Nestle’s Khoo Kar Khoon on agency fees and the challenges of marketing the brand

One of the biggest advertisers in Malaysia, Nestle is a heavyweight brand in the marketing landscape, owning a host of household brands such as Milo, Maggi, Nestum, Coffee Mate, Nescafe and more.

Communications director Khoo Kar Khoon is likewise, a familiar face in marketing. According to Khoo, last year in media alone, the brand spent RM 400 million. Khoo also holds an advisory role over Nestle's marketing activities in Singapore.

Even in the massive Nestle network, which is headquartered in Switzerland, Nestle Malaysia pulls its weight when it comes to Asia. Nestle has a total of nine plants in the region and operates seven of these out of Malaysia. Earlier this year, Nestle announced plans to invest further in the market: it would dedicate RM207 million to extend its noodles and new product production lines in Malaysia. This is expected to double its ready-to-drink manufacturing capacity there.

As of last year, Nestle commands a 14.5% share in the food and beverage sector last year, managing director Alois Hofbauer said, setting targets to raise this to 15% this year. This will be accompanied by significant increase in spending for its marketing budget, a spokesperson told A+M.

However, Khoo says that while Nestle has a strong brand when it comes to confectionery and fast moving consumer goods – there is a challenge of keeping the overall brand fresh.

“We don’t want consumers to think we are the leaders of yesteryears – there’s a need to keep new product communications fresh,” said Khoo.

Also, in recent years, just like other multi-brand conglomerates such as Unilever and P&G, Nestle faces the issue where individual brands are often stronger than the parent brand.

The last five years have seen Nestle embark on bigger “mother brand” initiatives - for example, highlighting Nestle’s slant to nutrition. “So in the recent years you would have seen more of such campaigns highlighting Nestle’s brand as well as more multi-brand campaigns,” said Khoo. 10% of the budget is dedicated to marketing Nestle itself. “The idea is to show that when a product is a Nestle brand, the consumer can and will expect a level of quality,” said Khoo.

But obviously, this is easier said than done. When Nestle’s international markets suffer a crisis, this also sends other markets into crisis control mode. One example is the comms crisis it is going through with its India operations - where consumers were spooked when its Maggi products were found to contain dangerously high levels of lead, hurting sales significantly. (According to global reports, Nestle has already reported a 2.5% decline in its consolidated net profit for the first half of 2015, with negative impact of the Maggi withdrawal expected to affect sales in Asia.)

Khoo says all markets had to be crisis-ready to answer the issue. “For us, we assured consumers that our products are made in Malaysia.” This was similar to Nestle’s quick moves when it was discovered that fake Milo was being created on its shores – the brand responded quickly to inform consumers how to spot counterfeit products.

On marketing’s talent drain and learning inertia

Beyond Nestle, Khoo gives his take on the Malaysian marketing landscape, citing talent drain as the industry’s biggest issue. The low, and now falling RM means young talent want to go overseas.

Next, the rate of learning is not keeping up with market demands. “There are so many new channels to keep up with,” says Khoo, but adds that marketers themselves have trouble keeping up. There are several reasons for this.

“This is a problem that starts all the way in education – universities and colleges are not keeping up when it comes to training students to be ready for marketing. Then, in marketing teams themselves, marketers are finding it hard to transfer skills – for example, someone trained in TV finds it hard to move to digital,” he said.

Should agencies blame marketers for falling agency fees?

Agencies are having a hard time, and many blame clients’ cut throat pricings for their suffering. What does Khoo think about this?

It may not be always the marketer’s fault, opines Khoo. Rather, agencies are offering themselves cheaper and cheaper. “You may get an agency that only knows how to do half the work, so they may split the work with another agency. And, instead of contesting on skill, they start to use price as a bait – dropping prices lower and lower,” he says.

“When I first joined Nestle, I said: 'We have to pay agencies fairly'. If you don’t, it affects everyone,” he says.

Also, talent churn from one agency to another creates uniform offerings, so agencies again end up competing on rates. “That’s the issue with agencies – you get an agency with 30 staff, and perhaps 5 of their staff will go to a new agency – and so ultimately, they end up competing on rates,” he says.

Khoo may have been with Nestle for 15 years, but he is no stranger to agency experience. Khoo says he was offered the position by Nestle while he was still heading up media for Zenith Malaysia.

Khoo was one of the founding members of the agency in Malaysia, and still credits Zenith CEO Gerald Miranda as being one of his most respected mentors. “In 5-6 years from founding it, we were one of the largest media agencies around,” he reminisces.

What’s kept him so long in the Nestle then? “Well, for a start, Nestle Malaysia is well-regarded in the Nestle network”, says Khoo. “It’s like a university, with many brands and portfolios – there’s always new things to learn and many roles to take on.”

Also, several years back, Khoo received honors for being one of the savviest digital marketers in Malaysia. In a market where many agencies bemoan the state of digital and in turn, clients’ knowledge of the space, what’s Khoo done differently, I ask?

“I believe ultimately, a marketer needs to be brave and ready to learn new things. A highly in-demand job may not be available tomorrow. For example, there was a time where they told students that app development was the next big thing. But when students of that came out to work in that arena, the market was already saturated.

A good marketer knows techniques, but a great marketer knows how to play around with knowledge,” he concludes.