On the up and out
Nestlé shifts gears, Netflix gets more expensive, GDP underestimations
Dear Insider,
Hardly anyone is better at “managing” than the Swiss.
An economy full of managed prices (via dynamic tariffs) - infrastructure that gets regular attention (as opposed to its German neighbour) - and a political system that emphasizes minute changes, not drastic overhauls.
But when managers don’t manage - they’re out.
That was the fate of Ulf Mark Schneider - CEO of Nestlé. His downfall was less about style and more about…management strategy.
The most unholy of Swiss sins.
Also in this edition of The Swiss Insider:
Not all prices are created equal (especially in the face of inflation)
When Rolex got real - and fancy
US expansion plans on hold for Meyer Burger
Tourists in Zermatt have to pay (more)
Enjoy!
Ian
💡Side note: Get more timely updates and insights on LinkedIn and on X.
🤑 When free time is less “free”
Nothing comes for free - even “free time.”
Despite having escaped the scourge of galloping inflation over the past 5 years, leisure activities have been hit by higher-than-usual price hikes.
Over the past half-decade, the leisure price index indicates a 9.6% jump, with some streaming services (40%), newspapers (20%) and cable TV (16%) topping the list.
In a survey of over 2000 readers, respondents indicated that higher prices for Netflix and Spotify did not seem to phase them - and a full 16% of those questioned would even be ready to spend more for what they watch and listen to.
A similar double-digit segment would agree to pay more for a museum or amusement park visit as well.
The Insider Advantage:
Swiss people already pay more than most when it comes to the necessities of life.
But those prices are often “silently” manipulated by the government - through tariffs and other controls.
(Read about how Swiss tariffs work ➡️ here.)
Where free markets do hold full sway - most people in Switzerland will “grin and bear” a more expensive service.
They are especially will if it offers a smooth experience and which does not become unpayable overnight.
💡Incremental price increases and top quality allow for slow and palatable inflation in Switzerland. Both are a result of years of conditioning to higher prices and higher standards.
❌The outsider at Nestlé goes out
He was a square peg in a round hole - in one sense. But that did not prevent him from being successful…until the end.
Nestlé’s CEO Mark Schneider, a German, takes his leave of the Swiss giant after 8 years. His track record has many highlights.
But after nearly a decade at the helm, an underperforming stock price and potential for missed revenue targets drove the board of directors to make replace him with company “lifer” Laurent Freixe.
According to an interview with Chairman Paul Bulke in Le Temps, Nestlé will concentrate on organic growth and doubling down on its present business lines.
It remains to be seen if the new leadership can catch up with arch-rival Unilever whose share price has jumped 29% in 2024 - compared to a 10% decline at Nestlé.
The Insider Advantage
Boldness at the helm of such a big ship as Nestlé has its risks.
When he was hired, Schneider seemed to fit a pressing need at Nestlé. His background (13 years as CEO at health-care provider Fresenius) was aimed at changing attitudes towards the Swiss food and drink maker as a healthier and more nutrition-oriented company.
But expansion and diversification produce distractions. And to believe former CEO-turned-chairman Bulke, too many attempts at “quick wins” prevented his CEO from building sustainable success.
Schneider’s reputation for being an “M&A junkie” caught up with him.
Now the focus will be on “back to the basics” and a “better allocation of capital.”
In other words - time for someone who knows Nestlé’s business well enough to make it better, without diving new business lines.
💡Swiss companies notoriously swing from outsiders to “one of their own.” The latter category usually wins out. Just ask Tidjane Thiam, John Mack and others…
📈 A chart (or two) is worth…
Outgoing Swiss National Bank chairman Thomas Jordan credited a strong currency for protecting the country from higher inflation (it never got above 3.5%) than its neighbors and trans-Atlantic trading partners.
Despite a stronger franc, the Swiss economy has picked up steam, growing at 0.5% clip - more than expected. An early rate-cut from the SNB may now be starting to take effect.
💎Watch out, Patek
Few watch brands can match Rolex for global attention - and desirability.
But there was a timie when the Swiss watch company was looked down upon by its more “rarrified” rivals - such as Patek Philippe.
Then in the mid-1990s, Rolex launched a timepiece that changed that perception - the Rainbow Daytona chronograph.
Set with sapphires in a colorful pattern around the bezel - the Rainbow Daytona proved that the “sporty” watch brand could do real chronographic art.
Today, that rare piece - one of only a handful produced - is worth over $3 million.
On 8 November, Philipps of Geneva will auction off a custom-made Rainbow Daytona - and make history with one of the highest prices ever paid for a Rolex.
The Insider Advantage:
Even venerable brands such as Rolex change and evolve.
With customized, finely-engineered watches like the Rainbow Daytona, the Swiss watchmaker proved itself against older rivals.
But it also remained true to its “exclusive, but accessible” positioning. Fortunately for its later revenues, sapphires did not become the focus.
💡When a good thing comes a long, there is no requirement to go “all-in.” Rarity is the key to getting top dollar - after all.
The Bonus
☀️Not so sunny - Swiss solar panel manufacturer Meyer Burger had big plans for the USA. But poor results and planned restructuring took their toll. (Link)
🏔️Pay up - The city of Zermatt and the iconic Matterhorn attract tons of tourists yearly. Now locals - and the local economy - should benefit. In the near future, visitors will need to pay a fee of 12 CHF, via an app. (Link)
🏢Renters get no relief - Despite an anticipated lowering of the SNB’s reference rate to 1.75% in September, renters in Switzerland are not likely to see their rates fall. (Link)
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