Nestle Purina PetCare is a global leader in pet food and pet care products. It is a subsidiary of Nestle SA and had global retail sales of $14.1 billion in 2010. The document provides information on Nestle Purina's market share, brands, manufacturing and distribution footprint, financial performance, and strategies. It recommends establishing a manufacturing facility in Latvia by 2017 to increase profitability by 8% and expanding into new markets in Europe and Asia by 2015 to increase sales by 4.5%.

1. Jason Atherton
David Friedman
Viktoryia Stackle
Xinwei Xin

2. Headquartered in St.
Louis, MO
Founded in 1894 as
Purina Mills
Merged with Nestle in
2001
Leader in pet food
sales in the U.S.
Operates in over 100
countries

4. Parent company Subsidiary Global Retail Sales
Mars Inc. Mars Petcare 14.7
Nestle SA Nestle Purina Petcare 14.1
Colgate-Palmolive Co. Hill’s Pet Nutrition 3.4
Procter& Gamble Co. P&G Pet Care 3.3
Del Monte Food Co. N/A 2
Others 22
The size of industry 59.5
Global Pet Food Industry Size for 2010 ( USD in billions)

5. 45.12
51.5
53
59.5
40
45
50
55
60
65
2007 2008 2009 2010
U.S.DollarsinBillions($)
Time Span
Global Dog and Cat Food Sales
Industry
Total

6. 25%
24%
6%
5%
3%
37%
Global Market Share 2010
Mars. Inc
Nestle Purina
Colgate-Palmolive
Procter & Gamble
Del Monte
Others

7. Differentiation
via Quality

8. Dog food and treats

9. Cat food and treats

10. High-tech
headquarters in St.
Louis, MO
Virtual reality
technology
Efficient Assortment
Solution
Top notch tracking
system

11. 69% female
25% 45-54 years-old
92% Caucasian
66% have no kids
28% income of $100-150K
53% with some college education

12. Distributes to: 65% of Purina
products sold in the
Americas
28% in Europe
7% in Asia, Oceania
and Africa

13. Headquarters in St.
Louis, MO
Over 20 factories in
U.S.
4 in Canada
6 in Latin America
9,850 employees

14. On-site quality assurance labs and staff
Tracking system
Ingredient screening
Eco-friendly materials

15. Wide variety of emerging global markets
Sales are not fazed by the economy
Low production costs
Community support
Intense competition
High regulations on food quality

16. Leadership position based on “trust” and
“quality”
Extensive products/brands portfolio
Efficient production and shipping methods
Best work-life balance
17 consecutive years of revenue growth
High reputation in the community

18. At Nestle Purina PetCare, we offer top of the line
dog food, cat food and pet care products for those
who seek the best for their pets. We deliver to
grocery and pet stores across the Americas,
Europe and the Asia-Pacific region. With
continuous growth, we strive to become the
leader in the global market.

19. Customers
Associates
Stockholders
Suppliers
Communities

20. Company Profit
Margin
ROA Inventory
Turnover
Quick
Ratio
Debt to
Assets
Nestle Purina 28.05% 27.57% 13.8% 1.03% 43.93%
P & G 16.13% 10% 12.4% 0.51% 52.07%
Colgate-
Palmolive
14.15% 19.72% 12.7% 0.67% 74.79%
Del Monte 6.53% 5.70% 5.1% 0.73% 57.39%

21. Strengths Weaknesses
• Top-notch ingredient screening
for best quality
• Lean and efficient production
process
• State-of-the-art technology
• High brand awareness
• Globally known parent
company
• High employee morale
• Unmatched r & d capabilities
• Factories concentrated only in
the Americas
• Too much focus on developed
markets
• Several pet food recalls
• Limited distribution channels

22. Opportunities Threats
• Increasing pet ownership in
emerging markets
• Increasing number of empty
nesters
• Global awareness of pet health
and wellness
• Rising disposable income
globally
• Growing amount of skilled
young professionals around the
world
• Product safety and quality
concerns
• Rising price of commodities
• Growing number of foreign and
domestic competitors
• Emergence of cheaper private
label products
• Cultural barriers in foreign
countries

24. New entrants-Moderate to high threat
Suppliers-Low to moderate bargaining power
Buyers-Moderate bargaining power
Substitutes-Low
Rivalry-Very high

25. Performance:
No manufacturing facilities to support Europe,
Asia, Oceania and Africa more cost effectively

26. Opportunity:
Fast growth of emerging markets and changing
sociocultural views

27. Threat:
Increasing number of private label companies
with lower prices and newer niche-oriented
products

28. Consumer confidence is increasing
Unemployment rates are decreasing
Emerging markets will continue to grow
Lifestyles, attitudes and perceptions around the
world will continue to change
Government will continue forcing regulations
Technology around the world will continue
booming

29. Open a manufacturing facility in Latvia to
increase profitability 8% by 2017
Increase sales by 4.5% by expanding into
Latvia, Romania, South Korea and Thailand by
2015

30. Expand manufacturing plants to developing
countries to cut costs and increase profitability
Expand international sales by entering new
emerging and developed markets to increase
global market share and narrow the gap with
Mars, Inc.

31. Open a manufacturing facility in Latvia to
increase profitability by 8% by the end of 2017

32. R & D
Basic research on
building and location
costs
$500,000
Building and equipping
the factory
$60M
Conducted by Nestle
Purina

33. Human Resources
Recruiting and training
$250,000
Wages
$2.15M (annually)
Benefits
$537,500 (annually)

34. Information Systems
Use of existing systems
with minor adaptations
$100,000
Finance
60% debt financing
20% equity
20% cash reserves
Marketing
None required
Market Research
Research on size of
the market and costs
$500,000
Action Plan 1

35. Pro Income Statement Before Strategy
(in millions)
2012 2013 2014 2015 2016 2017
1.0% 1.0% 1.0% 1.0% 1.0%
Sales $14,100.00 $14,241.00 $14,383.41 $14,527.24 $14,672.52 $14,819.24
Cost of good sold $5,295.24 $5,348.19 $5,401.67 $5,455.69 $5,510.25 $5,570.91
Gross profit $8,804.76 $8,892.81 $8,981.74 $9,071.55 $9,162.27 $9,248.33
General and
Administrative expense
$3,245.28 $3,277.73 $3,310.51 $3,343.62 $3,377.05 $3,410.82
EBIT $5,559.48 $5,615.07 $5,671.23 $5,727.94 $5,785.22 $5,837.51
Interest income $13.80 $13.94 $14.08 $14.22 $14.36 $14.50
Interest expense $64.32 $64.96 $65.61 $66.27 $66.93 $67.60
EBT $5,508.96 $5,564.05 $5,619.69 $5,675.89 $5,732.65 $5,784.41
Tax(25%) $1,377.24 $1,391.01 $1,404.92 $1,418.97 $1,433.16 $1,446.10
EAT(net profit) $4,131.72 $4,173.04 $4,214.77 $4,256.92 $4,299.48 $4,338.31

36. Pro Income Statement After Strategy
(in millions)
2012 2013 2014 2015 2016 2017
-1% 0 2% 5% 8%
Sales $14,100.00 $14,241.00 $14,383.41 $14,527.24 $14,672.52 $14,819.24
Cost of good sold $5,295.24 $5,380.29 $5,508.97 $5,509.26 $5,455.29 $5,402.45
Gross profit $8,804.76 $8,860.71 $8,874.44 $9,017.98 $9,217.23 $9,416.79
General and
Administrative expense
$3,245.28 $3,277.73 $3,310.51 $3,343.62 $3,377.05 $3,410.82
R&D $0.00 $60.50 $0.50 $0.50 $0.50 $0.50
HR $0.00 $0.0000 $2.9375 $2.6875 $2.6875 $2.6875
Info System $0.00 $0.10 $0.00 $0.00 $0.00 $0.00
Market Research $0.00 $0.50 $0.00 $0.00 $0.00 $0.00
EBIT $5,559.48 $5,521.88 $5,560.49 $5,671.18 $5,836.99 $6,002.78
Interest income $13.80 $13.94 $14.08 $14.22 $14.36 $14.50
Interest expense $64.32 $64.96 $65.61 $66.27 $66.93 $67.60
EBT $5,508.96 $5,470.85 $5,508.96 $5,619.13 $5,784.42 $5,949.68
Tax(25%) $1,377.24 $1,367.71 $1,377.24 $1,404.78 $1,446.10 $1,487.42
EAT(net profit) $4,131.72 $4,103.14 $4,131.72 $4,214.35 $4,338.31 $4,462.26

37. PROS CONS
Significant decrease in
costs
Easier access to
developing markets
Increased production
capacity
Local technology and
know-how
Lower profitability for
the first couple years
Potential increase of
contaminants
Safety concerns

38. Cost Of Reversibility
Irreversible costs
$950,000
Cost of building the facility
Estimated $20M
Severance package cost
$180,000(One month avg. salary)

39. 2013 2014 2015 2016 2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
R & D
Market
Research
ISYS
Plant
Construction
Equipment
Recruiting
/Training

40. Increase sales by 4.5% by expanding into Latvia,
Romania, South Korea and Thailand by the end of
2015

41. R & D
None required
Finance
60% debt
20% equity
20% cash reserve
Human Resources
Recruiting and
training 35 agents
$200,000
Wages
$485,000(annually)
Benefits
$121,250(annually)

42. Info Systems
Use of existing
Market Research
Research on:
Market size
Segments
Purchasing power
Pet acceptance
$1M

43. Pro Income statement before strategy
(in millions)
2012 2013 2014 2015
0.5% 0.5% 0.5%
Sales $14,100.00 $14,170.50 $14,241.35 $14,312.56
Cost of good sold $5,295.24 $5,321.72 $5,348.32 $5,375.07
Gross profit $8,804.76 $8,848.78 $8,893.03 $8,937.49
General and Administrative
expense
$3,245.28 $3,261.51 $3,277.81 $3,294.20
EBIT $5,559.48 $5,587.28 $5,615.21 $5,643.29
Interest income $13.80 $13.87 $13.94 $14.01
Interest expense $64.32 $64.64 $64.96 $65.29
EBT $5,508.96 $5,536.50 $5,564.19 $5,592.01
Tax(25%) $1,377.24 $1,384.13 $1,391.05 $1,398.00
EAT(net profit) $4,131.72 $4,152.38 $4,173.14 $4,194.01

44. Pro Income statement after strategy
(in millions)
2012 2013 2014 2015
1.5% 3.0% 4.5%
Sales $14,100.00 $14,311.50 $14,523.00 $14,734.50
Cost of good sold $5,295.24 $5,321.72 $5,348.32 $5,375.07
Gross profit $8,804.76 $8,989.78 $9,174.68 $9,359.43
General and Administrative
expense
$3,245.28 $3,261.51 $3,277.81 $3,294.20
HR $0 $0.503125 $0.60625 $0.85
Market Research $0 $1 $0 $0
Marketing $0 $90.0048 $90.0048 $90.0048
EBIT $5,559.48 $5,726.77 $5,896.26 $6,064.38
Interest income $13.80 $13.87 $13.94 $14.01
Interest expense $64.32 $64.64 $64.96 $65.29
EBT $5,508.96 $5,676.00 $5,845.23 $6,013.10
Tax(25%) $1,377.24 $1,419.00 $1,461.31 $1,503.27
EAT(net profit) $4,131.72 $4,257.00 $4,383.92 $4,509.82

45. Marketing in Europe
Target consumer: 30+
Latviansonline.com
Hockey games in
Latvia
Soccer games in
Romania
Subway stations
TV
$50,480,000
Marketing in Asia
Target consumer: 30+
Soccer games in South
Korea
Muay Thai fights in
Thailand
Bus and subway
stations
TV
$40M

46. PROS CONS
Narrow the gap with
Mars
Improve global brand
recognition
Local agents know-
how
Local brand loyalty
Cross cultural risk
Political and
economical threat
Possible competitors’
cost advantage in
price

47. Cost of Reversibility
Irreversible costs
$1.2M
Marketing cost
$90,004,800
Severance package cost
$17,835

48. 2013 2014 2015
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Market
Research
Recruiting
and Training
Marketing
TV Ads
Subway
Banners
Sporting
Events
Online

49. Pursue action plan 1 to establish a production
facility for future execution of action plan 2
Implementation of plan 1 allows for higher long
term profits

50. 52-week high: $57.25
52-week low: $43.50
Present price: $56
Market cap: 184.8B
Buy now

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