What Nestlé Forgot to Mention When Giving Its Reasons for Scaling Down in Africa

Thursday, June 18, 2015

Five years ago, Nestlé announced its bold expansion plan for the sub-saharan Africa region: a $161 million investment to build three new factories and 13 new distribution facilities. The desired outcome? Increased sales for the food multinational and 750 new jobs for the 21 countries in the region. This plan was inspired by the much-talked about economic revival of Africa and its “rising middle class”.

Now, in 2015, the tune has changed and Nestlé wants to scale down.

It will start off by cutting 15% of its workforce, reducing its product line by half, and focusing on more “core” product offerings.

In an interview (paywall) with the Financial Times, chief executive of Nestlè’s equatorial Africa region (EAR) Cornel Krummenacher, said:

“We thought this would be the next Asia, but we have realized the middle class here in the region is extremely small and it is not really growing.”

What is missing from Krummenacher’s explanation is a good-ol mea culpa.

In this case, it would be: “Sorry, we focused too much on Africa’s emerging middle class, and forgot about the low-income consumers.”

Source: Quartz (link opens in a new window)

Categories
Agriculture, Entrepreneurship
Tags
agribusiness, impact investing