By Kala Vijayraghavan & Ratna Bhushan
More than allegedly selling Maggi with excessive lead content or mislabelling packs, perhaps Nestle India’s biggest transgression in the run-up to the noodles hitting the fan in early June may well have been the inadequate communication with government and regulators. Small wonder, then, Suresh Narayanan, the 55-year-old Indian managing director at Nestle India, who’s been brought in to douse the fire, talks about “stepping up engagement with the government.” This, of course, will be in addition to taking “all necessary steps to engage with the consumer,” and the “first task” of getting “Nestle as an organisation to regain its self-confidence.”
Narayanan’s predecessor, Etienne Benet who took over in October 2013, replaced another expat, Antonio Helio Waszyk. To be sure, Nestle India has almost always had expat CEOs since it began operations in the country over a century ago; and Narayanan is the first Indian in that role, although he has come in from an overseas Nestle outpost (the Philippines).
Having an Indian at the helm is doubtless good for perception, credibility and communication, with regulators, consumers and even employees, reckon human resource experts. Says R Suresh, founder of RGF Executive Search: “Some European companies tend to have a mindset that expats should be at the helm of the company. But for Nestle India, which wants to get Maggi up and going, an Indian as CEO is a great decision.” D Shivakumar, chairman of PepsiCo, feels two strengths of Narayanan will come to fore at Nestle India. “He excels at customer management and boosting the morale of those who work with him.”
The new CEO, though, will be the first one to remind you that he does not have “a magic wand,” and the journey back to normalcy promises to be a long, winding one. Nestle posted its first loss in over three decades for the April-June 2015 quarter (of Rs 64.4 crore compared to a net profit Rs 288 crore in the corresponding quarter a year ago), thanks to the disruption in the instant noodles business. Consider what Maggi is up against: the 30-year-old brand with over 75 per cent market share has disappeared from shelves, virtually overnight. The national food regulator has banned sale of Maggi noodles nationally citing excessive lead levels, more than the permissible quantity of 2.5 parts per million; mislabelling on packs which declared ‘no added MSG (monosodium glutamate, a controversial flavour enhancer); and for selling Maggi oats masala noodles without product approval. Nestle has insisted that neither its noodles nor pasta contain added MSG, adding that many packaged foods contain hydrolysed groundnut protein, onion powder and wheat flour, all of which contain glutamate. The matter is in the courts.
For its part, the top brass at Nestle stresses that Narayanan has not been airdropped just because of his nationality, although being Indian has its advantages. Says Wang Ling Martello, executive vice president, Nestle SA, head of Zone Asia, Oceania and Africa: “Suresh is Indian, knows the market here, can hit the ground running. But when I scanned the world, I did not look for nationality. I looked for the skillsets… We don’t pick people depending on nationalities,” she says.
A former CEO at a multinational consumer goods company points out that an Indian in the hot seat is also good for PR – a front Nestle hasn’t emerged smelling of roses not just in India but globally too. In 2010, for instance, the Swiss MNC found itself at the receiving end of flak from environment group Greenpeace – and consequently on social media – which accused it of not heeding a cry to stop buying palm oil from an Indonesian company that was allegedly consciously destroying Indonesian forests. Nestle was duly slammed on social media for its apparent arrogance.
When the Maggi crisis broke in June, fingers were similarly pointed at Nestle India for living in denial, not communicating with consumers and a poor attempt at countering the criticisms on social media. The former CEO at the MNC says Nestle culturally has had condescending attitude towards the marketplace. “This is a world where leadership and brands have to be humble —to admit that, yes, we made mistakes, we will rectify them, and move on”.
“It is a tough one to resolve. Nestle allowed too much delay and let doubts creep into consumers’ minds, who have moved on to rearrange life around new habits. The company failed to present a different story. It will not be easy for Suresh even as an Indian to fix the damage,” says Santosh Desai, MD & CEO, Futurebrands, a brand management and marketing consulting firm.
Rajeev Bakshi, a former CEO at PepsiCo India, reckons that more than winning over the consumer, Narayanan’s biggest challenge is to win over the government. “This is not an attack from third party, unlike when Pepsi was attacked by an NGO.” In 2010, the Centre for Science and Environment had alleged that leading food brands including PepsiCo’s Lays, McDonald’s, KFC and, yes, Maggi, were guilty of “large scale misbranding and misinformation.” But today the government is the protagonist. “Nestle can’t afford to take an adversarial role here. They have to align and collaborate with the government,” says Bakshi, now managing director of wholesaler Metro Cash & Carry India.
Fifty-five-year-old Narayanan, who began his career with Hindustan Unilever, doubtless has his toughest mandate yet. “Deep down in my gut, the words that come to me are, we shall overcome… we (employees, colleagues, associates) can rebuild brick by brick, together.”
They’ll need plenty of help from government and consumer.
Source:The Economic Times
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