Creating shared value in the supply chain A Nestlé case study
Page 3: Creating Shared Value along the supply chain
Supply chain activities transform natural resources and raw materials into finished products which are delivered to the end consumer. Each stage of the process adds value to the overall end product.
Nestlé operates within complex supply chains. Its cocoa supply chain goes from cocoa bean to chocolate bar. This path starts with cocoa from farmers, who grow the crops; to cooperatives, which manage the sale of the crops; to processors and manufacturers, such as Nestlé which create chocolate products; to retailers such as supermarkets, and finally to consumers who purchase the products.
Nestlé sources materials from thousands of farms, many of them small farmers in poorer rural regions of the world. In many rural communities, a lack of investment in infrastructure has a serious impact on the quality and quantity of raw materials that Nestlé and other companies rely on. Nestlé provides training in order to encourage sustainable production, protect the supply and quality of its raw materials and have a positive, long-term impact on the local economy and farmers’ standards of living.
Around two-thirds of Nestlé’s worldwide expenditure is on raw materials. Nearly 40% of this goes on three main ingredients: milk, coffee and cocoa. Cocoa is the main ingredient in chocolate and as such is vital to Nestlé. It comes from cocoa beans that grow in a pod on a cocoa tree.
The Nestlé Cocoa Plan
The Nestlé Cocoa Plan was launched in October 2009 in the Côte d’Ivoire, Africa. It is a prime example of Nestlé’s Creating Shared Value approach to business and involves investment of £67 million between 2010 and 2020, building on £37 million in the 15 years before the plan. The initiative aims to help cocoa farmers to run profitable farms, respect the environment, have a good quality of life and give their children a better education.
However, it also aims to ensure a sustainable and high quality supply of cocoa for Nestlé in the long-term. Some of the areas it focuses on to achieve this are: improved farmer training, buying from cooperatives and paying a premium, and working with certification programmes such as Fairtrade. This creates value through the supply chain, particularly for farmers and their families along the way.
The Cocoa Plan has become a key way in which Nestlé is tackling issues facing cocoa farmers as well as their families and communities. Nestlé sources most of its cocoa production from Côte d’Ivoire. Both the quality and quantity of cocoa supplies are in decline. The average cocoa farmer is over 55 years old and so the industry needs to consider where the next generation of cocoa farmers will come from. Many younger people in the region are leaving the countryside to work in cities. As a result there is a shortage of labour and skills. Ultimately, the aim is to raise the standard of living of cocoa farmers to ensure a new generation of cocoa farmers will take over and benefit.
Nestlé | Creating shared value in the supply chain