Editor's Choice Interview Ukrainian macroeconomics

Ansgar Bornemann: We should continue aligning the legislation with EU laws for improving export and making trade free

Ansgar Bornemann, the General Director of Nestle in Ukraine and Moldova, told about the recent events in the company, cooperation with the European Business Association, good news for business, and future plans.

: Actually, it is not the first interview that we have. The first time it was with the Swiss edition. You got acquainted with us, so what had changed in the company, what news you have?

Bornemann: Look, in Nestle, I don’t want to say that after my last interview no significant changes took place. We got confirmation for a big investment in our noodle factory Mivina in Kharkiv, where we will over the next three years invest up to 30 million Swiss francs to upgrade the factory, improve the technology for producing better Mivina noodle products for the local market and for export. Today, more than 30 percent of our noodle production in Kharkiv is going to other Nestle European markets. The top three countries in terms of export volume are UK, Germany and Spain.

Reconstruction will not only upgrade the production lines, making them more efficient and automated, but also significantly improve product recipes and technology to produce different innovative products.  Also, this investment is to improve the working environment for our employees. There are three directions that I don’t think I have mentioned in our last interview. That is one of the big good news for us that our headquarters agreed on this investment in our factory in Ukraine.

: Not so long ago there was a meeting with the vice president of one of the coffee company and he was arguing regarding the counterfeit coffee. The influence of counterfeit is big on products and quality. Have you faced this problem?

Bornemann: Yes, I think it’s a big issue for branded coffee manufacturers, because there are certain business who produce and sell fake products that pretend to be Nescafe Classic or Nescafe Gold. They fake the packaging and they produce low-quality coffee and put it in the packaging of Nescafe Gold or Nescafe Classic, and sell it to open markets, traders and consumers. It is a big problem for us, because we want to guarantee our consumers high quality standards, and certain taste profiles.

: Is there the risk to find these fake products only in the supermarkets or also the risk to find them in the big malls, in the big shops?

Bornemann: I do not think that it will be sold in big malls, supermarkets, because all these retailers have good quality standards and they make sure that the products they source are from original manufacturers.

: How do you manage to deal with this problem? Are you in cooperation with some state communities or authorities to work this problem out?

Bornemann: We are working with the EBA (European Business Association) and with other manufacturers, who are also part of the Association. There are joint initiatives to make sure that all these initiatives are compliant with antitrust legislation of Ukraine.

: We have already understood that the one problem you face is fake products. What other problems you faced since the company was established in Ukraine?

A.Bornemann: Nestle came to Ukraine 24 years ago. There have been different situations and economic challenges, such as two economic crises. The biggest one hit Ukraine after the Revolution of Dignity  where Ukrainian economy had a significant drop. The devaluation of Hryvnia significantly increased the costs of goods bought outside of Ukraine leading to cost and price increases. These price increases were not compensated with salary increases, so the purchasing power of Ukrainian consumer dropped leading to the decline of many categories up to 50%.

This was the biggest economic crisis, which was a big challenge for the whole organization to adapt to change. At the same time there have been many positive changes in the last three years. Ukraine went through changes no other European country went through in the last 20 years. There have been more changes in the proper direction in the last 3-4 years in Ukraine than it have been during 20-22 years before, but still there are a lot of things to do. Just as an example of positive experience with customs, no more issues with tax refund or  public tendering. Hopefully, this year, inflation remains below 10 percent, what makes business much more predictable for us. There are still many things to do on fighting corruption, as one of examples, which does not any have quick fixes but is a continuous and painful work.

There will be an anticorruption court established in Ukraine that is good news, an independent body which will evaluate, judge and investigate with NABU and other state bodies on corruption. The economy is more stable, it is starting to grow, categories start to grow, but still there is a long way to go.

: Do you consider Ukraine an investment attractive country or not?

A.Bornemann: I think we have to go ahead because the people of Ukraine deserve it. Ukraine is a very interesting country to invest in. Investment is not short-term, but long-term. What is important for investment? Predictability. If you invest money you want a return, and you need to see a high probability that what you expect in return will come. Predictability, financial stability, inflation and currency exchange they have to be quite stable. Ukraine has a population up to 42 million people and I think it has a big potential with the size of the market, the opportunity of the market being very strong in agriculture products, as 30 percent of the black soil is in Ukraine. This country has a very good education level and qualification of people. What is needed are real further changes: the rule of law, combating corruption and the image of Ukraine outside Ukraine has to be improved constantly, showing what kind of great opportunities are in Ukraine. Where we have to be careful at the moment – young Ukrainians, who need to see an opportunity to progress, to do their career and to improve their life in Ukraine. Many young people leave Ukraine now and that is a challenge. There should be a clear perception of young Ukrainian people that they can do their fortune in Ukraine. They could go out, come back with international experience to help further to develop their country. If we look at our categories we operate, the per capita consumption (that means what one average Ukrainian person is consuming) is very low compared to Western Europe or even Eastern Europe. So, with the economic development, with increasing purchasing power, consumption will increase and this will build in our segment great growth opportunities.

: In the whole group of Nestle companies does Nestle Ukraine show growth and profitability?

A.Bornemann: Nestle Ukraine is part of the Europe, Middle East, North Africa region. Nestle Ukraine in that region is one of the major growth drivers. We have the opportunity with stable and predictable market condition to grow much faster than the rest of Europe.

: You are the member of the EBA Association. Why did you decide to join the Association and what do you expect from it?

A.Bornemann: The companies and manufacturers have interests; have demands they want to achieve, for example, to build a level playing field. They need a spokesperson that represents not a single company but the industry to the government, society and politicians. An association like EBA is a fantastic institution to listen to all the members where are the problems what has to be changed, we have in the EBA certain committees where companies work together to formulate their ideas.  In most of the free market economies, such associations function as voice of industry to government, society and etc.

: How long have you been a member of Association?  

Bornemann: More than 15 years already. Whatever country Nestle is present, we have been active member of business association to bring in ideas and Nestle expertise. For example, the association agreement with the EU where laws and rules have to be harmonized to the EU legislation to make the flow of goods very easy and simple. We at Nestle have big experience operating in Europe that we share with EBA working groups to support the different government bodies to get close to the EU regulations.

: As a member of the association, which plans do you have for the development? What are the next steps?

Bornemann: As I said, there are a lot of major initiatives besides the certain sectors. For example, we are part of the food committee. Our government relations manager is leading EBA Food committee. It is important to workfurther in the next year to align Ukrainian legislation with the EU laws, which will be beneficial for export operations and free trade. In all the other segments, banking, IT, logistic there are many activities to make business efficient and successful. On the other hand, there are other hot topics besides legislation alignment as privatization, fighting corruption, formation of anticorruption court, law obedience and system of justice. The potential of the country is tremendous, but it is hard work, it will not be done in one step, it is a continuous effort that has to be done by everybody, the companies, the government, all institutions to develop this country to the full potential.

 

Please read: To be successful in Ukraine, you need to forget everything you’ve ever known before entering its market

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