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Nestle Myanmar expects fourfold growth by 2020
Swiss food and beverage giant Nestle operates in 190 countries producing more than 2,000 products with 330,000 employees from 450 factories. The brand has been recognized in Myanmar for more than 100 years.
At the late of 2013, the company erected its next milestone stepping into Myanmar and Nestle Myanmar Limited was founded. Up until then, Nestle Myanmar had been importing their food items from nearby countries such as Thailand, Vietnam, Malaysia and Philippines in which Nestle has local factories.
In a recent interview, Nestle Myanmar Managing Director Hayri Devrim Cobek said that the company is expecting fourfold growth in Myanmar by 2020.
Mizzima’s senior business reporter Aung Thura sat down with the Nestle Myanmar leader to discuss the company’s 150 year history and its strategy for Myanmar.
Mizzima: Firstly, what are Nestle Myanmar’s overall intentions in the Myanmar market?
Mr Hayri Devrim Cobek: Firstly, Nestle is a one hundred and fifty year old company and we celebrated the 150th anniversary last year. You do not have many companies that can do this kind of years. In Myanmar, our products arrived in 1915, so Nestle is a historic brand in Myanmar and we have been offering the Nestle products to the Myanmar population since that year. Of course, over these years, we have different steps that we have been taking. Now we concentrate on the last step which is a Nestle Myanmar Limited set up here. Nestle Myanmar was established in late 2013 with the approval of the Myanmar Investment Commission (MIC). With this plan, we started the investment and we continue the investment so we established the company.
Now everybody is looking into the Myanmar market where we can see specific interests and opportunities. When we look at the package, the food and beverage market, it is forecast at the value of around US$ 3 billion this year. Within three years, we are forecasting that value could be as high as US$ 5 billion because of the growth in the middle class increasing the purchasing power in the future and also due to more urbanization. And this will lead to a need for better and healthier packaged food options. So basically that is why we are here and this is a very interesting and important thing for Nestle.
At the same time, we want to contribute to a healthier future for Myanmar. Therefore, we look at the nutrition and Myanmar habits and we also look to cuisines so we have to identify some areas that we can address. The biggest point there is iron deficiency. When you look at the iron deficiency in Myanmar society, iron deficiency is a really a big one. We can say that almost half of the adult women, they have iron deficiency for example so it is very wide. Lack of iron can cause fatigue, reduce the learning capability and have other side effects, etc, so we build our business by offering nutritiously delicious products.
Nestle is said to be setting up a local factory here soon. Can you share this information?
Let me share with you the top line of it. First of all, the factory in Myanmar is actually started operating because it is now in the testing period. Until now we invested US$ 25 million for the local manufacturing and we are going to create 150 employment positions. The factory is located in Dagon Industrial Zone of Yangon region. We are now producing. Of course it is not 100 percent finished. We will do an official opening in February, 2018. Within the factory, we will produce the high quality products of Nescafé, Milo and Bear Brands in accordance with Nestle global standards, so all these three products are being produced in Myanmar. Nestle has been manufacturing more than 2,000 brands globally, so we have quite a range of products and we will continue to import some of our range of products from neighbouring countries to the Myanmar market. For the Myanmar market, we selected six brands and we are investing in them, namely Nescafe’, Milo, Bear Brand, Lactogen, Maggi and Cerelac.
What is the marketing strategy of Nestle Myanmar for this young and emerging market compared to neighbouring countries like Thailand, Vietnam?
We believe the food is local. Whatever you produce, you have to adjust your products to the local taste profile. Whatever we do here is designed for Myanmar people. We believe that the market of food, package and beverages is continuing to grow in Myanmar. Today, this market is around US$ 3 billion and we forecast that this market is going to become US$ 5 billion by 2020. Everywhere we are operating in the world, we want to be in the top two position as we are one of the biggest companies in food and beverages. In Myanmar, we want to be in the same area. We do not have a barrier because we are starting our own operations. Right now, our base is small, but we want to grow four times in four years, 2020 so we have very aggressive growth.
What is the mood of the Nestle head office in Switzerland for this young market?
It is important for the company because this is a start-up and there are not many examples like that in the world. From the start-up, we want to do corrections and we want to establish the correct portfolio. Nestle is divided into three groups geographically. Myanmar is a part of Zone AOA which is Africa, Oceania Asia including Japan. So there is a lot of focus from this big group to Myanmar. I am getting a lot of support and a lot of people coming here and visiting Myanmar to support our growth here. And Wan Ling Martello, Nestle’s Zone A CEO will come to Myanmar and she will join us to open the factory in Yangon. So there is a lot of focus and all the good intentions to further invest in Myanmar.
What are your strategy in terms of competitors and how will plan to compete?
Our strategy is very much linked with our purpose. Our purpose is to enrich the quality of lives and contribute to a healthy future. So our strategy is based on that and I also believe in a differentiated point from the competition here. When we look at the competition in Myanmar, there is very strong local competition and very strong companies. They are very active, they have good distribution and they are also active in following the role of development. So our competition is mainly local companies in Myanmar. So how can we differentiate ourselves from them, we can differentiate ourselves if we deliver value every day, if we offer better quality products which are adjusted to the local taste profile. That would be our differentiating point.
How does your Myanmar strategy differ from other countries?
Our strategy in Myanmar is different from other countries because the needs are different. The first thing that we have done is we look at all these categories that I mentioned and we are looking to the Myanmar taste profile as we believe the food is local and the food business is able to offer the local taste profile. Nescafe that we have launched is adjusted for the Myanmar taste profile and Milo that we have launched here is adjusted to the Myanmar taste profile. Just two weeks ago, we launched the Bear Brand and rich malted milk is completely developed for the Myanmar people. You really have adjusted your product according to the local taste profile. So we have made different adjustments compared to neighbouring countries.
The second thing that we have done is differentiating the needs of nutrition, it depends on the cuisine and it depends on what they eat. When you look at Vietnamese cuisine, for example, the cuisine is very different. And Myanmar cuisine is rich in starch and it also consists of heavy of carbon nitrate, salt and fats. There is no hunger but there are some nitro-nutrient deficiency. So we see this fact as an opportunity and we also would like to address this by differentiating our products from those in Thailand and Vietnam.
What are the remaining challenges in this country to develop this business?
As probably you might know, according to the World Bank Group, doing business in Myanmar ranks as 171 globally. Clearly, I think it is not very easy to do business in Myanmar due to some barriers in the society. But the World Bank ranked a number to describe the situation of the country. When I always discuss with my bosses and the business community, we agreed the first barrier is not regulation and the first barrier is not infrastructure. For us, the first barrier is the people. Myanmar people are amazing because they have a lot of energy and the country has a very young population.
And they are very eager to learn. When you give opportunity, they are very eager to grab and learn new things even if they lack experience as well as knowhow. So you have to do extensive training for the people. When the economy is growing, people are moving from one company to another, so it is important to recruit the right people and retain them. It is the biggest challenge and this becomes the biggest barrier speeding up growth. This is the number one barrier for us. The second barrier is your right infrastructure. When we look at the local manufacturing, you cannot rely on the electricity grid for example. You have to keep a back-up one like your own generator for your production. When we talk about the distribution of the product, this is a big country in order to reach the 54 million population. Moreover, all of the logistics, road connections have their own difficulties. And the final barrier is regulation. For the regulation side, the government is working very hard and I think it is forwarding better, but there is still a gap on regulation and we also have the protection of the Intellectual Property (IP) rights. So all those things are important for any investors, and a lot of international companies complain about the import license. As you already know, a lot of companies do not have the right to import products directly.
How are you going to accelerate Nestle food business to Myanmar and what are your further strategies?
So, we want to continue to invest into the society and we also want to speed up our growth here with the key products and key brands that we have already chosen for this country. So the investment will be behind a limited number of brands. When we talk about our brands for this country; Nescafé, Bear Brand, Milo, Cerelac, Lactogen and also Maggi, those are the brands that we have chosen and they all have strategies. Apart from that, we also have to build Nestle as a brand. Nestle is the name of the company, the name stays on top of every brand. Globally, Nestle is one of the most trusted companies so we also want to introduce this to the Myanmar people and we also want to talk about Nestle. We want to tell people who we are and why we are here, what are our ambitions. Again, we want to share this information with the Myanmar people, we want them to learn more about Nestle.
In the end, we can achieve and we can earn the trust of the Myanmar people, we believe that these are first steps of our longer term strategy. So we will invest in six brands but also we will invest in our corporate brands. We are investing together with our local partner. Our partner is MDG-Myanmar Distribution Group. With our partner, we are investing in distribution because we talk a lot about producing the right products which are in line with local taste profile. You cannot have beautiful products and beautiful design unless we distribute them. So we cannot make it available then we will not be successful. MDG is parallel to us investing in distribution. Therefore, we will continue to do that.
How will you increase in the Nestle investment in Myanmar for the near future?
This is really parallel to our growth number. So the further we grow, we can speed up our growth further and we will invest further. Now our investment is just a first stage and next stage depends on the growth of categories. Therefore, the next level of investment will probably come around the next three years, 2020. What we calculate right now, the current investment is probably enough for us for the coming three years.
What else would you like to add? I have talked a lot about our own quality because we believe it is in our DNA. And we are also passionate about it. I would like to say my sincere thanks for giving me the chance to talk about our quality, our purpose and try to enrich the quality of life to contribute to the health of the future.