Nestle – addressing non market constraints in india

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A strategy to address non market constraints in India

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Nestle – addressing non market constraints in india

  1. 1. Nestle – Addressing Non-market Constraints in India An integrated approach to non-market issues 3/29/2014 1 Bhaskar Jayaraman
  2. 2. Agenda 3/29/2014 2 Case & Issue Introduction • Introduction • Nestle’s country focus – India • Beverage Industry & Water Use – Recent Industry Impact • Industry related issue – Coca-Cola Issue analysis • Competition’s response to issue & strategy • Unilever’s Integrated Strategy • Response Outcome • Non-Market approach • Emerging Trend • Evolving Issue & Impact - New Ground Water Regulation • Evolving Issue’s Relevance to Nestle
  3. 3. 3/29/2014 3 Issue Analysis Non-Market approachCase & Issue Introduction
  4. 4. Introduction • Nestle – Major US food & beverage co. with global footprint – Turnover 2010 – $ 75 Billion – Food Categories • Liquid – Hot drinks, alcoholic beverages, soft drinks, dairy, sauces • Solid/Semi-solid – Baked goods, cereals, confectionery, snacks, soups and prepared meals – Sales distribution 3/29/2014 4 Americas, 40% EMEA, 37% Asia, 23% Issue Analysis Non-Market ApproachCase & Issue Introduction
  5. 5. Nestle’s country focus – India • Parameters of business growth (Industry Anal. – Appendix I) – Emerging economy – High GDP growth, wealth creation, labor force growth – Demand for better products/services – Large population with significant youth numbers – Retail market • 2011 size - $ 450 Billion • Expected 2021 size - $ 1000 Billion • India specific Non-market issue sources – Labor – Regulation – Environmental – Resource depletion • India specific non-market issue focus – Industry Water Use (Ground water only source) – Affected people (Near manufacturing area) – Interest group backlash (Mostly affected people) 3/29/2014 5 Milk, Coffee, Tea, Water 95% Soft drinks 5% Indian Beverage Market Split Issue Analysis Non-Market ApproachCase & Issue Introduction
  6. 6. Beverage Industry & Water Use – Recent Industry Impact Issue – Industry water use Regulatory Body Pressure Old regulation • Ambiguous New Regulation • Developing Information Industry information impact • Water/Soil pollution • Image, Brand, Reputation New Information Impact • Ground water depletion discovery Interest groups Activist Pressure • Farmers/Home Owners/NGO • Consumers Other Industries • Competitive pressure Institutions Activist Pressure • Political Judicial Pressure • Ambiguous interpretation • Penalties Media Pressure • Reputational loss 3/29/2014 6Issue Analysis Non-Market ApproachCase & Issue Introduction
  7. 7. Industry related issue – Coca-Cola Overuse of Water 3/29/2014 7 Issue’s -ve Impact on Firm Issue Identification Interest group formation Legislation Administration Enforcement 2002 – Incidents of ground water depletion 2002 – 2005 Farmer/NGO activism www.globalresearch.ca www.indiaresource.org infochangeindia.org 2005 – Political Activism 2005 – 2011 Plant shutdowns 2011 Judiciary - Penalty/Compensati on Issue Life Cycle Decreasing Discretion Issue Analysis Non-Market ApproachCase & Issue Introduction
  8. 8. Coca-Cola Issue origination 3/29/2014 8 Decreasing Discretion Interest group – Public Interest group – Corporate Institutional action – Pvt. Institutional action – Public New Understanding Market forces Scientific (discovery/advan ces/uncertainty) Moral concerns Farmer protests Negative media coverage Administration & Judiciary Issue Analysis Non-Market Approach Issue’s -ve Impact on Firm Case & Issue Introduction
  9. 9. Issue impact – Coca-Cola (2002 - 2011) 3/29/2014 9 Legislation Administration Judiciary Media Buyers Increased exit barriers (M) Reputation loss Less bargaining power (M) Penalties & Compensation Plant shutdowns Issue Analysis Non-Market Approach Issue’s -ve Impact on Firm Farmers/Home Owners Coca-Cola Water share (M) – Market Impact Case & Issue Introduction
  10. 10. 3/29/2014 10 Issue Analysis Non-Market approachCase & Issue Introduction
  11. 11. Issue response – Overuse of Water 3/29/2014 11 Respond only when compelled to act Damage control once challenged Anticipatory, prepared, tackle before problem arises Proactive, affect what issues arise & how they’re framed Coca-Cola Unilever, Pepsi, SABMiller Increasing Discretion Issue’s -ve Impact on Firm Issue Analysis Non-Market ApproachCase & Issue Introduction
  12. 12. Response Strategy Address the Issue What? •Industry Water Use Backlash Where? •Semi- urban/rural area Why? •Land/Water availability •Low population density Address Information Availability What? •Inform •Create Awareness •Increase transparency Whom? •NGO/Activists •Institutions •Consumers How? •Web, Social media etc. •Events Address Interest groups What? •Educate/Engage •Gain trust, influence Whom? •Farmers •Consumers •Other Businesses •Consumers •Activists/NGOs •Trade Assn. How? •Partner •Sponsor Address the Institutions What? •Influence/Engage •Gain support, approval •Build relations Whom? •Administrative •International •Political •Media How? •Events •Sponsorships •Awards 3/29/2014 12Issue Analysis Non-Market ApproachCase & Issue Introduction
  13. 13. Competitive Response to Issue – Examples 3/29/2014 13  Pepsi, SABMiller (Appendix - II)  Unilever (Global Approach)  Sustainable Tea Farming  Institutions & Interest Groups  Rainforest Alliance Certified™ (Association)  Farmers  McDonalds (Corp.)  NatGeo (Media)  Department for International Development (U.K. Gov.)  India Water Body Initiative  Assess water demand-supply gap  Rainwater harvesting at Co. and Farms  Reduce on site water use  Institutions & Interest Groups  DHAN (Advocacy group)  NABARD (Gov.) Issue Analysis Non-Market ApproachCase & Issue Introduction
  14. 14. Unilever’s Integrated Strategy – Industrial Water Use 3/29/2014 14 Pepsi McDonalds Activists, Consumers, Media Market NGO Non-Market Strategy Market Strategy Inform, Educate Non-Mkt. Alliance Develop marketing capability Engage, Collaborate Farmers Engage, Support Administration Build Relations Supply Market to Retailers Influence consumer choice Issue Analysis Non-Market ApproachCase & Issue Introduction
  15. 15. Response Outcome 3/29/2014 15 Farmers/Home Owners Industries Consumer Administration Partners & Collaborators Consumer, Media Buyers (M) – Market Impact Issue’s +ve Impact on Firm Increased Preference (M) Reputation improved /preserved Reduced Regulatory pressure More tie-ups More bargaining power (M) Farmers/Home Owners Water share Issue Analysis Non-Market ApproachCase & Issue Introduction
  16. 16. Emerging Trend – Address issue early 3/29/2014 16 Issue Identification Interest group formation Legislation Administration Enforcement Issue Life Cycle Address Issue Here Issue’s -ve Impact on Firm Decreasing Discretion Issue Analysis Non-Market ApproachCase & Issue Introduction
  17. 17. 3/29/2014 17 Issue Analysis Non-Market approachCase & Issue Introduction
  18. 18. Evolving Issue & Impact - New Ground Water Regulation Evolving Issue What? •Industry ground water usage Where? •Regional level Guardians •State Government •Administration Impact Cause Why? •New regulations •Ambiguous clauses Whom? •Industries •Existing users •New users Related to •Water quality •Water quantity •Competitive landscape •Nature (falling table etc.) •Industry profile Impact Company effects •Risk to availability •Cost •Scalability •Profitability Consumer effects •Global brand image •Product availability •Price point •Global reputation •Preference Industry effects •New co. affected more •Existing co. less •Increased rivalry, exit barriers, & capital requirements 3/29/2014 18Issue Analysis Non-Market ApproachCase & Issue Introduction
  19. 19. Evolving Issue Relevance to Nestle 3/29/2014 19 Impact relevance Consumer Competitors Legislation Administration Judiciary Media Buyers & Suppliers Partners & Collaborators High Switching consumer preference (M) Mkt. share loss , New entrants, Substitutes (M) Bargaining power loss (M) Reputation loss Plant shutdowns Loss of non- market allies Penalties & Compensation Inc. exit barriers (M) (M) – Market Impact Issue Analysis Non-Market ApproachCase & Issue Introduction
  20. 20. Addressing the Evolving Issue – Water Usage & Regulation Relevant impact regions & response history •Regions of issue and business relevance •Competitive, institutional & interest group action •Executed by – Political Science B.A., Policy & Institutions expertise (Allotted time, 3 weeks) Consumer trends & business impact •Consumer & media trends vs. regions vs. product mix •Consumer, NGO, institutional, & interest group activity •Identifying the right message •Strategy to address trends and information channels (Old/New media campaigns) •Executed by – Psychology Ph.D. – Veteran, Consumers expertise (Allotted time, 3 weeks) Relevant markets & competition •Market analysis vs. product mix vs. issue •Identify potential markets •Competitive response, strategy, & threats in non-mkt. area •Executed by – Business B.A. – Intern, Markets and Regions expertise (Allotted time, 3 weeks) Identify collaborators & marketing potential •Businesses, interest groups, institutions to partner (Differentiation, pool costs) •Partnership strategy w.r.t. non-market goals •Aligning strategy outcome with business goals (economies of scale/scope , marketing potential, bargaining power, competitive advantage etc.) •Frame the integrated strategy •Executed by – Bhaskar Jayaraman, Strategy expertise (Allotted time, 3 weeks) 3/29/2014 20Issue Analysis Non-Market ApproachCase & Issue Introduction
  21. 21. Questions? 3/29/2014 21 A balanced water share
  22. 22. Beverage Industry Analysis – Appendix I • Bargaining Power of Supplier (Medium) – Main input product “Water” – No substitutes – Beverage Industry Source (India) – Private or Co. real estate – Large volumes required – Important to product quality – Industry important to supplier (Other consumers diff. sources) – Local sourcing (Supplier concentration) – Low input cost & switching cost – Water Supply Constraints • Natural – Unavailability, Scarcity – Seasonal, Uneven – Falling ground water table • Man-made – Competition (Other Industries) – Pollution 3/29/2014 22
  23. 23. Beverage Industry Analysis contd… – Appendix I • Bargaining power of buyer (High) – Retailers/Consumer switching costs low – Product differentiation high – Products low in importance to buyer usage (not essential to livelihood) • Threat from substitutes (High) – Milk/Coffee/Tea usage already high vs. packaged drinks • Threat from new entrants (Low) – High capital costs – Economies of scale – Product differentiation high – Access to distribution channels/resources – Cost advantages independent of scale (Brand value, reputation) • Rivalry (High) – Few equally powerful players – Fixed costs high – Lack of switching costs (Retailer, consumer) – Capacity increased in large increments 3/29/2014 23
  24. 24. Competitive Response to Issue – Appendix – II • Pepsi Co (Local Approach) – Positive Water Balance Initiative – Performance With Purpose – Institutions & Interest Groups • Farmers • Unilever (Corp.) • SABMiller (Local Approach) – Ground Water Management – Community Water Management – Institutions & Interest Groups • CII (Trade assn.) • ACWADAM (Advocacy group) • Gridline Consultancy (Corp.) • Humana People to People (Watchdog) 3/29/2014 24
  25. 25. Emerging trend – “Corporations fend for self” – Appendix III Interest groups observed Corporate initiatives Activism •Consumers •Organizations •Watchdogs Political agenda Interest group examples “Coca-Cola …Depletion...” •http://www.globalresearch.ca •http://www.indiaresource.org •http://infochangeindia.org “AIDMK election campaign… drinking water supply” – Oct. 2011 “Human Elephant Conflict Inside Coffee Forests” •http://www.ineedcoffee.com Institutions observed Policy making •Mandatory water harvesting •New Ground Water Regulation 3/29/2014 25

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