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Market insight into sustainability

17 June 2011 by
Market insight into sustainability

A big name in the UK out of home industry, Nestlé Professional will be sponsoring the Sustainable Business Award at the 2011 Cateys. Managing director Neil Stephens explains how sustainable business has developed from a cost-add to good business practice. Mark Lewis reports

Has the sustainability agenda taken a back seat in the downturn? No, it is gathering momentum. It's gone from "this adds to my credibility" to "this is central to my business". In the not too distant past sustainability came with a cost-add view. Now there's a growing view that a sustainable business is a good business: it delivers objectives and results you would want. In many cases sustainable businesses are highly profitable because sustainability and efficiency and using resources with a scarce mentality means you can reduce the cost of your business.

Do sustainable practices extend to guaranteeing the industry's future skills set? Yes, and Toque d'Or is Nestlé's manifestation of our commitment to continuing skills development. It's an example of us creating shared value. It's not just a competition to see how good at cooking you are - it's the whole aspect of what it takes to create a successful proposition, in a financially sustainable way, so it's a test of your overall appreciation of what it takes to operate a business.

Through Toque d'Or, Young Chef Young Waiter, School Chef of the Year, all the way through to the Bocuse d'Or, we see a whole lifeline of where we're helping to build skills. That is probably our single biggest motivation and therefore contribution. It's linked back to that notion of having to take some responsibility for the industry you operate in.

What does sustainability mean to you and Nestlé? Nestlé is a long-term business. One of our fundamental beliefs is that we have to create shared value for employees, the communities we produce in and source from, and the industry in which we work. We have to work with these stakeholders in a sustainable way because, if we do, future generations will have sustainable employment and our business will sustain itself. It's not philanthropic - if we don't practice sustainable methods the industry won't continue to be healthy, therefore we won't have a sustainable future as a business.

How is the industry holding up at the moment? We look at consumer confidence monthly and it continues to fall. Underlying demand is soft across the board. Consumers are spending a little less. We're looking at £15 a head as the biggest area of focus. Once it goes beyond that we start to see a tail-off.

Consumers still want to eat out, but they're looking for better value and choose a chain on that basis. That's manifested itself in the voucher trend, with which small independent businesses can't compete. Forty per cent of consumers are regularly using vouchers - a very high statistic. Two or three years ago they were sometimes seen as a negative thing to use in a restaurant, now it's a widely accepted behaviour.

The other area is people's view of quality of experience. We're seeing that there's more risk aversion. If I'm going to go out I need to know that the experience will be good. If they have a bad experience they won't give it a second chance. Conversely, if they have a good experience they'll keep going back - their money is a bit more hard fought for than it was two or three years ago.

What channels are thriving? We see QSR performing well, partly driven by this value for money proposition and convenience. A number have positioned themselves to a slightly healthier proposition. Managed pubs are also showing signs of steady growth - again through vouchers or deals.

Interestingly B&I is under pressure because people are bringing food from home and spending less on-site. There are still good alternatives for lunch and lunch is still a very big out-of-home occasion. The more fine dining areas are under a bit of pressure.

Given their relative buoyancy, will you chase the QSR and managed pub spaces? There are aspects of our business that are growing faster than others. The temptation is to follow those horses. But we already have strong businesses in health, civil areas and education, so we're not about to suddenly walk away from those elements and just chase QSRs. Our business is set up on longer term plans to continue to add value to the health and civil areas as well as looking at opportunities in other areas. It's about making sure we are agile in that short-term period and continue to be relevant to our customers and end-users.

How can you work with key customers to add value? We aim to be an inspiring growth partner. To do that we have to engage on several fronts. One is sharing more market insight. Another is ensuring our products and solutions enable customers to have a more convenient proposition where less resource and skill is required - they're able to take ingredients out of their business because we give them a more complete solution.

We also help customers to sell more by adding solutions like menu planning on food and beverages. We have teams advising on what beverage products you should be selling, and recommending selling prices. The last front is around trying to be more efficient with our customers so they look at us as a supplier that is willing, for example, to reduce road miles so they don't have to carry as much inventory and can take working capital down.

Isn't it paradoxical that Nestlé is supportive of skills-based initiatives like Toque d'Or, yet produces solutions for greater convenience? We recognize that some businesses demand simpler, more systematic ways of doing things which does take skill levels down. In other environments that's not the case and skills are very much alive and being developed. We try to look at the whole picture.

What was your response to the Responsibility Deal? We embrace the pledges and we've signed up to them. More consumers are looking for nutritional guidance. There's an openness to seeing calories on a menu and an expectation that consumers eat more healthily when they're out of home. They are more aware of fat and salt content.

We believe these trends will continue to develop and we have to make increasingly nutritionally balanced, healthier propositions for the market.

Are there challenges? Yes. As you get further down the chain and closer to where consumption is happening, a lot of tracking and monitoring is required to deliver on the pledges. Can I help as a supplier? Absolutely. The industry needs to collaborate: this ultimately only has traction if the consumer is given information and alternatives that meet their needs or aspirations.

Tell us about the impact of food costs. These are a significant issue. There are some areas where the rises are dramatic and it's impossible not to pass some of them on. But if I passed the whole lot on it wouldn't be sustainable. I would fundamentally affect consumer behaviour.

My challenge to myself and my team is, if we're not putting the emphasis on what constitutes value for our customers, and we're adding cost to our business that isn't helping give value, then we need to eradicate it. We have to make sure I'm doing everything in my own power to take out costs that are not directly leading to the value proposition in the marketplace.

Stephens' tips on trading successfully

â- Be intimate with existing and potential customers. What kind of consumers do you have around you: high or low disposable income? Young or ageing?

â- If you're incurring cost that doesn't contribute to the customer proposition eradicate it ruthlessly and reinvest savings back in the proposition. My mantra is: if it was your pound would you spend it

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