All in the family

Within the world of Nestlé, Salvador Pigem’s assignment from Indonesia to the Philippines six months ago is a move up the corporate ladder.

"In terms of population, Indonesia is three times larger than the Philippines. In terms of the company’s operational size, the Philippines is three times bigger than Indonesia," said Pigem, the president and chief executive officer of Nestlé Phils. Inc.

The Philippines is the most profitable operation of Switzerland-based Nestlé SA in ASEAN and the 11th most profitable in the world. "The Philippine operation is number one in the world, ahead of Switzerland, when its turnover is divided over a per capita of $1,000 over gross national product," said Pigem. Using this indicator, the Nestlé operations in Malaysia and in Chile are also in the top three list.

Nestlé SA generated a net profit of $2.1 billion in the first half of 2003.

Growth

In part, the healthy bottom of Nestlé Phils. can be traced to a regional complementation program that has identified factories of excellence with economies of scale to supply the entire ASEAN requirements in products and product categories at the lowest possible cost. Massive investments have made the Cabuyao and Cagayan de Oro plants the regional supply centers for infant nutrition and filled milk powder, respectively.

Within the Philippines, the company’s brands are either market leaders or a close second.

"Our mentality is that of a competitor, not that of a leader. We don’t just look backwards at what we have achieved. We also look to the future and come up with better brands and better ways of doing things. Otherwise, we will remain where we are while others move in front of us," said Pigem.

The immediate future of Nestlé Phils. is 2010, when it would have doubled its 2002 size through a combination of organic growth and acquisitions.

Key to meeting the 2010 target is the use of a global blueprint which Nestlé SA chief executive officer Peter Brabeck-Letmathe calls the "four pillars." These pillars and how they will help bring the company to the next level are:

* innovation or coming up with new products not only in the food and beverage industries but also in the nutrition and wellness industries;

* competitiveness or bringing down the cost of manufacture through efficiencies and through eliminating the middlemen without cutting the salaries of employees;

* distribution or increasing the availability of products even to remote areas; and

* communication or developing trust and eventually loyalty among the company’s many stakeholders.

Ownership

Anchoring the four pillars is the Nestlé workforce, which directly number 3,400. Including its suppliers and other partners, the company indirectly employs another 20,000.

"Having the right people in the right jobs enhances the brand," said Pigem. "The challenge is to develop people who will outpace competition. While they are specialists, they must have a 180- to 360-degree perspective. They must put the consumer at the center of their decision-making process. They must think like owners, whether or not they own shares in Nestlé."

Developing that sense of ownership among employees has been achieved by encouraging bottom-up solutions, many of them from the factory floors of the company’s six sites nationwide.

One such program is Sinag or Structured Implementation of Nestle’s Activities for Growth, which holds factory-level work improvement competitions. Once a year, the winners are flown to Metro Manila and present their projects before top management. This year’s Sinag Day national champion, a four-man team called the Mission Incredible 2 (The Coalition Force) from the Cabuyao plant, has been able to reduce the mix loss of the UHT batching area from 2.59% to an average mix loss of 0.73%.

"It is important to help collaborators come up with the best solution to a problem and not tell them what the best solution is. Whenever possible, it is important to listen even if time is of the essence. By working as a team, we co-own responsibility," he said.

Values

At the management level, cross-posting is encouraged. Pigem, for example, has been assigned to six countries–this is his second tour in the Philippines, the first one as head of the ice cream division–in his 25-year career at Nestlé. At any one point in time, there are 35 Filipino managers assigned to other Nestlé companies in the world.

"Tenure tends to be long. We take care of our people. We have developed opportunities for them. We have forgiven mistakes but not wrong-doings," said Pigem.

The company’s name and logo summarizes what the company is all about. In German, Nestlé – the pharmacist who started the business 137 years ago when he developed a cereal-based milk food for babies–means little nest. The company’s logo and the Nestlé family’s coat of arms is a nest with a mother feeding her young.

Today, that "nest" is the world’s leading food company, marketing 8,500 brands and 30,000 products. The company’s basic principles that lean heavily on family values in its dealings with its many stakeholders have, however, remained unchanged.