Academic journal article The McKinsey Quarterly

Nestle: The Visions of Local Managers

Academic journal article The McKinsey Quarterly

Nestle: The Visions of Local Managers

Article excerpt

An interview with Peter Brabeck-Letmathe, CEO elect, Nestle

McKinsey: How did Nestle begin?

Peter Brabeck-Letmathe: A hundred and thirty years ago, infant mortality was high in Switzerland - higher than in most emerging countries today. Henri Nestle was a pharmacist who was worried about children dying. He developed an infant cereal to help feed them. This was the first Nestle product.

Henri Nestle had two big visions. First, he immediately went international: the product was in five European countries four months after launch. Second, he wanted his own brand. Store brands - private labels - already existed, but he was one of the first to create a manufacturer's brand.

He also established a strong identity for his company through the nest image that Nestle still uses today. It happens that Nestle in Germany means "little nest," symbolizing all the good values of nurturing such as family, warmth, and caring. When distributors asked him why he did not put the Swiss flag on his product, he is said to have replied, "Anyone can use the Swiss flag, but only I can use my coat of arms. It will be my seal of quality."

His house and first factories were in Vevey, Nestle's headquarters. We also have another head office in Cham, near Zurich, which is where the other part of the company, a sweetened condensed milk factory, began.

Was it condensed milk that carried you around the world?

Milk at the beginning, then chocolate, then Nescafe. From the outset, we were an outward-looking company. When you make less than 2 percent of your turnover at home, you don't concentrate too much on your domestic market. Our Swiss operating company is only 2 or 3 kilometers from worldwide headquarters, but we visit them as frequently as that of any other market.

Unlike US companies, which try to transform local hires into American businessmen, we are not trying to export a lifestyle. We recognize we are foreigners; we don't try to disguise the fact that we are a multinational company based in Switzerland.

Many countries are more comfortable with the fact that we are Swiss than if we were from the United States. Coming from Switzerland gives us a definite advantage as we are considered politically more neutral. It would be foolish to pretend to be a Chilean company, or a Chinese company, just because we have a very strong local presence in those markets.

Before the arrival of our current chairman, Helmut Maucher, however, our companies looked very local. They were called Indulac or Chiprodal, for example - names connected with the local environment. In many markets, Nestle as a company name didn't exist.

Then we said, this is absurd. If governments or activists want to attack one of our companies, they only have to look at our annual report to know its true identity. What's wrong with presenting ourselves as we are? We should be proud we are Nestle, not hide away making believe that we don't want to be a multinational. So we changed our policy and gave every company in the group our own name.

Another distinctive aspect of your culture seems to be that you take a long view. You were one of the few that did not bail out of India, for instance.

We didn't bail out of India in the 1970s; we stayed in Chile under Allende. We don't normally quit just because there is a change in the political situation. When you are forever looking out for your short-term interests, you are not a reliable partner. Look at the way American money flowed in and out of Mexico if you want to see what devastating effects short-term speculative investment can have on a country. It is bad enough for the investor who loses a lot of money; for the local people, it is even worse.

But the company that stays, and carries on investing when things look bleak, and builds up a business, and creates jobs - its relationship with the country is quite different from that of a company that is forever coming and going. …

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