Paul Bulcke: I do believe in the creativity and ingenuity to reconnect, rewire supply chains where it is needed. … So I am quite optimistic. It’s going to be hard work. It’s going to be a lot of initiative, a lot of working together, a lot of creativity. But I don’t feel that we should fear over a global shortage, no way.
I am Paul Laudicina, chairman emeritus of Kearney and founder of its Global Business Policy Council, and this is “Coronavirus: a world transformed.”
We’re recording this on Friday, April 24.
Immediate human suffering continues to take a heavy toll on the lives and livelihoods of hundreds of millions of people around the world, even as some governments begin to relax some of the restrictive controls put in place to control the contagion. So it’s difficult to focus on other astounding developments in the wake of this invisible common enemy called COVID-19. But two which emerged this past week are mind-boggling.
First, the global oil market, the world’s largest commodity market, went into negative price territory, meaning that the sellers of oil were prepared to pay buyers to take oil off their hands. With oil trading at a negative $42 a barrel, we are now at inflation-adjusted levels of the price for oil not seen since the 1950s. Clearly, the ripple effects of this additional jolt to the system will be dramatic and felt for some time to come.
The second source of genuine concern is the updated forecast from the head of the World Food Programme warning that the pandemic might double the number of people around the world struggling to avoid hunger and starvation. The latest numbers indicate that the lives and livelihoods of 265 million people, especially those in low- and middle-income, already at-risk countries, will be under even more severe threat unless swift action is taken to tackle the pandemic. How will we continue to feed the world? How will we ensure the supply chain stays functioning and access to critical resources stay intact? And what role do companies have in keeping the system running to meet the most basic needs of people, and creating stability during this extended time of crisis?
What better person to join us for a conversation about the global food supply than today’s guest, who amidst all this troubling news shares words of wisdom and hope.
The following conversation has been edited and condensed.
Interview with guest
Paul Laudicina: Today’s guest, Paul Bulcke, is chairman of the board and former CEO of Nestlé, a company with quite a storied, 154-year-old history. Founded in 1866, Nestlé is today the largest food company in the world, with 339,000 employees in 187 countries. Any company that has endured— in fact, thrived—as many years as Nestlé has (and there are very few others that have) obviously has seen and been through periods of crisis, hardship, and extraordinary challenge, not least two world wars and the Great Depression.
Paul joined Nestlé in 1979 (41 years ago), and during his tenure, he’s led his company in many regions around the world. He’s also taken the lead on a number of the most important global public policies of the day, including on sustainability as co-chairman of the 2030 Water Resources Group. And he joins us today from Switzerland.
First of all, Paul, welcome. How are things looking in your neighborhood today? You’ve seen a lot in your tenure. You’ve helped steer Nestlé through difficult times. Tell us, if you would, how you see this crisis today. How different is it from other critical challenges that Nestlé and the world have been challenged by in your tenure in the past?
Paul Bulcke: Well, Paul, first, it’s a pleasure sharing some thoughts with you about something that touches us all. But first, I’m here actually in the office. We just had our general assembly, and I’m looking—and you know, we have a nice view—and this morning, the sun has risen too, and you will think it’s all normal, and it’s not.
This crisis is something that we’ve never seen before, at least in my life. It’s all over, it’s invisible, there’s no cure, there is no textbook or written experiences about these things, and you feel it also—how it is handled all over the world in different ways. And it creates that uncertainty, that anxiety, that I never felt before in such a way that it actually defines the whole, I would say, social and economic fabric of the world.
Now, that sounds very bad. Yet at the same time, there’s something about solidarity. We are sharing or facing a common enemy. And I hope that that feeling will win above that saying, “It’s your fault. Oh, you should have done this and here and there.” But that is still early to say where it’s going to go.
Paul Laudicina: It surely is. And uncertainty is a good word to describe as well, Paul, lots of concern that has been expressed about the global supply chain and distribution channels. And as the chairman of the company that is the world’s largest food manufacturer, you’re obviously in a very important seat. Tell us, how do you see this crisis affecting the supply chain of food? There’s lots of anecdotal information we see on our television screens every night of interruptions in the supply chain and areas of concern because of hoarding, etc. But tell us a little bit about what your views are on the integrity of the global supply chain and distribution channels for food.
Paul Bulcke: Well, first, I think we should maintain the view of the context because anecdotal things, you can always blow them out of context or proportions, etc. But still, there’s many things that are happening. Now we are at Nestlé very pretty much aware of this responsibility. We are a food company. And food is a priority.
Actually, from the start that we were fairly early on because we are very active in China and so we had the first frontline learning of this. We were one of the first companies also to say, “Hey, travel ban internally.” So the first priority was the safety of our people and, and leveling up our safety measures that we already had very intensively on our factories, etc. So, first safety of your own people.
Second, be aware of what your role is in society, and it is to produce food. So keep the operation running. Okay, stay pretty much aware of the context and the difficulties out there. Stay as close as possible to normal. And I must say kudos to our people, they lived up with a commitment never seen before. We can really be proud of them. They’re in the front line, they’re producing and making the supply chains work, having the labs functioning and producing products. And all in all, we have—we are up to three quarters of our normal operating functionality in our operations today, but it is relatively working well in the eye of the storm.
And that was a second priority: keep the operations running, produce products, make them available and link up with your partner's supply chain upstream, downstream to get it to the consumers.
And the third was then also be part of communities and help there too. So we have a very geographical physical presence in many, many places in the world. We have many factories; we are working with farmers, etc.
Keep that also. Extend your presence like we have always done. Be part of the communities and helping elevate things wherever you are present and, and that we have done through donations working together with NGOs, working with the Red Cross, some financial support for the urgent needs, etc.
So in general, that’s Nestlé. But in general, I am positive. I’m an optimist. I believe that, that we will rewire, reengineer, short-term some supply chains that are not well-functioning for today. We will work with our partners upstream, downstream, as I mentioned also to see how we can alleviate the pressure points that we have, etc. But I’m quite optimistic that there’s not going to be food shortage over time. Definitely not.
Paul Laudicina: That’s a very encouraging message, Paul, and surely Nestlé with a presence in 187 countries around the world has insights into how communities are affected by this crisis to be sure.
One of the areas of concern is that some of those areas of the world that are already in dire economic situation, particularly in the developing world, will be even more seriously affected by this pandemic: Africa, Latin America, the Middle East. Those are areas of the world that Nestlé knows well, not only because they are a critical source of supply for goods like coffee and cocoa, but also because you are selling in that part of the world, manufacturing and supplying the needs of local farmers and communities in those regions. What can you tell us about what’s happening there and how prepared Nestlé and the world is for what might develop in those regions of the world that are already somewhat under duress?
Paul Bulcke: Well, look, this whole pandemic, what it will do is that countries, communities that are already pretty much challenged on the basics are going to suffer quite intensively of this because it’s just that, that the ones who have no—I would say buffers or reserves—be it on on the health or be it financial or be it on healthcare systems or be it, etc.
It is always the same that when something like this happens, these communities are going to be suffering much deeper because there is no buffer and that we see firsthand as we are in many places in the world where that is going to happen.
Where we can help, we will, but I feel that’s a more global worldwide community issue that we have to take very seriously. It’s gonna be quite intense in areas like Africa; we know that. In certain parts of the Middle East or Latin America that was unstable, just before the crisis, we refer to a few countries there, where there’s instability.
So and reserves there, they don’t have a lot of reserves to counter these additional I would say pressures that will come. So I empathize with these communities and all, and I feel international solidarity is going to be needed there in a much coordinated way. A little bit worried about that coordinated way. I don’t see it happening in an international way.
Paul Laudicina: Well, one of the areas of concern, of course, is ironically, at the same time that we see images of farmers plowing under crops that can’t be harvested because of lack of workers or inadequate logistics to get the harvested products to market, we see long lines of people waiting for a distribution of food supplies from food banks. And we see a report that was just released by the World Food Programme, indicating that the pandemic might cause rates of hunger around the world to double.
Now we know of the wonderful support that Nestlé is providing to food banks and food delivery organizations to support people in need. I think in the US, you’re helping provide delivery of 40,000 meals a day through Meals on Wheels to homebound seniors.
But tell us a little bit, Paul, about whether or not you think we have a problem of trying to get product to market to help ensure that we don’t see the kinds of disruption and malnutrition that might result from inadequate food supply. What is Nestlé doing? What are others doing to try and create a more secure environment for feeding the people of the world?
Paul Bulcke: Look, Paul, I think also, you have to split the problem in the sense that if people have to queue for food banks or things like that, that’s a societal problem there somewhere of purchasing power and not being able to. It’s not a matter of is there enough food? It’s always the same.
And with the crisis that we have here, I think in the United States alone, you have 20 million people falling out of jobs and things like that. You’re gonna see also the remittances to many countries is going to go down dramatically. That will cause these queues.
I don't feel there’s not going to be food on the shelves, and so it’s a societal problem that is much more visible, that comes to the surface, because of exactly the fallout of this crisis, which is done with unemployment, and I mentioned a few of the others. So that’s why you have to split the problem.
Now for us, the supply chain—all in all, I don’t see apart from specific short-term like you mentioned, the farmer plowing over his produce because he cannot get to the end consumer or the out of home, where that fresh produce has to go, is closed down temporarily.
These are things that, yeah, very dramatic for the person involved and very dramatic to see. But all in all, in the context, I don’t see there’s going to be food shortages.
I do see companies like my company, but others and our partners, be it downstream or upstream, farmers, I do believe in their creativity and ingenuity to reconnect, rewire supply chains where it is needed.
But the fundamentals are still there, and it is for us to make them work. We may have temporary—like India, it’s very important for spices. We use many spices out of India. It’s, well, we don’t have the normal supply there. Well, we are already formulating products so in order that we can produce them without that supply.
So I am quite optimistic. It’s going to be hard work. It’s going to be a lot of initiative, a lot of working together, a lot of creativity. But I don’t feel that we should fear over global shortage, no way.
Paul Laudicina: That’s a very consoling forecast, Paul. And coming from you, given your perspective and certainly history in the food industry, really encouraging insight.
Well, Paul, I know one of the things that shareholders have and the global community have applauded Nestlé for is your commitment to what you have called for many years “creating shared value.” It’s been at the heart of the Nestlé group strategy that you’ve led. And certainly, the group has made strong social and environmental commitments and has attempted to address those challenges comprehensively. We see in the midst of this pandemic, how suspension of business as usual has impacted favorably the quality of the global environment.
And we know as well that there is little question that climate change has in fact accelerated the animal to human transmission of viruses like COVID-19. And so my question is, what do you think the world can learn from this crisis to become more responsible and inclusive on the kinds of issues that Nestlé has long before this crisis, committed itself to and been really a leader in terms of creating the shared value?
Paul Bulcke: Look, this concept of creating shared value is so fundamental. It’s part of our DNA of how we go about what we do. Now you know, our—the what we do, our strategy—is linked to nutrition, health, and wellness. So nutrients, interactive health, and quality of life of people, that’s the what.
The how is, as important and as intrinsic part of our strategy, is that greater shared value. It is to be part of society. We are part of society. We think about all stakeholders, and we are fundamentally convinced the company cannot be successful over time if it doesn’t create value for shareholders and all other stakeholders at the same time. And that comes quite natural to us because we are in these communities where you see that really at work, you know, in developing countries, milk farmers.
And in a crisis like this, we are working with 200,000 milk farmers directly—700,000 farmers in general but 200 milk farmers. Well, a cow doesn’t stop producing milk because there’s a virus out there. So we commit to these people, explicitly, that we will accept, receive their milk, pay them out, etc, etc.
So that is creating shared value. It’s being part of—we have and we’re extending our payment terms to people when it is needed, with many people, because cash is king in these times, are cash-stretched. Well, we can be part of their solution because these are the partners that are working with us in good times. Well, we want to work through bad times with them to have them still there in the better times to come. That is just normal for us, normal natural behavior of understanding what industry, what economic activity should do. It should be a force for good. You have to care and be efficient and be successful as a company—shareholder value. But you do that by keeping also an eye on creating value for society through good products, good salaries, good conditions, working conditions, working with our partners, farmers etc.
I mentioned it before: the fundamental mindset of us is in this crisis, care about your people, but stay as close as possible to normal also. I think leadership (in companies and also political) should stay calm, maintain perspective, go for the facts, don’t play it up politically, and engage with the different parts of the community and the society on these issues. That’s what we want to do as a company.
Paul Laudicina: Very wise advice, Paul, and your focus on creating shared value both corporate and your personal focus has long advocated for change in attitudes and management of water resources. And you’re co-chairman of the 2030 Water Resources Group. How do you think this crisis might affect the way we think about water and natural resource management in general?
Paul Bulcke: Well, there shouldn’t be any change in our mindset or our way of thinking.
You know, the last years, this whole and the last two years definitely, environment—global warming—has jumped on the scene with a force never seen before. With the virus, coronavirus now, we may have the false feeling this is like, forgotten. It’s true that we have the news and radio, television, we hear and it’s all focused about is coronavirus because that;s the house is burning. But for us the programs, the way we work are continuing, and also the Water Resolves Group is working and functioning.
So I don’t see that that should be put on the back burner. Definitely and it will not because I promise you this whole intensity on the environment and global warming etc. that we felt so strongly in the last few years. That’s going to come back straight away.
Paul Laudicina: We know that also organizations’ ability to function well, as Nestlé is during this crisis, as you’ve pointed out, is very much dependent on the culture of the organization and especially in terms of a crisis and one as sustained and devastating as this one. And I know that Nestlé is proud to have a family company culture. How important, Paul, is having a cohesive culture at times like this and being able to operate well and deliver on the needs of shareholders and stakeholders broadly?
Paul Bulcke: You know, there’s this proverb that says when you’re in trouble, stick together. And look, I feel the family values or feeling of a company like we have at Nestlé is all about that, it’s sharing a common purpose, it is understanding, it is the belonging, the values we have which are based on respect. Respect for yourself, respect for the other, diversity, respect for the planet, all that gives that feeling of being together.
We—and I have mentioned before, the first thing we did was really explicitly say, “Your safety goes first; you and your extended family goes first.” And we have in this whole crisis, absenteeism in our factories is like normal. Actually, we have less in certain areas. Why? People want to be part of this and be helpful and committed too.
And I feel it’s extremely important to have good leadership, a very strong I would say feeling of belonging to being proud of what is done, feeling mutual support between all players. And look, that is, in my eyes, something that is the condition of sine qua non of keeping a company running like we are able to do in troubled and ambiguous times like this. So I’m keeping this as high of high value.
Paul Laudicina: Well, I know Paul, you just cued us on something I wanted to ask you about because you once said that the biggest challenge facing management is having to make judgment calls in an ambiguous environment. And that’s what certainly I see in talking to lots of CEOs around the world these days that concerns the most is how can they make decisions with so much uncertainty and ambiguity? What advice do you have for business leaders in these uncertain and ambiguous times of ours?
Paul Bulcke: Yeah. I’m glad you mentioned that. We’re living in an increasingly ambiguous world. That means that there is not really a right answer. It depends of what angle you see things. And there is no textbook answers again, for this, there is no mathematics that will help you to get to a solution. There is no black and white. It’s ambiguous. And there again, being stronger on explicit values and understanding the references of values and how you judge.
So leadership is going to increasingly be linked with the capacity to judge. So action is important and, and driving and defining your strategy. That’s all important. The capacity to judge. And I think boards in general are going to be much more asked to help management to have that multi-angle judgment capacity.
And that’s why a crisis like this—look, there’s no real answer because you’ve never seen that before. And you have different angles to get to solutions. Some countries do confinement firm, others do more relaxed, others are doing nothing. So you can have your personal opinion, but these are judgment calls or lack of judgment calls. But the capacity to judge is always based on having a very good understanding of principles and values.
So yeah, value-based leadership is needed to make the right calls through a very increasingly, pretty much increasingly ambiguous world.
Paul Laudicina: What a wonderful note to conclude this discussion on, Paul. Purposeful leadership, making judgments must be based on principles and values.
Thank you, Paul, for your leadership over many years, always based on principles and values. Thank you for your friendship and engagement. And thank you for this very extraordinary discussion we’ve had today. Much appreciated.
Paul Bulcke: Thank you.
Wrap-Up (Paul Laudicina)
My thanks to Paul Bulcke for joining me today.
There’s only so much ground we can cover in one 30-minute interview, and we’re aware there are undoubtedly many more questions that you might wish we had been able to discuss during each podcast. So don’t hesitate to be in touch with me with any additional insight we might be able to provide by contacting me at [email protected] or on Twitter at @paullaudicina, and I would be happy to respond.
We’ll be back with new episodes of “Coronavirus: a world transformed” soon. So stay tuned. More is coming.
About Paul Bulcke
Paul Bulcke has been the chairman of Nestlé S.A board of directors since 2017. From 2008 to 2016, he served as Nestlé’s chief executive officer and was an executive vice president from 2004 to 2008. He joined Nestlé in 1979.
Paul is a member of the World Economic Forum’s Community of Chairpersons, a member of the European Round Table of Industrialists, a member of the board of trustees of Avenir Suisse, a member of J.P. Morgan International Council, co-chairman of the 2030 Water Resources Group, vice chairman of the board of directors of L'Oréal, and an honorary freeman of the City of London.
He earned a management degree from the Vlerick Leuven Gent Management School in Belgium and a commercial engineering degree from the University of Louvain.