Nestle’s Desi Patriarch

SURESH NARANAYAN, chairman and managing director, Nestle India, calls himself the ‘patriarch’ of the ₹14,709-crore food company. Having taken over in 2015 when the company was deep in crisis due to the Maggi noodles controversy (the product was banned for alleged high lead content), Narayanan’s immediate task was not only to bring the business on track but also boost sagging employee morale. He spent hours trying to convince them that there was light at the end of the tunnel. Nestle India came out of the problem, but Narayanan continues to play the role of a friend, philosopher and guide to colleagues, especially during periods of crises. “We have had to deal with Covid-19, geo-political crisis and inflation. My message to my 10,000-strong team has been to root for long-term purpose and values that are the foundation of our company.”

The company has vindicated his faith. Nestle has not reported negative growth in any of the last 22 quarters despite disruptions caused by the pandemic and adverse global geo-political situation. “In 17 out of these 22 quarters, we had strong double-digit growth, and in four, we grew 9-10%. The quarter two of CY2020, when Covid-19 struck, is when we recorded 2.6% growth.” In 2021, the company reported a profit of ₹2,145 crore, compared to ₹2,082 crore in 2020, with market cap surging four times to ₹1.85 lakh crore in last seven years.

Narayanan’s mantra is ‘grow to win’. When he took over Nestle India in 2015, the Maggi noodles issue was giving him sleepless nights, but he also realised that the company’s growth trajectory had been lacklustre. Market penetration was low. The company was also failing to bring out any innovation. “You can’t win unless you grow. We said we can get organic growth by being consumer-led and focusing on penetration,” says Narayanan. He says Nestle India has come up with as many as 100 innovations in past two years which include products such as Maggie Veggie Masala Noodles, Chicken65 Masala Noodles, Nestle Gold Corn and Oat Flakes and Nescafe Black Roast. However, of late, unprecedented inflation has increased costs. The company has been forced to increase prices but he claims “the operating margin has remained in the 20-21% range.”

Leading By Tech

Technology has played a major role in Nestle India’s growth. Early in his role, Narayanan realised that every state needed to be treated differently due to distinct consumer needs. Nestle divided the Indian market into 15 clusters to decentralise power from head office to regions. It empowered regional business heads. “This set the pace for data-led decision-making rather than hierarchy-led decision-making. It’s no longer important what I think, it is important what the data says,” he says.

In December 2019, the company launched Project Midas, its data and analytic framework. Data analytics gave geography-specific data which helped the company customise innovations and distribution. “I can target cities, localities, households and outlets.” For instance, data crunching showed that porridge made from ragi is popular baby food in southern and western parts of the country. Nestle used this to launch a variant of its baby food brand, Ceregrow, which has considerable ragi. Similarly, it launched a South Indian variant of Maggi Masala as the variant already available was more suitable for North Indian cooking. “You can’t have one marketing plan for the entire country. India is a complex market,” says Narayanan.

Nestle also used technology for improving its supply chain. Narayanan’s strategy of penetrating the length and breadth of the country and frequent innovations has helped it grow in both volume and value. “In June quarter this year, I grew 16%,” says Narayanan. Innovations such as Ceregrow’s ragi variant, Nescafe Black coffee and breakfast cereals have considerably boosted its premium play. The company has opened T-Hub, a command and control centre that tracks freight. “We not only know the location of our trucks, we also have information about the carbon footprint they are generating. These technologies will make us more customer-relevant, efficient and reliable.”

The FMCG industry is going through disruption. There is intense competition from biggies such as Amul and HUL. The start-up ecosystem is also disrupting the market with innovations. Then there are retail majors such as Reliance and Amazon which are working on their FMCG strategy. All this means the likes of Nestle have little choice but to keep innovating, penetrating and growing the market. “I am never intimidated by competition, I am energised. Competition throws up opportunities for differentiation,” says Narayanan.

“We will strengthen our proposition on platforms of nutrition, sustainability, reliability, safety and quality as we have done all these years,” he says. Though technology and data would certainly be the crux of Nestle’s future growth story, Narayanan also emphasises on quality talent. “Sometimes we lose the core perspective that an organisation is an organisation of people.” No wonder, Narayanan is better known as a ‘people’s person’ at Nestle.