Conflict and oil prices bring tough times for Nestlé in Middle East

By RJ Whitehead

- Last updated on GMT

© iStock
© iStock

Related tags Saudi arabia

Lower oil prices and disruption from conflicts in Syria, Iraq and Yemen have prompted the chief executive of Nestlé Middle East to brand the last year’s business as challenging for the Swiss multinational.

Nestlé’s regional operation has lost more than US$220m in business because of conflicts, while the low price of oil has also impacted the company in terms of the overall economy and low government investment, Yves Manghardt told Arabian Business​.

2013 was the tipping point for us​,” Manghardt said. “In February we lost our factory in Syria, which was our third largest country in the region at that time. Today it’s the tenth largest. 2014 was [when the conflict began in] Yemen and mid-2014 was the start of ISIS in Iraq​.” 

The factory in Syria manufactured products including infant cereals, milk powder, coffee, Milo and Maggi products for distribution in the country.

We used to have 600 people: 300 for the factory, 300 for overall business. Today we have just a few more than 70 people. We used to handle our business directly; we used to have close to 120 vans doing direct sales, but we don’t have one single van now and we rely on wholesalers to cover the country​,” Manghardt said.

Despite the difficulties caused by conflict and petrol prices, Nestlé Middle East reported US$2.4bn in sales last year, and “category-wise we are doing quite well​”. 

We maintained our increased market share, [across the region]. We have come up with some very good innovations in terms of nutrition, health and wellness​,” Manghardt said. 

In Iran, the company has launched Project Horizon, which helps farmers improve the quality of their milk to Nestlé standards. 

The [farmers] were not aware of issues with their milk. What we’re doing is helping the farmers, from feeding to milking the cow, to have a better quality. It now means that we can take 50% of our requirements locally. The aim is to become self-sufficiently locally​,” Manghardt explained.

The company has also been investing in education in nutrition, health and wellness. Its Lebanese programme, called Nestlé Healthy Kids, has also been rolled out in the UAE and Jordan.

We have evidence that the programme helps children to eat more vegetables, more fruit, and drink more water​,” Manghardt said.

In terms of consumer products, Nestlé has developed lines specifically for the Middle East, including Nescafé Arabiana, the first ever instant Arabic coffee. 

It was developed for Saudi Arabia​,” Manghardt said. “It look us three years and it involved the technology centre that we have in Switzerland and Japan. This was to answer a specific local taste and give an answer to a process that usually takes half-an-hour which is not very easy to master. Now we are exporting it to the United States, but it was really done for local taste​.”

Related topics Business Middle East Industry growth

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