Different Strategies used by Nestle

1. INTERNATIONAL PRICING STRATEGIES OF NESTLE
Presenting by: Dandu Shaik Vaseem Akram (MB180457)

2. What is NESTLE ?
• Nestle is a Swiss multinational food and beverage company.
• Nestle’s products include baby food, bottled water, breakfast cereals,
coffee and tea, confectionery, dairy products, ice cream, frozen food, pet
foods, and snacks.
• It is the largest food company in the world measured by revenues.
• Nestle Pakistan started in 1988 under a joint venture and took over
management in 1992.

3. NESTLE MISSION STATEMENT
• Nestle’s mission, in the words of our founder Henri Nestle, is to:
“...positively influence the social environment in which we operate as
responsible corporate citizens, with due regard for those
environmental standards and societal aspirations which improve
quality of life.”
Henri Nestle, 1857.

4. NESTLE VISION STATEMENT
Nestlé's vision statement on its global website:
“To be a leading and competitive nutrition, health and wellness
company delivering improved shareholder value by being a preferred
corporate citizen, preferred employer, preferred supplier selling
preferred products.”

5. NESTLE: A Very Brief History
• 1866: The key factor which drove the early history of the
enterprise that would become The Nestlé Company was
Henri Nestlé’s search for a healthy, economical alternative to
breastfeeding for mothers.
• 1905: The Company formed by the merging was called the Nestlé and Anglo-Swiss Milk
Company.
• 1938-1944: The end of World War I brought with it a crisis for Nestlé.
• 1944-1975: The close of World War II marked the beginning of the most dynamic
phase of Nestlé's history.

6. • 1974: Agreement with L'Oréal in 1974,
Nestlé's overall position changed rapidly.
• 1981: Nestlé approached the 1980s with
renewed flexibility and determination.
• 2005: Chairman recognized that the eating habits of the world’s
population were changing and hence it began its own transformation.
• 2009: Held the first Creating Shared Value Forum in New York, with
leading experts in the areas of nutrition, water and rural development
coming together to discuss serious global challenges facing us in these
three areas and the role of business in helping to solve them.

7. NESTLÉ – HISTORY OF LOGO
 The earliest Nestlé logo was introduced by Henri Nestlé in
1868, based on the meaning of his name in German, i.e.
little nest.
 Later in 1938, the “Nestlé” name was introduced to the
traditional nest design.
 However, in 1966, the design was again altered with a few
minor graphic tweaks.
 In 1988, the worm in the beak of the mother bird was taken
out while an extra fledgling was also removed.

8. NESTLÉ TODAY
 Operates in 194 countries.
 447 factories in 89 countries.
 2000+ brands worldwide.
 Employs almost 339,000 people.
 Salesin 2014 worth 95 Billion USD or 9.7 Trillion PKR.
 Largest R&D network of any food company, with 34 R&D facilities and over 5,000 people
involved in R&D.
 In 2011, Nestlé was listed No. 1 in the Fortune Global 500 as the world’s most profitable
corporation.

9. NESTLE: International Pricing Strategy
Price: Price is the one, which creates sales revenue – all other parts of marketing mix are
cost.
“The sum of all the values consumers give up in order to gain the benefits of having or using
a product or service.”
There are following factors that influence pricing decisions:
 Changes in technology
 Effect of suppliers
 Competitive pressure
 Increasing price sensitivity of the customers

10. PRICE STRATEGIES
There are following Pricing Strategies:
 Penetration pricing
 Psychological
 Bundling
 Price discrimination
 Price flexibility
 Negotiating margins

11. PENETRATION PRICING STRATEGY:
Penetration pricing is the pricing technique used by the firm in which offering a low price
for a new product in order to attract more customers away from the competitors.
Example:
The new products introduce by Nestle last two years is the Maggi new flavor of the instant
noodles. So, they are sold in a lower price which is Rs 18 in order to attract new customers.
Nestle want to attract more customer away from their competitor which also produce the similar
flavor which sold at rs20. However, the price of this product increased to around rs19. This is
because they had gained larger market share and customer base.

12. PSYCHOLOGICAL PRICING STRATEGY:
 Psychological pricing is a pricing strategy that helps to create a positive psychological impact
on the buyers and tempts then to purchase a product.
 The selling price of the products are often expressed as “odd price” which a little less than a
round number.
 Most of the Nestle Company’s products are using this psychological pricing strategy.
Example:
Nestle Bliss which is one of the chilled diary product produced by Nestle sold at rm3.95.
Consumer will have a positive perspective on the price which they feel like this product is
selling at rm3 rather than rm4. Therefore, they will feel the prices are cheap, and they will buy it.

13. BUNDLING:
 Bundling (package tie-in sale) is a type of tie-in sale in which two goods are combined so that
customers cannot buy either good separately.
 Nestle company usually use mix bundle rather than pure bundle.
Example:
Nestle always do the promotion in supermarket like purchase 2 bottles of Nestle Bliss at rm7.50 only.
Original price of 1 bottle costs rm3.99. If consumer purchase 2, it is much cheaper. As a rational
consumer, we normally ss purchase 2 bottles rather than 1, because we feel like it is much cheaper.
Therefore, this pricing strategy can increase sales volume and maximize profit very efficiently in both
short-term and long-term.

14. PRICE DISCRIMINATION:
It is refers to practice in which a firm charges consumers different prices for the same good.
There are three types of price discrimination:
 Perfect price discrimination
 Quantity price discrimination
 Multimarket price discrimination

15. Perfect Price Discrimination:
Perfect price discrimination happens when firm charges each individual customer his reservation price.
Reservation price means the maximum price that the customer willing to pay for a good.
Note: Nestle as a food and beverage company is not suitable to practice this type of price discrimination
because it is hard for Nestle to prevent resale. Therefore, imperfect price discrimination is not applicable for
Nestle company.
Quality Price Discrimination:
 Most of the customers are willing to pay more for the first few units of good they purchase, but as the
unit of purchase increase, their reservation price will start to decline. Therefore, in this situation, firm
may choose to discriminate the price base on the quantity. This type of price discrimination is called
quantity price discrimination.
 Normally, this type of price discrimination is applied by company that provides utilities to consumer.
Hence, this type of price discrimination is not applicable to Nestle because Nestle usually has a fixed
price for its good and service.

16. Multi Market Price Discrimination:
 Multimarket price discrimination occurs when firm divide its customer into several groups
and charges different price for each group of customer provided that each group have
different elasticity of demand curve.
 Nestle can practice multimarket price discrimination in order to gain more profit.
Example:
The demand for Milo in Malaysia and Pakistan is different. In Malaysia, people demand
more for Milo, therefore, when the price of Milo increase, the quantity demanded will not
change a lot, whereas, in Pakistan, the demand of Milo lesser, therefore, when the price of Milo
increase, people will tend to change to other drinks like coffee.

17. NEGOTIATING MARGINS:
 In certain market customer expects a price reduction in some products.
Competitive discounts, fast payment discounts an annual volume bonus
and other promotional allowances come under this category.
Nestle and its negotiations with its suppliers made them to gain a good
reasonable margin in all its goods.

18. PRICE FLEXIBILITY:
Flexible prices are the key factor of success of nestle in global markets.
For example:
MilkPak being the largest selling brand is sold out at the same price as
that of other low quality products while maintaining its quality.

19. CONCLUSION
Tie-in sales is the best pricing strategy to be used by Nestle in
order to maximize the profits of the firm. This is because this
strategy in which the purchase of one product is made the
condition of sales for another product.