Mark Schneider considers himself a lucky man for having an office right above a trial kitchen in Nestle’s headquarters in Switzerland. The chief executive officer of Nestle says he is “a self-proclaimed product junkie.”
“I love new products and their features and how they stack up compared to what was on the market previously. I also believe that it is essentially the product that fills a brand with life,” Schneider told us during his recent visit to India.
It was Schneider's second visit to the country since joining the world’s largest food company in 2017 from the healthcare group Fresenius where he was chief executive. It was also his first global market visit since the Covid-19 pandemic hit, and marked the first meeting of the board of directors in an international market, signifying the importance the company attaches to India, Schneider said during an exclusive conversation with Storyboard18 on CNBC-TV18.
Nestle also recently committed to investing Rs 5000 crore in India by 2025. India is Nestle’s 10th largest market globally and the fresh investments will help the company accelerate its core business in the country and leverage new opportunities for growth.
The maker of iconic brands like KitKat, Nescafe and Maggi owns over 2000 other brands around the world. In recent years, Nestle has been dialing up its growth strategies and sustainability efforts to address the many challenges it faces today. In a wide-ranging interview with Storyboard18, Schneider told us how Nestle is future-proofing its brands and business, and focusing on the new bottom-line - People Planet Profits.
How has this year fared for Nestle so far and what would you say is your report card for the company?
It is a very strong year when it comes to organic growth and that applies to Nestle India but it also applies to our performance globally. Some of that is driven by global inflation and pricing but we also see very strong volume developments especially in India and in some emerging markets. There’s very strong innovation momentum across the board. Innovation to me is the chief most sustainable growth driver in addition to population growth and economic development. Obviously, when it comes to the global economic outlook, it's a difficult time. A time when management needs to be very hands on and focused on day-to-day operations. And I think the team has done an outstanding job.
Where do you see the India market in five years?
At the very least I will tell you, this is the Indian decade. I would also say it's the start of the Indian age. You see a lot of the underlying strengths of this country coming to the forefront now and really building upon each other. You see tremendous growth and momentum. And so we want to participate in that. We've been in this country for so long and are deeply ingrained in the social fabric of this country. So I think we stand to benefit from that momentum quite well.
This is the Indian decade. I would also say it's the start of the Indian age.
How would you sum up your outlook on India and global markets for the time to come?
I'm definitely more optimistic on India than on global markets in general. The global economic outlook right now is kind of dim. That has to do with the war, rising interest rates and also the fact that maybe in the face of inflation the consumers will pull back when it comes to volumes in some markets and in certain categories.
In India, I admire the economic wisdom of the chart and the course it has taken. I think that's paying off fully now. Then, of course, when it comes to the next 5 to 10 years you see that huge demographic dividend that India has. As so many major markets around the world will start shrinking, India will keep growing when it comes to the workforce and people in their peak earning years. That always goes hand in hand with significant economic opportunity. So we're very bullish. There was a reason why our board of directors came here because they want us to see and experience the opportunities first-hand.
Speaking of the inflationary pressures that we're seeing globally, what are you doing to offset rising input costs and keep away from hiking prices too much?
Responsible pricing is very important to us. So rather than just trying to offload everything to the consumer I think we're looking for internal efficiencies as much as we can. This is a global job, but it also applies to Nestle India. We understand that affordability is a key aspect, especially in this country for vast areas of the population. There's no point in engineering the perfect product that no one could afford. So that's where our product attributes and affordability constantly need to be balanced. I think we've done a very good job.
When it comes to the global economic outlook, it's a difficult time. A time when management needs to be very hands-on and focused on day-to-day operations.
You mentioned the affordability factor because that's been a hallmark of Nestle products. Take Maggi, for instance. It's a pantry staple in India and it was comfort food for a lot of people during the pandemic. In fact, it was stockpiled in apocalyptic fashion. Maggi made a dramatic comeback after the 2015 crisis. You were not with Nestle back then, but let’s look back at that time. What are some of the learnings that came out of that episode?
Let me say, first and foremost, the team members and leadership here in India have done a stunning job in gaining back the public's trust into this brand and also making it very clear and test after test that our products have always been safe. Rather than looking back, I’d look forward and see how we address food safety and how we maintain the trust of the public. How can we improve regulatory oversight? We started a Food Safety Institute. We are getting the point across to the public that we're incredibly committed to food safety and quality. Then, of course, other historic aspects, the strong and long-standing legacy. Couple that with some meaningful product innovation, especially when it comes to nutritional values and micronutrient fortification, and yes, you have all the ingredients for strong recovery. And that's what we're seeing.
Let's talk about the new bottom line - People Planet Profits. Can you get into each of these aspects and tell me what Nestle is doing to address challenges and realize this new bottom line?
Increasingly people judge companies by what they're doing for society at large and for the planet in the face of growing environmental concerns. Obviously, people recognise that we are a for-profit company. So that's why the third aspect of the bottom line shouldn't go out of focus. But the first two - people and planet, are becoming more important.
Responsible pricing is very important to us. There's no point in engineering the perfect product that no one could afford.
We were always a stockholder company and one that is obviously subject to all the pressures and the responsibilities that come with being a stockholder company. We have a strong societal focus and a strong environmental focus which have been part of our DNA. When you’re dealing with farmers around the world for more than 150 years and when you see them exposed to the elements of the weather and all the things that can go wrong in a bad season, that puts planet thinking and weather thinking right into your DNA.
When you're feeding people around the world, as we do in more than 180 markets, then clearly, you know, being part of society and having a strong societal concern and responsibility, that's also part of our DNA. So for us navigating this new environment is basically second nature.
Sustainability is an essential operating principle for any responsible company and one striving for financial success. So what is top on your agenda? What are you dialing up at this point in time?
The one that I would describe as the defining one for our age and generation is climate protection and reducing CO2 and methane emissions. I'm very convinced that the next several generations will look back to this age and they will judge us by whether we get a handle on that situation or whether we just let it slip and that would have pretty catastrophic consequences for the climate around the world. So that one we're very committed to.
We were one of the early signatories to the science-based targets to limit earth’s warming to 1.5 degrees. We were one of the first people to issue a very detailed net zero roadmap that would get us there by 2050. There is a commitment to get greenhouse gas emissions down by 20 percent by the year 2025 and by 50 percent by the year 2030. So near-term action is also very important to us. Don't shove it down to the long term, do something now in this decade. This is also what the public is judging us by.
Increasingly people judge companies by what they're doing for society (People) at large and for the Planet... But the third aspect of the bottom line - Profits, shouldn't go out of focus.
Peak carbon is behind us, it was somewhere around 2018 - 2019. It’s already on the way down. And that is in spite of the fact that the company is growing very strongly.
Sometimes there's a misconception, people say you want to reduce carbon emissions, but when you have growth don't you overcompensate. No. When we're saying minus 20 percent or minus 50 percent, that is after considering the growth. So it's a pretty meaningful reduction when it comes to carbon per kilo of products that we sell.
While we’re on the subject of climate, let's talk about the plastic issue. FMCG companies are some of the largest consumers of plastic and eventually that becomes waste. What are some of the meaningful actions that you've taken with outcomes that have been desirable and where are you placed on getting to a waste-free future?
Plastics packaging would have been a close second right after climate protection when it comes to priorities. We have a situation here where plastic packaging has been growing for 60-70 years due to its superior properties when it comes to food safety and shelf life. And it's been only over time that societies around the world came to see some of the downsides.
I'm very convinced that the next several generations will look back to this age and they will judge us by whether we get a handle on the climate situation or whether we just let it slip.
We made a pledge that by the year 2025 our packaging should be recyclable or reusable. We're making very good meaningful progress towards that. Obviously, it won't be done with that 2025 pledge alone. You have to think ahead of and beyond that because recyclable when there's no recycling infrastructure doesn't solve the problem.
So that's why the term you're using, the waste-free future, I think that's the ultimate goal. That's why even with that intermediate commitment to 2025 there will be lots of work left to do. We are, to my knowledge, the only large food and beverage company that has its own research institute for packaging sciences because we did not just want to end up as a passenger to the packaging industry and whatever they have to offer. We also wanted to do our own research and development into better packaging. One key focus, for example, is paperistation. Paper packaging can take over from plastic packaging in many cases, but you'd have to check very carefully for food safety and shelf life, and keep the cost in mind.
Do you think companies often pass on the responsibility to consumers?
I think we all have to help. We got to do our part. Obviously consumer behavior is another essential part to get the job done. You can make your packaging recyclable. You can also try to sponsor infrastructure. But the consumer has to help because the consumer at the end of the day will also need to separate some of the waste. So I'm not in favor of just shifting responsibility wholesale to consumers. But we all have to help whether it's as producers, consumers, retailers or the government. It's a systemic issue and we all have to do our part to overcome it.
Near-term action is also very important. Don't shove it down to the long term, do something now in this decade.
Going back to the bottom line to something that ties all three aspects and that is Purpose. Purpose has been a bit of a buzzword for over a decade across corporations. It has also received criticism from investors and consumers. So what do you make of Purpose in business and branding?
Purpose is important. I mean you want to know what you go to work for and what you're trying to do. And when it comes to large organizations, it's hard to motivate someone by the bottom line and by profits alone. So it is about what do you do for society? What do you do for people around you? But it is important not to overdo it and also understand we're doing this within the confines of a publicly traded company and a company that belongs to investors and that needs to offer decent returns to these investors. So the balance between the two is the most important thing.
Purpose has been criticized when it has been blown out of proportion, but it is important. And profits have been criticized in the 80s and 90s. in the world of shareholders-only thinking, when they were blown out of proportion. To me it comes down to balance. You need to have a purpose in life. Otherwise, it's meaningless. But you also have to live your life according to some of the economic rules that we are all subject to.
You need to have a purpose in life. Otherwise, it's meaningless.
The situation in the 2020s is radically different from the 2010s in a much stronger way than compared to previous decades. And so the pressures on corporations are greater with what they have to deliver but also the opportunities, if you get it right.
Extending that thought on purpose and expectations that consumers have today from corporations. People want brands to stand for something. We saw that manifesting in a way during the start of the war between Russia and Ukraine. So what is your stance on companies pulling out their operations and some of their brands? Nestle did that in a limited fashion, keeping some essential products in the market. But where do you stand on that front?
We had a very strong presence both in Russia and Ukraine. What stands out in my view is the strong efforts we've undertaken as a company to support Ukraine in this war. So we've been bringing hundreds of tonnes of much needed baby food and medical nutrition, for instance, into the country, at times under pretty significant danger. We kept operating our facilities in the Ukraine. We have three manufacturing facilities there. One we had to temporarily shut down because of war action. So keeping up the essential food supply to the people of Ukraine was important. Our people signed up to house hundreds of refugees. So I think there was a lot of strong solidarity with the people of Ukraine. When it comes to Russia, we discontinued and suspended some international brands such as Nespresso, KitKat and Nesquik, to cite a few examples. But on essentials like medical and infant nutrition, we also have a long-standing history that when we serve a market, we do not walk away in times of conflict. Whenever it's possible to safely supply, we believe there is a responsibility that people have. There is a reason why food is usually exempted from sanctions, just like medical supplies, and we wanted to live up to that ethos.
The food space is booming right now, accelerated by the pandemic. There are new players and D2C brands emerging and large corporations getting into the FMCG space. What is your reading of these emerging brands and do you see them as a collective threat perhaps?
The way to compete and the way to succeed is to take a story from their playbook. Basically what people want is novelty. They don't want the same product day in day out for the next 10 years. So what you have to do is couple the trust that people have in these iconic brands with endless seeking of novelty. That's why variety, limited series and specialty editions, all of those keep brands alive and vibrant. You can also say the same thing about global versus local. So KitKat, Nescafe are global brands, but nothing stands in the way of giving these global brands local attributes and making them particularly appealing to a local population. That could be either through the packaging or some of the special flavors you put in. So this is, in my view, the way, in the face of these challenger brands, to keep global, iconic brands alive and relevant to consumers.
When we serve a market, we do not walk away in times of conflict.
What's your acquisition strategy?
When it comes to acquisitions across the board globally and across our categories, we’re very open to it. I think we have a good acquisition track record over the past years. But let me also say we've always been very selective and commercially sound. It's easy in the face of sky high valuations to get carried away. I think especially before prices recently came down, in the day and age when valuations were really high, it would have been easy to overpay. We’ve been sensitive to that. We dialed up some of the divestitures we had to do at times when valuations were really strong, but we were very selective on new acquisitions. But going forward, look, at the right price we're open for business.
I heard that you try every new product and innovation that comes out of Nestle. So do you generally give your feedback as the CEO or a consumer?
You're quite right. I'm a self-proclaimed product junkie. I love new products and their features and how they stack up compared to what was on the market previously. I also believe that it is essentially the product that fills a brand with life. A brand without constant meaningful innovation doesn't stay alive. So that's why the product focus is important. I’m very blessed that basically just upstairs from my office in Switzerland, there is a trial kitchen. And so the happiest moments I spend are in that trial kitchen just sampling.
But actually you are touching a very important point. When you give your feedback you have to give your feedback just as one more voice and not the director voice of the CEO because, at the end of the day, what matters in fast moving consumer goods is how appealing something is to a broader public.
When it comes to acquisitions, we’re very open to it. But we've always been very selective and commercially sound.
If I feel, very rarely, that something is clearly not ready, I will be more direct. But if it comes down to just my personal taste as opposed to someone else's taste, this is where you have to be democratic. And in the face of strong data that consumers want it, I would always go with that data. If there's some finishing touches here and there you can offer, I think, it is one more opinion that will help the team.
How has your leadership style evolved, especially given what the world has experienced over the past two years? What have you managed to dial up for your people?
Very important question in this decade that feels very turbulent and certainly a lot faster moving than the years before. I think this is a moment, when you have lots of health care concerns and rapid inflation, where the leadership style needs to become automatically more operational. In previous years, I think there was a better chance to leave some of the day-to-day to what I would call the system, established infrastructure leadership, and then focus on some higher-level strategic thoughts and longer range thinking. You can’t dial that down to zero but clearly when I look at my own time budget now, it has a lot more to do with day-to-day operational decisions. It takes a bit of capacity away from those longer-ranging, high level strategic thoughts. You can’t go down to zero though, you push them later into the day. But clearly operational management, I think, is what’s called for right now.
Essentially it is the product that fills a brand with life. A brand without constant meaningful innovation doesn't stay alive.
The interview first appeared on CNBC-TV18. Also, watch out for a version of the article in Forbes India magazine.