Suresh Narayanan, Chairman and Managing Director, Nestle India in a Q&A session with a broking house, Jefferies said there is going to be a lot of interesting play in the consumer goods industry as a result of COVID.
He said players like Jio are coming and shaking up the whole space. "They are transcending the traditional trade, e-commerce and modern retail format. They also tend to redefine rules of engagement," Narayanan added.
The Nestle CMD said the migrant issue is a humanitarian crisis but this issue will always remain in the memory as a sad thought which happened in the 21st century. The impact of Covid will be felt for the next 12-18 months, he said.
Excerpts from the Q&A:
Q: To start with, what was your first reaction after the lockdown was announced and some of the initial steps that you took?
A: First thing, before you take any step as a leader, is to try to internalize and digest the fact that you are in a crisis of global proportions.
The message in a pandemic is a lot more than what we are able to understand. My first reaction was to accept that this is a big crisis and not underestimate its potency for destruction. I did not think that this is just a passing phase from which we will come out very quickly.
The first decision was on people. We decided to do whatever is right for our people and whether it impacts business or not was secondary. From 17th March, we started working from home helped by our IT team. The team did a good job and made it possible for 600-700 people in Gurugram alone to work from home with laptops. We closed all our branches and all our field force were made to stand by or work from home. In a matter of a few days, the entire office went from working from the office to working from home.
Q: And in your personal life, how did you gear up for this crisis?
A: Personally, my wife and I have worked in various difficult geographies. I have spent 5 years in Egypt during the Arab spring, so I know a thing or two about what happens when the whole city and the whole country comes to a grinding halt.
When you are calm and mature then you handle it with the respect it deserves. The reason for this calamity is that we do not treat the pandemic with the respect it deserves. I have read that the entire weight of the virus that has infected more than 5 million people is less than 2grams.
Currently, I have a small space at my home as my office and every day I login at 9 a.m. and logoff at 6.30-7 p.m. The space is strictly used as an office area and I give it the necessary respect it deserves.
Work schedules have remained exactly the same. Meetings are now held virtually.
Q: As a leader of such a large organisation, how did you ensure that the employee concerns are addressed, and motivation level stays high in these tough times?
A: I have communicated with my team through mails, MS teams, chorus calls and have tried to address the fears. The biggest fear that employees faced was on job security.
First thing I told them is that it will be my endeavor to protect your jobs. For me, a job is more than a source of income; it is a sign of self-respect for the human being. I assuaged their fears and told them that I am not here to cut your jobs.
I think trustworthiness is important and no money can buy it. No amount of incentives can buy it. Nestle still has a revenue stream and we are not like the airlines or hospitality business which has gone down so much. We still have got equity with consumers and they still want us, and they still need us. That's what we will do with our employees, we still want them, we still need them, and we will still keep them.
Q: Apart from employees, what initiatives has Nestle taken to support other stakeholders such as vendors, distributors, channel partners etc?
A: I think three P's are extremely important and come before the fourth P that is profit. The 3 P's are People, Purpose and Partnerships.
Several initiatives to support the ecosystem, be it farmers who supply milk or MSMEs associated with the company These three are the heart of any organization. We made sure that people are safe and have work from home facilities. We have almost ten to twelve thousand front line people who work as distributor salesman, loaders, merchandisers and they all are humble people who get ten to fifteen thousand as monthly salaries. These are front line people, who are out there every day, servicing half a million outlets that we reach as a company.
The first decision was to get them on 'Nestle Suraksha', which provides them with COVID insurance. We were possibly the first company to do that.
In Punjab and Haryana, we work with 100,000 milk farmers. They have been giving us milk every single day for the last 60 years. When lockdown started, there was an immediate disruption as the whole place went under curfew. Due to our team in Moga, every single drop of milk given by the farmers has been collected. In fact, more farmers have started to supply us milk as they do not have any other source of revenue and we never refused any one of them. The collection of milk is more than what we normally do.
Nestle works with a large number of MSMEs like those who make cartons or supply indirect materials etc. We have ensured that not a single MSME working with Nestle should go under.
Nestle will do for them, what the government is expected to do for rest of the MSMEs. It is crucial at this time for corporates to step up.
They are well run, successful and profitable. Now is the time to show compassion and humanity. These will define corporates for the future, corporates that are not only profitable but also have heart and compassion. This is just the first of its kind pandemic and we don't know how many more will come. We don't know what climate change will bring to us. This is the time when companies like Nestle which have an immense amount of trust and goodwill must stand the test of compassion and trustworthiness. This is what society is looking for.
Q: Anything you believe you could have been done better, thus far?
A: I am comfortable with the decisions that I took. Maybe more time before lockdown would have helped. Due to the sudden lockdown, manufacturing and supply chain went for a complete toss.
Q: In our experience and interactions, we have heard this comment frequently that working from home has increased productivity quite a lot. What has been your experience and thoughts on this aspect?
A: Three things have turned out to be beneficial due to working from home. First, meetings have become more planned. When you are in the office, many unscheduled meetings happen, when you meet someone and decide to sit down and discuss. Now, meetings are very limited and focused.
Second, enablement and empowerment has increased. Personally, I have increased the empowerment of people.
Third, is the increased sense of responsibility. I think we love to be supervised but work better when empowered. The responsibility part has increased much more. Better management of time, greater enablement and empowerment and a greater sense of responsibility are the three beneficial outcomes due to working from home. However, now things are more stable for most people although there are always challenges.
Q: How have you ensured demarcation between your professional and personal life in a work-from-home regime? Is it difficult to have a disciplined life in this set-up for you as well as your team?
A: I am leading a disciplined life and do not feel any stress. I keep myself physically fit by walking and exercising regularly. Earlier, I used to travel a lot and therefore, used to eat out frequently. Now all this has stopped, and I eat home food due to which I feel healthier. I have become more disciplined in eating and drinking.
Q: Other than work-from home, what structural change will this crisis bring for organizations like Nestle?
A: There are three areas where things will change. Firstly, it will affect anticipation capabilities of organizations. Organizations will have to learn to anticipate a lot more rather than just being receptive to what happens. I had no clue COVID would be as serious as it is now. Anticipation by organizations has to be far better.
Secondly, organizations will have to be agile. Great corporates are not just about great strategies, but they are also about outstanding execution. You guys (Equity Analysts) have looked at Nestle not just as a part of a portfolio but as excellence in terms of execution. That's why you give us the P/E ratios that we enjoy as a company. Agility is a combination of anticipation and execution.
Third, is about being flexible and being an amoeba-like organization. Some parts of the organization will be like an amoeba, which will modify and morph itself according to the situation. At all levels, anticipation, agility and amoebalike organizations will be the three big shifts that I see.
I truly believe that every crisis makes us stronger. We learned a lot from the Maggi issue. And I am certain, that we will emerge as a much stronger company after COVID.
Q: What are the household chores that you have taken up or you help with during this period?
A: I must say, my wife is quite exacting in the standards she wants. Good to have a wife that knocks your head when your colleagues don't knock you on the head. I try to help once in a while in cooking which I like or involve myself in cleaning vessels. I have discovered a new penchant in doing the dishes. I don't do too much of it, but I do a little bit of it. Because my wife's standards are so exacting, I wash them twice. I haven't tried to sweep as my wife isn't happy about the outcome.
Q: From a government standpoint, what are your observations?
A: Government has put forward whatever it can. I wouldn't go in the debate about the percentage of fiscal stimulus, I am not an expert in that area. A lot of credit has been given as potential loans. I really believe that at this stage anything that can put money into the hands of consumers would really help because it's a demand situation.
Of course, supply will have to match up to the demand. Many industries worry about where the demand will come from? Whether it is automotive, 2-wheeler or consumer durables. A few sectors like mine (consumer goods), will have some demand. We will not have 0% demand or 100%, we will be somewhere in the middle. For many sectors, demand is going to be a problem. For me, the migrant issue is a humanitarian catastrophe.
We are trying our best as a company in terms of outreach programs, but it will always remain in my memory as a sad thought that this had to happen in the twentyfirst century. In the long term, I am very confident and bullish and exceptionally proud of being an Indian. I think the next 12-18 months will be quite tough for us and we will have to brace ourselves for many challenges.
Q: We are likely to face job losses and increased unemployment as the economy calibrates to the post-crisis normal. What do you think can be done in this situation, especially to support people at the bottom of pyramid?
A: It is a reality that there will be widespread unemployment due to COVID. Giving money to the hands of the poor will help in creating demand and thus having a spike in manufacturing or in any other parts of the economy.
Corporates need to play a bigger role, similar to a banyan tree. Nestle India chose to be like a banyan tree and is responsible for direct and indirect jobs of about half to one million people. I believe each of us should protect our own ecosystem as best as we can by which we can protect a part of society. It would be helpful if under the aegis of ministry of trade and industry, there are entrepreneurship programs and corporates help with, service platforms or setting up of small manufacturing ancillaries which can be funded with the generous loans that are put out today. To me, the biggest crisis the country will have is the job crisis, one million people entering the workforce every single month is going to be a cause of concern.
Q: Has there been any change in thought process with regards to brand communication? Consumers are moving to OTT from television; how are you dealing with this change?
A: Degree of engagement at home has gone up substantially. That's an obvious statement but for a brand, it makes a big difference. The out of home business clearly had a meltdown and now in-home engagement of brands is very high.
Today words that consumers are using are immunity, better nutrition and trust. These are the articulation of words that are being used as far as brands are concerned. I believe the more trustworthy the brand is, the older the brand is, the higher is the tendency of consumers to try and cling to it. It is like when the whole world is melting around you, you try and cling to familiar spots that you have seen and experienced.
Clearly the e-commerce journey is here to stay and there will be re-calibration of channels. I think the winners of the game would be e-commerce platforms if they are able to ramp up the infrastructure.
The good old Kirana stores will come back into figure because they will have location advantage, service to home delivery advantage, assortment advantage and credit advantage.
I think the old Kirana stores will become a friendlier place to shop because of social distancing, sanitization and hygiene norms. Organized trade would undergo a rejig. There are platforms that offer convenience, better assortment or better prices.
These guys will probably be the winners. Those who are just large boxes talking about the shopping experience, they might need to recalibrate themselves because the fact is that shopping experiences will probably have to wait for some time.
Then, of course, you have got players like Jio who are coming and shaking up the whole space. They are transcending the traditional trade, e-commerce and modern retail format. They also tend to redefine rules of engagement. There is going to be a lot of interesting play that I see in the consumer goods industry as a result of COVID.
On the portfolio front, there will be a lot of downtrading. People have lost jobs and incomes have shrunk. People will say why should I spend so much on a large pack, when I can buy a small pack. Companies that have a good portfolio there will tend to gain. There will also be selective premiumization. There would be good innovation opportunities as well. These innovations will have to be meaningful. They will have to be innovative on the platform of nutrition, better quality, greater trustworthiness, greater safety as these things are becoming very important vectors of consumer choice.