New Delhi:Paul Bulcke, the chief executive officer of Nestlé SA, was in India to inaugurate the company’s new coffee processing plant in Karnataka. Bullish on the country’s growth, he said that the company will invest $500 million (Rs 2,235 crore) in setting up new factories, and upgrading the existing ones. Edited excerpts from an interview:
Nestlé’s organic growth seems to be coming from emerging markets. How are the mature markets performing?
Our growth is coming from all parts of the world. We have developed markets growing, too, and emerging markets growing faster. It’s clear that the emerging markets have more upside opportunity of growth as 80% of the world population is living in emerging markets. They are working for a better tomorrow. And that’s the energy you feel in India.
The developed markets are having less growth as they have some structural problems. But inside that economy, we (Nestlé) are growing and outperforming the industry. There are opportunities in developed markets, too. Nutrition, for instance, is something relatively new we are working on. We are investing more, bringing more value into the products. These are all ways to grow in developed markets.
Will some of the growth also come from acquisitions?
Yes, but the fundamental growth of Nestlé globally comes from growing what we already have. We are in milk, coffee, culinary products like Maggi noodles, confectionary, infant cereals. We have a complementary set of categories and portfolio of strong brands. Growing that is our main purpose. We are also open for opportunities that can help us drive our strategy in countries where we are lacking some of these pillars. Yet, we are always open (to acquisitions).
Are you looking at any specific product categories?
No, I am not going to go into specifics because that would just add to speculation, but we have always been open. Last year, we had acquisitions equivalent to $5-6 billion. So it is sizeable.
What are your investment plans for India?
Next year, we will be 100-years-old in India. We feel at home here. Next year, we have a programme of $500 million investments in factories, capacity increases and new technologies. India, with its population, is important.
But the contribution from the Indian market is very small to the overall revenues of the company.
There is no small in Nestlé. We are selling 1.2 billion products a day. Everything adds up. The biggest market is USA because we have a deep footprint there. The potential that we feel in India is such that we see it as one of the highest priorities.
As chief executive of the biggest food company, how do you view the global economy? Is it still fragile?
I think that the economy worldwide is quite solid. Why? Because it’s more and broader spread than before. Developing countries must go about their development in a holistic way like India where we hear terms and concepts like inclusive growth, which is what we believe in. Inclusive growth is creating a middle class. The stability and development of a country is linked with how strong you build the middle class. There’s growth happening in many areas, including India, China, Indonesia and Africa. In fact, Africa has been growing 5-6%.
In the developed markets there’s slower growth because there’s a bill to be paid for the past. If you as a family live above your means for a long time, somewhere you have a bill that has to be paid. That’s where the western world is. I hope they go logically about it and do something.
How difficult is the job of a global CEO in view of new media like Facebook and Twitter? And in the age of activism?
Today, the world is a village. It is transparent. It’s a good concept. There are many opinions in the world, sometimes they are contradictory.
We are a very principle-based company. We call them the corporate business principles that are very explicit. That’s how we want the company to behave.
There’s a fundamental business philosophy under which we create shared value. We believe that for a company to be successful over time it has to go about its business meaningfully, effectively and efficiently. It can only do that when it links up its activity meaningfully with society at large. So everything we do should create shared value for the company, shareholders and society.
However, if we are criticized on some parts, we have to listen, be sensitive and open to that. Social media has the strength of ventilating that (criticism) very fast. When there is personal interpretation of a reality that we see very differently, we have to engage in dialogue. Is it more difficult than in the past? Well, social media are much faster. When it is negative, it is much harder. But you can also use it positively.
Should corporate social responsibility be made mandatory by the government?
It is like government saying honesty should be mandatory. In my view, it should be linked to principles and convictions rather than regulation. Of course, some things have to be regulated. Governments should shape the frame of the painting but they don’t have to make the painting. So, yes, efficiency of framing is important.
How has the consumer changed over the years?
The consumer has more insight; he has a voice through social media. He has an opinion. He’s linked as an individual and not just as the consumer. Communication is two-way now, earlier it was one-way. We had commercials on TV, that’s it. Today, he is empowered.
Are you looking at the rural markets in India?
We have geared a whole programme called Properly Positioned Products (PPP). These are products different in nutritional needs and also different from country to country. Africa’s needs, for instance, would be different. We have our Maggi noodles fortified with iodine and also with iron for the anaemic.
We have been identifying these markets for many years, but we’re doing it much more now. And that’s the reason why we are building our R&D centre in India, to translate all that we know for the specific needs of the consumer. We are serious about rural markets.
Any more global brands you’d like to launch in India?
I have so many brands that are yours already. We have concepts like Dolce Gusto, our coffee machines which deliver a fine cup of coffee. Nespresso also we may think of. We have a nice portfolio of brands that we can build upon.
What about water, given that Pure Life didn’t work?
Categories have to be strategically aligned with what we want to be as a company. We want to develop health and nutrition in our portfolio with strong brands; so strategically water fits in well. But it has to be sustainable economically, too. Do we have the conditions for that? Not now. This category is well covered.