Nestle flavoured milk

Contents

Executive summary 2

Introduction 3

Situation Analysis 6

Strategy 7

Target Market 8

Industry Analysis 9

Distribution Channel 10

Promotion and advertisement 11

Competitors 12

New entrants 12

Suppliers market 13

SWOT Analysis 13

Marketing strategy 15

Target market analysis 15

Five year marketing plan 16

Growth 17

Break Even 17

Problems and solutions 17

NESTLE FLAVORED MILK BBA14-5

NESTLE FLAVORED MILK

Executive Summary:

The name of our company is Nestle Pakistan. It operates in food industry. Our
company is providing different kind of things regarding food items. Milk is the core part of
our culture. People are having great intention toward milk. We have a big opportunity
operating in this industry.
Nestle is a globally renowned Switzerland based company, operating in different countries,
famous for its food products and is a name of trust. In Pakistan Nestle is operating since
1988. ‘Good Food, Good Life’ this is slogan of Nestle. No doubt Nestle has built its good
repute with excellent performance.

Nestle MilkPak is the favorite milk of Pakistan, it has largest market share in the processed
milk market. Observing market’s current trend and the favorable conditions like a well
repute, a good distribution and a team of highly qualified and committed professionals.
Company has decided to launch its new product that is flavored Milk, targeting the children
of Upper middle class and the upper class.
We will launch our product we will place it through our strong distribution channel in major
cities of Pakistan and promote it through organizing and sponsorship of different events. In
the launching stage we will make strong advertisement using print and electronic media. We
will offer our product at competitive price to penetrate in the market.

International Islamic University, Islamabad 2


Introduction
In line with our parent company's global philosophy, we are proud of our commitment
to excellence in product safety, quality, and value. Our products cater to human needs, and
we are active in the communities we serve.
From spreading awareness about nutrition and wellness to digging wells in the Thar desert
and helping earthquake victims, we are committed to serving our country and its people.
The consumer's voice is key to Nestlé Pakistan's vision and working. Whether you live in the
remotest village or the metropolis of Karachi, our consumer services team stands ready to
listen to your concerns and provide answers about our products and guidance on matters of
health and wellness.
Since Henri Nestlé developed the first milk food for infants in 1867, and saved the life of a
neighbor’s child, the Nestlé Company has aimed to build a business as the world's leading
nutrition, health and wellness company based on sound human values and principles.
While our Nestlé Corporate Business Principles will continue to evolve and adapt to a
changing world, our basic foundation is unchanged from the time of the origins of our
Company, and reflects the basic ideas of fairness, honesty, and a general concern for
people.
Nestlé is committed to the following Business Principles in all countries, taking into account
local legislation, cultural and religious practices:
• Nestlé's business objective is to manufacture and market the Company's products in
such a way as to create value that can be sustained over the long term for
shareholders, employees, consumers, and business partners.
• Nestlé does not favor short-term profit at the expense of successful long-term
business development.
• Nestlé recognizes that its consumers have a sincere and legitimate interest in the
behavior, beliefs and actions of the Company behind brands in which they place their
trust, and that without its consumers the Company would not exist.
• Nestlé believes that, as a general rule, legislation is the most effective safeguard of
responsible conduct, although in certain areas, additional guidance to staff in the
form of voluntary business principles is beneficial in order to ensure that the highest
standards are met throughout the organization.



• Nestlé is conscious of the fact that the success of a corporation is a reflection of the
professionalism, conduct and the responsible attitude of its management and
employees. Therefore recruitment of the right people and ongoing training and
development are crucial.
• Nestlé continues to maintain its commitment to follow and respect all applicable local
laws in each of its markets.

Analysis of sales and EBIT by product group

In millions of CHF Sales
EBIT
Beverages 28 245 4 854
Milk products, Nutrition and Ice cream 29 106 3 744
Prepared dishes and cooking aids 18 504 2 414
Chocolate, confectionery and biscuits 12 248 1 426
PetCare 12 130 1 876
Pharmaceutical products 7 318 2 435
Total segment 107 552 16 749
Unallocated items (a) (1 725)
Total 15 024

2007 consolidated
In millions of CHF
Sales 107 552
EBIT Group (a) 15 024
as % of sales 14.0%
EBIT (Food and Beverages) (a) 12 589
as % of sales 12.6%
Net profit (b) 10 649
as % of sales 9.9%
as % of average equity attributable to shareholders of the parent 20.7%
Capital expenditure 4 971
as % of sales 4.6%
Equity attributable to shareholders of the parent 52 085
Market capitalisation, end December 195 661
Operating cash flow 13 439
Free cash flow (c) 8 231
Net debt 21 174
Ratio of the debt to equity (gearing) 40.7%

(a) Earnings Before Interest, Taxes, Restructuring and Impairments
(b) Profit for the period attributable to shareholders of the parent
(c) Operating cash flow less capital expenditure, disposal of tangible assets, purchase and
disposal of intangible assets, movement with associates as well as minority interests.



Nestle Milk Pak. Ltd., a joint venture with the reputed multinational Nestle of Switzerland
operating in over 80 countries around the globe, has done the pioneer work in the field of
milk collection UHT processing on most modern and state of art machines and quality
packing. It is a household name in our affluent families. Lower class cannot afford the price
and for them it is still a luxury which they can enjoy only once a while. Nestle has developed
a remarkable set up to collect milk from areas stretching about 80,000 KMs, and keeping the
collected milk chilled in the most hygenic conditions until it reaches the processing factory
which may take 8 to 12 hours. They have set up over 2500 milk collection centres from
where it is transported to the 520 chilling centres within less than 3/4 hours. Chilled milk is
then transferred to the two factories at Sheikhupura near Lahore and Kabirwala near Multan
in special trucks with freezing arrangements.

We are going to launch nestle flavored milk we are launching it because of
the increase in the demand of flavored milk in the market especially among kids. It
can lessens house wife’s problems such as mothers are conscious about the health
of their children and by introducing flavored milk children love to drink milk with some
good added flavor. Our flavored milk products are in two forms first one is in liquid
form and it is also available in powder form for longer use. The product has the
potential to survive in the market because one or two regional based companies are
selling the flavored milk. We are installing a new plant of new technology in which we
added the different flavor in the milk that is produced. The different flavors given by
us are banana, peach, mango, chocolate, vanilla, cold coffee, strawberry, pineapple.
We are using the UHT technology in which the milk is treated in a proper way and it
is preserved for a long time through such treatment. These treatments involve
different steps like preparation & preservation criteria. After using such treatment
process flavor is added in the milk. We are also using tetra pack for packing which
have six layers for better preservation of milk.

Situation Analysis
Current state
Pakistan is among the top consumers and producers of milk and dairy products in the world.
Although not up to the standards and desires, but domestic milk producers are maintaining a
good repute. The milk market in Pakistan is efficient. There is traditional supply of milk from
the farm owners to customers and the milk processing companies are also there. These



companies process and package the milk with a longer shelf life and they make sure its
availability to the each corner of the country, even to the rural areas from where the milk
(unprocessed) is collected. The availability of milk is in excess for milk processing
companies. Companies have a good milk collection system from the farms. The processed
milk is getting popular in urban areas because of its availability, ready to use and has a
longer life.

Pakistan is currently in phase of political and economic turmoil. Political instability is
present in Pakistan and economic conditions are not supportive but the things are changing
gradually. There is some stability in political conditions and government is trying to tackle
with economic crisis. The market has the potential to expand and there is a fair competition
in the market. We have the chance of growing and expanding.

Milk is considered a good and essential part of food in our culture; especially for children
who are in growing and grooming stage. Milk contains calcium which is essential for growth
of bones and is considered a complete diet itself. Traditionally, mothers are very curious
about the growth of their children and milk is considered essential in diet. Children need all
the good, healthy nutrition they can get. Milk is a rich source and calcium is what kids need
when growing up to develop strong teeth and helping develop denser bones that will give
them a super start for a healthy future. Children must drink milk every day to meet their
nutritional requirements, especially that of Calcium.
1-3 year olds need 1-2 glasses of milk a day, and 4-8 year olds need 2-3 glasses of milk a
day.
The problem is that most children don’t take readily to drinking milk.

Strategy
For last two decades, Nestle is operating in Pakistan and for more than a century in the
world wide countries. We have a brand name and a good distribution channel, both of these
will be helpful in launching our new product We will enter in the market of falvoured milk
with a target class and advertise our product in order to bring awareness in the consumers
mind. Through our quality we will assure our consumer that we will provide the best flavored
milk as compared to competitors and with a reasonable price.



Technology is evolving very rapidly in the world as well as in Pakistan now days. So
in order to exist and succeed in market companies have to move with latest technologies
and upgrade their system regularly. To penetrate in the market and get maximum profit it is
essential for every one to use latest technology. We are using UHT technology for treatment
of milk and tetra pack for packaging, which is latest and best technology available in
Pakistan. We will update our plants according to latest technology when it will be available
and can operate in Pakistan.
It is usually observed that children like things with colorful packaging. They are
usually not aware of brands and if they had to select from many options they usually go for
the one with colorful packaging. We would also be considering this point during our
launching of product and will have an attractive and colorful packaging.
The threat for us is that some other local companies have already offered the same
product in market in same flavors and captured market share. So there is a chance of failure
of our product as well and it will take more time to get the maximum share of existing
market. Second threat for us is price issue. As we are launching our product in market at
competitive price but if any competitor lower its product price at the time of launching of our
product. At that time our expenditures will be high like heavy expenditures on
advertisements and promotions, and our returns will be low. So we can not lower the price
of our product easily in that early stage to compete in the market.
We have a great opportunity to groom in Pakistani market as our brand name
NESTLE is a well known name in market and owns a good market share. We can use this
market share and thus can make our product a successful one. As NESTLE has a strong
distribution channel so it is a great opportunity so we can utilize that opportunity and if our
product become successful then with the help of distribution channels we will distribute in all
the areas of Pakistan.

Target Market:

A mother’s preference is to provide her child food with all essential nutrients in diet from his
growth. Milk is considered essential for children.
Usually children hesitate taking milk, but it is observed that when some sweetener is added
to milk, they like that. Same is the case with flavored milk. Usually a mother makes the



buying decisions. They would like to buy milk with all the nutrients and kids will also like that,
no matter if it is flavored.

Our target market is the Pakistani market and we will launch it in all major cities of Pakistan
like Karachi, Lahore, Peshawar, Quetta and Islamabad.
Our target class is children and youth of Pakistan. As every one knows milk is very important
for children but they do not like to drink simple milk. They prefer to eat and drink those
things which are good in taste, color and smell. Mostly parents are making decisions for
their children and mostly children follow the decision of their parents. Parents had to buy
additional things along with milk like ovaltine and horlicks. These things give flavor to milk so
it would be convenient for parents to a buy a single thing and they would prefer to buy our
product.

If we see the market trends, we observe that the demand of milk is high in Pakistan. Milk is
used as a drink as well as added in many products like tea and coffee. Along with this there
are many products extracted from milk like butter, cheese and yogurt. So dairy products are
successful in the market. Talking specifically of our product the demand for flavored milk is
increasing as the milk is good in taste, extra nutritious and is ready to drink. It can also be
used as a serving drink for guests. Children who consume flavoured milk had higher total
milk intakes when compared to non-consumers of flavoured milk. Children who drink
flavoured milk consume fewer nutrient-void soft drinks and aerated beverages than children
who don't drink flavoured milk. Children who consume chocolate or other flavoured milk
have higher calcium intakes in comparison with children who do not consume flavoured
milk.

By encouraging flavoured milk consumption, you can help reverse the trend toward soft
drink and aerated beverage consumption, which are crowding out more nutritious beverages
like milk, and negatively impacting children's diet quality.

However, such drinks can linger in kids’ mouths, the chocolately sugary ones may increase
the risk of tooth decay. It is important not to add more sugar or create the taste an intensely
sweetened beverage. So make sure they brush well.
Parents find it easy to buy the product as children like it. There are a very few competitors
in market and competition is not so tough. Market is in its growth stage.



The market is divided on the bases of four characteristics. These are geographic,
demographic, psychographic and behavioral.
We have selected demographic. Demographic is most appropriate because of the age,
occupation, income and social classes. Geographic is less appropriate because we have
target the main cities while in geographic it includes all the territories and other reason is
that rural area people are not use to the packed milk. Psychological is not appropriate
because we have selected the age and territory while in psychographic age and territory
does not include in it. Psychographic includes personality, life style and values. Similarly
behavioral segment is also not appropriate because it includes attitudes, knowledge and
attitude. Which is up to some extent is not more appropriate.
Industry Analysis
We have a milk and dairy industry having milk products. In which we have different
categories like we have simple milk, powdered milk and flavored milk. Pakistan ranks 7th
among milk producing countries, with an estimated 21 billion liters of milk produced
annually. Although this level of milk production is more than adequate on a per capita basis
for today's population, lack of processing and poor distribution system in a long hot weather
(milk has a shelf life of only four hours under moderate temperatures) keeps it from reaching
consumers in areas that are either deficient in milk production, particularly the urban
centres, or those that are difficult to access. The milk yield per cow in the neighbouring
country is about 3000 liters per lactation period as against 1000 liters in Pakistan. In
Western Europe the average exceeds 5000 liters, in USA 9000 and Israel exceeds 7000
liters per lactation period.
Presently in Pakistan only about 22 per cent of milk production is processed, about 57.5 per
cent is supplied to urban areas in raw form in most unhygenic conditions causing real health
hazards. Rest is consumed by the farmers, mostly per force, specially in the far-flung areas
for lack of proper facilities to take it to deficient areas. About 75 per cent of the total
production of raw milk is produced in Punjab, 14 per cent in Sindh 10 per cent in NWFP and
only 1 per cent in Balochistan. In Punjab we have more buffalos than cowl in about 60-40
ratio, in Sindh it is 50-50, in NWFP dead 20 per cent buffalos and 80 per cent cows. In
Balochistan there are mostly cows. The UHT process, although expensive, has proven to be
a success in Pakistan as it increases milk's shelf life to 12 weeks. On the other hand, the
pasteurization process inspite of its low procession cost, had not made much of a headway
due to the short shelf life of its product and its dependence on old chain from production to
consumption. Taking advantage of this cost factor, The UHT process add heavily to the cost



of milk as it requires huge investment to set up the plant, production of packing material and
above all the collection cost of the milk making it beyond the purchasing power of poor and
even lower middle class.
We have developed an intensive distribution strategy that brings our products to your door,
through effective communication, door-to-door sampling, and exciting consumer promotions.
We focus especially on Pakistan's smaller towns, where activities such as town storming,
distribution drives and intensive distributor training ensure that products are easily
accessible and visible, giving us a strong competitive edge.
The main distribution channel is

Suppliers

Manufacturers
(Milk processing companies)

Distributors

Wholesalers

Retailers



Promotion and advertisement:
We are making promotion and advertisement through following channels
1) Electronic Media
• Television
• Radio
• Internet

2) Print Media
• News paper
• Banner Advertisements

3) Direct Marketing
• Door to door marketing campaign; To introduce and create awareness
among the mothers about our new product
• Arranging special programs at Schools and public parks. The children are our
main focus so to inform and attract them.

Major competitors:
Main competitors of NESTLE are:

1) Shakarganj Food Products Limited
2) Nurpur Foods
3) YaaZoo(Imported)

New Entrants:
NESTLE is a familiar name to the Pakistani consumers. It is operating in areas of packaged
edibles, beverages and dairy products etc. Nestle has a flavored milk ‘Milo’, a chocolate
flavored milk, already known to consumers in Pakistan, liked by many youngsters.



Expectedly, Nestle will not face many hurdles in launching its own new range of flavored
milk because of its expertise in this field. Goodwill also help in achieving the desired targets.
Nestle has a very good distribution channel so it will not be new thing for them to distribute.

Substitute Products:
The substitute product for flavored milk are:

• Soft Drinks
• Energy Drinks
• Juices

Competing Products:

• Oolala!
• Nurpur Flavored Milk
• Yaazoo!

Suppliers Market:

Nestle is working in FMCG industry for almost 140 years, it has expertise in this field. The
main raw materials are the milk, artificial flavors and packaging .Company will not face any
difficulty for arrangements for raw materials. The Nestle has its own milk collection system
so it will not have problem for milk collection. While the artificial flavor will be imported, the
packaging material will be available from tetra-pak packaging ltd.

S.W.O.T Analysis:
Strengths:
• End-user sales control and direction.
• Right products, quality and reliability.
• Superior product performance vs competitors.
• Better product life and durability.



• Spare manufacturing capacity.
• Some staff have experience of end-user sector.
• Have customer lists.
• Direct delivery capability.
• Product innovations ongoing.
• Can serve from existing sites.
• Products have required accreditations.
• Processes and IT should cope.
• Management is committed and confident.

Strength that Nestle has is that they are low cost operators. This allows them to not
only beat the competition by producing low cost products, but by also edging ahead with low
operating costs. Another strength is that they have is their brand recognition.

Weaknesses:
• Customer lists not tested.
• Some gaps in range for certain sectors.
• We would be a small player.
• No direct marketing experience.
• We cannot supply end-users abroad.
• Need more sales people.
• Limited budget.
• No pilot or trial done yet.
• Don't have a detailed plan yet.
• Delivery-staff need training.
• Customer service staff need training.
• Processes and systems, etc
• Management cover insufficient.

Due to foreign origin company some religious extremist avoid to buy the NESTLE
products.
Threats:
• Legislation could impact.
• Environmental effects would favor larger competitors.



• Existing core business distribution risk.
• Market demand very seasonal.
• Retention of key staff critical.
• Could distract from core business.

A threat to Nestle is the fact that some markets they are entering are already mature.
Opportunities:
• Could develop new products.
• Local competitors have poor products.
• Profit margins will be good.
• End-users respond to new ideas.
• Could extend to overseas.
• New specialist applications.
• Can surprise competitors.
• Support core business economies.
• Could seek better supplier deals.

One opportunity that Nestle has is that health-based products are becoming more
popular in the world, including in the Pakistan. Consumers are becoming more health
conscious, and realize that living longer isn’t only by luck and genetics.

Marketing Strategy:
Logically a plan which details what a business will sell, to whom, when and how, implicitly
including the business/marketing strategy. The extent to which financial and commercial
numerical data is included depends on the needs of the business. The extent to which this
details the sales plan also depends on the needs of the business.
Our main objective is to capture maximum market share of the product by winning
consumers attraction and trust. Through a powerful marketing campaign we will try to
capture the attention of our target audience. There are no big constraints in the marketing
for flavored milk whose targeted consumers are households i.e. children and their mothers.

Target Market Analysis:
Our Target Market or Target audience is mainly children, of upper middle class and the
upper class; the elite class. The children usually like to add something additional in milk like



sweetener, chocolate flavor, Rooh-Afza etc. If they are provided with a milk which has
additional flavor in it and is ready to use, with a variety of options, then they will definitely go
for it. And much more when it comes from the house of Nestle, definitely it will create trust
within no time

Analysis of marketing mix variable:
Marketing plan use for launching our new product is assumed to be a successful one.
Price
We are providing competitive price for the product as compared to our competitors.
For penetration in the market we use market penetration price strategy in order to gain
maximum shares of the market.
Product
Our new product is designed according to the desires of the consumers. It will gain
rapid attention of the consumers due to goodwill and brand name.
Awareness
We are hopeful that a strong and powerful advertisement campaign will be effective
and helpful to us for achieving our desired target i.e. to gain maximum consumer attention.
Distribution
We can proudly say that Nestlé’s distribution channel is one of the best distribution
system in Pakistan. Definitely it is going to be helpful in our new campaign.
Five years Marketing Plan:

Category 2009 2010 2011 2012 2013
Advertisement High Using
advertisement Persuading for
10 advertisement,
advertisements in Introducing Reminders Reminders Reminders
print media, 50 new flavor
advertisements in
electronic media.
Promotion Organizing and Special offers Value - Promote in
sponsoring addition all areas of
different events Pakistan



Placement Place in five Bringing more Same as - Targeting
different cities areas under previous Urban and
with strong coverage year rural area
distribution
Product Flavored Milk Introducing - - -
new flavor

Growth:

Year Marketing Other Total Total Sales Balance profit/Loss Profit/Loss Growth
Current Year Over All
Expanses Expanses Expanses Profit/Loss (%)
1st 725,000 300,000 10,25,00 700,000 (325,000) Loss Loss 10.29
0
2nd 500,000 250,000 750,000 10,00,00 250,000 Profit Loss 14.70
0
3rd 330,000 200,000 530,000 13,00,00 770,000 Profit Profit* 19.11
0
4th 170,000 200,000 370,000 17,00,00 13,30,000 Profit Profit 25.00
0
5th 170,000 200,000 370,000 21,00,00 17,30,000 Profit Profit 30.08
0
Total (over all) 30,45,00 68,00,00 37,55,000 Profit Profit
0 0
* We achieve our breakeven point here in 3rd year.
Breakeven Analysis:

Yea Total Expanses Total Sales Balance Prv. Balance Total Situation
r Profit/Loss Balance
1st 10,25,000 700,000 (325,000) -- (325,000) Loss

2n 750,000 10,00,000 250,000 (325,000) (125,000) Loss
d
3rd 530,000 13,00,000 770,000 (125,000) 645,000 Now our
Profit Start

Problem and Solution:



A big problem for flavored milk is that it has comparatively less shelf life than the ordinary
packaged pasteurize milk ,it can be solved by adding more preservatives and by managing
a good and on time supply .
While we believe that Nestle has a, dedicated and committed team of qualified professionals
who know their work. Nestle will not face many problems in launching and marketing this
product.

Bibliography:

1. http://www.udel.edu/alex/chapt3.html#societal
2. www.wikipedia.org
3. www.google.com
4. www.nestle.pk
5. http://www.udel.edu/alex/chapt11.html
6. http://www.udel.edu/alex/chapt15.html
7. http://www.businessballs.com/freematerialsinword/free_SWOT_analysis_template.doc
8. Tremendous potential of the industry so far remained unexplored
From Shamim Ahmed Rizvi, Islamabad
May 22 - 28, 2000


Nestle flavoured milk

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