Nestlé has been in Nigeria for 53 years, claiming it ‘has earned some of the scars that show we have been in the market for a long time’. In the last five years it saw an $860m turnover and 16% net profit which, Gordhon said is relatively successful, ‘but if you look at Nigeria as a whole, there are so many more opportunities’.
Diversity presents an opportunity
Speaking at Gulfood Manufacturing 2014 in Dubai, Gordhon said ‘being committed in your responsibility across society is what brings success’.
“We knew we would lose money for some time (by entering the Nigeria marketplace), but it’s about the staying force and having uncompromising discipline and that is the reason for the success of Nestlé in Nigeria,” he said.
In his presentation about utilizing best practices in food manufacturing and processing, he said the challenge starts when you build your industrial infrastructure.
He added, Nigeria is an extremely diverse country, every city and state is different, with religious differences in the north and south, and cultural consumption habits posing challenges of route to market.
“The infrastructure continues to keep us busy every day but the diversity presents an opportunity,” said Gordhon.
Political instability & corruption
“Simple things like not having access to roads and running water - how do you address the opportunities there? There are many debates about what the real population of the country is. When my teams discuss the latest UN figures, my answer is; ‘It’s big enough’.
“It is the consumer that is not being fully addressed in terms of the offerings, affordability, top premium products and lower end products. It’s a country many of you know about from the news. Everyone is talking about it and yes it has tremendous challenges, but they are not unique.”
Gordhon said most of the time, people are not paid to address challenges such as political instability and corruption at all levels, so why would a company invest in Nigeria.
“This is the question we face many times, with all of this why do you want to put money into a place that has so many challenges. But, the answer is we want to focus on the consumer and there are some amazing positives in Nigeria.
“It has the largest economy in Africa, for the consumer life has not fundamentally changed for them but the middle class growth has changed, with a vast population and serious national resources, oil and arable land - that is the true growth potential of the country. The question is, how do you move from a country that has relied on oil as an income to creating other industries.”
According to Gordhon, ‘you have to understand the market you are going for, focus on five cities to begin with and build your infrastructure to address that’.
“Success is what you put into your industrial plan and build slowly. You have to look at the longer-term potential,” he added.
“Companies need to go back to the simple things, focus on the consumer and what they want – they are no different to anywhere else in the world. Yes, the ‘theatre’ and environment is different, but the consumer wants the right product at the right price.”
Local taste preferences
He said what is key for Nestlé is adapting its product to local taste preferences and understanding what they are. It has an R&D centre in Abidjan, Africa, which he said gives them a competitive edge in understanding what is happening within the market.
One initiative was adding iron to its Maggi bouillon range across Central and West Africa two years’ ago to tackle micronutrient deficiencies in the country because the bouillons are a staple part of many lower income consumers’ diets in this region.
“The temptation is to take what has worked all over the world but it is not always possible, on the other hand, a product like Kit Kat is a global recipe and we are not going to mess with that brand,” he added.
“Proximity to the shopper, understanding how to get to the market and continuing to refine, adapt and be flexible in order to run an operation are the key challenges.
“In my dream world I want the entire basket of Nestlé products in Nigeria, but it doesn’t make sense if you don’t have the investment.”
He said today, Nestlé uses distributors across the country but it needs to have more partners who go in direct to market.
“One of the models we have is distributors throughout the country but many of them have other suppliers in separate operations. It’s about having access to capital for distributions and having a tri-partite relationship with the banks to finance the distributors. This is the biggest challenge because the market will turn at an incredible rate - how do you address this modernizing trade? This is our biggest challenge.”