Business Review

   

Overview

Nestlé Malaysia marked its centennial in Malaysia with another year of solid financial performance, underlined by consecutive good quarterly growth. This was driven by strong domestic sales with several of the product categories recording impressive double-digit growth.

Amid the challenging global economic conditions, the Malaysian economy remained resilient. The rising disposable income and the people friendly assistance such as the BR1M scheme helped consumer sentiments to stay positive and provide a boost in domestic demand.

In conjunction with the 100 years celebration, there was a notable increase in marketing and promotional activities to generate awareness as well as to express the Group's appreciation to our Malaysian consumers. The market reaction was very positive, which resulted in higher demand for most of Nestlé's products.

Continuous product innovation and renovation also resulted in the healthy demand for new variants, while promoting nutritional diets and healthy lifestyles in line with the government's goal of creating a healthy and productive society.

Meanwhile, exports, which accounted for almost 25 per cent of the Group's turnover, saw slower growth in 2012 as the weak global economic climate affected the demand from some affiliate customers.

Fortunately, strong domestic demand continued to spearhead the growth, compensating the softness in exports. For the year under review the Group turnover grew by 7.3%.

To support the increasing domestic and export based demand for Nestlé's high quality products, investments were made to enhance efficiency and boost production levels.

In the 2012 Business Solution Awards by the Nestlé Group, Nestlé Malaysia won 2nd prize for 'A Perfect Flow with Zero Waste to Deliver What Consumers Value'. It recognised excellent turnaround of the Nestlé Ice Cream Business, which was enabled by GLOBE as well as Nestlé Continuous Excellence tools and methodology. Focusing on delighting their consumers and customers with quality products and services, Nestlé Ice Cream started its Lean Value Stream journey in 2009 by eliminating non value adding activities and waste from its procurement, production, supply chain, distribution and retail value streams.

In 2012, training on Brand Building the Nestlé Way, a methodology and tools to help marketing teams develop strong and impactful brand campaigns was accelerated. The market conducted more than 100 trainings and workshops to all the marketing and sales teams where many successful campaigns such as MILO 'Play More, Learn More', NESCAFÉ 'Let's see what develops' and MAGGI 'Happiness is Homemade', were developed. This was reflected in improved brand health, accelerated sales growth and enhanced brands equity.

Additionally, the Sales Teams focused on 'Being Brilliant at the Basics'. This involved improving customer and shopper understanding, looking at ways to tap growth in alternate trade channels, strengthening performance with both our Modern and General Trade customers, and improving distribution and in-store execution through initiatives such as GPS coding of all outlets, creation of a retail lab and development of a perfect store concept. The implementation of a new Ullage Policy for Distributors in 2012 resulted in better freshness in the trade, improved stock levels and a reduction of goods to be destructed.

Complementing this, the Supply Chain performance improved in 2012 with service levels to our customers rising significantly. This was achieved while maintaining tight control of our inventories. The physical logistics side also showed significant progress with the Group increasing the utilisation of trucks in West Malaysia and containers moving products to East Malaysia. This lowered the variable distribution expenses and reduced our impact on the environment in terms of kilometer travelled per tonne of product.

The Group also continued with its people programme. A total of 27 Corporate in-house training courses were offered to employees which covered 1,589 people through a total of 94 sessions. The Group further engaged with employees by gathering their views through the 'Nestlé & I' employee survey, which saw a strong participation rate of 98%.

From the feedback, areas that required improvement were identifi ed and action plans have been established. One of the agreed action plans from the survey was to introduce a People Management Course for all our line managers. The course helped 218 line managers to better apply Nestlé's Management and Leadership Principles to effectively lead their teams to higher levels of performance. After a duration of three to six months, a training checkpoint survey was conducted for all participants to validate the outcomes of behavior change.

Thanks to the increased activities in promoting Nestlé as the Employer of Choice in universities, the Group also made good progress in improving its employer image in Malaysia. It ranked 23rd in the country among the 100 most popular graduate employers in 2012. Nestlé participated in 18 career fairs in various universities across Malaysia, and engaged with campus communities and undergraduates who were given a clear insight of the company, as well as the vast career and development opportunities within it. Additionally, as a result of greater brand visibility in key publications specially targeted at graduates, the Group managed to recruit best-fit young talents for its core programmes such as the 'Internship for Undergraduates' and 'Management Trainee for Fresh Graduates'.

Coffee & Beverages

MILO

It has been an exciting year for MILO, which started off with the launch of a nutrition campaign, aimed at educating mothers on the benefits of MILO. Key highlights of the campaign include the 10,000 pledges from mothers supporting this campaign and 10,000 breakfast giveaways by MILO to selected rural schools. The campaign was well received by parents and gain strong presence in the media.

MILO continues to advocate learning life values via sports through the MILO 'Play More, Learn More Campaign'. A total of 12 camps - reaching out to more than 45,000 children - were carried out nationwide, with the support from the communities through the respective local resident associations.

MILO Malaysia also introduced a new range of MILO mixes range - MILO Cereal (packed with cereal flakes), MILO Hi-Fibre (with a dietary fibre to help maintain the digestive system) and MILO Less Sweet (with all the goodness of MILO and 47% less sucrose compared to other chocolate malt mixes) - which provide added benefits catering to young working adults who are health conscious and looking for healthy options in their daily diet.

To provide consumers with even more value, MILO Sejuk was introduced in a value pack of 25 sticks.

NESCAFÉ

2012 is a year of innovation and continuous stimulation for NESCAFÉ with the start of a new communication campaign and launches of new products for the coffee shop specialty segment.

The NESCAFÉ mixes portfolio was expanded with the introduction of new NESCAFÉ Brown & Creamy, with brown sugar which gives it a creamy and caramel-like taste that appeals to young adults who are new to coffee.

Strengthening the growing white coffee segment was the launch of NESCAFÉ Ipoh White Coffee Hazelnut and NESCAFÉ Ipoh White Coffee Brown Sugar, along with the relaunch of an improved NESCAFÉ Ipoh White Coffee Original.

NESCAFÉ Dolce Gusto meanwhile launched its new machines - Genio and Circolo Automatic - while doubling the range of café-style beverages with Grande Intenso, an indulgent Chococino, refreshing Cappuccino Ice as well as the exotic, spicy Chai Tea Latte. The machines, beverages and accessories can now all be bought from Nestlé Malaysia's first online shop at www.dolce-gusto.com.my.

Nestlé Liquid Drinks

The Liquid Drinks business achieved strong topline growth, higher profitability and gained significant market shares in 2012. This was attributed to product renovation with the relaunch of MILO UHT and the launch of new NESCAFÉ UHT to recruit more young consumers.

With an improved recipe, MILO UHT is now tastier, creamier and more chocolaty to delight 7-12 year old children. Meanwhile NESCAFÉ UHT in 200ml packs aims to delight new coffee drinkers who prefer the comforting goodness of milk with a light touch of coffee and has gained significant market shares from the competition.

In the digital social sphere, youths were engaged to discover the extraordinary in them through the new NESCAFÉ on the Life Campaign, while the MILO Cans Next Games Campaign engaged and tapped their creativity by inviting them to redefi ne the future of sports.

Meanwhile, MILO UHT for the third year, continued to raise the awareness on the importance of paper carton recycling amongst Malaysians by collaborating with Tetra Pak, schools, retailers, charity organisations and other stakeholders.

Food Business

The Food Business continued to sustain strong growth driven by its core categories within noodles, stocks, seasoning and sauces, supported by investments in consumer engagements and renovations.

The Me and My MAGGI Campaign promoted tasty and balanced preparation of MAGGI noodles with fresh eggs, meat and vegetables, which was supported by the launch of a new packaging with noodle recipe suggestions. Consumers were also encouraged to share their unique recipes through a digital campaign.

Another highlight of the noodles campaign was the successful introduction of MAGGI Mi Goreng Kari Ori - a delightful fusion of MAGGI's well-loved curry flavour into a convenient dry noodle format - while the MAGGI Mi Goreng range was launched in a cup format. These initiatives resulted in increased consumer loyalty for MAGGI, which enabled the brand to maintain market leadership.

MAGGI's big idea - Happiness is Homemade - was further strengthened via continuous communication behind key culinary solution categories such as MAGGI Cukup Rasa all-in-one seasoning, bouillon stocks, Chili Sauce and Oyster Sauce. MAGGI Cukuprasa registered double-digit growth and increased market share as penetration increased with the launch of the 1 Ringgit Pack. Media communications, sampling and cooking events were also intensified promoting the goodness of home cooking among women, as well as the youth.

Nestlé PROFESSIONAL

Nestlé Professional acknowledged and thanked coffee-shop operators by hosting 'A Tribute to Malaysian coffee-shop, the Nation's heritage' ceremony. The coffee-shop operators unyielding support towards NESCAFÉ and MILO has made both beverages staples in Malaysia. Nestlé Professional also advocates healthier lifestyle and healthier choice through the 'MILO Kosong Campaign'.

In the Food business, the new MAGGI Abalone Sauce launch was well received by Chinese restaurant operators in Malaysia. NESTUM was also launched in coffee-shops, to grow the out-of-home consumption for this nutritious drink, as well as for restaurants, as a key ingredient in their menu creations.

Chilled Dairy

Chilled Dairy delivered another year of accelerated growth with a double-digit rise in both yogurt and yogurt drinks. Impactful brand communications and shopper engagement successfully led category growth and reinforced Nestlé's number one position in the yogurt category.

The communication for the Nestlé BLISS 'Looking Good From Within Campaign', which focused on the product's superior taste and product benefits, was effective in gaining new customers. Nestlé Natural Set yogurt generated higher brand awareness and usage through cooking demonstrations in store and recipe suggestions.

Confectionery

Confectionery maintained strong double-digit growth in 2012 driven by both the domestic business and direct exports. KIT KAT strengthened market leadership in the count lines segment and continues to be the main growth driver.

KIT KAT remains successful with its digital communication programs and in-store activities while Nestlé Wafer, which is targeted at the mass market, stays driven by strong marketing support and distribution extension.

Ice Cream

The year under review was a great year for the Ice Cream segment - driven by breakthrough innovations - which expanded the share of the Impulse segment.

Key highlights of the year included the successful launch of MAT KOOL Spiro and DRUMSTICK Rockin' Hazelnut. These breakthrough innovations were the first in the market and delivered our commitment to delight our consumers by creating excitement for the overall Ice Cream category.

Milks & Cereals

The encouraging growth of Nestlé OMEGA PLUS continued through collaborations with retail partners to drive higher heart health awareness. A more convenient way to manage cholesterol level was also introduced with the launch of Nestlé OMEGA PLUS One.

The Hot Cereals portfolio was reorganised under the NESTUM brand (for both All Family Cereals and 3in1 mixes) and the label was relaunched with a more contemporary design. A new value-added 3in1 range now offers the balanced goodness of NESTUM cereals and the renowned goodness of Traditional Asian Medicine (TAM) - NESTUM 3in1 with American Ginseng and Dang Gui - in collaboration with Eu Yan Sang, which is recognised for its TAM expertise.

Infant Nutrition

In conjunction with the Nestlé centennial celebration, the Nestlé Start Well Stay Well Educational Programme was undertaken to educate Malaysian healthcare professionals and consumers on the importance of nutrition in the first 1,500 days of life.

A symposium on breastfeeding was also organised by the Nestlé Nutrition Institute to share knowledge and exchange best practices amongst healthcare professionals in evolving and encouraging breastfeeding.

Healthcare Nutrition

Strong double-digit growth was achieved leveraging the Diabetes and Critical Care product platforms. NUTREN untuk Diabetik is the biggest contributor to the business while PEPTAMEN is the first choice nutritional formula for Intensive Care Unit patients.