PETALING JAYA: How do you successfully run a food empire with some 100 years of history in Malaysia and with markets and consumer preference evolving very rapidly?
With 2015 revenue of nearly RM5 billion, with the figure projected to rise to RM6 billion next year, Nestlé (Malaysia) Bhd says the secret is that you don’t stop investing, reinvesting and innovating.
Displaying some new Nestlé products at his office in Mutiara Damansara, managing director Alois Hofbauer said a big challenge for the giant food company had been producing and selling daily to consumers.
“That is the challenge and the beauty. When it comes to Milo, we sell more than seven million cups a day (in Malaysia). We have to do a good job to build and keep consumer trust.”
All in, some 12 to 15 million Nestlé products are consumed daily in Malaysia, ranging from Maggi to Nescafe and, of course, Milo and Kit Kat.
The No. 1 food company in the world sees Malaysia as a big consumer market, a test bed for Nestlé products sold worldwide and a major supplier of halal Nestlé products globally.
Hofbauer disclosed that plans were afoot to make Malaysia one of the three global procurement centres for Nestlé, besides its Swiss headquarters, and Panama.
This will be a major move by Nestlé and marked its vote of confidence in Malaysia as a vibrant trade and service hub for major multinational corporations such as itself.
“We will also have global buying. This is a big testament to the confidence that Nestlé globally has in Malaysia, not only in Nestlé Malaysia, but also Malaysia as a destination.”
Hofbauer cited several plus factors that helped Nestlé choose Malaysia over other bidding countries. “English education and digital education. It is about software and talent,” he said. “This is where the service industry is going in the future.”
The Austrian-born Nestlé Malaysia chief, who admits that he personally conducts house visits to study consumer preferences, spoke on how innovation has helped to grow sales.
“Nestlé Malaysia, especially last year, has really been an innovation machine,” he said. “Last year alone, we generated RM400 million from our innovations.”
“Over the last seven years, we have invested about RM1.5 billion in Malaysia,” he said. Nestlé currently has eight factories with almost 6,000 employees in Malaysia, almost all of them Malaysians, some of them second-generation staff.
Hofbauer conceded that 2015 was not an easy year overall.
“But if you look through our financials, we performed very strongly. Growth overall in Malaysia was flat, including export growth, but we still delivered positive growth, and we really strengthened in delivering our operation results.
“We had a very good first quarter; we were able to move the momentum into the first quarter, and you will see we have good growth acceleration, a solid three per cent growth.
“To add, this was in a market that was not growing. But our profitability went up nicely, almost 17 to 18 per cent, and export again has been up by 12 per cent, so a very strong start.”
What will be the outlook for this year? “I think it remains to be a challenging year, but we have prepared ourselves.
“We did not start only recently; we prepared ourselves many years ago. Two areas we are working very strongly on, as I have said — focusing on productivity, basically cost-efficiency, that’s one pillar.
“And we work with our factories (technologically-advanced new factories), end-of-the-line manufacturing, etc. And the second area is a very massive innovation drive, as innovation is a key driver of our strategy.”
Hofbauer spoke of four emerging trends in consumer behaviour.
FIRSTLY, overall, big outlets and hypermarkets’ sales were rather flat or even decreasing. At the same time, convenience store growth was in the double-digits.
“People are eating a lot more outside than at home, which is quite an interesting development.”
SECONDLY, there is a rising trend in terms of on-the-go consumption and demand for good-for-me products.
“People are more pressured for time, they don’t have time for breakfast, and they want a convenient solution, so we invest a lot into that particular focus.”
THIRDLY, keeping Nestlé prices stable. “Over the last two years now, we have not increased prices and there are no big plans to raise prices,” he said.
FINALLY, in many areas, people basically want to indulge and upgrade.
“We have our Maggi Curry, which is still a big staple in the Malaysian kitchen, but then, we come in with new offerings, like Maggi Royale Penang (Seafood Curry) and Johor (Seafood Laksa). Once in a while, people want to treat themselves.”
Hofbauer has a few words of advice for marketers and branders: “If you don’t innovate and if you don’t change for the consumer, sooner or later, you become extinct, and that is why it is very important.
“You can see that not only in new products, but e-commerce is also becoming more important for us,” he said.