Nestlé has a geographical divisional structure with operations segmented into five key regions. For many years, Swiss multinational food and drink company Nestlé had a complex and decentralized matrix organizational structure where its numerous brands and subsidiaries were free to operate autonomously.
Department
Type
Details
Advantages
Drawbacks
Research and Development
Functional
– Teams organized based on technical functions such as food science, product innovation, and quality control. Functional managers lead these teams.
– Specialization in research and product development. – Efficient management of R&D tasks and expertise.
– Potential communication barriers between different technical teams. – Siloed work without cross-functional collaboration.
Production and Operations
Functional
– Teams responsible for manufacturing, supply chain, and logistics. Functional managers oversee production and operations functions.
– Expertise in production efficiency and supply chain management. – Effective cost control and process optimization.
– Potential misalignment between production and R&D. – Challenges in adapting to rapid market changes.
Marketing and Sales
Functional
– Teams focused on marketing strategies, branding, and sales efforts. Functional managers lead marketing and sales functions.
– Expertise in marketing and sales techniques. – Effective customer engagement and revenue generation.
– Potential disconnect between marketing and product development. – Overlook of holistic user experiences.
Quality Assurance
Functional
– Teams dedicated to ensuring product quality and compliance with regulations. Functional managers oversee quality assurance operations.
– Proficiency in maintaining product quality and safety standards. – Effective response to quality concerns and regulations.
– Limited integration with other functions like R&D and production. – Potential quality silos.
Geographical Regions
Divisional
– Divisions organized by geographical regions (e.g., North America, Europe, Asia). – Divisional managers for each region.
– Tailored strategies for regional markets. – Localized decision-making and adaptability.
– Potential conflicts between regions in resource allocation. – Challenges in maintaining a consistent global brand image.
Product Categories
Matrix
– Cross-functional teams for different product categories (e.g., beverages, confectionery, pet care). Team members report to both category and functional managers.
– Enhanced collaboration between product development and manufacturing. – Efficient category management.
– Potential for power struggles between category and functional managers. – Complex communication channels.
CEO Mark Schneider noted that this move would enable Nestléto “significantly sharpen our geographic focus to drive sustained profitable growth everywhere we operate. This move will bring us closer to consumers and customers, unlock new business opportunities and enable us to be even more agile in a fast-moving consumer environment.”
Let’s describe these geographic divisions below in addition to some other aspects of Nestlé’s organizational structure.
Nestlé’s geographic divisions
The five geographic divisions (and the countries they incorporate) include:
Zone North America (NA) – this includes the United States (the company’s largest market) and Canada.
Zone Latin America (LATAM) – this includes Brazil and Mexico – among Nestlé’s largest markets by revenue – and the Caribbean.
Zone Europe (EUR) – in Europe, the company’s category-focused operating model has enabled it to grow its market share and build its innovation capabilities.
Zone Asia, Oceania, and Africa (AOA) – a broad geographic region that also includes the Middle East and North Africa (MENA).
Zone Greater China (GC) – a rapidly expanding market that offers significant growth potential for the company.
Note that not all of the company’s food and drink operations are organized under these regions. Globally managed businesses such as Nestlé Health Science and Nespresso remain separate.
The same is also true for joint ventures such as Froneri and Cereal Partners Worldwide.
Executive Board
Nestlé’s Executive Board takes care of the day-to-day management of the company.
In addition to current CEO Mark Schneider, there are 14 Executive and Deputy Executive Vice Presidents. Five of these lead the geographic divisions, while the remaining nine manage functional groups with the following titles:
Chief Financial Officer.
Head of Operations.
Chief Technology Officer.
Global Head Human Resources & Business Services.
General Counsel, Corporate Governance and Compliance.
Head of Strategic Business Units and Marketing and Sales.
Chief Executive Officer Nestlé Health Science.
Head of Group Strategy and Business Development.
Head of Nestlé Coffee Brands.
Board of Directors
The company’s Board of Directors is responsible for:
The Group’s environmental, economic, and social sustainability initiatives.
The Board of Directors consists of 15 members which include Mark Schneider and Nestlé Chairman (and former CEO) Paul Bulcke. Other board members bring experience from companies such as Amway, Apple, Credit Suisse, Inditex, AXA, and Harman International.
Overview of Nestlé’s Organizational Structure
Nestlé utilizes a matrix structure that integrates both geographical and product-based divisions:
Geographic Divisions:
Zone Americas (AMS)
Zone Europe (EMENA)
Zone Asia, Oceania, and sub-Saharan Africa (AOA)
Each geographic zone is responsible for managing operations, sales, and marketing strategies tailored to their specific regional markets.
Product Divisions:
Nestlé Waters
Nestlé Nutrition
Nestlé Purina PetCare
Nestlé Health Science
Confectionery
Frozen and refrigerated foods
Other food and beverage categories
These divisions focus on specific product lines, ensuring specialized attention to product development, innovation, and consumer needs.
Comparison with Other Major Companies
Here’s how Nestlé’s organizational structure compares to other major global food and beverage companies like Unilever, Procter & Gamble, and Kraft Heinz:
Comparison with Unilever
Similarities: Both Nestlé and Unilever use a matrix structure that includes geographic and product divisions to manage their wide range of consumer goods effectively.
Differences: Unilever places a stronger emphasis on brand divisions than geographic regions compared to Nestlé. Unilever’s structure is more oriented towards fast-moving consumer goods and less on specialized nutrition and health sciences compared to Nestlé’s diverse and specialized product focus.
Implications: Unilever’s brand-focused approach allows for strong brand identities and marketing strategies, potentially enhancing brand loyalty. Nestlé’s approach provides a more nuanced adaptation to local market conditions and a diverse product strategy that can address a broader range of consumer needs and health-related products.
Comparison with Procter & Gamble
Similarities: Like Nestlé, Procter & Gamble has a matrix organizational structure focusing on both product categories and geographic regions.
Differences: P&G focuses almost exclusively on consumer goods without the diversification into the food and nutrition sectors that characterizes Nestlé. P&G’s geographic division is more streamlined, focusing more on global brand management.
Implications: P&G’s streamlined focus allows for strong global branding and efficiencies in marketing and product development. Nestlé’s broader focus allows for greater market penetration in diverse sectors, including health, nutrition, and food services.
Comparison with Kraft Heinz
Similarities: Kraft Heinz and Nestlé both manage a variety of food and beverage products, with organizational structures that emphasize product divisions.
Differences: Kraft Heinz operates with a more centralized organizational structure compared to Nestlé’s decentralized, matrix structure. Kraft Heinz focuses more on North American markets, whereas Nestlé has a significant presence and tailored strategies across global markets.
Implications: Kraft Heinz’s more centralized approach can lead to greater efficiencies and cost control within North America but might lack the agility of Nestlé’s structure in adapting to global market trends and regional consumer preferences.
Key takeaways:
Nestlé has a predominantly geographical divisional structure with operations segmented into five key regions. This structure was first announced in October 2021 to replace the more complex, matrix structure.
Nestlé’s five geographic divisions are North America, Latin America, Europe, Asia, Oceania & Africa, and Greater China. The company’s joint venture projects and globally managed businesses such as Nestlé Health Science and Nespresso remain separate.
Nestlé is also supported by a 14-member Executive Board with members appointed as CEOs of the five geographic regions plus various functional groups.
Key Highlights about Nestlé’s Organizational Structure:
Geographical Divisional Structure:
Nestlé has transitioned from a complex and decentralized matrix structure to a new geographic divisional structure.
The organizational structure is designed to focus on geographic regions to drive sustained profitable growth and agility.
Rationale for Change:
CEO Mark Schneider announced the shift to a geographic focus to bring Nestlé closer to consumers, unlock new opportunities, and enhance agility.
Geographic Divisions:
Nestlé’s operations are divided into five geographic zones:
Zone North America (NA): Includes the United States and Canada.
Zone Latin America (LATAM): Encompasses Brazil, Mexico, and the Caribbean.
Zone Europe (EUR): Focuses on growing market share and innovation capabilities in Europe.
Zone Asia, Oceania, and Africa (AOA): Includes Asia, Oceania, Africa, Middle East, and North Africa.
Zone Greater China (GC): Targets the rapidly expanding market of Greater China.
Globally Managed Businesses and Joint Ventures:
Certain businesses like Nestlé Health Science and Nespresso are managed globally and remain separate from the geographical divisions.
Joint ventures like Froneri and Cereal Partners Worldwide also operate independently.
Nestlé is a powerhouse in the consumer space, owning multiple brands. In 2022, most of the company’s revenue came from the powdered and liquid beverages segment, followed by pet care, nutrition & health science, and prepared dishes.
Nestlé’s cost structure is skewed toward marketing and distribution for its consumer brands. Its most substantial segment is the powder and liquid beverages business, which in 2022, for instance, on an over 25 billion Swiss Franc revenue, generated over 5 billion in operating profits.
Nespresso is one of the key brands part of the Nestlé family of consumer brands. Nespresso generated over 6.4 billion Swiss Franc revenue in 2022 (over $7 billion).
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
