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Name Maurizio PatarnelloCompany Nestlé Russia and EurasiaPosition Regional CEOHQ Moscow for Nestlé Russia and EurasiaEmployees 10,000 employees in Russia and Eurasia region

EXECUTIVE INTERVIEW

The largest food and beverage company globally—with revenues of CHF91.6 billion in 2014, and sitting at number 11 on the Financial Times Global 500 list —Nestlé is a force to be reckoned with. You’d be hard pressed to find someone who hasn’t consumed a Nestlé product at some point in their life, with their reach spanning the globe.

CEO of Nestlé Russia and Eurasia, Maurizio Patarnello has worked for the food giant for more than 20 years. Originally graduating with a degree in business from the University of Bologna, Maurizio worked his way through a number of senior positions at Nestlé before being appointed to his current role. Maurizio spoke to The CEO Magazine about how he has grown Nestlé in the Russia and Eurasia region, Nestlé’s focus on training and developing its staff, and why it’s essential for the company to have good relationships with local suppliers.

The CEO Magazine: Having joined Nestlé in 1993, how do you feel your positions within the company prepared you to fulfil your mandate as CEO of Nestlé Russia and Eurasia?

Maurizio: I always say that your career is a journey. During my journey, I was lucky enough to have several postings in quite interesting countries that were

Nestlé is seeing substantial growth in Russia and Eurasia under the leadership of CEO Maurizio Patarnello.

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EXECUTIVE INTERVIEW

others. In my career, I experienced substantial growth. When I was in charge of a large geographical area that comprised many emerging countries, we had an ambition to double our business, and that is what we did—we exceeded this goal in relatively short periods of time. So it was substantial growth.

Of course, Russia was a different story because it was already a market that you

could consider, in certain categories, to be mature. A category like confectionery, for example, has been in the country for a long time. Even during the Soviet era there were confectionery factories all over the country. There are also other categories that are more recent and with higher potential. So the way we ensured growth in Russia was essentially by investing in our brands and investing in innovation. We focused on the brands

that were really generating growth, and brought innovation to those categories, such as coffee, confectionery, and ice-cream.

What have been the major challenges you have faced and how have you overcome them?

Innovation, and basically bringing new technology into the market, is one of the drivers to overcome challenges. We had to remember that the region and its growth is not just based in Russia; there were, and still are, other emerging countries. As a result of a good strategy and development in the other countries in the region in the last two years, we had quite fantastic growth in not just Russia, but also in Kazakhstan and Turkmenistan, just to mention a few countries. I think this geographical development was important to our growth.

What do you believe gives Nestlé its competitive edge in Russia and Eurasia?

First of all, our vision. We have become  a  company that is both international and local, with large scale. We have invested more than US$1.8 billion in the  last 20 years, essentially in building  capacity and doing a few key acquisitions. Our first goal was to be a big company in Russia, because this is a  country where I think you cannot succeed in business with a small approach. If you don’t have a vision about where you want to be, and about building a large business, you’re better to  stay out of the Russian market. Nestlé had this vision, and over the years has

“The way we ensured growth in Russia was essentially by investing in our brands and investing in innovation.” - Maurizio Patarnello

totally different from one another. I was in Western Europe, the Middle East managing Africa and Asia, and then Eastern Europe. I didn’t think that one day I would be the CEO of Nestlé Russia and Eurasia, but of course the company gave me the opportunity to be exposed to so many different environments which helped me get to where I am. The  key to thriving in different environments is your capacity or ability

to identify partners. I was lucky enough to have seen so many different partners, in different parts of the world, in different categories. That gave me a background to allow me to identify different situations and patterns and then decide on the appropriate measures to address different situations. In this sense, my previous roles were a good preparation for my current role.

Your mandate, when you became CEO, was about growing the region. How have you achieved growth in your previous roles and how do you apply that to your leadership of Nestlé Russia and Eurasia?

First of all, you have to have a passion for growth, and I have that mindset. But it can be difficult because there are places where it is easier to grow than

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implemented it consistently and with determination.

This already gave us a competitive edge, which has essentially translated into two key things that give us a further advantage. Firstly, we are manufacturing nearly 90 per cent of what we sell in the region locally, which gives us a competitive edge compared to companies that import products. It also gives us the ability to adapt to the local sales. I think there is no such a thing as a global consumer. Each consumer is a local. In Russia, consumer behaviour is different region by region. At

Nestlé we have product technological centres and application groups to adapt our products that are manufactured in different Russian regions to the local taste. Another strength is the mix of international and local brands. This structure of our portfolio has helped us to sharpen our competitive edge.

How does Nestlé invest in its staff  with regard to training and  development?

We invest in staff in many ways. We develop our staff using international and local training. We have a partnership with the Vlerick Business School in

Belgium to expose 50 managers per year to a development program delivered in Moscow. We have very strong training programs for staff in the factories, such  as the Nestlé Continuous Excellence  Program, which is the development plan we have established for employees in our factories.

With the majority of materials packaged and sourced within the region, how has Nestlé taken steps to strengthen and consolidate the supply chain?

Supply chains in a country like Russia are extremely important now. In the

last 20 years, we have developed good working  relationships with local suppliers. And we continue to do this by  investing our time, resources, and expertise to share knowledge with those partners. It takes time to develop these relationships everywhere, and the situation is the same in Russia because there are quite well-established quality standards that suppliers have to meet. It takes time and it takes investment from both sides. It’s all about sharing  technology with them; sharing  the know-how.

We have a dedicated department to work with suppliers. Teams go across the country working on procurement with potential partners. Then we have  a  group of people in the technical  department who ensure the development of our suppliers. This is

another key success factor for us, because not every company has the ability, the expertise and the resources to develop local suppliers, but if you don’t do that then it doesn’t make sense to manufacture in Russia. You could continue to manufacture in China and export to Russia. Because if you don’t develop your network of local suppliers then you lose one part of your competitive  edge.

What do you believe will be the major changes or trends in the food and beverage industry in the coming years, specifically in Russia and Eurasia?

I think there is a game changer already—it’s the structure of the food and beverage industry. If you compare Russia three years ago to today, the

development of the modern trade has been incredible, particularly for the discounters. So this will have an impact on changes in the industry. When you have to fight for a piece on the shelf in the discounter’s store, you need to have a few very good SKUs [stock keeping units], but at the same time they have to be innovative. It’s crucial to bring continuous innovation into the market, and certain categories are very innovation driven. It’s about balance, because simultaneously you need to have SKUs that cannot fail with a consumer, that are immediately appreciated and popular, because that’s the only way we have assurance with the modern retailers that we will remain on the shelf and will  continue to be distributed. This, I  think, is the main game changer going forward.

“I think there is no such thing as a global consumer. Each consumer is local. At Nestlé we have product technological centres and application groups to adapt our products that are manufactured in different Russian regions to the local taste.” - Maurizio Patarnello