Maggi bouillon cubes are big in West and Central Africa. Huge. Drive around and you can see cafes decorated with Maggi packaging and painted in the Maggi colours. The Maggi ‘cooking caravans’, showing how to cook with Maggi, attract hundreds of thousands and in some areas the stock cube is even used as local currency.
So why, when you are selling a cool one hundred million cubes per day, would you decide to fiddle with a winning formula?
But this is just what the executive and nutrition teams at Nestlé told then Africa business manager Maarten Geraets to do. They wanted Geraets to fortify the cubes with iron to help combat the anemia which was devastating the malnourished and impoverished local populations including huge numbers – up to 75% in Nigeria – of preschool-age children.
However, not only would adding iron increase the costs of producing the cubes – and any price rise could put it out of reach of those who stood most to benefit – but there was also the risk that introducing iron could affect the look and taste of a hugely successful product.
In other words, changing the product might make sense in terms of health benefits but it also risked killing the market, in which case both Nestlé and the consumers would lose. So, why do it?
Scroll back to 1997 when Peter Brabeck-Letmathe was appointed CEO, Nestlé. His vision was to shape the world’s biggest food manufacturer, with its £62 billion annual turnover (2013 figures) into a leading nutrition, health, and wellness company. “We believe that our future lies in helping people to eat a healthier diet, whether the problem is deficiency in vitamins and minerals …or obesity,” he said and in 2004 he created the unique Corporate Wellness Unit to co-ordinate his vision.
Four years later, Nestlé formally committed to a Shared Value strategy, committing the company to maintaining respectable profits whilst at the same time making a significant positive impact on the lives of its consumers.
“Creating shared value means that we systematically take actions that produce value for the business and directly benefit consumers, employees and suppliers, their families and their communities,” explains Janet Voûte, Global Head of Public Affairs. ‘It is ultimately about ensuring our competitiveness and commercial success in the long term.”
Having identified iron deficiency anemia (IDA), caused by micronutrient deficiencies and which impairs the mental development of infants as well as women’s health, as one of the most serious problems facing its customers in the developing world, the Nestlé specialists set about examining hundreds of its products to identify those best suited to “renovation” – being fortified with micronutrients.
The products needed to have both the physical properties that would mesh well with added nutrients as well as good bioavailability, allowing them to be absorbed efficiently by the body.
But above all, customer satisfaction was paramount so that the product would reach the widest possible number of consumers. To this end, Nestlé also established the 60-40 test: any product put forward for renovation must be preferred by at least 60% of a large consumer panel in a blind taste test against its most prominent competitors.
Once the Maggi cube had been chosen as the flagship product for shared value, Nestlé’s Corporate Wellness, Sales and Marketing and R&D units began a two-year marathon of market research, adjusting recipes and testing reformulated versions of the seasonings.
In the African version of the bouillon cube, they were able to absorb the costs of iron fortification by making other adjustments to the recipe. In India, however, Nestlé took the decision to absorb the added costs themselves rather than risk losing the customers who most stood to benefit by inflicting a 10% price rise.
The fortified cube went to market in 2011 and by 2013 hundreds of millions of Africans had incorporated the iron-fortified seasonings into their daily diets. In Nigeria, people consumed over 30 billion iron-fortified individual servings of per year, each carrying 15% of daily-recommended iron intake. Shared value strategies were also being successfully rolled out beyond Africa, with fortified chicken bouillon in Central America and spice sachets in India.
Sales remained steady in Africa, while in India, where Nestlé had made a short term cost sacrifice, sales increased by 70% across the country.
Whilst, financially, shared value has proved its case, the direct health benefits are harder to quantify. “We are selling huge numbers of renovated, iron- fortified products,” says John Bee, Communications Manager at Nestlé’s Vevey headquarters in Switzerland, “so we know we are having an impact. But it is a contributive impact; health improvements depend on many factors – income, environment – as well as diet so it is difficult to put a figure to it.” But certainly, says Bee, Nestlé is confident enough about the real benefits of shared value to be working to identify more products for renovation in the near future – and to be doing so with enthusiasm.
And this is the key – enthusiasm. A sustainable, shared value strategy is about more than a successfully renovated product. It demands fundamental shifts in a company’s vision and mindset. It means that corporate thinking and executive decisions can no longer be inspired by profit alone but by shared rewards.
This is a big ask. Firstly, there the added costs to the company, in Nestlé’s case, establishing the Corporate Wellness Unit to identify shared value opportunities and oversee their implementation as well as investing more in research and technology in nutrition science. Today, the company employs 5,000 people in 32 R&D and product technology centres worldwide, and invests over £1 billion in R&D annually to create shared value strategies for its tens of thousands of products. In India alone, Nestlé invested 10 million Indian rupees, around £126,706 to launch fortified Maggi spice seasoning.
Making these costs acceptable means bringing everyone on board, from the boardroom to ground level. Executives at enterprise level within Nestlé understood that they needed to encourage business unit managers to take control of the renovation process—an exercise in persuasion rather than top- down commandeering.
“We cannot be launching from headquarters,” explains Christiane Kuehne, Head of Nestlé Food Strategic Business Unit. “If you force it, the market has millions of ways to make it fail.”
Finally, it means convincing consumers of the added value of their renovated products which means time spent working with local health and nutrition groups as well as with – importantly – shop and market traders and even direct with customers with cooking demonstrations explaining the benefits of added nutrients.
Selling shared value strategies in-house, however, was surprisingly easy, says Bee. Once the financial case had been proved, the feel good factor quickly followed. Indeed, it was the very fact that shared value made financial sense that made it so appealing. “Not only were we not having to ask shareholders to make sacrifices but we were doing real, financially stable good which is very different – and ultimately more rewarding – than making a donation. This is not charity, and that is what is exciting,” he explains.
This article has been taken from here.