Nestlé’s New Top Boss Hire Is A Sign Of Times To Come

Most FMCG veterans from Hindustan Unilever (HUL) and those heading other organisations fondly recall how their first assignments as management trainees were in rural India, say for example Etah in Uttar Pradesh. They said this experience shaped their outlook and understanding of the Indian consumer. But what happens when the consumer and the distribution pipelines start shifting, as they are now, from physical to digital or a complex hybrid of both?

Nestlé India, the maker of Maggi and KitKat, has recently hired a replacement for 26-year-old company veteran, chairman and managing director Suresh Narayanan who retires next year. Interestingly, the incoming chairperson worked with Amazon for eight years. However, he has also spent 20 years before that at Unilever. The Amazon part is unlikely to be a coincidence.

There are two interesting themes at play in the succession playing out for Nestlé India’s top job. First, Nestlé has chosen to go for an outsider. This is unusual for multinationals like Nestlé, Hindustan Unilever and Procter & Gamble, among others, particularly in the consumer products space.

These companies pride themselves on the internal growth opportunities and succession pathways for their employees that kick in almost the day a management trainee steps into the office. To skip the internal succession route would suggest Nestlé feels it needs skills the company might not have internally. Add to that, the new hire comes from Amazon and not another consumer products company. It is perhaps the experience in e-commerce that is presumably important here, apart from all the other factors of brand, market and consumer experience.

This is a different world from the early days of the HUL management trainee at Etah. Most consumer product companies would have similar initiation rituals given that this is the part of India where the bulk of their consumers reside. But the digitally savvy consumers are increasingly likely to consume differently, even if they are in the same physical locations. India has close to 800 million internet-enabled smartphones with a robust payment system for transactions and the logistics infrastructure to deliver to most places or pin codes. Significantly, for both HUL and Nestlé, the share of e-commerce to total sales is growing and currently stands around 7%.

HUL’s CEO Rohit Jawa said recently that e-commerce was growing faster than modern trade and modern trade was outpacing general trade, a trend that seems secular. Nestlé said a few months ago its e-commerce business continued to accelerate with significant growth in quick commerce along with click-and-mortar, driven by brands such as Kitkat, Maggi noodles, and others.

This is not to say that a stay in Etah will not be useful or productive for a management trainee in a consumer products company. But what they will learn in these places is likely to be different from their predecessors: a different lens and approach to selling.

In the earlier era, you had brand managers who focused on brand marketing, proposition and then a distribution tail which included warehouses and distributors. The structure of this goes back to the pre-GST era when states had different local taxes and transport of goods was highly constrained.

In the new era where direct channels are growing, the nature of distribution and marketing is changing fast. For example, there was no role for influencers earlier because sales were driven by physical outreach campaigns including in-shop posters, pamphlets and other merchandise. Or conventional media like television and print advertising.

The new consumer product company CEOs have to think differently and perhaps unlearn certain things that brought them to their current position. The new markets have to be driven by understanding and execution that is top-down. The realisation seems to have already set in, but the change will take longer to come. Nestlé’s hire is a sign of times to come.