Prof Bharat Nadkarni

CASE STUDY FOR CSR INITIATIVE

Agricultural Raw Materials Direct Procurement

Organisation Name

Nestlé Headquarters

Problem

Nestlé relies on the long-term supply of agricultural raw

materials at competitive cost so that finished products
remain affordable. At the same time, consumers'
confidence depends on the quality and safety of the food
supply chain. Damages to natural resources and
environment will affect agricultural productivity.

Solution

Nestlé's decision to set up Direct Procurement depends

on a number of factors. These include the company's
requirements in terms of:

• quality
• safety
• quantity and cost
• the characteristics of individual raw materials
• the reliability in supply
• the local conditions for sustainable production.
The direct procurement system is based on the set up of
the local Nestlé operational company's network, and the
raw materials purchased are processed at Nestlé
manufacturing sites in the country itself.
Nestlé is more involved in the direct procurement of
green coffee and fresh milk. Nestlé implemented direct
procurement for coffee beans in six countries, Thailand,
Ivory Coast, Indonesia, China, Mexico and the
Philippines. In 2003, Nestlé purchased about 1.8 million
bags or 110,000 tons of green coffee from over 100,000
farmers. In 2003 Nestlé implemented direct procurement
for fresh milk in 37 countries (among others China,
Bangladesh, India, Pakistan, Sri Lanka, South Africa,
Turkey, Brazil, Argentina, Colombia and Mexico) covering
about 6,600,000 tons of fresh milk from over 325,000
farmers.

Benefits

• The direct procurement system provides farmers with

an alternative sales channel that is transparent, fair
and based on quality. Farmers receive a better price for
their produce, as there are no intermediaries.
• It induces quality improvement by basing payment on
quality.
• Where appropriate (particularly in developing
countries), Nestlé provides various technical assistance
to farmers to improve the quality of their produce and
farm in a sustainable manner.
• For Nestlé, it ensures a long-term supply of
agricultural raw materials that are of the right quality,
safe and at a competitive cost.
• Direct procurement empowers the local economy and
supports rural development.
Period Of Implementation

2003

Place Of Implementation

Varied developing countries

Themes

Health and Safety

Mainstreaming CSR