It has been a bumpy year-and-a-half for Nestle. Even as it was recovering from the Maggi crisis, demonetisation of high-value currency notes came as a bolt from the blue that dented demand.Suresh Narayanan, the first Indian to head the company’s Indian operations in 16 years, and who was brought in especially to bring Nestle India back on track, said “volatility and uncertainty are part of the lexicon” and company is now “back in business”. Edited excerpts from an interview with Nestle India’s CMD:
You were just recovering from the Maggi crisis, when demonetisation was announced last November. What was the impact?
Volatility and uncertainty are part of the lexicon. I cannot expect any week or month to go without a minor crisis somewhere or the other. As leaders, we have to be built with that inoculation that you will face either big or small crises during your career. Some of us seem to attract crises… I am one of them. Either I walk into a crisis or I create one. But that is fine.
Yes, what happened (demonetisation) was certainly unanticipated and it did take a toll on our results and though we saw a positive growth of over 16%, of course, there was a little bit of base effect… it did take a blip for about a month but then it started to come back. Now we are getting back to what would be our normal pace as a company.
How has the perspective of India changed for Nestle Global amid all the volatility and uncertainty?
Nestle operates in almost 200 other countries. So we are in different levels and scale of volatility. We are in Venezuela, Zimbabwe, China, India and in parts of Africa... all of whom have a whole host of volatile issues. We are a 150 year-old company. We are not a new kid on the block to not be able to take the rough with the smooth. There is a lot of resilience in the company.
The way in which we came out of the crisis only reinforced the belief in the company and team in India. Ultimately you bet your money not so much on strategy but on people. The level of engagement in India has certainly gone up. We have a new CEO Mark Schneider.
He also shares similar perception about India in terms of what the team has achieved. So, I don’t really have any concerns on that front.
And in any case, for me, the immediate point of contact is our local board. They have been completely supportive of what we do. That degree of confidence is there in the system and the fact that the company was able to weather and withstand the storm.
I don’t say this in arrogance, but very few companies will be able to face this. Many would have shrivelled or probably shrunk or shut shop due to the kind of blast Nestle took.
Would you say the Maggi crisis is totally behind you and you are now at pre-crisis levels?
No. In terms of market share we are at 60% now, which was about 80% before the crisis. So, clearly there is a journey there. Are we fully out of the woods? No, because there are still matters in the Supreme Court, they are sub judice. Till that is finally disposed, I don’t think as an organisation, we will consider we are completely out of the crisis. Yes, we are back in business and we are back in the leadership position.
The recent flurry of new launches suggests a shift in approach. Is it a learning from the Maggi crisis to not bank too much on one product?
It’s more than learning. Maggi was incidentally 30% of the portfolio, so it’s not that the whole company depended on Maggi but it has been the most visible face of the company.
I always say crisis is an opportunity.
There was a kind of pent-up energy in the organisation to prove to ourselves and the world outside that we can be a nimble, savvy and innovative company. For us in India, the challenge is not what to launch but when to launch.
Unlike many food companies, we are not stuck to one or two categories.
There is so much worldwide that we don’t even have here.
I think to fail is not a bad thing. So when you launch 35 products, we could be successful in some, miserable failure in others. But if I don’t even try, then what will I gain? Some of these have seen good response from the consumer. We will focus and increase the footprint of those through the year. We will also try to consolidate the portfolio to get the results, get the growth drivers going. We do that and then we will add more products or totally new categories.
The philosophy that we now have in the company is that be 100% right on time even if you are 60% accurate rather than being 100% accurate and being late which means some of the basics will never be compromised on but after that, decision making process will be quick. There will be limited test markets, limited geographies, not just waiting for national launch then waiting for 6 months or a year over it.
I have been out of India for 8-9 years. The India that I left was not as hyper competitive as the India I have come back to.
Overall, Indian industry is seeing a slowdown. What is your take on growth prospects?
Yes. It has been impacted. Demand numbers have been hard to come and growth numbers were not particularly encouraging for FMCG. I think the decent monsoon, the One Rank One Pension announcement and the 7th Pay Commission (for government employees) brought in hope for the company. Those factors have not vanished, but one has to see how this plays out in the next couple of quarters.
I think I would take the cautiously optimistic route. The industry still has promise but there has been various impacters on the business such as demonetisation. I think every company has shown some impact – big or small. We have to see how this plays out. These are not going to be immediate quick-fix solutions. We will take a quarter or two... But in the longer term if economy does grow at 6-7% and pace of urbanization, job creation and urban incomes do pick up as we see it. I think companies like Nestle should do well.
You talked about focus on nutrition and low sugar products. What role do you see Nestle playing in the health and wellness space?
We have a lot of products under what we call Nestle Health Sciences that address the issue of post operative care, cancer patients.
We are now part of a project with the FSSAI on IEM, which is relatively rare but is a crippling affliction to have. It is inbuilt errors in metabolism which children are born with it. There are products that are specifically meant for children with inbuilt errors of metabolism. The fact is in India you don’t even have detection technology for this and these children die very quickly and you won’t even know why they died.
As we go forward, we will work on expanding that footprint of fortification. We have for eg. masala magic which is a taste enhancer. It comes with iron, iodine and vitamin A and we sell 1 billion servings each year in this country.
We want to do this next for milk. There is an active project for fortification of milk. Vitamin D is certainly an area we are looking at as a company. Then there is the fortification of noodles because we sell a lot of noodles as well and there is a clear kind of impact it has on the Indian food basket.
