TBY talks to Yves Manghardt, Chairman & CEO of Nestlé Middle East, on the company’s new facilities, the Middle East market, and the FMCG segment.
TBY What is the significance of Dubai in terms of your regional operations?
YVES MANGHARDT Nestlé’s first official presence in the Middle East was in 1934 in Lebanon. Since then, we have grown in the entire region, and we have opened operating companies in every country of the Middle East, with the exception of Yemen and Iraq. In these two countries we work with agents selling and distributing our products on our behalf. In 1997, we established our regional head office in the Middle East in Dubai. We currently focus our activities on 13 countries of the Middle East.
In 2010 you opened a new factory in Dubai—a $136-million investment. What made Dubai the choice for such a large investment?
There were many factors, including the ability to attract talent, the overall economic, political, and legal environment, and the existing infrastructure. It is indeed important that we are able to ship products across the region easily, bring in raw materials, and export finished products. We took into consideration other factors as well, such as schools for children of all ages and investment and tax incentives. In the end, Dubai was selected to build a NIDO plant, followed by a KIT KAT factory. The overall environment in the UAE has been very supportive, and our employees very much enjoy living in the UAE.
In terms of retail and distribution, how would you characterize this market compared to others?
We distinguish between three trade clusters in Middle East. The first includes countries like Qatar, the UAE, Bahrain, Oman, and Kuwait, where the top-10 retailers account for more than 50% of our sales. In this environment, business is much more skewed toward key accounts, supermarkets, and hypermarkets. In our second cluster, the top-10 retailers make up less than 30% of our business including countries like Jordan, Saudi Arabia, and Lebanon. The third cluster consists of countries where the top-10 retailers account for less than 5% of our business with countries like Palestine, Yemen, Iran, Iraq, and Syria. The UAE are very much a part of what we call a developed trade environment, where key accounts, hypermarkets, supermarkets, typically Carrefour, Lulu, the Coop, and Spinneys represent the majority of our sales.
What challenges are there for FMCG companies operating in this environment?
There is one key issue; the fact that there is increasing price control activity by the UAE authorities. It is a real challenge, and to a certain extent it threatens Dubai’s competitiveness in the future, both from a retail perspective and from an investment point of view as well. If a company is not free to price its products, decision makers will start to ask themselves if it is really the right place to invest. It can be a drawback and this is something that the UAE has to manage more carefully.
What products and strategies are you implementing to lead the local market?
We are gradually establishing what we call a “multi-tier portfolio” with products and brand propositions for different price points, from premium to popularly positioned products (PPPs). We are responding to the diverse needs of our consumers by adding more products in the premium and in the more affordable segment to our assortment as well. Recently, we have launched our MAGGI bouillon powder that is even more affordable than our MAGGI stock cube in countries such as Syria and Iraq. In addition, we have introduced NESCAFÉ 3in1 Matinal, a different blend, which is more affordable than our standard NESCAFÉ 3in1. In Syria, we have brought a variant of KIT KAT to the market that is smaller than in the rest of the region in order to reach a specific price point. In the premium segment, we have just launched NESCAFÉ Dolce Gusto—a coffee machine with capsules—in the UAE, Qatar, and Kuwait. NESCAFÉ Dolce Gusto is the new way to have a coffee shop experience at home at a more affordable price. Two years ago, we introduced a range of premium soup called MAGGI Excellence, which has transformed our consumers’ experience in terms of quality and convenience. NESCAFÉ Ready-to-Drink in cans is another successful product positioned more on the premium side. Our own factory in Dubai allowed us to re-launch KIT KAT last year with a taste that has been adapted to the preference of the Middle East consumers. We have a winning formula because we are manufacturing here, catering to the more specific needs of the region and using the latest technology available.
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