CFO interview: Managing Milo

Manuel Vázquez helps make Nestlé – the world’s largest food company by sales – a sweet success.

Just nine years after joining Nestlé as a driver in Mexico, Manuel Vázquez was chosen to spearhead a new treasury centre for the food giant’s Latin American operations. His unlikely path from the driver’s seat to office suite has given him a leading position in Nestlé’s push towards generating 45% of revenue from emerging markets by 2020.

“At the time [that I started at Nestlé] I obviously had no university degree therefore I was driving office mail in the mornings and running to the university to study finance until 10 in the evening,” he said.

After securing his tertiary qualifications and ending his driving career, Vázquez soon impressed his new white-collar bosses and was asked to join a small team in Panama that would create the company’s first Latin American treasury centre.

“In 2004 the idea of creating treasury centres was relatively new and hence Nestlé wanted to be, as always, the first company doing something on a big scale,” he said.

“We started from scratch,” he said, noting that the group was made up of: “two or three people who were experts in each of the fields of cash management, foreign exchange and risk management and corporate finance.”

“The idea was to put these people together and start talking to our CFOs, saying: ‘Listen guys, this is the way that the board has decided to move. We want to create a centre of expertise and we want you to join; you are going to be our clients, we are here to serve you’.”

He has since replicated the effort in Africa — a move that at the time made him question if it was a punishment or a promotion — and finally settled in Singapore in November 2007 as regional treasurer for the Nestlé treasury centre in Asia Pacific.

“Here, already you have the house; my role is to make it a bit nicer, make it a bit more efficient and keep growing it in a region that is growing at these [fast] speeds,” he said.

As the world’s largest food company by sales and boasting about 6,000 brands, Nestlé’s operations involve every stage of the food chain — from farming and food production to manufacturing and finally consumption. In Vázquez’s region, this includes coffee farmers in Indonesia, cocoa plantations in Papua New Guinea and quality assurance centres in Singapore and China. It is the regional treasury’s role to collate and analyse data from 23 countries and steer each country closer to the policies and direction coming from the head office in Vevey, Switzerland.

Despite the potential benefits for more streamlined operations and communications, Vázquez, who is now studying for an MBA from the University of Chicago, said he faced challenges convincing colleagues the centres were necessary.

“From my experience, to start a regional treasury centre the most difficult concept to assimilate is how you break up power within an organisation,” he said.

“It is always difficult when you are coming to sell a concept to colleagues that will mean they don’t have ownership of the process anymore so they are just a chain in the process,” Vázquez said. “People tend to reject a little bit this kind of idea because they feel that now there is another guy that is doing the job and that this guy is not next to my door so if I need something I don’t know what the reaction time will be.”

Nestlé operates treasuries in five regions – Middle East and Africa, Asia Pacific, Europe, North America and Latin America — that build forecasts to guide operations from day to day transactions, FX and risk management strategy, debt, capital structure and cash flow generation.

“All this information coming from the markets is digested and analysed starting here at the regional centre and then we use that information to execute the different things that we do on a day to day basis, starting with cash management which is nothing more than putting the right money in the right place at the right time at the lowest cost to make the most out it. That daily process is done here, not only from doing daily exercises to see how much money you have but also in executing transfers between banks or borrowing money from local banks.”

The Asia Pacific treasury has only eight dedicated staff for a region stretching east from India to the Pacific Islands and from Mongolia in the north down to Australia and New Zealand. The region turns over about Sfr$14 billion ($15.9 billion), however it is set to become an even larger driver of Nestlé’s growth due to the booming developing markets in the region.

“We and many other companies are betting a lot in emerging markets and I think you have seen recently some statements from our CEO (Paul) Bulcke saying that 45% of our sales should come from emerging markets in the next 10 years and that is the objective that the group has fixed,” he said.

“It’s not surprising that Nestlé is investing a significant amount of resources in this part of the world. It needs to be said that, despite the crisis, you are still seeing very positive GDP in Asian markets, with exceptions of course like Japan and some others. If you look at the totality of the region growth is very, very positive. It is good to be in this part of the world at this particular point of time.”

Vázquez said the achievement he is most proud of has been slashing cash balances by 38% in both 2009 and 2010 during a mission to free up idle cash held in the region.

“Now it is easy to put these in figures and say that we reduced cash by 38% but the amount of work that is done in order to achieve one percentage [reduction] is huge,” he said.

“You have to deal with complexity and you have to deal with growth. You are growing very fast so you need money and flexibility and you need working capital and you need all these things. On the other side you really want to have the cash in the right place at the right time so you really need tailor made mechanisms to enable you to obviously not put a straitjacket on the operations in the market while still using your resources in the most efficient way.”

 

This story was first published in the October 2011 issue of FinanceAsia magazine.

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