Like all other businesses in the country, liquidity challenges being faced by the country have also affected our business. However, we always take a long-term approach to doing business and we focus on providing the best nutrition solutions for our consumers in good and bad times.
GLOBAL food and beverage manufacturer Nestlé has remained steadfast despite economic headwinds that have threatened the viability of business in Zimbabwe with local management indicating plans for further investment in the country. Zimbabwe Independent business reporter Taurai Mangudhla (TM) interviewed Nestlé south cluster manager (Zimbabwe, Zambia and Malawi) Ben Ndiaye (BN, pictured) on the company’s recent investments in Zimbabwe as well as its strategic outlook. Below are excerpts:
TM: Nestlé Zimbabwe recently commissioned affordable product lines, what informed the decision?
BN: Nestlé Zimbabwe believes in innovation and has leveraged our research and development capability. We have commissioned filling and packing production lines to produce affordable products targeted at high-density urban and rural areas. This is a result of a marketing survey and consumer insights which showed that although Nestlé products in general are well-known and liked by Zimbabweans, we are only able to reach a certain category of consumers with our current pack sizes. An expansion in our consumer base has thus motivated this capital investment in filling and packing machinery, to produce product brands affordable to the majority of the population. The new products launched will have a price range of 25 to 50 US cents.
TM: What products are to be produced on the affordable product lines?
BN: We are implementing our commitment to increase the local content in our products as part of our innovation pipeline with a deliberate intention to use local raw and packaging material in our value chain.
We have two types of new complete products in the market such as the Nestlé EveryDay Instant Milk tea which is a 25g tea, sugar and powder milk coming from the local farmers and Nestlé Cerevita Flakes with Milk 35g is the second innovation as we have added the milk to the flakes. We have also made some line extension with new affordable packs of Cremora 25g (a teapot size for five cups) and a Cerevita 25g (the recipe we were selling until now). Very soon Cerelac 50g will be the new addition to this new range of locally produced affordable products and other new lines.
TM: What is the pricing model for the affordable product lines and how does it fare compared to competition and products that you already have on the market?
BN: The recommended retail selling prices range between 25 to 50 cents and the prices are competitively priced to meet the aspirations of the needs of a larger consumer base. In addition to being affordable, we also make sure that our products meet the nutritional needs of the population as well, being fortified with iron, vitamins and minerals.
The Zimbabwe Micronutrient Survey report of 2015 by the Ministry of Health and Child Care reported that there is prevalence of iron deficiency in the Zimbabwean population and thus these products play a role to support this challenge.
We would like to further point out that our original product portfolio (Cerevita, Cerelac, Milo and EveryDay Milk Powder) is equally fortified with nutrients and vitamin blocks.
With this new offer of nutritious and fortified product range that addresses these deficiencies with the right taste, right nutritional information, right portion and the right price, we are proud to reinforce the Purpose of our company which is about “Enhancing quality of life and contributing to a healthier future”. Also by using local raw and packaging material we are creating shared value to the local community.
TM: What is the quantum of investment on the affordable product lines and can you give a breakdown, how much was spent in which areas?
BN: An investment amount of US$200 000 was spent in constructing the production area and assembling of the filling and packing machinery.
In addition to the expenditure on machinery, we must not forget the amounts spent on consumer market research, product research and development, cost of product manufacturing trials, quality control and checks of the new products, research on the route to the targeted markets, packaging development with suppliers, development of advertisement materials from point of sale posters, radio jingles and television.
All these product development activities cost much more than production lines alone.
TM: Since 2011, the group has invested US$30 million in Zimbabwe, in what areas was this money invested in and what informed the decision?
BN: Since 2011, Nestlé Zimbabwe has invested close to US$30 million in the refurbishment and upgrading of the cereals and Milo plants and equipment to increase production capacities, efficiencies and introduction of new products and technology (Cerelac with Pro Biotics) .
We now have two mega silos for storage of imported raw materials that have been recently installed which will facilitate consistent Cremora production. A new Administration block and quality assurance laboratory was built and we also refurbished and upgraded Egron milk powders and Cremora plant which has improved environmental safety standards and production capacity increase. The Egron capital expenditure was for US$8 million.
Investments were necessary to upgrade the factory with latest technology, capacity increases and operating efficiencies in order to produce quality products and be competitive and meet the current and future growth in demand for Nestlé products.
TM: Zimbabwe’s economy has performed badly in terms of the ease of doing business, what gives Nestlé the confidence to continue investing under such conditions?
BN: At Nestlé, we think long-term and we constantly aim to provide the right nutritious, affordable products to meet the needs of our Zimbabwean customer. With these new product launches we have also increased our impact to SMEs (small to medium enterprises), especially by empowering new local distributors and we have plans to create indirectly more jobs with a strong distribution network.
TM: What are your investment targets into the short-term, and long-term and in what areas?
BN: Investment targets in the short-term will be centred on innovation with additional new products development in collaboration with our regional office in Nairobi and Nestlé research and development centres scattered throughout the globe. To complement the investment in plant and equipment and new product development, Nestlé also invests in its people.
A leadership academy has been created in order to build capacity amongst local talents with a view to developing current Zimbabwean employees for leadership positions locally, regionally and globally.
TM: To what extent are imports, especially those that are being smuggled, a threat to your business?
BN: We cannot quantify similar Nestlé products being smuggled into the country. We are confident the Zimbabwe Revenue Authority is monitoring and taking action on illegal imports. Smuggling and infiltration of imports without paying duty is a threat to the whole economy of Zimbabwe as the country loses revenue required for social investments in health and education.
TM: To what extent has Nestlé benefited from Statutory Instrument 64 (SI64)?
BN: Since the introduction of SI64, Cremora production has increased sufficiently enough to meet all local orders of the product. There is no longer any need for traders to bring the same product from outside the country and thus save the country the much needed foreign currency.
TM: Businesses across the economy have suffered declining revenues or volumes due to the economic crisis, what is the situation for Nestlé?
BN: Like all other businesses in the country, liquidity challenges being faced by the country have also affected our business. However, we always take a long-term approach to doing business and we focus on providing the best nutrition solutions for our consumers in good and bad times.
TM: Nestlé launched a heifer scheme, what has been its performance so far in terms of heifers put into the market and milk production?
BN: Since the launch of the Nestlé Dairy Empowerment Scheme in December 2011, the performance has been satisfactory with increase in raw milk deliveries to our factory increasing in line with the national milk production which has gone up from 38 million litres in 2010 to 65 million litres as at end of 2016.
TM: What is the status of Nestlé Zimbabwe in terms of compliance with the Indigenisation Act?
BN: Nestlé Zimbabwe is in compliance with the Indigenisation Act.
TM: How much is Nestlé Zimbabwe exporting and what are your major export products?
BN: Nestlé Zimbabwe is targeting to increase exports from the current 5% to 20% of turnover by end of year. The major export products are Cerevita and Cerelac.
TM: What has been your company’s performance in terms of revenue and profitability in 2016 and the first quarter of 2017?
BN: Nestlé Zimbabwe financial results are consolidated in the Nestlé Global results published by Nestlé Headquarters in Vevey, Switzerland.
TM: Nestlé is among the big companies in Zimbabwe, is there scope to list locally, especially given government’s thrust for companies to have primary listing in the country?
BN: At the moment, this is currently not in the pipeline.