Mauricio Alarcon: Leading Nestle through a tumultuous economy, yet shoring up revenue
Being the Chief Executive of the company with the highest share price in Nigeria is no small feat. More importantly, ensuring that the company stays at the top and attractive to investors is, perhaps, an even harder feat. At the close of trading yesterday, Nestle’s share price was N1,400.
A little over two and half years ago, on October 1, 2016, Mauricio Alarcon stepped into a demanding role as CEO of Nestle Nigeria Plc, and even more nerve racking considering it was at a point Nigeria’s economy slid into recession. For a Fast-moving Consumer Goods (FMCG) company, this was a big deal, as it would imply reduced consumer spending. However, Nestle not only weathered the storm (like Nigeria appears to have also done), but also the company continued to increase its revenue even through the turbulent times.
In 2017, Alarcon told Businessday, in an exclusive interview, that despite the challenging environment, Nestle remained committed to Nigeria. In the interview, which was conducted before Nigeria exited recession in 2017, he told Businessday; to stay competitive in this environment, we have stayed focused on our commitment to provide good quality nutrition solutions to our consumers. Our result is due to the continued confidence of our consumers in our brands, the hard work of our people, and our distribution network.
“We have also continuously improved our efficiency while focusing on local sourcing of raw materials. Everywhere in the world, the Nestlé name represents a promise to the consumer that the product is safe and of high standard,” he said.
Nestle Nigeria Plc. manufactures, markets and distributes food products throughout Nigeria. The company also manufactures Hydrolysed plant protein mix and other food products based on its local agricultural raw materials under its backward integration program. The company manufactures and markets a range of brands including Nestle Pure Life, Golden Morn, Milo, Kitkat, Maggi, Nescafé and Cerelac.
In the Nigerian capital market, the Nestle stock has over the years earned for itself a reputation of giving investors some degree of assurance that their investments will likely continue to appreciate and yield dividends.
The Journey to becoming Nestle Nigeria’s CEO
A Mexican citizen, Mauricio Alarcon, who was born in 1973, is an alumnus of the Manchester University in the United Kingdom where he studied Engineering, Manufacturing and Management between 1992 and 1997. Between 2014 and 2015, he also participated in the Executive Development programme at IMD Business School, Lausanne, Switzerland. An engineer by training, Alarcon is also a Member of the Nigerian Institute of Management.
Alarcon joined Nestle Mexico in 1999. Following a number of Sales and Marketing assignments in the Ice Cream business, including Marketing Advisor at the Ice Cream Strategic Business Unit, he was appointed as the Marketing Manager for the Ice Cream business in Australia.
In 2010, he joined Nestle Egypt as Business Executive Manager, Ice Cream where his dynamism played a key role in transforming the business. Under his leadership, the Ice Cream business turnover in Nestle Egypt more than doubled and the profitability improved in a challenging environment. He was the Managing Director of Nestle Cote d’ivoire from 2014 to September 2016, overseeing Nestlé’s operations in Senegal, Guinea Conakry, Guinea Bissau, Gambia, Mauritania and Cape Verde until his move to Nigeria. On October 1, 2016 he became Managing Director/chief Executive of Nestle Nigeria.
“I’m honoured to take up this new challenge to lead Nestlé’s business in one of the largest economies in Africa. Despite the current challenges the country is facing, Nestlé Nigeria is committed to still offer nutritious and tastier food and beverages that meet the needs of people,’’ said Alarcon when he assumed his role as CEO in Nigeria. “I look forward to working with my team and all our stakeholders as we continue to pursue our vision of enhancing the quality of life of people in Nigeria’’, he added.
Nestle Nigeria’s performance under his watch
Nestlé Nigeria is the biggest food company in West Africa and in Nigeria, it employs around 2,400 people across what has been described as three world-class factories.
Nestlé has been present in Nigeria for more than 50 years. The company has invested in three production sites in Agbara, Shagamu, and in Abaji; supporting the local sourcing of raw materials and the investments in rural communities.
Revenue has been good at Nestle, with some measure of Year-on-year growth since 2014, but with the recession when Alarcon took over as CEO, this was perhaps the major test of his leadership and management skills.
Weathering this storm according to Alarcon was possible due to several factors, including what he described as “the trust of our consumers in our brands.” According to him, the lower base in the corresponding period of 2016 and the impact of the price increases implemented also played a part. Another factor is the internal cost saving and operating efficiency initiatives, which were put in place. These results, according to him were to be sustainable in subsequent quarters if the operating environment improved.
Another challenge Alarcon met on assumption, was an observation Businessday made at the time, that 2016 had the lowest Return on Assets since 2007; in essence the lowest in Ten years. Asked, at the time, why the company faced this challenged, Alarcon attributed it to two things; the loss of pioneer status, and the revaluation of the company’s loans in foreign currency.
He did not go into explicit details of how the trend will be reversed, only saying “We have put plans in place to mitigate both factors. Therefore, we are cautiously optimistic that our profitability will improve in 2017.”
True to Alarcon’s statement, Nestle’s profitability improved by the end of 2017, recording a revenue of N244.1 billion, a 34 per cent increment from N181.9 billion in 2016. The revenue growth was consolidated even further in 2018, with the company recording a revenue of N266.3 billion.
Apart from revenue, even profits have been soaring, with Nestle posting a Profit After Tax (PAT) of N33.7 billion in 2017, followed by N43 billion in 2018. So far, the company has reported a PAT of N12.8 billion in the first quarter of 2019.
Betting on the local ecosystem
Nestlé has continuously expressed its commitment to the local sourcing of raw materials for its production, and for the past 7 years, reaching about 80 per cent local sourcing of raw and packaging materials so far. The five major locally sourced products (average volume per item) are: 1. Corn: 10,000 metric tonnes
2. Sorghum: 6,500 metric tonnes
3. Soya Beans: 5,000 metric tonnes 4. Cassava Starch: 4,000 metric tonnes 5. Cocoa: 5,000 metric tonnes
Alarcon noted in an interview that in 2016, Nestle engaged 41,600 farmers to supply maize, soybean, sorghum and millet to its factories. 100 percent of the maize used in cereal brands – Cerelac and Golden Morn is sourced locally through the Nestlé Cereals Plan.
A recent Businessday report noted that Nestlé Cereals Plan project has over 30,000 farmers who supply 100 percent of the grain requirement for Golden Morn Maize (alone). Through its Sorghum and Millet in the Sahel (SMS) project, now called Nestlé Nigeria & IFDC / 2Scale Project Sorghum & Millet, the food and beverage giant has engaged up to 10,671 farmers.
“The Industry has huge needs and we must help farmers improve their yields to meet them. To achieve real success with connecting farmers to industry, a 360 degree approach which will include the aggregators, processors, and logistics suppliers must be considered within this value chain,” says Alarcon.
Nestle, according to Alarcon, is committed to expanding its investments in Nigeria, and increasing production capacity at its different facilities. Not just this, but the company has consistently stepped up its impact program, which creates a win-win for communities where it operates, as well as Nestle as a business entity.
Called Creating Shared Value (CSV), Nestlé Nigeria says it touches the lives of millions of people, from the farmers who grow its ingredients to the families who enjoy its products, to the communities where the company operates, and the rural environment upon which it depends.
“Nestlé Nigeria is enabling healthier and happier lives for individuals and families, sourcing raw materials locally, investing in capacity building for farmers and in rural development,” he said.
Sustaining the local supply chain
For Nestle, Alarcon says local sourcing is a long-term goal. The company has partnered with institutes like the IITA, IFDC and USAID to promote sustainable farming practices while increasing yield and quality.
“With our partners, we have worked with farmers, teaching them simple methods for maintaining good agricultural and storage practices, how to manage grain quality and safety. These efforts ensure that we have the right quality of raw materials to attain our local sourcing targets,” he said.