Nestlé obtained outstanding results for the first half of the year, in both sales and net profits, as the importance of emerging countries for the company continues to rise. The firm’s CEO explains this as a consequence of Nestlé being an AND company.

For instance, sales by Nestlé Brazil in the first semester amounted to 4.5 billion Reales (2.54 billion dollars), representing an increase of 11.5 percent in relation to the same period of last year. This increase more than doubles the company’s worldwide increase, recently informed as 5.7 percent, which amounts to 55.3 billion Swiss Francs (50.73 billion dollars).

According to Ivan Zurita, CEO of Nestlé Brazil, such results are the consequence of investments made in marketing and technology: “The investments we made in marketing and technology this year doubled those of 2007” he said, and added that all of Nestlé‘s 30 factories in the country – from a total of 72 in Latin America- are subject to technological enhancements. What Zurita omitted to mention was the number of jobs that will be wiped out by those “enhancements”, which will also be losses contributing to the ”growth” as seen by Nestlé.

As per statements made by high officials of Nestlé, during the period under analysis, the company benefited from a “more ample distribution” of its products in emerging markets, (which currently represent 35 percent of the firm’s overall sales) and from the global trade of high-quality products. The increase of sales in emerging countries amounted to 11 percent – with an even greater increase in BRICS (Brazil, Russia, India and China) – as compared to the 2.5% registered in western Europe, and the 6% of North America.

The significance of Brazil to Nestlé is clear in the statements made by Zurita to the magazine Valor Económico: “Brazil is our second biggest market, second only to the U.S.”¹, where he also pointed out that, sales are expected to grow from 10 to 12 percent this year. Last year, the Brazilian market generated sales for 5.78 billion Swiss Francs (5.44 billion dollars), as compared to sales in the U.S. which represented over 30 billion Swiss Francs (28.25 billion dollars) and in France with 8 billion Swiss Francs (7.536 billion dollars).

Nestlé expects the share of emerging countries in overall sales – today at 35 percent – to climb to 45 percent for the year 2020. The investments planned justify the goal defined: 1.5 billion dollars in BRIC countries, 1.6 billion in Latin America, 2.000 billion in Asia, and 1.000 billion dollars in Africa, for the period between 2010 and 2012. We shall be considering some of those investments and their consequences in future articles.

What is the opinion of Nestlé’s CEO in regards to these results?

Following is a transcription of the communication recently sent by Paul Bulcke to the company’s employees and its corresponding translation into English:

 

Let’s start on the positive side: in his report, Bulcke does not resort to the traditional term of ”collaborators” but rather replaces it with “colleagues” and “friends”, and also makes a difference between them (“Dear colleagues, Dear friends”) so as to differentiate between friends and colleagues. Because not even someone like Bulcke could possibly imagine that all of Nestlé’s employees could be his friends, the term “colleague” seems to have been chosen to replace the confusing and despicable word “collaborator”. If it is verified in the dictionary, we find that colleague means “mate at school or corporation”. Bulcke’s efforts for calling the things closest to that by their own name are really to be acknowledged. But since the term “comrade” will surely squeak in the sensitive ears of Directors back in Vevey, it is possible that, sooner than later, the Nestlé kingdom will once again reassume the use of the currently banned term “worker”.

This is not so encouraging. Without a single line dedicated to those who have made growth in profits greater than growth in sales something possible, Bulcke states that though results have proven positive, there is also the possibility – what a discovery indeed!- of having to face competitors. His speech concludes with a strange emphasis on the AND: “we are the Company of ANDs” he assures. And yet, he is even right for his “regional communication” includes, among others, three examples in our region that deserve a strong and stunning AND?, to which Bulcke should respond.

1) Last May 10^th - during an interview for the Chilean newspaper El Mercurio -, in his statements, Bulcke admitted, among other things, that “during the past 10 years, we developed projects to increase efficiency in factories and resulting in savings and higher productivity. But now we have a different approach, where we provide employees with opportunities to be part of the process. For instance, we have created factory environments where workers², with a better knowledge of the machinery, contribute with ideas for reducing the time on machines implied in changing formats (of products). These participative solutions lead us to significant reductions, where a format change of 57 minutes comes down to seven minutes”.

Five months later, the Brazilian Public Ministry of Labor (MPT) fined Nestlé for breaching the terms of an agreement entitled Conduct Adjustment Terms (“Términos de Ajuste de Conducta” - TAC) relative to working hours and environments, duly convened with labor unions, whose compliance guaranteed by the MPT itself. Seven violations of the TAC have been verified, including excessive hours in a working day, lack of time breaks, and pressure forcing to work on weekends and holidays (+Info).

And, Mr. Bulcke... Don’t you think it’s better to clarify the situation than to be seen as someone who disregards the truth and manipulates facts?

2) At Nestlé Peru’s factory, in Lima, the new collective bargaining agreement should have been applied as of last January, but the systematic interruptions made by the company in both the direct negotiation process and in the reconciliation process still keep workers in uncertainty. Parallel to this, on 23 August, Bulcke and the main regional directors of the trans-national company attended a meeting with the President of the Republic, Mr. Alan García Pérez, who, following the meeting reported Nestlé’s authorities as having admitted their intention to double the investments made in that country. Therefore, the non-subscription of the agreement is not in fact due to economic hardships.

And, Mr. Bulcke... Don’t you have anything to say in this case either?

3) The following could well be considered the icing on the cake. The media in Brazil have just released the news that inspectors from the Ministry of Labor and Employment and officials from the Public Ministry of Labor discovered, last August 18, tens of unregistered workers in the orange harvest of two agricultural exploitations in São Paulo, whose owner is Ivan Zurita, the CEO of Nestlé Brazil. Workers also lacked toilets and drinking water, let alone proper areas for breaks and protection elements, in additions to the bus for transportation not being in the right conditions for circulating. On one  of the properties –euphemistically named Campo Alegre (Joyous Fields)- the inspectors verified cases of fraud in workers remunerations. Instead of the actual weight of the bag of oranges, equivalent to 27 kilos, they were paid with a salary based on production on a 34K weight. The individual responsible for these facts is, among other things, in charge of applying Nestlé’s so hackneyed Corporate Social Responsibility in Brazil.

And, Mr. Bulcke... Do you think that paying a fine will do it?

Loquatious Mr. Bulcke is in fact right: Nestlé is indeed the company of ANDs.