How Nestle's change in operating model proved to be a game-changer

Nestle India is among the few FMCG companies that has bucked the consumption slowdown and reported a healthy growth over the last few quarters. In the second quarter of FY20, Nestle's revenues grew by 10.5 per cent and profits by 33.5 per cent, as opposed to the tepid growth stories of most of its peers. The company has strengthened its distribution and has launched over 60 new products over the last couple of years. Suresh Narayanan, MD & Chairman, Nestle India, attributes the recent change in its operating model as a major game-changer.

It has divided the country into 15 consumer clusters and the idea is to offer more focussed solutions to consumers. How has this made a difference? The company earlier had a single strategy for the entire country. There was a national Maggi, Nescafe or KitKat plan, and this was the cause of consumer disconnect. For, the tastes and preferences of a Maggi or Nescafe consumer in Mumbai are quite different from that of a person living in Salem in Tamil Nadu.  "Earlier, it was geography that was defining the customer and then it was defining the brand and category and then finally it would touch upon the consumer. It was painting the country with one single plan. The effort now is to look at the country from the lens of consumer first, rather than geography first," explains Narayanan.

It's not that the tastes and preferences of Indian consumers have suddenly become diverse. Narayanan says that the power of data analytics and consumer insights has enabled them to cluster and sharply target consumers.  "We are able to access the kind of consumers that are interested in our kind of categories in brands, it has helped us to amplify better, we are able to get to the target consumers and also use the right media mixes in order to amplify the presence that we have for our existing brands and also increase accountability." The company now has a more individualised plan for Tamil Nadu, Andhra Pradesh or Uttar Pradesh. For a product like coffee, analytics has helped them to target consumers based on their consumption frequency, the equity for different kinds of coffee, consumption occasion and so on. Coffee consumption down South is a daily ritual while in the North or in the East, coffee consumption usually happens outside of home. Therefore, these markets need to have different route to marketing and distribution strategies. Painting the entire country with a singular plan was just not viable.

The Nestle head honcho further explains by citing the example of the coffee consumption habits of Tamil Nadu, Andhra and Karnataka. Their instant coffee strategy in these markets was largely Tamil Nadu centric since it was their biggest market. "We were operating on a TN centric plan and applying it in Andhra and Karnataka with the hope that the Andhra and Karnataka consumer will see value in our brand. That wasn't happening and we were giving the field open to our competitors to walk through the door. Using the bar of clusters, what we have done is to get relevant with a product that is common."