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Reduce poverty and increase profits: is that possible?

by Earle Fernando


Our youth - their potential must be harnassed

Yes, it is. And, in fact, it is happening. To find out more, start with a visit Kirillapone market around nine in the morning. You are likely to see a young man with an eye-catching tricycle. It has a box and canopy in front.

Under the canopy, there are two shining cylinders fitted with taps. He turns the tap and pours steaming hot drinks into little white cups. And the cups are placed on a small tray and served to vegetable vendors. Just watch the faces of those vendors.

They sip slowly. Their faces show signs of relish. And they look revived when they finish. Vendors say that they rise early to get to the market. And they look forward to this drink. For the drink, they say, is cheap, clean and refreshing.

The young man wears a cap, slacks and a T-shirt. He looks smart. His business is brisk. And he gets about his business without any fuss. Probably he is trained for the job. He collects the drinks from a place in Nugegoda where it is made and distributed through young people like him.

On the way to Kirillapone market, he stops at selected spots. Regular customers wait for him, just like those at Kirillapone market. Within a short time, the cylinders are empty. And he gets back, re-fills the cylinders and starts another round.

What is he selling? He sells Nescafe, the popular ready-mixed coffee made by Nestle, a multinational. A little cup of Nescafe is sold for ten rupees. And for every cup, he earns a commission of two rupees. Ask him how many cups he sells daily? About three hundred, he says. And he earns an income of six hundred rupees a day.

From Kirillapone to Kataragama and from Matale to Omanthai many young men on tricycles are vending hot and cold Nescafe. And hey earn a decent living.

The young men on tricycles selling Nescafe aroused the writer's curiosity. And to find out more, he contacted Cubby Wijetunge, Vice President, corporate Affairs and Stuart Young, Managing Director of Nestle. Mr. Young spoke of the background and purpose of deploying young people as Nescafe vendors. He was frank and forthright. He said, "We want to promote coffee drinking.

And promote Nescafe as a brand". The writer thought, "Well, this is yet another promotion of a multinational!" Mr. Young perhaps read the writer's mind. He quickly added, "This is not just a promotion. We want to create jobs for young people. Jobs with real economic values. And jobs for those who are willing to work hard".

Mr. Young introduced Mr. Sumit Law, Manager, Additional Trade Channels as the person responsible for the Nescafe vending project. The project is centered round 'Hubs'. And Nestle out sources the operation of Hubs to entrepreneurs on commission basis. Entrepreneurs are carefully screened and selected, mainly based on their proven entrepreneurial ability. And Hub owners recruit young people as tricycle vendors.

Sumit Law accompanied the writer to visit a Hub in Dehiwala. Nestle usually requests the Hub owners to demarcate a separate area of their premises for setting up the Hub. In Dehiwala too, coffee is prepared and filled into cylinders in a room set aside by the Hub owner. Nestle has redesigned and insect-proofed the room. It is a 'sanitized' environment where shoes are taken off before entering it.

Nestle supplies purpose built tables, furniture, utensils and all other equipment to the Hubs. The workflow, from washing empty cylinders and filling and sealing them, is smooth.

And every stage of the coffee making process is carefully planned. And Nestle closely monitors the process and ensures that Hub owners adhere to stringent hygienic conditions and correct procedures.

There is a filter mechanism to supply good quality water for making coffee. And gas heaters boil the water to the required temperature. Nestle supplies the premixed packs of coffee, milk and sugar from their own factories in Polonnaruwa and Pannala. Measured quantity of this mixtures is used in coffee making.

Thus, there is strict control of quality, consistency and the flavour of coffee. For Nestle knows that these basics contribute to sales and brand loyalty. No wonder even the vegetable sellers at Krillapone wait for the little cups of Nescafe!

Also, as a precaution against adulteration, the Hubs are required to fix tamper proof seals on the cylinders after filling. And if the seal is damaged or broken when the vendors return the cylinders, they get no cash as commission.

Usually, about four to five tricycle vendors operate from a Hub and cover a designated area. Nestle is planning to expand and increase the number of Hubs. The key to expansion is continuous research and development. Nestle commissioned a local cycle manufacturer to make the tricycles and jointly developed many innovative features such as disc brakes, front buffer, headlights and hand brakes and large-diameter front wheels, which make it easier to steer.

The newer tricycles are lighter, stronger, easy and safe to handle. The box between the front wheels is fitted with a battery unit, which powers lights for night work and a small sound system with a hailer. A young technician developed an electronic 'chip' in the sound system, which plays popular Nestle tunes heard in radio and seen in TV commercials. And, wherever possible, Nestle reportedly commissions young, local talent for such developments and innovations.

At present, there are about 180 tricycle vendors operating in different parts of the country. Nestle's target is to increase this number of tricycles to about 380 by end of 2004. And, by 2005, increase it further to about 500. Nestle reckons that, within the next two to three years, there is scope to expand the network up to about 1,000 tricycles and about 200 Hubs. What is the impact of this on skills development, innovation, youth employment and poverty reduction?

To begin with, there will be direct, decent employment for about 1,000 young people. And they in turn are likely to support about 4,000 of their extended family members. In addition, a total of about 200 Hubs are required to support the expanded network of 1,000 tricycle vendors.

And if each Hub were to employ about three in the coffee making process and other related work, about 600 more people may get direct employment. And they too would support about 2400 others. Since Hubs engage skilled people to repair and maintain tricycles on part-time basis, a total of nearly 10,000 people stand to benefit. This is a fairly significant achievement for a modest project of this nature.

The coffee vendors on tricycles are mostly rural youth with about ten years of schooling. Incredibly, some have never had the opportunity to ride a cycle, let alone tricycles with a load! So, the first thing that Nestle does is to train them to ride and manoeuvre their tricycles and adhere to traffic rules. They are also trained in basic customer-care and sales. Training in personal hygiene is a priority.

This is why they look well groomed and smart. Besides, youngsters like smart looks and jobs that give them a sense of dignity and recognition. This is a crucial point. But it is often overlooked. Instead, it should be considered as the priority prerequisite in any scheme, which needs to attract young people for work and retain them.

Smart looks and polite behaviour also contribute to sales and marketing. Hence, Nestle invests considerable sums of money and puts in a lot of effort to provide the necessary skills and to groom the young vendors.

In addition, Nestle offers basic entrepreneurial training to Hub owners and some technical training to others who work there. The point to note, therefore, is that attracting and training youth for jobs on the one hand and sales and marketing on the other could be a mutually beneficial exercise.

What is Nestle trying to achieve through this relatively small project in Sri Lanka? Perhaps Nestle is trying to change tea-drinking habits and make ours a coffee-drinking nation! This is obviously far fetched. However, the special report on Nestle that appeared on 7th August 2004 issue of The Economist, seems to suggest that this is not an impossible goal for Nestle.

For the report Neatly encapsulates Nestle's philosophy and purpose in just three words: 'Daring, defying, to grow'. And "When you stop growing you start dying" says Peter Brabeck, the CEO of Nestle who seems determined to keep this daring spirit alive. And in Sri Lanka too, Mr. Young and his team maintain the same spirit, take risks to grow and increase Nestle's market share and profits.

The report further states that 'Nestle has not been afraid to invest in emerging markets and in new lines of business that are not immediately profitable'. Again, this captures the philosophy and spirit of Nestle. Take, for instance, the project on Nescafe vendors on tricycles. It is small and it may not be immediately profitable.

However, the project has an interesting flip-side. While Nestle invests to increase its market share and profits, many people like the rural unemployed youth working as tricycles vendors, workers in Hubs who make Nescafe, repair mechanics and many others reap direct benefits.

In addition, a large number of extended family members, painters, printers and several others enjoy indirect benefits. Therefore, one could say that Nestle's investments and efforts, though primarily aimed at increasing profits, also contribute the reduction of poverty to some extent.

In the past few months, government authorities have launched several new projects focused on the rural areas. The main objective is to revitalize the rural economy, alleviate poverty and create employment opportunities.

The writer believes that those who are responsible for such projects should study the small Nestle project described in the foregoing sections.

For it offers very useful insights and ideas, which include: creating a sense of dignity and recognition to attract and retain youth in jobs; investments in training skills and entrepreneurship and in continuous research and development pay rich dividends; expanding market share and promoting brands require firm commitment to quality in manufacturing and production; and perhaps most importantly, outsourcing helps organizations to remain lean and efficient.

In fact outsourcing is a much better option than creating additional, multi-layered staff cadres to implement government projects.

As mentioned earlier, poverty reduction and increase of profits could go hand-in-hand. Therefore, based on this concept, the authorities should strike mutually beneficial partnerships with global players like Nestle and with several, equally competent, local ones. For such partnerships, which are essentially 'give-and-take' arrangements, are cost-effective and facilitate the realization of poverty reduction project objectives.

(The writer is the former advisor to the Government on technical education and vocational training. He is also a former regional advisor/senior specialist on vocational training of the International Labour Organization).

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