What is Nestlé’s role in future global food system? Do you support partnering both horizontally (with competitors) and vertically (with suppliers)?
Creating a wonderful cup of coffee is not only Nestlé’s business, but it is the business of everyone involved in its supply chain (The Times 100, Coffee- the Supply Chain). Today, Nestle is heading the worldwide movement of promoting sustainable agriculture for the entire food industry. The company’s role in the future global food system is going to be very critical. Since farmers come first in the supply chain of the food system, Nestle has started providing “extension services” to thousands of farmers who are its direct suppliers in many markets. Through its SAI (sustainable agriculture initiative) platform, the company had already created an amalgamation of best principles and practices for sustainable agriculture of certain crops. This would address several key issues relating to environmental, social and economical topics related to agricultural production systems and would make Nestle, a key player in shaping the future of global food system.
Nestle must definitely partner with its competitors, there are following reasons that support this stand:
- Nestlé has successfully tied up with its competitors such as Danone and Unilever in the past for the development of SAI.
- Since Nestle buys coffee mostly through its suppliers, tying up with competitors can ensure that the suppliers do not overcharge and vary the quality of their supplies from one customer to other.
- It would bring a greater transparency in the supply chain and would promote healthy competition along with the quality of supplies.
- Nestle must think of tying up with the competitors, especially in markets where supply chain goes through various dealers and middle men.
Nestle must also tie up vertically with the suppliers, following reasons support this argument:
- In some countries, it is not possible to buy directly from the farmers.
- Although Nestle is one of the world’s largest direct purchasers of coffee, it has to tie up with the local dealers, where it is not possible to buy directly.
- Nestle will purchase coffee at international rates in these markets, and would ensure that the coffee meets its international standard and health regulatory norms.
- The dealer and shippers involved in the supply chain will be adequately trained along with Nestlé’s quality assurance staff, assuring that quality would be maintained all across the supply chain.
The fact that Nestle is a leader in the chocolate, dairy, and coffee industries may conflict with the company’s sustainability and health priorities. Identify some potential conflicts.
Through its SAI platform and Creating Shared Value (CSV) program, Nestle has put its principles and practices together and has collaborated with other member companies like Danone and Unilever through SAI to create a sustainable effort in addressing several issues related to agriculture production systems. These issues consider factors such as health risks related to pollution, bio diversity, environment, rural development and teaching good farming practices to farmers in the developing nations. However, being a market leader in chocolate, dairy and coffee industry, the group can come under scrutiny from some agencies and environment groups that can give rise to the following potential conflicts:
- Wrongly accusing the company of promoting deforestation in some countries and causing harm to the environment. A similar case happened when Green Peace accused us of promoting deforestation in Indonesia.
- Company can be accused of promoting ‘unhealthy’ products such as chocolates which promote obesity.
- Activists creating videos that allege wrong doings and accuse Nestle of being an irresponsible company. (Greenpeace case)
- The resulting heat from the accusations could affect the supply chain, as the supply of coffee might reduced in certain regions due to protests.
- This might cause the price of coffee to go up in the international markets.
- The resulting speculation in the Wall Street will further put pressure on the prices, and this would put a lot of strain in the supply chain.
- In the regions, where Nestle buys through dealers, there might be some supply concerns.
- There might be some conflicts between the farmers and the Nestle team, when they think that they are being ‘exploited’ by Nestle due to false propaganda.
- Nestlé’s social media pages might be targeted by groups such as Greenpeace, as they did in the past.
However, these are only concerns. Nestle brand is strong enough to face any oppositions, and the company is confident of defending itself against any group.
What are the recommendations?
One has to remember that Nestle is into coffee selling business, and one of the most interesting facts about coffee is that it is mainly grown in developing countries such as Brazil, Vietnam, Columbia and Indonesia. Whereas, it is mostly consumed in developed countries like U.S, U.K and France. Most of the farmers, who produce coffee, are poor and lack proper education on processes related to coffee production. As a part of our SAI and CSV initiatives, it is our duty to create sustainability in our supply chain operations.
- We must intensify our efforts in tying up directly with more farmers and removing middle men from the supply chain.
- These farmers must be given the best prices so that we ensure that they supply high quality green coffee.
- The direct buying method should be increased to more than 50 % of the total trading methods.
- Where there are dealers involved in the supply chain, emphasis has to be given to greater information sharing, transparency and strict quality assurance standards. Any dealer, who is not able to match these requirements, must not remain associated with Nestle.
- In developing countries such as Indonesia, rural people must be willingly trained to become ‘Farmer Business Advisors’ and we must repeat the success story of Cambodia ( Joehr,H. Creating Shared Value at Nestle. P3). These advisors would teach good farming practices to farmers, who are the most crucial part of the coffee production supply chain.
- Promote functional leadership across the organisation and promote sustainability through each and every employee of Nestle.
- Listen and address the issues of each player present in the supply chain. Right from coffee growers to the processing team. Keep all the stakeholders happy and satisfied. This would ensure that the end product meets the highest standards of quality and taste.
- Provide detailed information about our relationships with our suppliers to public, this would improve our transparency and our customers will be assured that we serve them the best coffee that is processed by highest quality standards.
- Focus on Research and development initiatives to develop better products and improve the physical well being of our customers.
- Trying to address problems such as obesity, malnutrition and deficiency through its corporate social initiative and products.
- Trying to introduce more economical products in the emerging markets such as India, Brazil and China (www.nestle.com/csv/nutrition).
References
The Times 100. Coffee- The Supply Chain.
Mazurek, B. (2013). Coffee and Sustainability: A Complex Cup. Retrieved from http://civileats.com/2013/02/06/coffee-and-sustainability-a-complex-cup/
Kruschwitz, N. (2013). Creating Shared Value At Nestle. MIT Sloan Management Review. Print.
Blanchard, O. (2010). Greenpeace Vs Nestle. Retrieved from http://thebrandbuilder.wordpress.com/2010/03/22/greenpeace-vs-nestle-how-to-make-sure-your-facebook-page-doesnt-become-a-pr-trojan-horse-part-1/
