Nestlé looking forward to 2016

Ganesan Ampalavanar, managing director of Nestlé Vietnam, talked to VIR’s Bich Ngoc about the company’s investment strategy and its game plan to keep the leading position in the Vietnamese market.

How do you think Vietnamese consumers see Nestlé after more than 20 years of operation in Vietnam? What are the respective market shares of Nestlé products in the country?

We are running up to a memorable 2016, looking to commemorate not only Nestlé Vietnam’s 21^st, but the whole group’s 150^thanniversary. We have walked a long way before gaining the current support of our consumers.

Apart from the three key brands of NESCAFÉ, MAGGI, and MILO, we are producing a large range of other products. 90 per cent of our products in Vietnam are manufactured domestically in our factories throughout the country.

In the fast consuming market one of the most important factors is to develop the market and try to keep the leadership position.

To reach these targets, Nestlé must understand our consumers who will decide our success against other competitors. In addition, our research and development team is concentrating efforts to understand Vietnamese customers’ taste and habits, from rural to urban areas, from traditional to the new, consumerist lifestyles in order to design the best suitable products for the market.

We know that we can only become the leading company on nutrition, health care, and wellness if we produce high-quality products.

We set a 15% growth target for 2016.

How effective are your company’s investment projects in Vietnam and how do they fare against the company’s expectations?

In many other markets, Nestlé has been present for a long time. We are also marking our 21^stanniversary in Vietnam. This confirms our long-term commitment to stay on the Vietnamese market.

Our total investment capital so far reaches nearly half a billion US dollars. We now have three factories and two LaVie bottle factories in Vietnam. Our sixth factory is going to be put into operation in a northern province very soon.

We are especially proud of our Nestlé Tri An, located in Dong Nai province’s Amata Industrial Park, producing decaffeinated coffee beans for use in Nestlé factories all around the world. This factory utilises the most advanced technologies at the hands of Nestlé.

The largest advantage is the factory’s location abundant with in-site material resources.

One of the most important factors in the export business now is to improve the value of products. In order to do just that, we have to improve the quality and add value to our products by manufacturing them, instead of exporting raw products.

This shows the close linkage to and the importance of Vietnam in the global business system of Nestlé.

How do you see Vietnam’s position on Nestlé’s global investment map?

Growth is currently at the top of our priorities in Vietnam, including a range of different factors, such as growth in quantity, quality, benefit, human resources, and many others.

However in our short and mid-term vision, we want to develop fast while retaining sustainability and responsibility to our consumers.

Producing the maximum benefit in the short term is not our target. Nestlé’s business vision is not only to bring benefits to our shareholders or to the group exclusively, but for enriching, strengthening, deepening our links with our partners, local communities, and our environment.

We call this business vision “Creating Shared Value.”

We have been working hard to keep to our target of bringing Nutrition-Health-Wellness to millions of local consumers through high-quality nutritive products.

Our MILO brand’s operations are coordinated with the National Institute of Nutrition to provide knowledge and a solution for the chronic lack of iron in the Vietnamese populace, especially the children. We are working closely with Vietnamese authorities to educate Vietnamese children about the importance of a stable life with nutrition and physical activities.

Creating shared values are among the core values of Nestlé. Could you share more about how Nestlé Vietnam applies this in the Vietnamese business context?

“Creating shared value” is not a strategy of pure charity, but it is a business philosophy which Nestlé has been applying since the beginning days.

This philosophy presents three key elements: nutrition, water, and rural development.

In the course of our programme named “Nutrition Education in School - Nestlé Healthy Kids”, Nestlé Vietnam has coordinated with the Vietnamese Ministry of Education and Training and the National Institute of Nutrition to provide computer labs, software, documents, and training materials on nutrition to be taught in schools.

Operating since 2012, this program has been successfully implemented in 18 primary schools in five cities and provinces.

Regarding water resources, the Water Education for Teachers (WET) project was conducted in Vietnam by LaVie in 2005.

This was a programme to protect water resources and our living environment in Vietnam. It also became part of secondary schools’ curricula to enhance students and their families’ awareness of water resource protection. LaVie also works in tandem with the Ministry of Natural Resources and Environment to control and maintain sustainable water resources in rural areas.

For five years, Nestlé Vietnam has invested and provided price–subsidised plantlets and technical assistance to 20,000 farming households in Central Highland, making Vietnam the world's second gest coffee exporter.

Regarding the coffee industry, Nestlé aims to make Vietnam become the “benchmark” of Robusta coffee in the world. How could you turn this into reality? What are the challenges that you have to overcome?

Vietnam has established a strong foothold on the global coffee market and is now the biggest Robusta exporter in the world. Nestlé Vietnam contributes 20-25% of the total export volume of coffee/Robusta.

The strategy is to sustainably improve the quality and quantity of Vietnamese coffee as well as the income of domestic coffee producers. To deliver this, Nestle cannot do it alone we need to cooperate with a number of partners, the Ministry of Agriculture and Rural Development (MARD), associations, and the farmers themselves.

In the context of Vietnam joining and becoming party to a multitude of investment and trade agreements, especially the TPP, what opportunities and challenges do you foresee for Nestlé Vietnam?

The opportunities are huge and neither Vietnam nor Nestlé wants to miss out on them.

Vietnam is integrating well into the regional economic community through the AEC, or more globally with the TPP.

This is great news because all the previously existing barriers will be removed, allowing Vietnamese products and services to freely enter the global supply chain. The same is to be expected with Nestlé Vietnam as other Nestlé subsidiaries will be more accessible.

The challenge is in the constant improvement of our business capacity. Free trade goes hand-in-hand with the high pressure of cost efficiency. Additionally, businesses cannot rely on low-cost models anymore—they need to focus on product and service quality.