There is an old story about two shoes salesmen from different companies sent to Zimara, an imaginary developing country, scouting for new markets. One cables headquarters, “Coming home tomorrow. No possibilities in Zimara. The natives don’t wear shoes.” The other cables home, “Fantastic sales opportunity!! Natives are all barefoot! Everyone here needs shoes.”
Flexibility, patience, commitment, innovation, the right attitudes, and the willingness to go the extra mile will often result in vast rewards in emerging markets. After 13 years of talks (patience), Nestle was finally invited to help boost milk production in China. When Nestle opened a powdered milk and baby cereal plant, it faced an inadequate source of milk and an overburdened infrastructure. Local trains and roads made it almost impossible to collect milk and deliver the finished product efficiently. Nestle’s solution was to develop its own infrastructure by weaving a distribution network knows as the “milk roads” between 27 villages and the factory collection points (the extra mile). Farmers pushing wheelbarrows, pedaling bicycles or working delivered their milk and received payment on the spot, another innovation for China.
Suddenly the farms had an incentive to produce milk, and the district herds grew from 6,000 to 9,000 cows in a matter of months. To train the farmers in rudimentary animal health and hygiene, Nestle hired retired teachers who were paid commissions on all sales to Nestle (incentive).The result? Business took off. In three years, Nestle factory production rose from 316 tons of powdered milk and infant formula to 10,000 tons. Capacity has tripled with the addition of two factories.
Seventeen years after talks began, Nestle’s $200 million sales were just barely profitable. However, a year later they had risen to $250 million (patience). Nestle has exclusive rights to sell the output of its factories throughout China for 15 years (reward), and now sales of milk in China are more than $1 billion.
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