The tranquil town of Vevey, Switzerland, perches among the vineyards above
glimmering Lake Geneva. Wealthy retirees take in Alpine vistas as they pass
their afternoons strolling along the peaceful waterfront. The most exciting
event is the annual grape harvest. Silicon Valley and the hubbub of high
technology seem worlds away.
But this bucolic setting is the epicenter of one of Europe’s most ambitious
Internet initiatives. At the town’s edge stands the glass and steel global
headquarters of the world’s largest food producer, Nestlé–which plans to
invest as much as $1.8 billion over the next three years to become one of the
world’s Web-smart elite. The venerable company wants to overhaul everything
from buying raw materials such as cocoa beans to producing, marketing, and
selling products such as KitKat chocolate bars and Nescafe instant coffee. Peter
Brabeck-Letmathe, Nestlé’s chief executive, calls the process "an
e-revolution’’–albeit one that will take several more years to fully bear
fruit. "This might sound slow for Silicon Valley, but it’s very fast’’
for a company like Nestlé, Brabeck says.
Nestlé in India |
Carlo M V Donati, chairman and managing director Revenues: January-December 1999: Rs 15 billion (profits Rs 984 Q3 2000 (July-September): Nestlé’s plants in India: Bicholim Taluka, Goa; Mogra, Key products: KitKat chocolates, Maggie noodles, Nescafe instant DQ |
Dot-com companies may capture the headlines, but Europe’s real New Economy
litmus test will come from slow, old-line multinationals striving to transform
themselves into e-businesses. It’s a Herculean task. The Continent’s giants
suffer from elephantine structures and the weight of decades or even centuries
of management tradition. The 134-year-old Nestlé, for instance, booked $46.6
billion in revenues in 1999. It employs 230,000 people and runs 509 factories in
83 countries, producing an astounding 8,000-plus different products.
The Web promises to make this lumbering behemoth more agile–and put a
serious dent in the cash Nestlé lays out for everything from supplies to
marketing. "For big companies like us, the Internet is particularly good
because it shakes you up,’’ says Mario Corti, Nestlé’s chief financial
officer and head of its Internet offensive. Early results are promising: Because
of new e-commerce initiatives as well as other restructuring efforts, Nestlé’s
net profit rose nearly 35% in the first half of this year, to $1.7 billion. Its
net margins grew almost a full point, to 7.2%.
The Swiss giant isn’t the only European industrial titan attempting to
become a nimble New Economy sprinter. Old-line Continental conglomerates from
the Swedish-Swiss group ABB Asea Brown Boveri Ltd. to Germany’s Siemens are
planning ambitious Internet investments. Unlike ABB’s power stations or the
trains and electronics that Siemens builds, food remains a local product that’s
hard to globalize. As Brabeck says: "You can’t sell a Bavarian soup to a
Taiwanese noodle-lover.’’ So Nestlé must practice a delicate balancing act:
wielding the Net to gain economies of scale, while catering to a wide variety of
cultural preferences.
Quick response. Because its task is so daunting, the Swiss food conglomerate’s
experiment is being watched across the globe. "This is about taking the
world’s largest elephant and making it dance,’’ says Thomas Baur, a
vice-president at software maker SAP. Nestlé inked a $200 million contract last
June with SAP–the German company’s largest sale ever–to streamline its
technology operations and give far-flung employees quick access to information
from around the globe. That should speed up financial reporting by more than a
month. And it will let Nestlé know, for the first time, how much it buys from
various suppliers around the world. As information flows more smoothly, Brabeck
says underperforming business units should be detected more quickly–and
responses formulated faster.
By William Echikson Contributing: Arlene Weintraub in BusinessWeek. Copyright 2001 by The McGraw-Hill Companies, Inc