Nestlé posts steady organic growth as infant formula recall casts shadow over 2026 outlook

Nestlé has reported full-year 2025 sales of CHF 89.5 billion (US$101.5 billion) with 3.5% organic growth, driven by a second-half acceleration in real internal growth (RIG) from 0.2% to 1.4%. However, net profit dropped 17% to CHF 9.0 billion (US$10.2 billion) and the company’s 2026 outlook is clouded by the financial and reputational fallout from the recent global infant formula recall that triggered criminal complaints in France and product withdrawals across more than 60 countries.

“I am encouraged by our performance during 2025, which reflects the targeted actions we have taken in a difficult external environment,” says Nestlé CEO Philipp Navratil. The underlying trading operating profit (UTOP) margin came in at 16.1%, down 110 basis points year on year, while free cash flow reached CHF 9.2 billion (US$10.4 billion). Navratil says improving organic growth, RIG, and market share trends in the second half “show that our actions are working.” 

In the results is a footnote disclosing the financial toll of the infant formula crisis. Nestlé booked CHF 75 million (US$85 million) in UTOP impact from estimated sales returns and CHF 110 million (US$125 million) in inventory write-offs — a combined hit of CHF 185 million (US$210 million). 

The impact of sales returns on organic growth will be recognized in the company’s 2026 results, where Nestlé estimates a drag of approximately 20 basis points, with “additional impact uncertain” and the potential to push growth “toward the lower end” of its 3–4% guidance range.

The recall, which began in December 2025, stemmed from cereulide contamination traced to arachidonic acid (ARA) oil supplied by an unconfirmed manufacturer to multiple formula producers. 

Nestlé recalled products across more than 60 countries, making it one of the largest recalls in the company’s history. Dutch consumer watchdog Foodwatch has filed a criminal complaint in France naming seven manufacturers, including Nestlé, Danone, and Lactalis, alleging failures in traceability and delayed public warnings. Foodwatch claims Nestlé informed European regulators about contamination risks in December 2025 but only issued a public recall a month later.

The recall compounds existing weaknesses in Nestlé’s nutrition business. Through the first nine months of 2025, the Nutrition and Health Science segment posted just 0.5% organic growth, far behind powdered and liquid beverages (mainly coffee) at 7.5% and confectionery at 8%. 

Nestlé’s corporate restructuring 

Nestlé is now folding its standalone Nestlé Health Science (NHS) structure into a single integrated Nutrition business run through its regional zones, with NHS CEO Anna Mohl stepping down from the executive board on February 28.

The restructuring is part of a broader portfolio overhaul under Navratil, who took over in September 2025. Nestlé is narrowing its focus to four core businesses — Coffee, Petcare, Nutrition, and Food & Snacks — which account for approximately 70% of sales. The company is in advanced negotiations to sell its remaining ice cream business to Froneri, and is separately progressing the sale of its water unit, valued at around €5 billion (US$5.7 billion). 

Its “Fuel for Growth” cost savings program delivered CHF 1.1 billion (US$1.2 billion) in 2025, exceeding targets by more than CHF 350 million (US$397 million), while 16,000 job cuts are on track through 2027.

Coffee and confectionery remained strong growth segments. Nescafé soluble, ready-to-drink coffee, and Nespresso all contributed to high single-digit organic growth in beverages, while KitKat drove confectionery to 8% organic growth through the first nine months despite double-digit pricing to offset cocoa costs. 

According to Innova Market Insights, functional coffees incorporating adaptogens, protein, and vitamins are among the fastest-growing product segments globally — a trend that aligns with Nestlé’s push behind Nescafé Espresso Concentrate and its cold coffee portfolio.

Nestlé Petcare posted low single-digit growth, led by premium brands Felix, Pro Plan, and Purina ONE

The company expects 2026 organic growth of around 3–4%, with RIG accelerating, a UTOP margin improvement strengthening in the second half, and free cash flow above CHF 9 billion (US$10.2 billion).