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August 2006 - Strategy Magazine
Biz

What's the strategy? Series: Word from the top of Canada's biggest CPG players - Nestlé's innovation renovation
It's all about taste. And also the ease factor. But don't forget health, and then there's retail and...the list goes on

by Lisa D'Innocenzo
page 11

Bob Leonidas dips a spoon into a bowl of Purina Beneful dog food, lifts it to his lips and unhesitatingly swallows a mouthful, then offers a taste to said reporter, who politely declines.

"It's fantastic," says the president/CEO of Nestlé Canada, pointing out the healthy ingredients - veggies, meat and rice - clearly visible in the chow. He also stresses the packaging - a plastic bowl with a lid that is easily snapped on and off. "Here we're taking canned dog food and putting it in a [format] that's unique and you can just take it and put in on the floor."

Interestingly, this pooch product reflects the type of fare that global giant Nestlé is serving up for human consumption as well. Leonidas, who has been with Nestlé Canada for the past 22 years and took the reins of the company last March, notes there is a trio of trends driving the Toronto-based CPG firm's business for the future - health and wellness, convenience and portability, and taste, the latter being "always at the forefront."

To deliver on these consumer needs, Nestlé, which has a vast array of brands in categories ranging from water to pet food and confectionery, has implemented what its leader calls an "innovation renovation" strategy. (More on that later.)

He adds: "We're an evolutionary company, not a revolutionary company. We don't come out with big statements saying we're going to do this or that. But if you look at our annual report, you will see good, steady growth. In the food business, I think it's the right strategy."

Integral to the process of "innovation renovation" is a thorough research procedure. Nestlé Canada has put into place an "expert panel" of eight that visits HQ every two weeks to rate the goods.

The participants, who have been involved in the program for three years (it was first introduced in 2001), have an affinity for the culinary and have been trained for their task, not unlike wine experts. They sit in a booth and are passed dishes through a window, where they examine the product under infrared lights, judging it for appearance before moving on to aroma and taste. Their results are then tabulated. Leonidas believes the research panel is unique to the Canadian marketplace, both in terms of its scale and interaction.

He adds that the Canadian division, which has 4,300 employees, 27 locations and 11 factories, also takes advantage of its Swiss parent Nestlé S.A.'s product technology centres, of which there are six. "You can ask them to develop ideas, and [there is also a] research institute in Switzerland," he notes. "We spend well over $1 billion on research globally, which is huge in food."

Nestlé's carefully crafted strategy for growth appears to be working. According to its 2005 annual report, Nestlé S.A. experienced 6% organic, and 4% real internal growth, which measures like-for-like volume growth.

Here in Canada, things appear equally buoyant. ACNielsen data, for the 52 weeks ended March 18, 2006, indicates Nestlé's market share was up 11% from the previous year, making it the fastest-growing CPG company in the country, in a category that is holding steady at between 1% and 3% growth.

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