Kais Marzouki, Chairman and CEO, Nestlé Philippines

On the pandemic’s impact on consumer behaviour

In what ways has the Covid-19 pandemic changed consumer behaviour?

KAIS MARZOUKI: First, demand for fast-moving consumer goods (FMCG) has fluctuated throughout the different stages of the pandemic: we witnessed a surge in the initial weeks, followed by stagnation as many households experienced lower or no income. As of the third quarter of 2020 demand had fallen below pre-pandemic levels, and we expect this to continue until at least the first quarter of 2021. 

Second, consumers have broadly shifted from out-of-home to at-home consumption, which translated to more cooking and baking at home – at times trying to recreate the restaurant experience. This has impacted a number of channels and categories in different ways. 

Third, there has been a stronger focus on health and nutrition in the minds of consumers. Not falling sick has become a priority for every household, irrespective of purchasing power, as nobody wants to go through the related stress of visiting a doctor at this time.

What were the main challenges manufacturing companies faced in maintaining operations and distributing goods during lockdown?

MARZOUKI: When the lockdown started, firms had to quickly reorganise their workforces to enable the safe return of employees to factories and distribution centres in order to resume operations. We needed to find creative ways to achieve these dual goals. Some companies in the Philippines did so by housing employees on their worksites, which proved to be a complex task as everything – including food, internet, and leisure and rest areas – had to be set up very quickly. Even so, this model was successful because employees did not want to place their families at risk, and many preferred to isolate in the workplace with the facilities and services provided by companies. Motivating staff to return to the worksite was also not a given at times, and often necessitated one-on-one personal discussions.

Supply chain adjustments were another challenge. New suppliers had to be identified in record time as countries where raw materials had previously been sourced went through various stages of lockdowns. Back offices and procurement teams had the double task of transitioning smoothly to work from home, while also securing the supply of raw goods and packaging materials. Organisations had to become more flexible, especially in the face of growing demand in the initial months of the crisis.

To what extent will the pandemic encourage food-manufacturing companies to stock up in the event of another crisis?

MARZOUKI: Naturally, if we had known that there would be a pandemic in 2020, we would have built up more stock. However, most organisations have now learned how to navigate such an extraordinary situation. In parallel, and more importantly, consumers understood that a lockdown would not automatically lead to food shortages. For example, during the second lockdown in July 2020 we did not witness long lines in front of supermarkets. Food manufacturers will therefore not have to manage as extreme of adjustments as they did during the first lockdown.

How has the focus on environmental sustainability affected FMCG in the Philippines?

MARZOUKI: Both consumers and policymakers are increasingly cognisant of the importance of environmental sustainability. Millennials, in particular, are concerned about the future of our planet, as are consumers in the middle and upper socio-economic groups. While the Philippines’ FMCG market is heavily dependent on packaged products made from single-use plastics, distributed through more than 1m sari-sari stores (small informal stores), the country has also been singled out as the third-largest plastic polluter of oceans.

In this context, we recognise that each manufacturer and user of plastics needs to play a part in preventing waste from ending up in landfills or in the environment. We took steps to achieve plastic neutrality in August 2020 by retrieving and cleanly disposing of as many tonnes of plastic as we consume for the packaging of our products – and we intend to stay this way. We also advocate for the establishment of a national extended producer responsibility scheme, which would ensure that all industry players take responsibility and participate in an efficient and effective waste-management system.