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Nestle project


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About Nestle's Innovation and Diversification

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Nestle project

  1. 1. Nestle Project—Market StrategyHistoryNestle SA, Switzerland is amongst the world’s largest food and beverages companies. Thecompany is progressively evolving from a respected, trustworthy food and beverage company toa respected, trustworthy food, beverage, nutrition, health and wellness company. This objectiveis encapsulated in “Good Food, Good Life”. The principle activities of the group encompass:beverages, milk products, nutrition and ice cream; prepared dishes and cooking aids; chocolate,confectionery and biscuits; water; and pet care. It has 511 factories in 86 countries around theworld.Nestle IndiaNestle India is a subsidiary of Nestle S.A. of Switzerland. Nestle India manufactures a variety offood products such as infant food, milk products, beverages, prepared dishes & cooking aids, andchocolates & confectionary. Some of the famous brands of Nestle are NESCAFE, MAGGI,MILKYBAR, MILO, KIT KAT, BAR-ONE, MILKMAID, NESTEA, NESTLE Milk, NESTLESLIM Milk, NESTLE Fresh n Natural Dahi and NESTLE Jeera Raita.After independence, in response to the then economic policies, which emphasized localproduction, Nestle formed a company in India, namely Nestle India Ltd, and set up its firstfactory in 1961 at Moga, Punjab, where the Government wanted Nestle to develop the milkeconomy. In Moga, Nestle educated and advised farmers regarding basic farming and animalhusbandry practices such as increasing the milk yield of the cows through improved dairyfarming methods, irrigation, scientific crop management practices etc. Nestle set up milkcollection centres that ensured prompt collection and paid fair prices. Thus, Nestle transformedMoga into a prosperous and vibrant milk district.In 1967, Nestle set up its next factory at Choladi (Tamil Nadu) as a pilot plant to process the teagrown in the area into soluble tea. Nestle opened its third factor in Nanjangud (Karnataka) in1989. Thereafter, Nestle India opened factories in Samalkha (Haryana), in 1993 and two in Goaat Ponda, and Bicholim in 1995 and 1997 respectively. Nestle India is now putting up the 7thfactory at Pant Nagar in Uttarakhand.Today, Nestle is the worlds largest and most diversified food company. It has around 2,50,000employees worldwide, operated 500 factories in approximately 100 countries and offers over8,000 products to millions of consumers universally. Nestlé India is a responsible organizationand facilitates initiatives that help to improve the quality of life in the communities where itoperates.
  2. 2. Marketing Mix of NestleProduct• Being the world’s largest food and nutrition company almost six thousand products are beinghosted under the brand named Nestle.• Its products are very wide spread in range counting almost all daily use products as well asoccasionally used products. The products includes coffee, bottled water, cereals, pharmaceuticalproducts like lens care solutions, infant food, beverages, chocolates, candies, ice creams,refrigerated foods, yogurt, milk cream a very unusual product that is pet food and the largestselling brand milkman. All these categories are subdivided to the diverse choices of customersincluding different sizes and flavors (Kowitt, 2010).• Products that are introduced in the market are first screened through high profile research anddevelopment sector including food processing, micro analytical research and proper delivery offunctionalities in the food products thus promising the healthy goods for consumers.• Main raw material for its milk products are UHT treated and packed in tetra packaging,moreover the packaging is long lasting as well as tempting.• As hygiene is a basic ethical question for edible products, so Nestle has a full concern andfocus on this parameter.• Nestle provides the product compliance to the customers including all legal supports.• Nutrition quality is preferably determined and is provided on the packing of the product tofacilitate consumers to check their preferences along with the expiry dates.• Complaints if any are timely responded and suggestions are always welcomed.Price• Flexible prices are the key factor of success of Nestle in global markets for example Milkpakbeing the largest selling brand is being sold out at the same price as that of other low qualityproducts while maintaining its quality.• Their marketing strategy includes a wide range of pricing strategy, and by doing this they canmaintain their product rates at a sustainable position.• Prices are affordable to almost all types of consumers as they have wide range of single productas in the case of beverages, fruit juices are affordable to low economy class and expensive tinpacked beverages are also doing business in the market.• Bulk purchase discount is also provided at the whole sale markets as well as at the marketstores.
  3. 3. • Seasonal price variations are also seen, especially in the case of chocolate products, either byupsizing at the same price or reducing the sale price.Place• Nestle products have their main business area in Europe from where they get almost 90 percentof the sales and revenues.• Nestle is running globally, its setup being run in 86 countries. So, the sales are also doneglobally and are impulsive ones.• The products are not directly thrown into the market, rather a full procedure is followedincluding all the essentials from Manufacturer, Distributor, Wholesaler, Retailer and finally toConsumer.• Nestle products are available in all its variety at the maximum outlets, as the company isalways looking forward to expand its outlets.Promotion• Promotion strategies of the company are very well planned and they always pay multiples ofthe expected amounts.• Advertising on electronic and print media along with sign boards having tempting figurationsof the brand always proves good for the brand• Sometimes limited economy offers boost up the popularity of brand especially in the case whennew induction to the market is made.SWOT AnalysisStrengthNestle’s LC1 division has many strengths. Their first is that they have a great CEO, PeterBrabeck. Brabeck emphasizes internal growth, meaning he wants to achieve higher volumes byrenovating existing products, and innovating new products. His explanation of renovation is that“to just keep pace in the industry, you need to change at least as fast as consumerexpectations.”(Hitt, 2005) And his explanation of innovation is “to maintain a leadershipposition, you also need to leapfrog, to move faster and go beyond what consumers will tell you.”Brabeck has led Nestle into a position to better achieve the internal growth targets with his.Another strength that Nestle has is that they are low cost operators. This allows them to not onlybeat the competition by producing low cost products, but by also edging ahead with lowoperating costs.
  4. 4. WeaknessThe main weakness of the LC-1 division of Nestle is that they were not as successful as theythought they would be in France. The launch in France was in 1994, but since the late 1980s,Danone had already entered the market with a health-based yogurt. The second weakness is thatLC-1 was positioned as too scientific, and consumers didn’t quite understand that LC-1 was afood and not a drug.OpportunityOne opportunity that Nestle has is that health-based products are becoming more popular in theworld, including in the United States. Consumers are becoming more health conscious, andrealize that living longer isn’t only by luck and genetics. LC1 has not been introduced in theUnited States yet. Nestle also has an opportunity of being even a larger market leader inGermany with LC-1. Within two years of launching the product in Germany, they had captured60% of the market. This was due to the fact that they differentiated the product, and Germanssimply preferred the taste. Another opportunity of LC1 is that, because they are a market leader,they can introduce more health-based products in Germany.ThreatA threat to Nestle is the fact that some markets they are entering are already mature. Danone hadan established leadership position in the yogurt market in France. Since Danone was the first toarrive in the market, they have always been the market leader there. Also consumers in Franceliked the taste of LC-1, but researchers believe they did not repurchase the yogurt because theypreferred the taste of Danone products better. Another threat to Nestle is that there is intensecompetition in the United States yogurt market. General Mills’ Yoplait division is the leader inthe yogurt market in the United States. Yoplait has been the leader for years and is constantlyinnovating new health products.Future Plans• Nestlé India’s objective is to manufacture and market the company’s products in such a way soas to create value that can be sustained over the long term for consumers, shareholders,employees and business partners.• Nestle aims to create value for consumers that can be sustained over the long term by offeringa wide variety of high quality, safe food products at affordable prices.• The company continuously focuses its efforts to better understand the changing lifestyles ofmodern India and anticipate consumer needs in order to provide convenience, taste, nutrition andwellness through its product offerings.
  5. 5. Factors for successThe culture of innovation and renovation, continuous improvement and the thrust on value-for-money and affordability have helped the company to focus on adding value for the consumer.The company has continuously focused on operational efficiency; improving product availabilityand visibility and initiated efforts to make its products more relevant to the consumers. This hasbeen supported by the distribution of smaller stock-keeping units (SKUs).There has been continuous focus on the seven value drivers, namely:• Sales growth• Profit margin• Working capital intensity• Fixed capital intensity• Income tax rate• Cost of capital• Value growth durationNestlé’s Competitive StrategiesNestlé describes itself as a food, nutrition, health, and wellness company. Recently they createdNestlé Nutrition, a global business organization designed to strengthen the focus on their corenutrition business. They believe strengthening their leadership in this market is the key elementof their corporate strategy. This market is characterized as one in which the consumer’s primarymotivation for a purchase is the claims made by the product based on nutritional content.In order to reinforce their competitive advantage in this area, Nestlé created Nestlé Nutrition asan autonomous global business unit within the organization, and charged it with the operationaland profit and loss responsibility for the claim-based business of Infant Nutrition, HealthCareNutrition, and Performance Nutrition. This unit aims to deliver superior business performance byoffering consumers trusted, science based nutrition products and services.The Corporate Wellness Unit was designed to integrate nutritional value-added in their food andbeverage businesses. This unit will drive the nutrition, health and wellness organization acrossall their food and beverage businesses. It encompasses a major communication effort, both
  6. 6. internally and externally, and strives to closely align Nestlé’s scientific and R&D expertise withconsumer benefits. This unit is responsible for coordinating horizontal, cross-business projectsthat address current customer concerns as well as anticipating future consumer trends.Nestlé’s InitiativesIn their quest to embrace diversification, Nestle has adopted two initiatives. The first initiative isan extensive management training program at their own Swiss training facility. The individualsinvited to this training are high potential managers who are expected to eventually join Nestlé’sexecutive management. The month long training focuses heavily on the benefits ofdiversification. Additionally, Nestle partners with the International Institute for ManagementDevelopment (IMD) to provide additional education resources for their management all-stars.Finally, Nestlé’s executive managers are expected to give back to the company by acting asinstructors and mentors at the training facility (Reichlin, 2004).Nestle has also adopted a policy of promoting from within. By promoting individuals who havealready gone through the company’s indoctrination process, they are guaranteed to have uppermanagement that believes in the company’s ideals of improved performance via diversification.The direct contact between upper management and executive management trainees guarantees asolid foundation for this process. This promotion from within initiative also lends itself to thecompany’s decentralized management model (Reichlin, 2004).