Sep 18, 2012, updated September 2012
Nestlé Pakistan plays a central role in the modernisation of the dairy sector in Pakistan. It is the dominant actor in the milk processing industry and in the development of the milk district in rural areas, increasing productivity, improving market access and promoting diversified livelihoods for smallholders.
At the same time, Nestlé Pakistan generates and shares economic value, knowledge, health, social coherence and protection for the natural environment for the following shareholder groups at a regional, national and global level:
- Consumers: The value shared with consumers (the value above the price paid, and in excess of what consumers expect from our competitors) was estimated to be 120–230 million CHF in 2008. By sourcing its milk directly, testing the quality of the milk, and using cooling stations and collection points, Nestlé has helped to prevent adulteration and unhygienic milk handling. By offering higher quality milk, Nestlé has responded to growing consumers’ expectations. It has also fortified its products with iron to help to prevent anaemia, a major public health issues in Pakistan.
- Suppliers: Nestlé Pakistan is the largest processor of milk in Pakistan, buying milk directly from over 150,000 farmers. These farmers are predominantly smallholders, almost all of whom sell the equivalent of the daily production of one buffalo. Dairy farms selling milk to the processing industry earn about 59% more per cow/buffalo, the environmental production conditions within the milk districts are superior to non-milk districts, and school enrolment among the daughters of smallholders within the milk district has increased.
- Industry: The success of Nestlé Pakistan’s milk districts has drawn in other domestic players, leading to an increased competition at the farm gates and among consumers. Increased competition has lead to higher prices for smallholders, increased farm efficiency and lower price premiums for processed milk.
Value to Society
Nestlé Pakistan employed 2,377 people in 2008, with a total salary of 32 million CHF. The average salary of a factory worker is more than double the average wage of the milk processing industry, and four times that of the informal sector. The equivalent of 3% of wages was spent on training, and by getting the Sheikhupura milk processing factory certified to the highest ISO 14000 and OHSAS 18001 standards, Nestlé further improved employee safety and working conditions.
The net effect of Nestlé Pakistan’s activities in the dairy sector amounts to more than 80,000 jobs, equivalent to 35 indirect jobs for each Nestlé employee. Contrary to the traditional, informal dairy sector, Nestlé paid 22.5 million CHF in taxes in 2008, representing 0.16% of total government revenues.
Furthermore, a joint programme between the UNDP (United Nations Development Programme) and Nestlé Pakistan aims to train 4,000 women agricultural advisers, whose assistance and advice is helping to increase milk production among female dairy farmers in rural Pakistan.
Value to Nestlé
Nestlé Pakistan generated wealth for its shareholders, with market capitalisation increasing by a yearly average of 28% between 2003 and 2008. When combined with the dividends paid during that period, Nestlé Pakistan generated some 652 million CHF, of which 267 million CHF went directly into the economy of Pakistan.