investigations found that the country’s mineral-water industry—including Nestlé Waters—relied on banned purification techniques while bottling brands marketed as “natural mineral water.” Regulators have ordered filters removed, prosecutors have searched offices, and consumer groups are now pushing for retail bans on Perrier in its home market. Nestlé says it is cooperating fully and has taken corrective steps, but the episode reinforces a narrative that compliance and candor weren’t as tight as they should have been. For investors already uneasy about execution, it was a costly unforced error.

Food-safety lapses have hardly helped. In 2024, French prosecutors filed preliminary charges tied to an E. coli outbreak traced to Buitoni pizzas two years earlier—another reminder that operational vigilance is part of the consumer-trust compact. These cases can take years to resolve; the market rarely grants management teams that much patience.

The deeper question is whether Nestlé’s ownership and governance design have left it without a true principal—an owner figure with both the clout and the incentive to force through hard choices. Nestlé openly tells investors it has no shareholder above Switzerland’s 3% disclosure threshold, and its own Articles of Association cap any single investor’s voting rights at 5%. Those rules reflect a traditional Swiss preference for widely spread ownership and stability. They also mean that no outside shareholder—no matter how aggrieved—can easily command votes or threaten control. That can blunt the edge of activism and tilt boardroom politics inward. In quiet times, that looks like ballast; when performance stumbles, it can look like entrenchment.

To be clear, Nestlé’s formal governance has all the right trappings. The board emphasizes independence in line with Switzerland’s Code of Best Practice, committees are composed of non-executives, and since last year Isla has served as lead independent director and vice-chair, a role designed to balance a chair who previously ran the company. On paper, this is textbook. In practice, investors are asking why the textbook did not catch problems earlier—why the market was surprised by Schneider’s departure, why Freixe’s vetting failed, and why the company seemed slow to address portfolio exposures that sat uncomfortably with its “nutrition, health and wellness” mantra.

That last point is not just branding. A leaked internal assessment in 2021 acknowledged that a majority of Nestlé’s mainstream food and drink portfolio did not meet recognized definitions of “healthy,” and a coalition of institutional shareholders pressed the company in 2023 to shift its mix. Nestlé has made real efforts—building out Health Science, pushing reformulations, investing behind pet care and coffee—but the credibility gap persists when growth is powered by price instead of new demand. The result is a strategy conversation that keeps circling back to hard choices: fewer SKUs, faster innovation cycles, and sharper bets on categories that deliver both volume and premium—paired with a willingness to prune where the company does not lead.

Capital allocation sits at the center of that debate. Nestlé’s 20.1% stake in L’Oréal has been a spectacular investment and a useful earnings cushion. It is also a perennial question mark: an orphan asset that arguably dilutes focus. Several investors now frame it as a test of resolve for the next chair. Selling down could fund heavier brand investment or simplify the balance sheet; keeping it signals continuity and optionality. Either path can be defended. What markets want is a board that can choose decisively and explain why.

The fix for Nestlé is not mysterious; it is managerial. First, finish the governance reset the company has already begun. That means accelerating a clean handover to an unquestionably independent chair, clarifying succession beyond the new CEO, and tightening board-level oversight of conduct, product risk and regulatory exposure so that “no surprises” actually means no surprises. Second, wrestle growth back to earth. Volumes—not price—must carry the baton in 2026, which requires reformulations that genuinely improve nutrition and taste, packaging that signals value without gimmicks, and marketing that treats the digital shelf as the primary storefront. Third, decide the portfolio—announcing where Nestlé will be a consolidator and where it will be a seller—and match capital allocation to those choices. None of this precludes Swiss steadiness; it simply demands speed.

Nestlé still owns enviable brands, unmatched distribution and a balance sheet most CEOs would trade for. What it lacks, at the moment, is the sense that someone with authority is pressing the advantage. The paradox of dispersed ownership is that it can produce both admirable stability and a vacuum of will. If Pablo Isla uses his chairmanship to bring genuine outside discipline to Vevey—and if the board backs a chief executive who wins on product superiority rather than on price increases—the Swiss watch can keep perfect time again. The alternative is more drift, more internal politics, and more reminders that even the safest staples can spoil when nobody is clearly in charge.