In conversation with Nestlé Pakistan’s corporate-affairs head.
Switzerland-headquartered Nestlé set up shop in Pakistan by acquiring Milk Pak and the juice company Frost in 1988. Nestlé Pakistan is today among the largest food and beverage companies in the country. It achieved a turnover of Rs. 96.46 billion in financial year 2014 with a profit after tax of Rs. 7.93 billion. We spoke with Waqar Ahmad, Nestlé Pakistan’s corporate affairs chief, about the company’s 27 years in Pakistan, the Maggi noodles controversy, and more. Excerpts:
What are some of the country-specific challenges Nestlé has had to contend with?
One is the differences in regulatory standards following the 18th Amendment to the Constitution. Provincial laws need to be harmonized so our products can move freely throughout the country. A national quality policy would help. Nestlé also suffers from the law and order situation and energy crisis. To cope with the energy problem, we’ve installed biogas plants and are using solar panels to run our milk collection centers.
What sort of investments has Nestlé recently made in Pakistan?
Our $104-million milk-drying facility at Sheikhupura was the largest FDI in Pakistan in financial year 2013, when we also set up a $30-million water treatment plant. It costs $30 million annually to maintain these facilities. In 2015, we have earmarked Rs. 3.8 billion to increase operational reliability and capacity. Our innovation plans are geared toward making products different: we’ve introduced new beverages, such as orange-carrot juice. We’re also working to reduce sugar and salt content in all our products.
Pakistan ranks among the world’s largest milk producers yet imports around 40,000 tons of powdered milk every year. How does this change?
Nestlé collects milk from about 200,000 farmers across the Punjab and Sindh and is now expanding to Khyber-Pakhtunkhwa. In 2013, we collected Rs. 19 billion worth of milk; this grew to Rs. 23 billion the following year. The milk-collection cycle in Pakistan is a little more challenging than in most countries. During flush season [November through April], we are able to procure up to 3 million liters a day. In the lean season, this drops to 700,000 liters. We import milk solids to make up for the shortfall. The large difference in seasonal supplies can be reduced if farmers can source better feed, breed their animals well, and adopt better farming practices.
What are the major problems with Pakistan’s dairy industry?
About 95 percent of the industry remains undocumented. The potential for investment in packaged milk is tremendous, and the government can help by enforcing minimum pasteurization laws. Milk is mostly sold loose in Pakistan and significant production is wasted because it does not reach consumers in time. Pasteurization laws that encourage more packaged milk will decrease quantities wasted and also ensure quality and uniform standards. Pakistan should follow the model of Turkey—which was, a decade ago, where we are today. Their packaged dairy industry has grown from 10 percent to over 70 percent because the government provides subsidies to farmers who sell milk to processors. These farmers also get subsidized animals and chillers. Our government has encouraged the dairy industry by maintaining zero-rating sales tax on milk, but this will only be a promoter if processors get the tax refunds quicker.
Rightly or wrongly, there’s a cloud over the quality of bottled water available in Pakistan. How is your product different?
From extraction of raw water to the removal and insertion of minerals, we ensure quality is maintained. Microbiological analyses and quality-control testing on pH and minerals are done at our water factories to conform to quality standards stipulated by Nestlé, the Pakistan government, and the World Health Organization. The Pakistan Standards and Quality Control Authority (PSQCA) and the Pakistan Council for Research in Water Resources (PCRWR) evaluate our bottled water every three months. Nestlé’s bottled water has been declared “safe” by the PSQCA in each evaluation since the authority began evaluations in 2009, and the PCRWR has again confirmed the safety of our bottled water in its latest report.
Maggi noodles were banned in India because of high lead and MSG content. Are they safe to eat in Pakistan?
Maggi noodles available in Pakistan are not imported from India or anywhere else. They are manufactured at our Kabirwala plant. The raw materials as well as the finished products are tested at our quality-assurance labs that use methods prescribed by the Pakistan National Accreditation Council (PNAC) and ISO 17025. The PSQCA and the Pakistan Council of Scientific and Industrial Research (PCSIR) regularly check Maggi noodles. They are certified as halal and are absolutely safe for consumption.
Pictures of Nestlé juice boxes with mold growing on them went viral recently. What steps are you taking to avoid such health hazards from arising?
Such mishaps occur if the packaging of our products gets damaged. Our products contain no preservatives, so even microscopic damage to their six-layered packaging exposes them to air and high temperature causing decay. Damage can occur because of mishandling during any step of the value chain, from road bumps to cartons being thrown to careless shelving and storing. These are external factors which we cannot entirely control. But we are developing stronger packaging and adding extra layers of protection for transportation. We urge consumers to check for damage before purchasing any Nestlé product.