Companies

Nestle sacks 46 workers in Kenya and regional hub

nestle

Nestle’s logo on a road sign near the company’s headquarters in Vevey, Switzerland. PHOTO | AFP

Summary

  • The affected employees are drawn from Nestlé Kenya and Nestlé Equatorial Africa market with the latter made up of 21 countries, including Kenya, with Nairobi as the regional hub.
  • Reliable sources told the Business Daily that among those sacked were senior accountants and expatriates.
  • A number of multinationals in Kenya have found the going tough due to higher operational costs, which end up eating into their revenues.

Nestlé Kenya has sent home 46 senior and junior staff members as competition and huge operating costs continue to weigh down on companies.

It also highlights the struggles the consumer goods company is going through to retain its market share in a fluid market.

Last year, the parent company, Swiss-based Nestlé reported a 9.6 per cent fall in net profit to £3 billion (Sh413 billion) although the African market showed improved growth by registering a 9.7 per cent profit, up from 8.2 per cent in 2013.

Nestlé Kenya appears to be trimming its workforce in line with last year’s promise by chief executive Paul Bulcke that it would improve margins through cost cutting and investment in innovation.

The job losses add to the 400 workers laid off by Eveready Kenya and Cadbury East Africa last year.

Eveready cited high operational costs in its Nakuru plant and opted to import batteries from its Energizer Egypt subsidiary while Cadbury decided to keep only its marketing and distribution outlets and rely on imports.

The affected employees are drawn from Nestlé Kenya and Nestlé Equatorial Africa market with the latter made up of 21 countries, including Kenya, with Nairobi as the regional hub.

In a confidential letter dated January 15 and signed by Alastair Macdonald who is the head of human resource at Nestlé Equatorial, Mr Macdonald says the current workforce structure has not responded to set market targets in terms of profit scale, forcing the firm to restructure its employees.

“The current business model within our region is not responsive to our current or anticipated business expectations. As such, we are actively reviewing our structure to ensure that we can provide sustainable and profitable growth across the region,” said Mr Macdonald in a letter sent to the sacked employees.

“This has led management to rethink how we operate with a view of accelerating growth. We anticipate that several employees and related functions may be impacted by this intended redundancy,” added the statement.

Although the signed letter indicates the affected individuals are expected to exit by February 15, most of the sacked workers have already cleared their desks, according to a source conversant with the restructuring.

“While exploring alternative avenues, we hereby give you notice of intended redundancy as per existing laws, to take effect as from February15, 2015 if confirmed,” the letter further reads.

Reliable sources told the Business Daily that among those sacked were senior accountants and expatriates.

“The downsizing was initially expected to happen in September last year but it was called off after the management said they had identified the areas of weakness to enhance growth.

“Later on it was communicated to us that measures had to be taken since the Kenyan segment was not doing well,” said a source at the company who requested anonymity.

Nestlé has of late been making changes in its senior management in a fight to retain its market share that has been eaten into by both local and international firms like Unilever, GlaxoSmithKline and Kapa Oil Refineries Ltd.

In September last year, Nestlé tapped a former health care executive Ciru Miring’u as the country managing director for Kenya to drive growth.
Ms Miring’u previously worked as the general manager in charge of Africa nutrition ventures division at GlaxoSmithKline.

Last year, the Financial Times reported how multinationals operating in Kenya are facing stiff competition from homegrown companies who understand the local economy better and are ready to work in fragmented markets.

“There is growing competition from local companies and brands,” reported the newspaper quoting Ian Donald who by then was the Nestlé Africa market head.

A number of multinationals in Kenya have found the going tough due to higher operational costs, which end up eating into their revenues.

Last year, Industrialisation principal secretary Wilson Songa lamented the exit of global manufacturers saying they impacted negatively on the economy.

He promised government intervention to address the situation, including supplying cheap power and stamping out counterfeits.

Kenya has been a central market for Nestlé where it has a production factory. The other plants are in Zimbabwe, Angola and the Democratic Republic of Congo.