‘To do it right, we go holistically, innovate dramatically'

His words are measured, his enthusiasm for the company's Indian operations obvious. And why not, when Nestle India has managed to double its sales in four years and clock double-digit growth in 16 consecutive quarters. Besides, it completes 100 years here next year. No wonder then that Paul Bulcke, Chief Executive Officer of Nestle SA, who was on a week's visit here to review some of the company's facilities, sales points and start a new factory in Karnataka, found the atmosphere so “motivating” that it “charged his batteries”.

In a freewheeling interview with BrandLine, the Belgian CEO of the Swiss food processing major spoke about escalating food prices the world over, high raw material costs, emerging and developed markets and what India means to the company. Bulcke was helped by Antonio Helio Waszyk, head of Nestle India, with some of the answers specific to the Indian Government's policy.

How's the recovery in Europe? Has it forced companies like yours to look at countries with strong fundamentals such as India and Brazil?

It would be wrong for a company like ours to condition our strategy on the whims and volatility of crisis … the financial crisis came as a surprise. In retrospect, it should not have been a surprise, but it was to me. Though what it did was bring to the surface the trends that were already there. That the developing world was already developing and emerging markets are growing was visible even before. Only now it is growing with self-confidence. Of course, it is more accentuated now. Regarding the developed world, we have to adapt ourselves to crisis, we were already there. Hundred years in India, 90 years in Brazil and many, many years in the developed world … So are we here for many, many years. Emerging markets are growing faster. We see it more consolidated and more contrasting now. There is more opportunity in the developing world. The developed world is subdued in its growth, yet our company is growing in the developed world too … There is deeper nutritional knowledge in the developed and developing world. Certain dynamics have shifted … What is happening in the West is logical. If you live on credit for too long, something of an invoice comes to you. We hope to take some decisions so that we can take the challenges and create better for society at large. We are an ‘and' company – emerging markets and also developed markets.

What about the global food prices? They are on the increase once again. Is that threatening your margins as it is a global phenomenon now?

It is a global phenomenon and it was also in the past - in 1994, 1995, 1996. But this time, it looks like the whole basket is going up. There are two things – there is volatility and nervousness and that is not what we are looking at. The underlying trend is that the basket and the raw materials are dramatically going up. First of all, it was going down for many years … It was not given the right attention by politicians, by governments or by technology. Now the developing world, where 80 per cent of the world's rural population is living, is eating better and more. That is a more positive thing. But it creates tensions in agriculture. The supply is not growing at the same pace for many reasons. There is an accelerating demand but also agri-policies worldwide rely on WTO free trade and technologies that we use, can they be better and do we invest in R&D? All these questions need to be answered. It will create more incomes for farmers. It is good and there is good dynamics behind it.

It is also linked to the higher demand from the developing world and it is good … how much of the crops we cultivate is used for biofuel, if you see. Twenty per cent of corn produced is used in biofuels and 40 per cent of corn produced in the US also goes for biofuels … You see what kind of tension it can build up. It adds up. And that is what is happening. And how do we go about it? First of all, we have been inventing and putting more into our products. So that the value creation in our products is more than what it was 10 years ago. There is nervousness about the price increase. The answer to this is innovation and innovation.

Each innovation is trying to build in as much value into the products. You have to rewire your products. We have technologies and look for alternative ways to have the same nutritional blend with lesser amount of raw materials … We have been inventing value products so that the proportion of raw material used is less. Value creation now is more than what it was ten years ago. Innovation is another aspect and each innovation is adding value to use less raw materials. We have ways to go ahead with efficiencies and effectiveness in our company. It is clear that in a period like this, if you have to increase prices, you have to do it. But you have to be sensitive and timely about it.

We have noticed that in your products, in some cases you have increased the prices marginally and you have reduced the weight. Is this the formula you use globally?

It is being smart. I don't want you to eat so many calories, but enjoy the same benefit. What we do, though, is lighten the packaging materials. It is to give the same enjoyment at less cost. In that direction, we have smaller packs. Our idea is not to cheat the customer. You have to be honest with your customers.

Volatile raw material prices are one of the challenges the company faces in India and globally as well. Do you feel that these raw material prices will impact the company which has been seeing double digit growth for the last 16 quarters in India?

To do it right, we go holistically. See the trend. Innovate dramatically. I do believe you have to increase prices country by country. But you have to do it holistically. In each country, the portfolio is different, inflation is different and so are the raw material prices. Price increases have to be done in a timely and spaced manner. We don't produce prices, we produce enjoyment, we produce nutrition and value. If we can maintain our company on creating value, people are going to value it and pay for it. I don't see a dramatic impact if we do the right thing.

How important is India to you?

Every country is important because we are a company that adds up many things. India, with the chief potential it has, is definitely very important. That's why I'm here the whole week to get the feel of the country. We have gone to our factories and seen the sales departments.

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