Interview: Paul Grimwood, CEO Nestlé UK and Ireland

At 48, Paul Grimwood has plenty of experience squaring up to the challenges facing his industry. Always a student of commerce, Grimwood was born and bred in the confectionary manufacturing hub of York before really being bitten by a FMCG bug during an industrial placement with Mars while reading business studies at Huddersfield University. “I was convinced within a few weeks of the placement that fast moving consumer goods and their manufacture were what I wanted to be involved with from there on in,” remembers Grimwood.

It was a conviction which has never faltered, though forays into pet food and whiskey production added diversity and a different insight than might have been gained at giants like Mars and Nestlé. Working for the more modestly sized Highland Distillers, now part of the Erdington Group, is an experience Paul particularly values. “It gave me an understanding of the financial challenges of running a business which you don’t get exposed to in a large organisation,” he says.

Not only that, but Highland Distillers woke Paul up to the varying requirements of product development from company to company and product to product: “Coming to Highland Distillers from Mars, I don’t think I learned anything about commercial strategy and marketing, but I did learn a great deal about taking a mid and long term approach to product development. Whiskey is not whiskey until it is three years old and that climbs to eight or ten years for malt.”

Developing patience as a virtue with regards to product development and strategic planning became an obvious asset to Paul on joining Nestlé. “Short term goals are important at Nestlé but there is a much heavier emphasis on the mid and long term,” he comments.

Fine words and not unfamiliar ones for well established organisations with vast resources. But what about the average SME? “I don’t think longtermism is the luxury of a large organisation, though they may be in a better equity position,” asserts Paul. “If I am honest I think it is the luxury of a well run company. If a company, whether it is small, medium or large, focuses on the short term, they will quickly become tactical and find that costs escalate as they struggle to manage cash flow.”

Grimwood says that all decisions at Nestlé are taken on a threefold assessment of “whether it is strategically right, will it deliver the benefits we need in the medium term and does it support what we call the ‘Nestlé model’ for operating in the short term.”

It’s a format which is applied globally, and like regional leaders in most multinational organisations, one that Grimwood must always bear in mind as he tries to promote the UK as an investment location for Nestlé and stand up for the broader concerns of British food and drink manufacturing. “My job has to be approached as a 50/50 split between being very passionate about the UK and understanding where the opportunities exist for Nestlé worldwide. I will lose credibility if I recommend an investment or an acquisition knowing full well that it would get a better return somewhere else.”

With the UK exhibiting relatively high energy costs, laborious labour regulations and being seen as a high tax jurisdiction, are Grimwood’s arguments that the UK is a key concern for Nestlé few and far between? Not at all he says. “I think the UK is a good place to do business. Nestlé has been operating here since 1886 and the attractiveness of the UK as a place to invest has improved recently, despite the economic environment. The government has sent out some very clear messages on how it intends to cope with the challenges at hand, and as a businessman, I feel confident making decisions based on those messages.”

The challenge is now on how to validate the confidence that led to headline grabbing sums of money being poured into Nestlé’s UK facilities. In the company’s full year results for 2011, released in February this year, £500m was pledged to developing UK sites over the next three years. The winning argument? “Nestlé sees the UK as a great place to export from,” states Grimwood. “At the moment we are exporting towards £300m a year to around 50 countries.”

And Nestlé is not the only food and drink organisation to find the UK offers big wins for food exports. In his concurrent role as deputy president of the leading sector trade body the Food and Drink Federation (FDF) and chairman of its Competitiveness Steering Group, Paul is proud to report that British food and drink exports (excluding alcohol) totalled a record £12bn in 2011 – up from £10bn in 2010.

So it’s a good news story all round? Not quite counters Grimwood. “These are record figures and should be celebrated but, marginally, we [the UK] are still losing share every year because other markets such as India and China are growing their ability to export food quicker than we are.” To tackle this Grimwood says there needs to be a one-stop-shop information point to make it easy for SMEs to get into the export game, rather than the confused landscape of advice from disparate groups in Defra, the Foreign Office and UKTI.

Instilling confidence in food and drink manufacturers to grow is of huge importance according to Grimwood. He says that food and drink, which is the UK’s largest manufacturing sector contributing around £20bn GVA and employing 400,000 people, has been disregarded by government in the past and completely overlooked by the previous administration in its assessment of growth areas in advanced manufacturing.

This faux pas has now been addressed and there are commitments in place between government and the FDF to see the sector grow 20% by 2020. Campaigns are already underway to increase the use of new automation technology in factories and boost investment in R&D.

This last issue of particular importance if UK food and drink manufacturers are to meet the needs of global consumers going forward – not in terms or product and brand development for consumer appeal – but in terms of survival. Paul grows serious as he says, “Food security is one of the big issues that the world must deal with – and it is a problem we are facing now, not a future scenario.”

Setting an example for the kind of R&D FDF would like more of its members to initiate with the support of the High Value Manufacturing Catapult, Grimwood describes Nestlé’s response to the food security challenge. “We are constantly trying to predict the dynamics that will dictate this. For instance, global warming and population growth. We are doing a lot of R&D work to develop crops which are drought resistant. In the Ivory Coast we now freely distribute 1.1 million drought and disease resistant cocoa plantlets a year. The plants also have a 30 per cent higher yield than the average cocoa plant. It’s all very well to talk about food security, but this is the kind of thing we are really doing to tackle it.”

The problem boils down to “a fundamental challenge for us as a food provider to continue putting food on the table for people around the world,” says Paul. But what about the tables of those who already have far too much?

As the producer of much loved confectionary brands, children’s cereals and a host of products familiar in the average Western kitchen, Nestlé often finds itself with the spotlight in rows over the responsibility food manufacturers should take for rising obesity levels around the world, particularly in the West. But should manufacturers really be taking the flack for lack of self restraint and poor dietary education on the part of their customers?

“There is no one person who should be held accountable for this kind of major issue. But there are a variety of stakeholders,” Grimwood answers diplomatically. “We call ourselves a nutrition health and wellness company and we take that seriously when measuring the effectiveness of our products. What it means practically is that, while every product must pass a 60:40 taste test – where a bare minimum of 60% of those trialling it must say there is something really special about the flavour – there is also a 60:40 Plus measurement which asks if there is some kind of nutritional benefit to the product.”

Paul talks about the Nestlé biscuit range as an example. “People talk about products like biscuits very quickly, and without much knowledge, as being unhealthy. But the fact is that the Food Standards Agency says 10 per cent of your daily intake can be from snacking. Taking that guidance, we have developed and reconfigured many of our favourite brands, like Kit Kat, Breakaway and Blue Biband, so that they are only 99 calories. This gives the consumer a snacking choice that is easy to keep within that 10 per cent.”

Nestlé has led the way in removing artificial preservatives and colours from all its confectionary products and halted advertising to children long before there was pressure on confectionary makers and retailers to do so. It was also brave enough to be the first confectionary manufacturer to put RDA (recommended daily allowance) information on the front of all its products – clearly showing consumers how much of their daily intake each portion contains.

“So, as the manufacturer of so many leading food brands there is clearly a responsibility for us in advising on how to consume responsibly,” says Grimwood – though the ‘but’ hangs heavy in the air.

“There is a limit though,” he continues. “It is not all down to us. I have real concerns about the education process in schools when it comes to nutrition. If you ask quite well educated youngsters today how many calories they think they have on their plate and how many they should be consuming in a day you get a ridiculous range of answers because they simply don’t know.”

Summing up Paul speaks of the four-way stakeholder relationship he feels is necessary to get control of the world’s rapidly polarising picture of glut and famine. “Government, education and industry all have to play a part, and then it will come down to the fact that some people out there just need to start taking responsibility for themselves. People can’t go on blaming their own poor nutrition on the fact that they found a product tempting on the shelf.”