Nestle
India:
Mixing Commerce With Community
Service
By Dev Waram
In the world of processed food
Nestle is the First to Last word.
Nestle's transparent business
practices, pioneering environment
policy and respect for the fundamental
values of different cultures have
earned the global food major an
enviable place in the countries
where it operates. Nestlé's
activities contribute to and nurture
the sustainable economic development
of people, communities and nations.
Above all, Nestlé is dedicated
to bringing the joy of 'Good Food,
Good Life' to people across the
world. And Nestle India is part
of this global brand.
Nestlé
India, a subsidiary of Nestle
S.A of Switzerland, the world's
largest processed food company,
has been playing a remarkable
role in dovetailing its business
initiatives into efforts to improve
the quality of life in the rural
communities where it operates.
The Indian processed foods major,
which shares its parent firm's
business principles based on honesty,
integrity and fairness in all
aspects of its commercial dealings,
has over decades earned the trust
and respect of every strata of
society that it comes in contact,
namely farmers, dealers and consumers.
Today Nestle India is rated among
India's “Most Respected
Companies and 'Top Wealth Creators.”
In the first half of 2006, Nestle
India reported a healthy top-line
growth of 10.4 percent supported
by growth in most categories of
its products.
Nestle has brought professionalism
to Indian dairy farming, an otherwise
rural and rustic vocation. “The
challenge is to really professionalise
dairy farming and win farmers'
confidence,” said Martial
Rolland, Chairman and Managing
Director of Nestle India, while
sharing his thoughts during an
interactive session he recently
had in Mumbai, with members of
the Swiss Business Forum.
Nestlé India manufactures
products of truly international
quality under internationally
famous brand names such as Nescafe,
Maggi, Milkybar, Milo, Kit Kat,
Bar-One, Milkmaid, and Nestea.
In recent years the company has
also introduced products of daily
consumption and use such as Nestle
Milk, Nestle Slim Milk, Nestle
Set Dahi and Nestle Jeera Raita.
Nestlé India's parent company
was founded in 1867 on the shores
of Lake Geneva in Vevey, Switzerland
and its first product was “Farine
Lactée Nestlé”,
an infant cereal specially formulated
by founder Henri Nestlé
to provide and improve infant
nutrition. Ever since Henri Nestlé
developed this first milk food
for infants in 1867, and saved
the life of a neighbor's child,
the Nestlé Company has
aimed to build a business based
on sound human values and principles.
From its first historic merger
with the Anglo-Swiss Condensed
Milk Company in 1905, Nestlé
has grown to become the world's
largest and most diversified food
Company, and is about twice the
size of its nearest competitor
in the food and beverages sector.
Nestlé's trademark of birds
in a nest, derived from Henri
Nestlé's personal coat
of arms, evokes the values upon
which he founded his company.
Namely, the values of security,
maternity and affection, nature
and nourishment, family and tradition.
Today, it is not only the central
element of Nestlé's corporate
identity but serves to define
the Company's products, responsibilities,
business practices, ethics and
goals.
Today, Nestle employs around 250,000
people and have more than 500
factories or operations in almost
every country in the world. The
global giant, which offers around
8,000 products to millions of
consumers universally, reported
sales worth CHF 91 billion and
a net profit of CHF 8,0 billion
at the end of 2005.
Nestlé's relationship with
India dates back to 1912, when
it began trading as “The
Nestlé Anglo-Swiss Condensed
Milk Company (Export) Limited,
importing and selling finished
products in the Indian market.
After India's independence in
1947, the economic policies of
the new government emphasized
the need for local production.
Nestlé responded to India's
aspirations by forming a company
in India and set up its first
factory in 1961 at Moga, Punjab,
where the Government wanted Nestlé
to develop the milk economy.
Beginning with its first investment
in Moga in 1961, Nestlé's
regular and substantial investments
established that it was here to
stay. In 1976, Nestlé set
up its next factory at Choladi
(Tamil Nadu) as a pilot plant
to process the tea grown in the
area into soluble tea. The Nanjangud
factory (Karnataka), became operational
in 1989, the Samalkha factory
(Haryana), in 1993 and in 1995
and 1997, Nestlé commissioned
two factories in Goa at Ponda
and Bicholim respectively. Nestlé
India is now putting up the seventh
factory at Pant Nagar in Uttaranchal
state.
“Of particular satisfaction
is the commissioning of the first
phase of the Uttaranchal plant
in record time, setting a new
benchmark,” Rolland said
while releasing the company's
second quarter results recently.
Nestlé has been a partner
in India's growth for more than
nine decades now and has built
a very special relationship of
trust and commitment with the
people of India. The Company's
activities in India have facilitated
direct and indirect employment
and provides livelihood to about
one million people including farmers,
suppliers of packaging materials,
services and other goods.
Progress in Moga required the
introduction of Nestlé's
Agricultural Services to educate,
advise and help the farmer in
a variety of aspects. From increasing
the milk yield of their cows through
improved dairy farming methods,
to irrigation, scientific crop
management practices and helping
with the procurement of bank loans.
Nestlé set up milk collection
centres that would not only ensure
prompt collection and pay fair
prices, but also instill amongst
the community, a confidence in
the dairy business. Progress involved
the creation of prosperity on
an on-going and sustainable basis
that has resulted in not just
the transformation of Moga into
a prosperous and vibrant milk
district today, but a thriving
hub of industrial activity, as
well.
The Company continuously focuses
its efforts to better understand
the changing lifestyles of India
and anticipate consumer needs
in order to provide Taste, Nutrition,
Health and Wellness through its
product offerings. The culture
of innovation and renovation within
the Company and access to the
Nestlé Group's proprietary
technology/Brands expertise and
the extensive centralized Research
and Development facilities gives
it a distinct advantage in these
efforts. It helps the Company
to create value that can be sustained
over the long term by offering
consumers a wide variety of high
quality, safe food products at
affordable prices.
The Company started milk collection
in Moga in 1961 with a collection
of 511 Kgs of milk from 180 farmers.
It has substantially expanded
its operations with over 85,000
farmers in its own milk district.
Nestlé uses local raw materials
and develops local resources wherever
possible. Milk Collection Centres
with farm cooling tanks to preserve
the quality of milk were established
by the Company.
Besides this, milking machines
were provided to the farmers maintaining
large dairy farms. Farmers were
advised on good breeding and feeding
practices, and on the health of
dairy herds. Techniques for increasing
milk yields at the farm were introduced.
Nestlé has invested in
Chilling Centres and Farm Cooling
Tanks. In addition to this, the
Company provides assistance to
farmers in the areas of cattle
feed, quality fodder seeds, veterinary
medicines and mineral mixture
and procurement of bank loans.
”Nestle brings world-wide
expertise to assist the Indian
dairy farmers,” Rolland
said.
Nestlé support goes further
than the work with the dairy farmers.
The Company is helping with the
construction of facilities for
drinking water and lavatories
in village schools in the Moga
Factory Milk District. This is
a joint effort with the schools,
parent associations and village
administrations. Another project
involved the funding of medicines
for a tuberculosis clinic which
is treating residents from Moga
town and the nearby villages.
By working very closely with the
farmers of the Moga Milk District
and local administrators, Nestlé
has helped to raise the quality
and hygiene of the milk produced
there and improve the health and
life style of the farmers and
other residents. Its contribution
to the creation of prosperity
on an on-going and sustainable
basis has not only transformed
Moga into a prosperous and vibrant
milk district today, but also
a thriving hub of industrial activity.
Nestlé India has always
focused on long term, sustainable
and profitable growth and helped
communities around its factories
to improve their quality of life
in a similar manner. Nestlé
Agricultural Services has used
the experience gained by Nestlé
across the world to set up a system
of direct and efficient contact
with the farmers. Company veterinarians
and agronomists supervise the
milk routes and advise farmers
on various issues including proper
feed for the herds. Milk storage
facilities have been set up close
to the farmers. Veterinary services
are provided free, and medicines
provided at wholesale cost. The
company assists farmers in artificial
insemination programs for their
cattle, provides subsidy and helps
them in procuring loans.
Water is a scarce resource. In
India, availability of clean drinking
water is a major concern for many
communities. Almost 200 million
people do not have access to clean
drinking water. Nestlé
India is committed to improving
the situation and believes that
the first step is to create awareness
in the communities around its
factories. A key focus area of
our Corporate initiatives is to
help provide Clean Drinking Water
and educate children in schools
to conserve this scarce resource.
Nestlé supports initiatives
to create awareness about the
right to education and encourages
the communities around its factories
to send their children to school.
Nestlé India employees
have developed a special play
'Let Us Go to School' for this
purpose. This has been staged
amongst the communities around
our factories, and its recordings
screened at smaller gatherings
along the milk routes.
The Company also recognizes the
active role that village women
play in adopting good dairying
practices in dairy farms and regularly
conduct special programs that
help them.
“Women are absolutely essential
in dairy farming,” Rolland
said.
Nestlé India supports local
schools, helps in the maintenance
of public parks and green belts,
facilitates blood donation camps
and health awareness programs.
The key messages of conservation,
hygiene, health and wellness are
progressively built into the communities
where the Company is present.
All these initiatives strengthen
the bond between Nestlé
India and the community.
“We feel that we are very
much part of the Indian Fabric.
We will be here hopefully forever,”
Rolland said
 |
|
Nestle
India's domestic
salesup despite rising
input costs |
Nestlé
India, a processed foods major,
has posted a healthy increase
of 13.5 percent in domestic sales
in the second quarter ending June
30 of the calendar year 2006 despite
rising costs, the company said.
Martial Rolland, Nestle India's
Chairman and Managing Director,
said:
“I am very pleased with
the strong growth in net domestic
sales supported by a healthy bottomline
in an environment of continuing
high input costs. Also of particular
satisfaction is the commissioning
of the first phase of the Uttaranchal
plant in record time, setting
a new benchmark.”
Net Sales for the Quarter were
Rs.681.2 crore and have increased
by 10.6 percent, compared with
the same period of 2005. Net domestic
sales were Rs.610.3 crore and
have increased by 13.5 percent
supported by growth in most categories
and across channels. Export sales
have decreased by 9.2 percent
compared with the same period
of 2005 mainly due to lower sales
of beverages to Russia and Japan,
partially offset by growth in
sales of other countries across
the world.
The net profit for the Quarter
was Rs.81.0 crore. The reported
EBITDA as a percentage of Net
Sales, for the current quarter
is 20.3 percent, compared to 22.4
percent in the same period of
2005 which was a quarter of exceptional
performance as explained in the
results of that quarter. The current
quarter has been positively impacted
by a one-off write back no longer
required and the adjusted EBITDA,
after excluding the effect of
this write back, stands at 18.8
percent. This decline in margin
is mainly due to steep increase
in prices of commodities, fuels/energies;
and higher operating costs associated
with upgraded formulations and
manufacturing processes of the
Infant Nutrition products to further
enhance their quality. Staggered
increases in selling prices and
higher volumes have partially
offset the cost increases.
The reported net profit as a percentage
of gross revenue for the current
quarter, has decreased to 11.8
percent from 13.3 percent in the
same period last year. After stripping
out the effect of 'provision for
contingencies' and other exceptional
items, the adjusted net profit
as a percentage of gross revenue,
has decreased to 11.2 percent.
This is largely due to the reasons
explained above.
In A Nutshell
• Net Sales for 2nd Quarter
ended 30th June '06:
Rs.681.2 Cr. UP 10.6 %
• Net Domestic Sales for
the Quarter : Rs.610.3Cr . UP
13.5 %
• Net Profit for the Quarter:
Rs.81.0 Cr EBITDA / Net Sales
ratio:20.3 %
• Higher volume growth &
better realization accelerates
Net Sales
• Margins continue to be
healthy.
• Greater focus, improved
efficiencies, higher volumes and
staggered price increases partially
neutralise the impact of high
prices of commodities/energies,
higher operating costs associated
with upgraded formulations and
manufacturing processes to further
enhance quality
• Innovation & Renovation
to increase Nutrition, Health
and Wellness quotient in products
continues on plan
• New benchmark for efficiency
- Initial phase of 7th Factory
completed within 7 months.
