Conflicts in Syria, Iraq and Yemen have slowed the company’s regional performance, according to Rainer Mueller, communications and marketing services director at Nestlé Middle East, with the rise of ISIL in Iraq reversing three years of steady growth in the country.
“In non-stable countries, which include Syria, and Iraq since last year, it’s clear that we are losing business compared to the past. We made a calculation, just to give you an idea, over the last three years – if we add the loss of sales in Syria, Yemen and Iraq, it is an amount of around US$220m, which is a significant size for the business,” said Mueller.
Never pulling back
He said while the Middle East was a region of challenges, it was also “a land of opportunities”, and that for the time being Nestlé, along with many other companies is having to distinguish between stable and non-stable countries in the region. But he said there was no possibility Nestlé would withdraw from any of the non-stable markets.
“We have been present in the Middle East for 80 years – we started in Lebanon in 1934. The fact is, in the countries where we started to distribute our products to consumers, we never went out. In Syria we are still present, we are still present in Yemen – we are, despite all difficulties, never pulling back,” Mueller said.
“We strongly believe that this is a consumer need, that we provide our products to consumers, despite difficult conditions. And as a consequence, there is a trust level we have achieved with consumers over the years – we were never opportunistic, we always said even if we lose money in a country, we will continue to be there to provide our products,” he added.
Growth targets doubtful
When asked if these conflicts would affect Nestlé’s ambitious growth targets – which regional CEO Yves Manghardt set at US$6bn in sales by 2020, almost three times its current US$2.4bn, in February this year – Mueller acknowledged there would likely be an impact. But he said strong growth in stable countries would mostly offset the losses in markets such as Syria and Iraq.
“We are not in growth numbers of 13% or 14% – rather we are in high single-digit growth. This means we still believe in the US$6bn we can achieve in this region, but it might not be in 2020 – it might be a few years later,” he explained.
Nestlé Middle East operates 18 factories across the region, 15 of which produce bottled water. Two of its food factories are based in Dubai, producing powdered milk and confectionery, with a third US$109m plant under construction in the emirate, slated for coffee and culinary products.
The firm also operates a factory in Iran, which produces infant cereals and formula milk. It will soon add production of Nesquik and coffee products.