The Obstacle
Nestlé is the biggest food and beverage company in the world, with more than 2,000 brands and a presence in 185 countries. But challenges across the industry, ranging from inflation to supply-chain volatility to evolving consumer preferences, dictated the need for a transformational change in procurement.
In Europe alone, the company’s maintenance, repair, and operations (MRO) spend for facilities was spread across nearly 7,900 suppliers, often with different prices for identical parts. In packaging, many business units operated with their own specifications.
The company’s scale is a strength, but can also create complexity.
To respond, Nestlé launched a massive cost transformation. The goal was to drive simplification and free up capital that Nestlé could invest in growth, innovation, and brand-building. That served as a rallying cry, motivating teams and employees around a clear goal of not just increasing efficiency but unlocking capital that would help grow the business.
Approach
The company set an ambitious, three-year timeline for a program that would cover most of the enterprise. With BCG’s support, the effort focused on five core principles:
Strong sponsorship from leaders. Overall governance sat at the top of the enterprise, chaired by senior executives and sponsored by business leaders. Senior leaders leaned in—chairing key meetings, sponsoring supplier partnerships, and celebrating outcomes—signaling that this was not a one-off initiative, but a new way of running the business.
Business-led. Nestlé understood the program would have to go beyond procurement and involve a direct partnership with business units. Nestlé’s leadership team structured it as “business-led and procurement-enabled.” Cross-functional teams—with representatives from the business and from procurement—worked on each of the transformation’s main initiatives, making key decisions collectively. That increased buy-in, surfaced new solutions, and ensured that programs would be successfully implemented.
AI-enabled simplification. The program capitalized on several AI tools. For example, to simplify MRO procurement, an AI solution scraped more than 200,000 purchase orders covering more than 100,000 spare parts. That helped the company spot specification inconsistencies and understand the fragmentation of its suppliers. As a result, teams were able to rapidly harmonize prices and identify potential substitutions, so that engineering, operations, and procurement teams could consolidate nearly 7,900 suppliers into eight distributors.
Similarly, the company used AI to simplify packaging. Previously, many brands had their own specifications—a clear pain point in procurement and R&D. AI tools identified areas where the company could standardize specifications to take advantage of scale. As a result, packaging specifications were reduced by nearly two-thirds with new global standards that sped development and improved quality. Greater volume for each type of packaging meant greater brand consistency, lower cost, and lower supply risk. To make sure the gains were sustainable, Nestlé R&D and marketing teams catalogued packaging specs and locked them as global standards so that complexity wouldn’t creep back in.
Smarter supplier negotiations. Nestlé's procurement organization (Nestrade) is known for its industry-leading negotiation capabilities. Augmented with AI, the team was able to prepare more quickly and effectively for negotiations, allowing them to reach results at record speed.
Regional autonomy. While the leadership team set overall targets, individual markets created their own initiative roadmaps, leading to constructive competition. For example, one unit in the Americas built a CHF 27 million ($35 million) pipeline of cost reduction initiatives in four months, teams in Asia accelerated the adoption of catalog specs, and the procurement function in Europe focused on developing better supplier partnerships.
The Result
The company aimed to reduce costs by CHF 2.5 billion ($3.15 billion) by 2027, but it generated close to CHF 700 million ($900 million) of that in the first year—capital that Nestlé’s leadership team was able to invest in growth, innovation, and brand-building. Moreover, the gains in procurement are self-reinforcing, with annual savings increasing from 3% to 5%, turning efficiency into a renewable source of growth. Equally important, by embracing a culture of simplicity, the transformation increased Nestlé’s speed and agility—helping it to compete more effectively as a global enterprise.
The Nestlé story is more than just a successful procurement transformation—it’s a broader model for how a company can reimagine its operating model to power value creation—connecting strategy, execution, and culture across the value chain.
