Mr Mauricio Alarcon, Managing Director/ Chief Executive Officer of Nestle Nigeria, in an exclusive interview with Daily Trust, discussed a range of issues which border on the need to cascade economic growth to every Nigerian and why the downgrades by rating agencies should not cause sleepless night for quoted companies. Excerpts:
Recent figures by the bureau of statistics indicate that we are out of recession, how did the recession impact on your operations in Nigeria?
The reality is, it did as well impact on the consumers. The question is how did it impact the consumers? A lot of the consumers changed their consumption habits. So we are very happy that our consumers were able to understand the quality of the products, the nutrition values. They want to continue to consume those products but what they were looking for were much more affordable options.
So, we started to focus much more on what we call PPP products. These are the Popularly Position Products which are the same quality of products but in much more affordable single serve sachets. That was the need of the consumer, and we responded to them and I think this has been demonstrated on the growth of the single serves and practically, consumption has dramatically increased and that also meant that we have to change a bit of our manufacturing strategies to help those single serves to continue to grow as an important part of our portfolio.
This was the answer to that need and of course today our consumers can purchase on daily basis as they were doing. Some others are also using this as a way of portion control, how much they consume.
How did that impact your bottom-line with regards to performance in terms of number?
I think if you look at it in terms of the bottom line in parts of 2016, you have to compare 2015 to 2016 and then 2016 to 2017. In terms of the consumption patterns, that was not necessarily impacted. We did have to change some of our lines, some of our setups and of course it had a small impact but not important. I think the biggest impact in 2016 in terms of our bottom line was the revaluation of the loans we had in dollars. The second big impact is the loss of private tax status and I’m talking about the net bottom line. Then you look at our operating profit and price increase of raw materials. Our raw materials are sugar, salt, palm oil and the rest of them. Of course we had to be conscious, most of our consumers could not afford drastic price rises. We did some price increase but we also had to do a lot of internal saving.
Following the difficulty in accessing the dollar, a lot of companies had to start focusing more on sourcing locally, how much of that kind of realignment happened with Nestle?
You are asking a very interesting question. The reality for us is that, local sourcing is part of our strategy. It is not something we did because of the ban on the 41 items. We actually worked on; it is imbedded in the way we do business. You know, the purpose of our company is to contribute to the quality of life; we are helping to better the future.
If you look into that, the reality is that the only way you can make a difference is if you contribute to the society that you’re with. You have to be part of the society within your operation so for us that meant local sourcing has to be part of our strategy. Not because of our forex situation, it is really because of what we believe to be true. So for the past five years we have been doing local sourcing, because of that, we have been able to source 100% of maize on our Golden Morn.
So more than 82% of our raw materials are locally sourced excluding milk products and that is because we truly believe this is the only way. So how do we do that? First of all you know you need to make sure that the products that we buy are in compliance with the terms of our very rigid quality status. We have to work very much with the farmers to make sure that they have best farming practices; that they can increase their yields because if they increase their yields, they can increase their income.
It is also very important for us, that they have training so you have good supplies; that you also have transformers, people who can transform that material into a usable, industrial, consumable product. So we also work with a lot of transformers and that chain which I simplified is actually a lot of work.
Can you further breakdown what Nestle operations impact in terms of job creation, and household empowerment?
Nestle is a public liability company meaning that part of our shareholders are Nigerians; another part includes employees, more than 2,200 employees are Nigerians including key members of the management committee such as factory managers, public affairs manager etc. which is one part of Nestle being Nigerian. Every company has internal training that is continuously developing our people not only locally but internationally.
We have talented Nigerians around the world today being trained for future positions but in some cases training Nigerians that are just coming out of school. So we are very proud of attending to trainings that we have. We have another one that is being built. We take some of the best students and we train them even more on skills and in front of machinery because today the important part is not only to be trained theoretically but also to do work. We train them after university and they have the choice to stay with us or to work somewhere else and that is something that we are very proud of because we are helping those not necessarily working for our company and this is at an average of 25 people each year out of which the five best ones will go for a month to Switzerland. That is in collaboration with the Switzerland government.
Another important part of our responsibility is to ensure that people are trained in nutrition and we do that through quite a lot of different activities. One is with kids. We try to continuously teach the kids about healthy eating habits. We also teach about nutrition to mothers, you know we have a lot of nanny caravans that move around different parts of the country talking about good nutritional habits.
We also train paediatricians about the importance of nutrition which is sometimes critical from the first one thousand days of the newborn. And you know, we have been supporting the minor basketball championship so we are developing sports.
Another side, as mentioned earlier, is related to agriculture. We train farmers to be able to deliver quality products for Nestle. We train them in farming practices, business orientation and that is a great advantage because we are helping them to have better lives, better incomes, better yields. From them those products do not come directly to us. We have people who transform them into industrial usage. We develop those suppliers that turn cassava into cassava flour, salting. We have also worked with other suppliers throughout the years to develop the starch industry that at a certain time was very small in Nigeria. We don’t only have them developed in some cases, we purchase in advance; we give them technical assistance to set up the quality needs, that’s another area.
Another area where we make a difference is water. Wherever we have our water factories, we make sure we give the communities around them free access to the water so they have quality Nestle water.
In 2016 we gave 7 million litres of water free to the community where we operate. These are just few examples that come to my mind of our different activities. So, as you can see, on way or the other we have been 57 years in our country; 57 years of creating jobs, of continuous growth and development. As I always say we are Nigerian, we are part of Nigeria and you see it in our products. Our maggi today is part of the Nigerian kitchen; our products today are part of the everyday breakfast, our Golden Morn developed by Nigerians, for Nigerians is part of everyone’s breakfast and all the opportunities we still have to grow are part of who we are.
How much are you aligning your growth plan with the government’s economic recovery and growth plan?
I think when you look at the ERGP, a lot of times government tends to present plans. I think the important part is when you focus on the real action. This is what we have been able to battle with the government and we have already started to see a recovery of the economy. We see how the ease of doing business is starting to bring results, we have been users of some of these improvements and these policies such visa on arrival have helped us in some cases. As the minister of industry said, sometimes those are beautiful steps but there are important steps for companies to follow, I mean for us to be able to bring some of our visitors here easily. It does help us to go through a lot of things so we see the plan and we acknowledge the plan. But I think we will be happy when we start to see the actions coming to reality.
Power generation is a big challenge in Nigeria, how are you coping?
First of all, let me tell you that everywhere in the world there are operational challenges. I had the opportunity to be in a few countries among them Switzerland, Australia, Egypt and there are always challenges so I think Nestle will like to focus more on the opportunities than the challenges. In terms of power generation, it allows us to look at a lot of different opportunities so today we are operating with things such as diesel, gas, we also connect to public supply but we are also looking for potential opportunities to use the energy. You know the power challenges in Nigeria forces us to move faster that’s why I say it’s much better to look at the opportunities. For us it’s been a number of solutions for energy and we are looking into potentials of solar power for part of our energy sourcing in addition to what we have already which is power plants and gas generation.
With the GDP numbers, we are aware that a good number of the sectors are still struggling, especially manufacturing. What do you think we need to do to drive growth in this area?
I think to keep growth, the answer is in your question. It cannot only be a recovery that is happening in the oil sector, it has to be a recovery that is helping more Nigerians. To do that we have to make sure that what is happening in the macro economics is cascaded down to the average Nigerians, that’s the fundamental challenge.
We have to make sure that all the benefits that we see in the recovery, the GDP, the oil sector growth cascades down to every Nigerian so that we won’t go back to the levels of poverty that we used to have in the country. If this happens, manufacturing will come back, jobs will come back and that is the fundamental; so let’s make sure that all the good news is cascaded down to every single Nigerian. That’s the way out and I think that is the idea of the economic recovery plan. We should use some of these resources to boost agriculture, infrastructure investments and if properly cascaded down and reflected into actions, it should help us to work and grow faster.
You talked about the belief you have in Nigeria, what is the implication of the Moody’s downgrade on listed companies attracting foreign capital?
I think the real investor’s confidence is focused on the result of companies and I think as a participant on the Nigerian Stock Exchange, we shouldn’t lose direction, that is at the end of the day the result that we deliver to shareholders and nothing else, that’s what we should be doing.
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