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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Global giant Nestlé upbeat on Sri Lanka

Global giant Nestlé upbeat on Sri Lanka

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1Global giant Nestlé upbeat on Sri Lanka Empty Global giant Nestlé upbeat on Sri Lanka Tue Aug 14, 2012 2:36 am


Director - Equity Analytics
Director - Equity Analytics
By Nisthar Cassim

The world’s leading nutrition, health and wellness company, Nestlé said last week Sri Lanka is a high growth market with strong upside in tandem with improving socioeconomic development aided by the end-of-war benefit.

“We are experiencing double digit growth in Sri Lanka and see very positive prospects going forward. Our commitment to Sri Lanka is underpinned by the roll out of Rs. 10 billion investment over a five-year period, of which Rs. 3 billion has already been made,” Nestlé S.A. Deputy Executive Vice President and Member of the Executive Board Jean-Marc Duvoisin told the Daily FT in an exclusive interview during a whistle stop tour to Sri Lanka.

He said that growth prospects had considerably improved especially following the end of the conflict in Sri Lanka, which had provided the country with an unprecedented opportunity. “We also see doubling of per capita income and lifestyles improving. Given our portfolio of products, Nestlé is well positioned to serve growing needs of the country,” Duvoisin said.

Nestlé is also encouraged by the Government’s thrust to make Sri Lanka self-sufficient in its milk requirements. As a global leader Nestlé is also partnering in this initiative, though according to the Executive Board Member, a collective effort by all stakeholders is key to realising this goal of self sufficiency.

Via a stepped-up strategy as well as greater coverage via newly set up collecting centres, Nestlé’s fresh milk intake has increased by 36% whilst boosting domestic value addition and 90% of its products sold are produced locally.

Nestlé’s contribution to local farmers and coconut producers last year was around Rs. 3.6 billion, up by 63% over 2010.

“We are in the food business, hence reliance on local supplies is linked to our business model. Food can’t be transported across the world nor is it commercially viable but must be sourced from within markets. This apart, such a strategy also helps to better serve the local taste preferences,” said Duvoisin, who was associated with Nestlé Lanka Managing Director Alois Hofbauer during the interview.

A graduate in economics and political science, Duvoisin who is also overseeing Nestlé’s global Corporate Human Resources function, also said that the global giant remained committed to all its markets on the long haul enriching communities via its products as well as corporate best practices.

“We have never pulled out of a market, no matter how difficult the conditions may be. At present in Sri Lanka too there are some external factors-led difficulties such as depreciation of the rupee, high energy cost and a relatively higher inflation but the country as well as the Nestlé local team remain resilient and we are confident of the future,” he added.

According to Duvoisin, Sri Lankan operations remain unique as there are only six expatriates out of an employee base of 1,200. “We are keen to sustain this pool of local talent and as we grow our business we need more as well,” he said.

He said part of the Rs. 10 billion investment would also go to human resource and skills development. However, drawing global lessons, Nestlé’s EVP said the challenge for corporates was to ensure not only investing in people but more important than money was having the right mindset as well as investing in time for people development.

“In managers, top of the mind should be people; they must dedicate time to their teams as well as engage them. This is key,” he added. “Sustainability of an organisation as well as its success depends on engaging the employees who will be close to the consumer and trade partners. Such a strategy will see people aligned, motivated and committed to realise the corporate vision,” Duvoisin emphasised.

He also finds Nestlé Lanka’s operations well integrated encompassing the workers, sales team, suppliers and trade partners. This, he said, has helped Nestlé Lanka to be progressive. Nestlé has also developed products which are unique only to Sri Lanka, which he linked to an empowered local team understanding the domestic markets needs better.

“In tough economic conditions the value a firm’s products and services offers to consumers ensures success. This, along with quality, trust in the brand and seeking internal efficiency improvements, innovation as well as good corporate citizenship, fuels sustainability of an organisation in any market,” the Nestlé EVP pointed out.

A dual Swiss and Italian citizen, Duvoisin, with an ever-increasing scope of management responsibilities, has had numerous international and Corporate Headquarters positions ranging from Marketing and Sales in Colombia to Market Zone Coordinator for Zone Americas, finally culminating in heading the Ecuadorian, then the Bolivarian Region (Colombia, Ecuador, and Venezuela) and finally, the Mexican markets as the CEO. He returned to the Nestlé Corporate Headquarters in Switzerland in 2007.

In the first half of 2012, Nestlé Lanka recorded a good revenue growth of 13.5% (YoY) posting revenue of Rs. 14.5 billion against the background of a difficult market environment. The company announced a flat bottom line growth of -1% (YoY), with a net profit of Rs. 1.24 billion due to currency depreciation and the rise in fuel, energy and other costs, which resulted in a significant increase of costs for its manufacturing operations.

“2012 continues to be a very trying year for us. Despite the many challenges we face, we are maintaining a solid revenue growth and strengthening our leading position in our key categories. However, external impacts on the bottom line are continuing to take its toll. Notwithstanding, Nestlé will continue its strong commitment to Sri Lanka and its people,” Nestlé Lanka Managing Director Alois Hofbauer said in a press statement in early August in releasing the interim results for the first half.

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