Nestle India Confectionery Market


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Despite performing well & being a market leader in almost all segments viz. beverages, food, milk, noodles and culinary products in India, the company is yet to display the same growth success in confectionery segment. The report provides inclusive and in-depth analysis of the scopes and challenges for Nestle India and is going to analyze the major industry drivers, along with the challenges hindering the growth of the company in this booming industry

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  • Nestle India Confectionery Market

    1. 1. Nestle India: Challenges Faced in the Indian Confectionary Market Submitted ByMillan Sahoo (43) Namrata singhal (47) Subhodeep Biswas (86) Prasun Chandra (57) Vijay Kumar Mishra(98)
    2. 2. Nestle India- a brief profile  subsidiary of Nestlé S.A. of Switzerland. vibrant Company that provides products of global standards and is committed to long-term sustainable growth  employ around 2, 80,000 people and have factories or operations in almost every country in the world.  The Company is acknowledged amongst India's 'Most Respected Companies' and amongst the 'Top Wealth Creators of India‘.  The culture of innovation and renovation within the Company and access to the Nestlé Group's proprietary technology/Brands expertise and the extensive centralized Research and Development facilities.
    3. 3. Vision  Food is a source of nourishment and satisfaction, but also pleasure, health, happiness and peace of mind.  Nestle – strive to make their products tastier and healthier.  Largest R&D network of any food company in the world, with 34 R&D facilities (3 Science & Research centers and 31 Product Technology Centres and R&D centers worldwide), and over 5,000 people involved in R&D.  Are able and committed to create trustworthy products, systems and services that contribute to improving the quality of consumers’ lives.
    4. 4. Mission "Good Food, Good Life" Best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night.
    5. 5. The Challenges Facing Nestle India- in the confectionary market  Falling much behind Cadbury in the race - market share continues to decrease.  Opportunities & challenges in a bulging market with changing trends Recent splurge in investment in India- ambitious plan of a long term growth.
    6. 6. Relative profit Share Across Product Portfolio 
    7. 7. Product Portfolio
    8. 8. Swot Analysis Strength (S) • Strong Brand Recognition • Experience of operating in Indian Market • Capital & R&D support from the Parent company • Competitive Pricing • High quality of Manufacturing
    9. 9. Swot Analysis  Weakness ( W) • Less products in the premium segment • Profit margin low • Supply chain  Opportunity (O) • Expansion • High Growth Confectionary Market • Recent Investments in R&D • Global Strategy stressing profit from Nestle India
    10. 10. Swot Analysis Threat • High Market Share of the Immediate Competitor • Ever Increasing competition in the confectionary Industry • Sectoral woes • Trend towards healthy eating • Growth of private labels
    11. 11. Porter’s 5 Forces Model Bargaining Power of Suppliers Threat of New Entrants Bargaining Power of Customers Competitive Rivalry within the Industry Threat of Substitute Goods
    12. 12. BCG Matrix Star Products Question Mark • Maggie Noodles • Processed food & Beverages • Chocolate & Confectionary Market Growth rate BCG Matrix Cash Cow Dog • Milk Products & Nutrition • Nestle Dahi Relative Market Share
    13. 13. Confectionery Industry Analysis India The confectionery industry in India is approximately divided into: • Chocolates • Hard-boiled candies • Éclairs & toffees • Chewing gums • Lollipops • Bubble gum • Mints and lozenges
    14. 14. World confectionary market
    15. 15. Operation Factors  Common factor  Govt policies  Taxes  Labour skill & wages  Power & water supply  Technology & Infrastructure  Uncommon factors  Resources  Transportation
    16. 16. Nestlé's Facility Locations Manufacturing Plant State Location . Tahliwal Moga (Punjab) Choladi (Tamil Nadu) 1961 Moga 1967 Samalkha Pantnagar Gurgaon Nanjangud (Karnataka), 1989 Samalkha (Haryana) 1993 Ponda and Bicholim (Goa) 1995 & 1997 Goa Pantnagar (Uttarakhand) 2006 Tahliwal (Himachal Pradesh) 2012 Nanjangud choladi
    17. 17. Cadbury’s Facility Locations Manufacturing Plant • . Thane State Location 1948 Induri, Pune Malanpur, Gwalior 1989 Baddi, HP Bangalore 1950 Hyderabad 2006 Cocoa Operations Dharapuram 1970
    18. 18. Facility Locations • . Tahliwal Panjab Pant nagar Hariyana Kolkata Goa Karnataka TN
    19. 19. Resource Factor Most Important ingredients  Milk  Sugar  others  Largest states 1. AP 2. Bihar 3. Gujarat • Sugar producing  Department of Food & Public Distribution report 1. 2. 3. 4. 5. NDDB Largest Milk Producing states UP Rajasthan AP Gujarat Punjab
    20. 20. Distribution channel MAN UFACTU R ER  Carriage & Forward agent  Distributer /Wholesaler  Retailer  End customer
    21. 21. Process & Design  Procurement( vendor selection )  Modernizing Ware house (RF)  Distribution (customer)  Transportation
    22. 22. SCM  M A N U F A C T U R E R ( 8 in the country)  C & F agent (1 Each state)  Super stockiest ( 1 Each state)  Distributer (depend on size of city), 1300 till 2010  Retailers ( 5.5 Lakhs)  End customer  Wholesaler ( unstructured)
    23. 23. Complexity
    24. 24. Financial Analysis Profitability Ratio • EBIT is good as it is increasing constantly which is good sign for company. However in EBITD is low due to high depreciation. Gross profit margin is constant in these years as it should not fluctuate. Net profit margin is constant as profit is also increasing proportionally to sales. • The reason behind decrease in ROCE is mainly because company has invested huge capital in last three years and it will take few years to recover the amount.
    25. 25. Financial Analysis Efficiency Ratio • ITR: It shows how many times a company's inventory is sold and replaced over a period. It implies poor sales and, therefore excess inventory. • DTR: It is used to quantify a firm's effectiveness in extending credit as well as collecting debts. A high ratio implies either that a company operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient. • FATR: It has declined significantly as amount is locked up in fixed asset Rs 3000 crores in upgrading and expanding existing capacities as well as setting up new plants.
    26. 26. Net Sales & PAT (Rs in crores) 10000 9000 8000 7000 6000 5000 Net Sales 4000 PAT 3000 2000 1000 0 2008 2009 2010 2011 2012
    27. 27. Financial Analysis Liquidity Ratio • Liquidity Ratios are quite manageable and under control and it has shown the trend of constant decrease in these ratios which is good sign for the company. But one alarming fact is that gap between Current and Quick Ratio as good amount of investment is blocked in Inventory.
    28. 28. Important points • During past 3 years Nestle India has invested around Rs 3000 crores in upgrading and expanding existing capacities as well as setting up new plants to prepare of new reality. • It added another 5,00,000 outlets accelerating from 4,00,000 incremental outlets in the previous year. • During the year, export grew by 7.6% which was around 12% last year. • The company completed its expansion plan in Tahilwal (HP), Samalkha (Haryana), Ponda (Goa) and in Moga (punjab).
    29. 29. Important points • Finance cost has increased significantly from Rs 51 million to Rs 266 million as Nestle India has borrow money from Nestle SA parent company through (External Commercial Borrowing) ECB route. • We will accelerate penetration and increase frequency and develop winning concepts. • We will focus on both growth and margins. • Nestle runs 30 research and development centers, with 5,000 employees, globally and its research budget was 1.4 billion Swiss francs in 2011.
    30. 30. Culture at Nestlé and Human Resources Policy • Learning is an integral part of Nestlé’s culture. • People development is the driving force of the policy. • The policy deals with recruitment, remuneration and training and development and emphasizes individual responsibility, strong leadership and a commitment to life-long learning. • Training is done on-the-job. • Formal training programs are generally purpose-oriented and designed to improve relevant skills and competencies.
    31. 31. Nestlé Apprentice Program • Apprenticeship programs have been an essential part of Nestlé training where the young trainees spent three days a week at work and two at school. • It’s not only a matter of learning bakery; trainees also learn about microbiology, finance, budgeting, costs, sales, how to treat the customer, and so on. • Additional courses are held outside the factory when required, generally in connection with the operation of new technology.
    32. 32. Local Training • Training farmers on cattle raising, feeding & breeding practices and on health of daily herds. • course is designed specifically to cover farm management, milk production, cattle health, nutrition and breeding. • Deployed trained veterinarians & other experts to local farmers in order to transfer knowledge, equipment & technology required to enhance calf-survival rate & set up of a farm infrastructure. • Village Women Development Programme – 30000 trained women dairy farmers.
    33. 33. Shared value ( Nutrition)  Nestlé Healthy Kids Program • In collaboration with Universities Nestlé Healthy Kids for Delhi  Health Camp: Micronutrient awareness • In collaboration with Drishtee Foundation
    34. 34. Shared value ( Rural development)  Milk Farmers, technical assistance and training to farmers  Village Women Dairy Development Program Chicory farmers  Training, Improve chicory quality and productivity The NESCAFÉ Plan  Launched on 5th Jan 2012 Sanitation facilities  Sanitation projects benefitting girl students
    35. 35. Shared value ( Water)  Clean Drinking Water Projects  Access to clean drinking water in village schools across factories Water Awareness Program  Creating awareness among village school students International Water management Institute  Water Awareness Program for milk farmers
    36. 36. Suggestions  Marketing • • Develop Exclusive packaging ( Brand Recall) Focus should be more on Premium chocolate • Re-positioning of Alpino.  Operation • Establish Facility in UP or near by, that improve presence in central India as well as they can buy resources at more cast effective manner • Fix or Remove whole sellers ( Define responsibility & Area)  Financial • Loan Restructure  HR • They believe it pays off in the long run in their business results. • It is important to give people the opportunities for life-long learning.
    37. 37. Thank You