Global food giant Nestlé began importing noodles into Papua New Guinea in the late 1970s and is now one of PNG’s major manufacturers. How does it do business in PNG? Business Advantage PNG asked the Managing Director of Nestlé Pacific Islands, Eugene David.

Nestlé Pacific Islands’ Eugene David

Business Advantage PNG: What are your plans and strategy for the Papua New Guinean market over the next twelve to twenty-four months?

Eugene David (ED): We are in the middle of executing an investment plan and increasing capacity in our factory in Lae, which will keep us busy through 2013 and 2014. We want to increase the capability of our factories to meet the growing demand from the consumers. As a result, we are expecting to increase the number of people we employ.

BAPNG: How do you see Nestlé’s mission in PNG?

ED: We’re a food company and our mission is very simple: it’s to delight generations of consumers across PNG and the Pacific by offering tastier, healthier food and beverage choices. For us, it’s about building trust in the brands that we have and in the Nestlé company. This takes time, so Nestlé is a company with a long-term view. We’ve been in PNG for close to three decades now, manufacturing for over twenty-five years in Lae.

Road transport from Lae to Hagen of around 320 kilometres is around two times more expensive than a comparable distance in Australia.

BAPNG: How important is it for you to have a local manufacturing capability in PNG?

ED: The local manufacture part of our business is a sizeable one. Around 85% of our sales are locally manufactured in PNG—made by PNG for PNG—and I think it’s a very strong indication that we are here to stay. Being in the food business, local manufacture gives us the advantage of being closer to consumers and allows us to be more responsive to evolving taste and needs over time, which can change. So we believe that the strategy of staying closer to the consumer is the right one.

BAPNG: Papua New Guinea is not a low cost place to do business, and yet you have to be very mindful of getting the best price point for a product. How does Nestlé navigate those two possibly conflicting issues?

ED: It has always been a challenge. Logistics certainly carries with it some cost that puts operating in PNG in a slightly different position compared to operating in markets where you have better logistics. Just to illustrate: road transport from Lae to Hagen of around 320 kilometres is around two times more expensive than a comparable distance in Australia. Similarly for shipping: the 800 km journey from Lae to Vanimo is even more expensive than shipping from Sydney to Auckland, which is 2000 km.

We challenge ourselves to drive down all other costs we can control. Having said that, we are clear on areas where we do not want to cut costs, and that’s in the area of quality and product safety. I think it’s one area indeed that PNG as a country needs to seriously address. If it really wishes to be competitive in the future, improved infrastructure needs to go beyond just forums and discussions into real actions and projects.

I think the view is it is the time to invest ahead of the herd. I think a lot of companies were caught in a situation where they were chasing their tails over the last two or three years.

BAPNG: One of the things that’s impressive about your operation in PNG is how you get the goods to market …

ED: We work within existing trade structures. We have wholesalers who have a very specific set of loyal customers, and those customers supply down as low as two or three layers below that. Each of the layers have roles to play and some cost and risk attached to them, but our approach has always been to recognise the important roles each of these retailers and wholesalers play. Our job from a Nestlé perspective is to make sure we are satisfying the consumers.

BAPNG: If you want to sell products in Australia, you can put ads on TV and radio, you can put point-of-sale material out in the retail environment. Are there any particular tactics that work well in PNG?

ED: Yes. In PNG, one of the key initiatives we have is what we call the Village Roadshows. The Village Roadshow is about helping increase the awareness of basic nutrition, teaching people the basics of food preparation with hygiene and of course helping them prepare healthy balanced meals. It’s a lot of work to reach out into hundreds of villages. We have done it for quite a number of years, which is part of why Maggi noodles and some of our other brands are the best loved brands in the marketplace today. I think the personal interaction is very important. As you can imagine, in PNG culture it is the sort of activity that is talked about long after the event has been run.

BAPNG: Retaining staff has been a big issue for employers of all kinds over the last few years. What strategies do you have to train and retain staff?

ED: Attracting and keeping the best talent is critical to our long-term success. However, we believe that attracting and keeping the best talent is not just about competitive remuneration and benefits. Probably, Nestlé won’t be the highest payer in the market. That’s never been our strategy. We have a concept we call Total Rewards which includes dimensions such as personal growth and development, work environment, and work/life balance, and so on, which we believe offers our people more.

BAPNG: How do you feel PNG’s economy is travelling at the moment?

ED: It’s slowing down a bit but you don’t want to be too cautious. Yes, there could be a little bit of a slow down, but it’s also anticipated to peak in 2015, so what are you going to do? If anything, I think the view is it is the time to invest ahead of the herd. I think a lot of companies were caught in a situation where they were chasing their tails over the last two or three years.