Your Brand is Your Best Business Continuity Plan in a Crisis

Mr Suresh Narayanan, Chairman & MD, Nestle India Ltd.,

We now have evidence that over the last three decades the real sources of shareholder value have shifted outside the balance sheet. Today, leading businesses across the globe transact and influence value primarily through brands. This is evident from what we see in the context of COVID scenario, in which brand‐led businesses are speaking the language of revival and regaining lost glory while businesses that have banked only on their supply‐side assets are fighting for survival.

At a time when all our assets are tested, will brand be the one to bring us safely to the harbour? In order to shed light on this critical theme, MMA and EQUITOR Value Advisory partnered to create a new series on ‘Brand Value Management’ and to bring the best thought‐leadership in this domain, so we might all navigate out of this crisis safely and create inordinate value. The inaugural session was held through webinar on 23 May 2020 on the theme, ‘Your brand is your best business continuity plan in a crisis.’

Mr A Venkataramani, Managing Director, IP Rings Ltd, as President of MMA, delivered the welcome address and opening remarks. Mr Ramesh Jude Thomas, President and CKO, EQUITOR Value Advisory, delivered a talk on the theme ‘Brand Value Management.’ The Chief Guest of the session, Mr Suresh Narayanan, Chairman & MD, Nestlé India Ltd., delivered the inaugural address. Ms Nappina Sampath, EQUITOR Value Advisory, moderated the Q & A session. Group Captain R Vijayakumar (Retd) VSM, Executive Director of MMA, delivered the vote of thanks.

Excerpts from Mr Suresh Narayanan’s address.

I do not know if it is a privilege or misfortune for me to face numerous crises. Whether it was the Lehman meltdown in 2008 while I was in Singapore, the five years of the Arab Spring in Egypt, Libya and Sudan where I worked, or the five years of pretty rigorous work in India at the start of the Maggi crisis that we had to face as a company. One thing can be said in common: A crisis doesn't come with a calling card. As a crisis creeps in, it falls on you and grows on you. But the fact is that the crisis then blows up and creates consequences.

Crisis and opportunity: 2 Sides of a coin

The pandemic that we face is not a crisis that we invited. It came. It started in China and found its way into different parts of the world. Lo and behold, we find ourselves doing all the lockdown procedures and living a life that is very different from what we had dreamt of and thought in January or February of this year. So you can see how life can be upended by a crisis. But in every crisis, there is also an opportunity as the Chinese word for crisis indicates.

I want to share five core messages and probably five principles that I have learnt in my years of being in the consumer goods sector and in responsible positions at the world's largest consumer goods company, Nestlé.

A company with a noble birth

Nestlé is the example closest to my heart, and it is an organization that I have tried to serve to the best of my capabilities. It is a very old company set up in 1866 by a German immigrant to Switzerland by the name of Heinrich Nestlé, but he adapted himself to the context of the French­ speaking part of Switzerland that he came to; Heinrich became Henri. He was a serial entrepreneur who failed in numerous ventures. He had a gas­lighting business and a paraffin wax business. He tried to make some chemicals. He was a trained pharmacist.

In those days of 19th century, Switzerland was surprisingly a poor country. They had high infant mortality. Nestlé being a kind­-hearted man told himself that he must put his knowledge to use and save the life of his neighbour's child. He put up a combination of wheat flour, milk, vitamins, minerals, sugar and a bit of water, mixed it and gave it to the child who survived.

His mother asked him to give it to the neighbourhood children who also starved. He gave it to those children. They all survived. The head of the village told him, “Look Henri, you will not be able to survive if you don't make this into a business.” So reluctantly, Henri Nestlé started the business and called it ‘farine lactée’, which is French for wheat flour with milk. He put the name Nestlé to it, to have his personal guarantee to the food quality and safety of the product. This set off a journey 154 years ago.

Henri Nestlé’s quest began with a social cause of saving the life of a child. The product that he produced still exists. Some of you might have given it to your children and it is called Cerelac. It was the first product that the company put up 154 years ago.

Since then, the company has grown through a lot of its own organic brands and through acquisitions. Today, we tip the scales at over $90 Bn in sales. We are the largest consumer goods company in the world represented in about 200 countries. It employs 300,000 people, and what is more, we nurture 2000 global and regional brands.

The portfolio of the company is such that my successors down the ages can continue to launch brands of Nestlé. The challenge for Nestlé is not what to launch but when to launch, which is a different challenge from many other organisations.

Have a break: KitKat

Many of the brands that we have had also began with a social purpose. KitKat was a brand that was introduced to factory workers in the UK in the 19th Century, to provide them with a quick energy product between their breaks. They needed a chocolate or some form of energy. So a two-­finger and a three-finger KitKat were designed, fitting into the back pocket of the overalls of a factory worker. The tagline is still being used: Have a break; Have a KitKat. It began with a factory break. But now, we have so many other breaks in life.

The coffee crisis & Nescafe

Our brand Nescafe was created as a result of a crisis. In Brazil, there was excess coffee crop and the Brazilian government did not know what to do with this coffee. They requested Nestlé to do something about it, because they were a food company. Nestlé put its scientists to work and in a couple of months, they were able to crack the first prototype of what became instant coffee. That instant coffee was Nescafe.

Nescafe went on to dominate the global markets because of the American troops who were travelling all across the world during the World War II. As a result of the American soldiers’ habit of drinking Nescafe, the world got to drink Nescafe. So Nescafe also began in a crisis.

Milo: Nestlé’s high

Milo again is a brand that was founded in Australia. It came out of a crisis. Australia was having serious issues in terms of children not getting adequate nutrition. The government requested Nestlé as a company to do something about it. Thus, almost 80 years ago, Milo, our energy drink, was born.

Thus, every crisis has given rise to an opportunity, enabling people to see virtue in that opportunity and create brands; such brands last.

KitKat is a 90­-year­-old brand; Nescafe is 80 plus. Milo is 80 plus. In India, we are 108 years old. Longevity comes when you have strong genes, firm foundations and principles of nurturing that you do not ever violate in all the history that you go through.

My only advice to you as a senior leader is to first manage yourself. We start managing others by being confused and incoherent. It doesn't help.

5 Key principles: The 5Cs

I look at the FIVE Principles that helped shape the company, and I call them the 5Cs.

Connect

Connect across the value chain. Why were we able to bring Maggi from the ICU? It was a brand that was dead for four to five months (following the allegations of excess lead in Maggi samples) and then it came back. Within two months, it became the market leader once again and we haven't looked back.

Today, in the pandemic, it is the most sought­after brand because it is a quick form of having a snack or assuaging hunger. The reason why it happened is because of the ecosystem that the brand has. Maggi is a brand that is upwards of Rs.2000 crores in terms of value. Maggi depends on about 400,000 wheat farmers, whose produce is necessary for making Maggi. We have a couple of thousand spice farmers and another couple of thousand suppliers. We have about 1800 distributors. We have four and a half million outlets.

Maggi, in fact, started the food retailing revolution in this country. It was not Domino’s, KFC or McDonald's. In the early 80s when Maggi came, it was being made in small outlets outside cinema theatres, bus stations and railway stations and inside colleges. They all gave source of living for people. The ecosystem was much larger. Today, in the pandemic, we reach out to that ecosystem.

The reason why we were able to resurrect this brand from a difficult situation was because it stood for happy moments in the lives of our people. So, brand trust and brand love are essentials. Maggi has always had happy moments with people. You all have fond memories of the brand—whether in school or college or cafeteria or on holidays.

It is a brand that is available from Kashmir to Kanyakumari and Dwarka to Meghalaya. Everywhere, you can find Maggi and tea, if not anything else. It is something ubiquitous.

It has come about because of the core principle of connecting across the value chain with respect, trust and transparency. During the Maggi crisis, one of the pledges that I took, and I always thank the Lord for having given me the strength to be able not to forsake it, was that no job should be cut. Not a single employee lost the job during the Maggi crisis. That was the only pledge I had.

This is not just livelihood. For a person to lose a job is like losing his/her self­respect. I have no business, as a business entity, to sacrifice the very foundations that make my business. So ‘Connect’ is extremely important.

Comply

Nestlé has global expertise. In the last 20 years, we have spent more than $35 billion in R&D. Every year, we spend about $1.5 billion in R&D across our 31 R&D Centres. We have 4,000 employees who work in the R&D Centres. What do they do? They convert science into nutrition; they use technology to leverage nutrition. At this time during the pandemic, one of the things that I am very proud of is that we are reaching out to the government to help educate food processing industries on safety, social distancing, hygiene practices and good manufacturing practices.

Our team members take positions at various places to educate. We have a network of almost 5,000 to 10,000 suppliers. Many of them are MSMEs. One of the principles that I have put forward to my team is that we should not allow even a single MSME to go belly-­up. I am truly grateful that they live by it.

This is the time we have to stand by MSMEs because they have stood by us all these years; therefore, we reach out to them. We help them get permission to start manufacturing. We support them with advance payments and orders. We are privileged to own a brand that is strong. So compliance is a very important part of the brand.

If you are ethical, honest and moral compass is true north, then you have nothing to fear. But when you deal in duplicity, deception and dissonance, your business model will start to shake. If a model is completely based on a fictitious valuation, you will not be able to stand on your feet.

If your brand is based on connections, compliance and ensuring that it genuinely gives value somewhere to someone, you have every reason to stand and come out of a crisis.

Create

We have to create properties around our brands and also nurture them. We have a property, for example, called ‘Ask Nestlé.’ This is one of the biggest platforms in the country and probably the only true nutrition site where you get information on nutrition.

Just like fake news, we have fake news in nutrition as well. This site is today being leveraged for information by mothers on good nutrition for children, on growing habits or uncommon nutrition practices and recipes. Mothers now seek different recipes because they have to keep the kids engaged at home and also give them nutritious food.

We have managed to get more than 1.2 million contacts in a matter of days. This took us last year almost seven to eight months. We have www.maggi.in which is reaching out to consumers who are now cooking at home and who need different ideas. This is like a helpline, providing them with hundreds of recipes —not all related to Maggi—but as a service to a cause.

I am very proud, that as a result of all of this, my core suppliers survive. They thrive. I work with 100,000 farmers in Punjab and Haryana. Since the crisis, every single day, every drop of milk has been collected by Nestlé and processed; they are promptly paid.

Values, trustworthiness and principles are the true tests in a crisis. When everything is good, the birds fly; the parrots look green; the world looks awesome. When the chips are down, true men and women stand up. It is the time when your purpose and values speak.

Consistency

You need to be consistent. You can't suddenly become from a zero to hero, or you should not decimate yourself from a hero to zero through behaviours that are seen to be completely and totally opportunistic. This is not the time for opportunistic brands. This is the time for compassionate brands. You will make your money and profits. The value chain will carry on. When your brand is valued, you will find greater value add because of ethical, honest, sincere, transparent and trustworthy behaviours. But with duplicity, deception and dissonance, you will lose a lot more. Don't worry about a few thousand that you lose today. You will make many millions tomorrow if you are consistent.

My only advice to you as a senior leader is to first manage yourself. We start managing others by being confused and incoherent. It doesn't help.

Be competitive

You are in business to be competitive. You are in business because an essential dimension differentiates you from others. A crisis is the time when you have to ask the question, “Am I differentiated or am I just like everybody else?” If you are like everybody else, you will divide the cake into ten pieces amongst ten people.

If you are differentiated, you will divide the cake into ten pieces, but you will get six pieces and the four pieces will be divided amongst the other players. What is the game that you want to play—a competitive one or a fairly average game? It is time to ask those questions. Today, we create content as we are a digital company. We are no longer a company based on press and television. We are a company of millennials. When I retire, the average age will fall by five years, because there are much younger people in the company. They come up with new ideas and new ways of doing things.

This is the time for you to empower your teams. I keep telling my team that my only role is to do two things: (1) Tell them the purpose, and (2) Empower them and get out of the way. If I can do that successfully, I think we will have a successful organization going forward.

So Connection, Compliance, Creation, Consistency and Being Competitive—These are the 5Cs, or the 5 essential principles, a robust set of grand principles which can help to bail you out during a crisis.

Compassion

My only advice to you as a senior leader is to first manage yourself. We start managing others by being confused and incoherent. It doesn't help. A leader has to be crystal clear. Ask Group Captain Vijayakumar of MMA, an ex-­Air force man, as to what a crisis is and what leadership means when you are in a war. COVID­19 is a war that we are fighting.

The 6th C that I would add to 5Cs is compassion. Be compassionate. This is the time to give, not take. The more you give, the more you will get. That is what all our religions have told us. And that is what I hope all of you also follow.

To view the full interaction and Mr. Suresh Narayanan's talk, check out on the latest edition of Business Mandate.