Nestle plans to invest US$50-60 million in Pakistan: EVP Operation, Nestlé GLOBE

Unveiling the new milk powder drying facility that has been completed with an investment of $104 million, Nestle has once again proved its commitment to the Pakistani market .The plant in Sheikhupura was inaugurated by Nestlé's Executive Vice President of Operations Jose Lopez, who was in the country on a three-day visit.
Following is an excerpt from the conversation that took place during his brief sitting with the media. BR Research: When we speak to businessmen, we come across an arm-long list of impediments to investment in the current economic climate of Pakistan. How do you rate the current investment climate in the country?
Jose Lopez: The answer I will give may surprise you, but we don't take these things into consideration when we make an investment in a plant. Nestle is a long-term thinking company. We do not make decisions on the base of how not to face difficulties. We make decisions on the basis of opportunities. We commit our investments based on what we believe will be the natural development curve of a country and a market; hence this investment was dictated by demand from these very markets.
The growth of consumption within Pakistani market dictates that we spend more in order to be able to supply the consumers with the value that they deserve. Hence for us, the investment climate within Pakistan is as good as it ever was. The market is blossoming and it is our long-term commitment to remain here and grow with this country and its economy.
BRR: Does this mean that Nestlé's investments are a part of a long-term plan for Pakistan?
JL: We have been investing very heavily in Pakistan. There are further plans to invest $50 to 60 million dollars that will be spent on capacity enhancement by the end of the ongoing year. Then we will have to absorb this additional capacity that has been installed and we will see where the future wave of investment will need to go.
But to sum it up, demand is what will determine where the money is going, where technology will be going and where our human resources are going to be invested in Pakistan.
BRR: An increased investment in capacity enhancement would mean that Nestle Pakistan would be in a position to export from its plants here. Are any such plans in the pipeline?
JL: We are already exporting out of Pakistan. Afghanistan is one of our customers. But I would like to say here that Nestle does not make investments with the view of creating economies of scale or to exploit the availability of cheaper labour in any particular market.
Nestle invests to the needs of the local consumer. In case of India they are actually organised as a region so as far as they are concerned, the regions that they supply to are part of the one common management. But here, Nestle Pakistan is for Pakistan. But we do have neighbouring operations with needs and therefore we will look into possibilities to supply them, but that will not be the primary reason we will continue to invest in Pakistan.
Moreover, because food that is something that has to have the taste of the local people and because is very close to the lifestyle of the local people, Nestle never sets up a plant in any location for the purpose of exporting from that locality.
So we invest to grow the business here in Pakistan, for the people and for the suppliers and Pakistani businesses, because our long-term commitment is to contribute to the general development of the country.
BRR: How do you rate the local competition?
JL: For us competition brings more good than bad. Competition comes with the need to improve yourself. It also comes with better offerings for consumers. Of course we want to be better than them, but a business without competitors will die, because there will be no incentive for improving, so we welcome competitors.
While it can be said that some of the competitors here have the advantage of knowing the market better, we have practically the same advantage as the people who make decisions for Nestle Pakistan are Pakistanis. Also our entire value chain is closely linked to the country, from raw material suppliers to distributors, Nestle Pakistan is as much a local as any other competitor and at the end of the day, all we want is to make sure that our value-added product is the best one on the shelf.
BRR: Where does Pakistan stand in terms of risk reward equation amongst your emerging market portfolio?
JL: We don't look at businesses in terms of risks and rewards and rankings. We are not a venture capitalist fund. We are the number one food company in the world and what we see are consumer's needs. Of course the reliability of outcomes, currency situation, inflation etc do play into our business operations. But Nestle is not overly concerned with measuring risk because we have a long-term relationship with this country and its people.
We are a part of this country, not only are we based here and listed on the local stock exchanges, but we are fully integrated in this country's economy.
Also, we have had excellent growth here in these markets. The beautiful numbers speak for themselves. So if we really do have to talk about risk and rewards, I would say that from where I sit in Switzerland, Nestle Pakistan has an excellent reputation.
BRR: Law and order situation in the country has been cited as one of the biggest impediment to industrial growth in Pakistan. Does Nestle feel that its operations will face difficulties because of this situation?
JL: Let me relate a story to you.
Our factory in Syria was operating three weeks ago. "And when I say "it was", I mean that we only shut shop because they bombed tour factory. That's how Nestle operates. They shutdown our manufacturing but we continue to run commercial operation in Syria because we have to provide food to the people. That is our duty to the people who buy our product.
In the sector where we operate, and the philosophy which we follow dictates that issues such as law and order situations are not our primary concern. This concern shall and always will be serving the consumer. This week we will celebrate 100 years of operations in Japan. If the atomic bomb and the war didn't stop us there, the law and order situation here will not hurt us either.
BRR: What measure does Nestle plan to implement in order to bring down the costs of their operations in a climate where inflation is pushing down margins and making operations costlier?
JL: The way we measure performance doesn't obey to simple equations like low cost is more profits. In the sector where we operate, the goal is to enhance people's life by adding to their health and wellness.
The equation therefore cannot be costs plus profit equal price. The equation must be Value minus Costs equals Profits. So everything we do here we must create value for the people and guarantee reliability at all costs. Moreover, our mindset is a little different. Instead of cutting corners on costs, we want to cut down on wastes. And that's how we try to make our businesses as competitive as they can be.