'Facing challenges is a way of life': Nestlé India CMD Suresh Narayanan on FMCG giant's big India strategy

Nestlé India chairman and managing director, Suresh Narayanan, compares himself with an albatross which always attracts trouble. For the man who saved Nestlé India from an existential crisis in 2015 (the Maggi Noodles controversy), battling challenges has become a way of life. His first brush with crisis was when he was asked to run the cattle feed business of Hindustan Unilever (then known as Hindustan Lever) way back in 1981. Narayanan, barely 22, was over the moon when he was asked to head a business soon after he completed his stint as a management trainee. He took over a team of 35 members at the cattle feed factory (which was eventually sold to Godrej Industries) in Ahmedabad. However, within months he was asked to shut down the factory and set up a new one in Vadodara.

“I had to close down a factory with 35 people all of whom were as old as my dad. I had to deal with union leaders and government officials. At that time there was also the Gujarat agitation and parts of the state were shut down for a couple of months. I had a factory crisis, a business crisis and an environmental crisis to deal with. That was also the time when Unilever was divesting the animal feed business to Lipton, a sister company. So, all the licenses had to be shifted from HLL to Lipton, and that meant a whole lot of procedures. It taught me how to cope with crisis, how to remain calm and steadfast and not lose hope. It also taught me the power of engaging with people and being fair with them,” Narayanan reminisces. Instead of him bidding farewell to his team, it was the team which gave him a send-off. “They told me I dealt with them fairly.”

Though Narayanan joined Nestlé in India, he was soon moved to head operations in Singapore. “That’s when Lehman Brothers collapsed (in 2008) and the first country to announce official recession was Singapore. Yours truly was put there to head that business. We still managed to grow and hold our share and deliver a decent profit.”

Narayanan always managed to land in one trouble-prone market after the other. When he was asked to take over Egypt in 2010, he was told it was the most predictable market — that the tides of change would never hit its shores, the wind would continue to blow in the same direction, the Nile would never change its course and most importantly, the dictator, Hosni Mubarak, could never be challenged. The opposite happened. In January 2011, the Arab Spring broke out, Mubarak had to step down and there was chaos.

“Suddenly the internet got cut, tanks were out on the streets and there was violence. I was an Indian leader who didn’t speak a word of Arabic and that was a challenge. While most companies evacuated, we chose to stay. That played off positively because the workers were grateful that the leadership never left when crisis hit.” Nestlé invested more in the country and the business grew by 25% year-on-year for the next five years.

Saving Nestlé India

The Maggi crisis (when the largest selling brand of the Nestlé India portfolio was accused of containing lead content beyond permissible levels) was the hardest, admits Narayanan. He was barely four months into heading Nestlé’s largest Asia operations in The Philippines, when he was asked to return to save the business in his home country. The Maggi crisis had pulled down Nestlé India’s revenue to ₹8,175 crore in 2015 from ₹9,855 crore in 2014, while net profit dipped 53%. The morale of the employees and the trade was at an all-time low as the century-old business stared at closure. The first thought that came to him was, ‘why me?’. He sought advice from his father. “When I spoke to my father, he said, come back. The company is asking you to take charge because it has confidence in you. In the worst case, you won’t be able to save the business. If that happens you can always return to Chennai and the two of us can have coffee and read the newspaper in the veranda every morning,” were his father’s golden words to him.

Narayanan never misses a game of tennis with friends during weekends. His forte is stroke play, which he believes is all about resilience. “I keep returning a shot that comes to me and I don’t necessarily add too much of power to it. I play to my strength,” he says. His greatest strength after braving so many crisis situations is resilience. “In a crisis you don’t run a company but you serve a family. Things don’t happen by ordering around; you have to imbibe and soak in the context, soak in the options and stand by the decisions that you take. You can’t pass the buck during a crisis,” he explains.

His first move after coming to India was to convince employees that their jobs were safe. “It was a risky statement to make, as I knew if things got worse, I may have to shut down factories. But today, I can proudly say that we didn’t part with a single employee.” Nestlé did the biggest reverse logistics in the history of consumer goods in India. It took back 39,000 tonnes of Maggi Noodles. “Many of our distributors and retailers refused to bill us. They said, we have earned from this company, so we don’t want to give you pain in difficult times. But our principle was to return every rupee of our partners. Everyone was treated with trust, dignity and respect.”

Narayanan successfully managed to steer Maggi back to safe waters. Every respected food laboratory in the country gave it a clean chit. However, the Maggi crisis was merely the tip of the iceberg of a much larger problem. Nestlé India had been consistently losing market share in whichever category (instant coffee, baby food, chocolates, etc) it was present in, much before it was hit by controversy. Maggi was the only saving grace. It was not just the larger food companies which were giving stiff competition; start-up-led direct-to-consumer brands were also making a mark. Narayanan put into practice his greatest learning from the game of tennis — “You are only as good as your last game, you have to constantly look at improving yourself.” He upped the innovation ante and Nestlé went on to launch 50-60 new products year-on-year at a success rate of 70%, delivering a robust growth of 11-12% for eight consecutive years. Revenue grew from ₹8,175 crore in FY14 to ₹24,276 crore in FY24. Market cap spiralled from ₹56,200 crore to ₹2.15 lakh crore in the past decade.

Narayanan not just bettered Nestlé’s innovation cycle, he also focused on penetrating into the belly of India. Nestlé, which was once perceived as a company that appealed only to rich urban consumers, today prides itself as a penetration-led, volume-growth firm. “We started on this journey relatively late in 2019-2020 with about 68,000 villages. Today we cover 200,000 villages. Our distribution penetration is increasing by the day in Tier-II, III, IV, V India. We have more than 15,000 touchpoints for distribution which was a third of that a couple of years ago. We believe the more people buy, the more they consume, the better is the company.”

Nestlé is also using technology to improve distribution efficiency. “We can geo-target using analytics which markets and pin codes we need to go to with our products. Earlier, it used to be spray and play. Today, using data analytics and with the benefit of AI, we are able to move from information-based platforms onto predictive platforms. My salesman is using the sales automation software before he goes to an outlet; he knows what he needs to sell and which promotion he should be focusing on.”

Narayanan firmly believes in the power of the general trade at a time when quick commerce is grabbing eyeballs. He says he will never walk away from general trade (GT), as it is still 85% of the trade and more importantly, makes money. Quick commerce, on the contrary, is still proving itself. “One needs to understand where your core source of business is. For me, my core source of business is still GT. I can’t walk away, and will not walk away because these are retailers who have built my business. I cover 1.5 million retailers directly and 4.5 million indirectly. I don’t land up giving somebody with a lower contribution a much higher return simply because it is more fashionable. Today ecommerce is 7-8% of my sales and half of that is quick commerce. We treat them as partners, but not at the cost of GT.”

Challenges Continue

The Maggi controversy is behind him, but Narayanan’s tryst with challenges continues. After delivering robust volume growth for eight years, Nestlé India’s growth story has got derailed due to the consumption slowdown. Its volume growth has dipped to low single digits.

Narayanan goes back to his tennis analogy of bettering his game no matter what the situation is. “You can release enormous amount of negative pressure in the organisation just because the going is tough. If you do so, the whole thing will collapse. People will start becoming embittered, take short-term decisions and start shirking on compliance. We have ensured that quality and safety are never ever compromised in the worst of times.” He refers to the recent controversy around the company’s baby food brand, Cerelac, which has been accused of containing a high percentage of sugar.

“The honourable Minister, J.P. Nadda (minister of chemicals and fertilisers) said nothing is found violated in Nestlé products with regard to added sugar, and that it’s compliant with the law of the land. I don’t have the power to get such a senior minister to make a statement of this kind,” says Narayanan. The company has launched 14 variants of Cerelac in the market with no added refined sugar ever since, and seven more would be coming out at the end of the first quarter.

A few months ago, a trade partner messaged Narayanan on LinkedIn saying he was trying to reach out to the vending machines team at Nestlé, but there was no response. Narayanan apologised, and ensured that the complaint was addressed. He believes in team play, again a lesson which tennis has taught him. “There is a team behind you to make you successful — your coach, the physiotherapist or even your partner are important components of your performance. When I responded to that message on LinkedIn, I got a flurry of messages saying there was no need for the head of the business to respond. I said it is important for the head of the company to respond. Not only is consumer centricity important, working as a team is equally important. If I only think from my perspective, I will take sub-optimal decisions.”

On July 31 this year, the 65-year-old retires from Nestlé India after an illustrious career of 44 years. So, what is Narayanan’s retirement plan? He doesn’t intend to mentor start-ups or smaller FMCG companies. He wants to teach in a business school. “I enjoy interacting with young people, I find it inspiring and educative. I have had the privilege of 40-plus years of relatively secured life in terms of job and expectations; kids today have to be prepared for a lot more uncertainty. If some bit of my experience or perspective can help, it would be my way of giving back to young aspiring managers.” Also, on his bucket list: To watch a few live tennis matches in Wimbledon and Roland Garros.

His two cents to leaders running businesses in an environment where volatility, uncertainty, change and ambiguity are a given — “As a leader one needs to first learn how to manage oneself, as you are going to have a crisis every day. It could be environmental, political, economic or even gender. So, it is not just multi-tasking but also assimilating all that is happening around you. You have to be sensitive, yet not allow them to adversely influence you. Organisations invariably fail not because of bad strategy, but because of bad leadership.”

Crisis makes a person strong, resilient, agile and proactive. Narayanan has proved it time and again.