‘Despite the challenging environment we are committed to Nigeria’

Mauricio Alarcon, the Managing Director/CEO of Nestle Nigeria PLC, in this interview with Caleb Ojewale, shares the company’s vision to remain viable and competitive, as well as continuously contributing to development in different sectors of Nigeria through what the company calls Creating Shared Value.

The Nigerian economy is going through a rough patch at the moment but, I hear that Nestle has not disengaged workers (as some companies have had to do) despite the challenging times. So I’m curious, as a consumer goods company (and with households incomes on a decline) what has been the secret in staying competitive?

To stay competitive in this environment, we have stayed focused on our commitment to provide good quality nutrition solutions to our consumers. Our result is due to the continued confidence of our consumers in our brands, the hard work of our people, and our distribution network.

We have also continuously improved our efficiency while focusing on local sourcing of raw materials.

Everywhere in the world, the Nestlé name represents a promise to the consumer that the product is safe and of high standard.

Revenue has been good at Nestle, with some measure of Year-on-Year growth since 2014, last year even recorded 20.3 percent. What are the projections for this year?

We are cautiously optimistic for 2017.  However, due to the volatility of our current environment we cannot make projections at this time.

We posted solid results in Q1 which were made possible by several factors. One is the trust of our consumers in our brands. The lower base in the corresponding period of 2016 and the impact of the price increases implemented last year also played a part. The other factor is the internal cost saving and operating efficiency initiatives which we have put in place. These results are sustainable in subsequent quarters if the operating environment improves.

Last year had the lowest Return on Assets since 2007; that is in Ten years. What confidence boosting measures are being put in place (for shareholders) in ensuring that the company’s vast resources are being optimally utilised to make more profit?

Two things happened in 2016 – one was the loss of pioneer status. The other was the revaluation of our loans in foreign currency. We have put plans in place to mitigate both factors. Therefore, we are cautiously optimistic that our profitability will improve in 2017.

Nestle presently has three factories; in Shagamu and Agbara both in Ogun state, and the Nestle waters factory in Abaji. Are there plans for expansion in production capacity or are you (perhaps) scaling back?

Despite the challenging environment we are committed to Nigeria. Therefore, we continue to invest.  We will invest as much this year as we did last year in increasing our production capacity.

Within just one year after the commissioning of the new water factory in Abaji, we are seeing consistent growth.  The new factory supplies water to the customers in the northern part of the country. We are constantly reviewing the operations of the business and exploring the opportunities offered by the factories.

Giving back to host communities is considered critical to promoting business sustainability. In what way has Nestle been doing this in Nigeria?

Nestlé, the largest nutrition, health and wellness company, works alongside partners to create shared value – contributing to society while ensuring long term success of its business. It is called Creating Shared Value and it is embedded in everything Nestlé does.

Nestlé Nigeria touches the lives of millions of people, from the farmers who grow its ingredients to the families who enjoy its products, to the communities where the company operates, and the rural environment upon which it depends.

Nestlé Nigeria is enabling healthier and happier lives for individuals and families, sourcing raw materials locally, investing in capacity building for farmers and in rural development.

We also invest in training and empowering the youth through various programs including sports and technical training to develop the leaders of tomorrow.

Some of our CSV programs include the Nescafé MYOWBU which has created 1,300 jobs since 2010. The program encourages entrepreneurship among women and youth. There is also the Technical Training Centre (TTC) which provides multi-skill vocational training since 2011.

Nestlé cereals plan program in partnership with IFDC, taught sustainable farming practices to 15,000 farmers in 2016 alone. The company has also been providing access to clean drinking water in the communities around the Agbara and Abaji factories. 7,117 cubic meters of water was provided in Agbara in 2016.

Going back to the part of “sustainable farming practices”, how have you been able to achieve the success rate of 82 percent sourcing of raw materials locally?

For us, local sourcing is a long-term goal. We have therefore partnered with institutes like the IITA, IFDC and USAID to promote sustainable farming practices while increasing yield and quality.

With our partners, we have worked with farmers, teaching them simple methods for maintaining good agricultural and storage practices, how to manage grain quality and safety. These efforts ensure that we have the right quality of raw materials to attain our local sourcing targets.

In 2016, 41,600 farmers supplied maize, soybean, sorghum and millet to our factories. 100 percent of the maize used in cereal brands – Cerelac and Golden Morn is sourced locally through the Nestlé Cereals Plan.

From your experience, what needs to be done to ensure more raw materials can be sourced from Nigerian farmers?

We see 3 main opportunities which we work to leverage through our programs:

One is improving grain quality by introducing better farming practices. This intervention ensures the production of high quality grains and reduces the risk of contamination.

The second is the reduction of post-harvest losses by providing training and technical support to improve post-harvest practices. We also work with aggregators, processors and other agro-dealers to improve the agro-logistics within the clusters where we operate.

The third is to help the farmers form cooperatives to support each other, ensure access to necessary inputs and agro-services to improve processes like threshing, cleaning, drying and storage.

Are there issues surrounding the quality of some of these locally sourced inputs?

One of the major challenges is to consistently ensure the good quality of the raw material we source, hence the training of farmers to improve the quality of the raw materials.

There is an exception to the sourcing of Milk locally. What is the reason for this?

We develop local sourcing wherever it is possible. For the dairy value chain, we need to align with other stakeholders on a common approach.

In the end, Nestle is as much a “health company” as it is one that thrives on agriculture. So, I want you to tell us about some of the nutritional challenges that have been observed in Nigeria and how you think they can be addressed.

One of the nutritional challenges which we have observed is micronutrient deficiency which is a serious public health problem. Many diets do not contain sufficient amounts of vitamins and minerals.  These deficiencies contribute to a vicious cycle of malnutrition, underdevelopment and poverty affecting already underprivileged groups. Children are often the victims of malnutrition, which further jeopardizes the future of their country.

Micronutrient deficiencies cause a wide range of health problems including anaemia, birth defects, maternal death, impaired physical and mental growth.  Preventing these deficiencies will free up funds previously devoted to curative health care and social welfare needs to other development needs.

One of the ways to address this is by providing nutrition education to enable people make the right nutrition choices. Another way is through food fortification.  It is also important also to ensure even starting from pregnancy children have adequate nutrition in the first 1000 days.

At Nestlé Nigeria, we see it as a responsibility and an opportunity to improve the nutrition status of people at risk by adding relevant micronutrients to food and beverages that they consume regularly.  In 2016, 157 million portions of fortified foods were served to consumers. The fortified products include Golden Morn breakfast cereal and Maggi.