nestlé sa

Nestlé SA

The Nescafé Plan in China

The Team

2

G205069 G205080 G205055

Abdulmajeed Alzunaidi

Hatim Alsaif

Abdulaziz Aleshaiwy

Ibrahim Alfaqih

G205105

AGENDA SLIDE

INTRODUCTION

Introducing Nestle and the story of Nescafe1

INTRODUCING COFFEE

Summary of Coffee value chain and the Economy of Coffee2

CREATING SHARED VALUE INITIATIVE

A look at Nestle’s Strategy, CSV Initiative and the Nescafe plan4

THE NESCAFE PLAN IN CHINA

Closely examining Nestle’s three options and the best option to

move forward

5

Sustainability

NGOs and the support for coffee farmers3

1867 82

Fortune Global 500

11.4$B

Rev.

Established

352K

# of Employees

247$B

Market Cap.

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Stock Price in CHF

Stock Price

InstantHistory

• In 1929, Louis Dapples, the Nestlé Chairman, was presented with an interesting task by his former employer.

• The bank owned warehouses full of Brazilian coffee beans, which were sitting unsold.

• They wondered if Nestlé could turn the beans into a “soluble coffee cube” to be sold directly to consumers.

• In fact, when it seemed impossible to retain the coffee aroma and the project was cancelled.

• Max persevered and continued to experiment on his own.

• His dedication paid off. In April of 1937, a stunned Nestlé Executive Board was invited to a tasting.

• From the first mouthful, their response was overwhelmingly positive.

• The scale-up began immediately and in 1938, Nescafé was officially born.

• By 1940, only two years later, Nescafé was already available in 30 countries.

• These days it is enjoyed by millions of people around the world.

Switze rland

Nescafé

starts

operations

1938

Thai land

Experimental

farm

2005

P hi l ippines

First

Agricultural

Serv ices

launched

1960

R&D Center

2009

France

R&D Center

opened

1986

Côte d’Ivoire Côte d’Ivoire

Agricultural

Serv ices

Launch

Nescafé Plan

Me x ico

2010

Me x ico

Agricultural

Serv ices

1987

Vie tnam /

Brazi l

Agricultural

Serv ices

2011

Ecuador

Experimental

farm

1988

Côte d'Ivoire

Experimental

farm

2013

Thai land

Agricultural

Serv ices

1991

Nicaragua

Agricultural

Serv ices

2014

China

Agricultural

Serv ices

1992 1994

Global

Grown

Respectfully

Consumer

Campaign

2018

India

Agricultural

Serv ices

Indone sia

Agricultural

Serv ices

1996

Switze rland

First Nescafé

Plan Report

2021

1938

A young food chemist

work ing at Ne stlé cal led Max

Morge nthaler found a way to

cre ate water-soluble coffee.

1953

Nescafé be cam e the f i rst coffee brand to

cl im b Mount Everest as part of Edm und

Hi l lary’ s e xpedition.

Apollo 11

Nescafé was launche d into

space along with astronauts

Ne i l Armstrong, Buzz Aldrin

and Michae l Coll ins to help

k e e p them sharp on their

1969 m oon landing.

#1Nescafé is the world’s

preferred coffee brand

180Countries distribute

and sell Nescafé

1 in 7Cups of coffee consumed

around the world is

Nescafé

Backward IntegrationWorking with Coffee Farmers

Paying Higher for Certified beans

To advance Nescafe plan in China; Nestle had 3 Choices

Introducing Coffee

Summary of Coffee value chain and the Economy of Coffee

Intro to Coffee / Supply Chain

Growers + Buyers + Processors + Government Agencies + Exporters + Dealers

Roasters

Distributers

Retail

Key Sources of Coffee 2012-13

17

Brazil35%

Vietnam19%

Others19%

Central America & Mexico

11%

Colombia7%

Indonesia6%

India

3%

Percentage of World Production

Global Market Shares in Coffee 2009-2012

18

22%

23

%

22%

22%

0.00

%

0% 0%

11%

0.00

%

0% 0%

6%

0.40

%

1% 2% 3%3% 3% 3% 3%

7% 7% 7%

7%

68%

67%

67%

49%

2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2

G LOBAL M ARKET

Nestle Mondelez International DE Master Blenders

Green Mountain Coffee Roasters Tchibo GMBH Private Labels

Other

Retail Sales of Coffee in China (2019-2012)

19

8 9 11 13

4 6 6 7

726

820

981

1120

2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2

IN US$ M ILLIONS

Coffe Beans Fresh Ground Coffee Instant Coffee

Retail Sales of Coffee in China (2019-2012)

20

321

28

6

321

36

2

143

127

143

161

3670

7

3349

2 3670

7 4005

3

2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2

IN TONS

Coffe Beans Fresh Ground Coffee Instant Coffee

Sustainability

NGOs and the support for coffee farmers

The Common Code for the Coffee Community (4C)

01 Economic Sustainability 02 Social Sustainability 03 Environmental Sustainability

0

0.5

1

1.5

2

2.5

3

3.5

4

$ /

lb.

Coffee Prices Lower Price Line Fair-Trade

Coffee Prices and the Fair-Trade Pricing*

23*Based on Current Fair-Trade Premium of 0.2 and floor price of 1.35$ / lb.

Creating Shared Value Initiative and Nescafe

Plan

A look at Nestle’s Strategy, CSV Initiative and the Nescafe plan

• Evolve with consumer needs

• Good nutrition

• Healthier, balanced lives and a healthier planet

• Evolution, innovation, acquisition or partnerships.

Nestlé’s Strategy

Enhance the health and wellness of people and pets.

• Needs of the modern consumer

• Premium food innovations to market

• Plant-based foods

• Increase access to nutrition for everyone, everywhere.

Nestlé’s Strategy

We play to win in all our categories while pursuing higher growth in coffee, pet care, infant nutrition, water and nutritional health.

Value Creation Model

Creating Shared Value in Nestlé

• Long term

• Shareholders and for society

• Positive differenceto society

• Nestlé’songoing success.

St at us of our commitments

New In progress

Roll out our Nestlé

needs YOUth init iative across all our operations

Enhance gender

balance in our work f orce

and em power wom en across t he entire value

chain

Adv ocat ef or healthy

workplaces and healt hier employ ees

Assess and address

hum an right s im pacts across our business

activ ities

Im prov eworkers’

liv elihoods and prot ect children in our agricult ural

supply chain

Enhance a cult ure of

int egrit y across the organization

Prov ide ef fective

griev ance m echanisms t o

em ploy ees and stakeholders

Launch more f oods

and bev erages that are nut rit ious, especially for

m ot hers- to-be, new

m ot hers, and inf ants and children

Furt her decrease

sugars, sodium and

saturated f at

Increase v egetables, f iber- rich grains, pulses,

nut s and seeds in our f oods

and bev erages

Sim plif y our ingredient list s and

rem ov e artif icial colors

Address under-

nut rition t hrough m icronut rient f ortif ication

Im prov ef arm

econom ics am ong the f arm ers who supply us

Im prov ef ood

av ailabilit y and dietary

div ersit y among the f arm ers who supply us

Implement

responsib le sourcing in

our supply chain and prom ot e animal welf are

Continuously im prove

our green cof f ee supply

chain

Roll out t he Nestlé Cocoa Plan with cocoa

f armers

W ork t o achieve

wat er ef f iciency and sust ainabilit y across our

operations

Adv ocat ef or

ef f ective water policies and st ewardship

Engage wit h

suppliers, especially

t hose in agricult ure

Raise awareness on wat er conservation and

im prov e access to water

and sanit at ion across our v alue chain

Prov ide clim ate change

leadership

Promote t ransparencyand proact iv e, long- term

engagement in clim ate

polic y

Build and share

nut rition knowledge f rom t he f irst 1000 days through

t o healt hy aging

Build b iom edical

science leading t o health-promoting product s,

personalized nutr it ion

and dig it al solutions

Im prov ethe

env ironmental per f ormanceof our

packaging

Reduce f ood loss

and wast e

Prov ide meaningf ul and accurat e env ironmental

inf orm ation and dialogue

Preserv e natural

capital

Enhancing rural

development and

livelihoods

Respect ing and

promoting

human rights

Promoting decent

employment

and diversity

Caring for water Acting on

climate change

Safeguarding the

environment

Building, sharing and

applying nutrition

knowledge

For our communities

Helping develop thriving, resilient communities

For the planet

Steward ing resources and the environm ent

For individualsand families

Enabling healthier and happier lives

I nspiring people to

lead healthier lives

Offering tastier and

healthier choices

Apply and explain

nut rition inf orm at ion on pack s, at point-of-sale and

online

Of f er guidance on

por t ions f orour produc ts

Lev erage our marketing ef f ort sto

prom ot ehealthy cooking,

eat ing and lif estyles

Em power parents, caregiv ers and teachers t o

f oster healthy behaviors in

children

Support breast f eedingand prot ect it by continuing

t o im plem ent an industry-

leading policy t o market b reast-m ilk substitu tes

responsibly

Inspire people to

choose wat er to lead healt hier liv es

Par t ner f or

prom ot ing healt hy

f ood env ironment s

Achiev ed

Our 2030 ambition is to help 50 million children lead

healthier lives

Our 2030 ambition is to improve 30 million livelihoods in

communities directly connected to our business activities

Our 2030 ambition is to strive for zero environmental

impact in our operations

Responsiblecoffee sourcing

Our com mitment

Continuously improve our green

coffee supply chain

Our objectives

By 2020: 70% of the total Nescafé cof fee supply to

be responsibly sourced

In progress

By 2020: Nescafé to improve the quality, quantity

and sustainability of its cof f ee supply chain by

distributing 220 million cof f ee plantlets

In progress

By 2020: Nescafé to improve cof f ee f arm

economics in at least f our cof f ee-sourcing

countries

In progress

By 2020: Nescafé to monitor and improve labor

rights in at least tw o cof fee-sourcing countries

In progress

By 2020: Source tow ard 100% of the coffee for

Nespresso’s permanent range through its AAA

Sustainable Quality Program on cof f ee sourcing

In progress

Coffee tree

renovation programs

Training on best

agricultural practices

F inancial l i teracy andrec ord ke eping

Training women a ndy o ung farme rs

Farmer o rganization p r ogr ams

I n terc ropping programs

S a nitation and food c r ops programs

Water, ecosystem

and soi l management

programs

Increased coffee

productivity

Improved coffee quality

Optimized costs

of production

Tree stocks rejuvenated

Farmers adopting

best practices

Farmers as agripreneurs

Improved living conditions

Better management

and controls

Women and youth

empowerment

Betterorganizational capacity

Farm productiondiversified

Improved health conditions

Water resources conserved

Soil fertility improved

Biodiversity promoted

Improved coffee

economics on farm

Resilient coffee

farming

families and

communities

Sustainably

managed coffee

landscapes

What we want to achieve How we want to ge t there What we do to ge t there

The Nescafe Plan

The Nescafe Plan Monitoring and Evaluation

ECONOMiCSMeasuring farmer

earnings and earning

power from coffee

and other crops

KPIs

✔ Net farm income

✔ Coffee revenue

✔ Productivity

✔ Cost of production

✔ Farm diversification

✔ Adoption of best

agricultural practices

SOCIALMeasuring our impact

on farm families

and workers

KPIs

✔ Bookkeeping records

✔ Financial literacy

✔ Gender and youth

participation

✔ Safe working

conditions

ENVIRONMENTMeasuring water, soil and

biodiversity

KPIs

✔ Watershed conservation

✔ Household wastewater treatment

✔ Shade coverage

✔ Soil conservation

✔ Mill water conservation

✔ Mill water treatment

✔ Irrigation water

conservation

GENERALKPIs (qualitative)

✔ Satisfaction with

Nescafé Plan program

✔ Farmers’ views on

future outlook

Monitoring & Evaluation

key performance indicators

Key performance indicators are

designed to measure progress

towards our goals and alignment

with common sustainability frameworks

in the coffee sectorand the Sustainable Development Goals.

13countries wi th annual

Rainforest Alli ance

im pact asse ssm ents

The Nescafe Plan in China

Closely examining Nestle’s three options and the best option to move forward

• Nestle Extended the Nescafe plan to China in 2011.

• Nestle started working with Coffee farmers to ensure they receive

✓ Steady Income

✓ Training and Technical Services for cultivating coffee

• Set a Purchasing Station to source beans directly form farmers (9,500 Tons in the first half of 2013).

• Invested in Research to

• Improve farmers yields.

• 10 years research to determining the exact variety that should be grown in the region

• Investing $16M toward building coffee-farming institute

Nescafe Plan in China

34

Backward Integration

Backward integration into coffee farming in

China (Similar to tea farming)

Strengthening Local Efforts

Strengthen its commitment to sustainable coffee

in China by working with coffee farmers at the

grassroots level to improve their productivity

Higher Prices to Farmers

Paying Higher prices to purchase coffee beans

that had been grown according to some form of

certification relate to sustainability

To advance Nescafe plan; Nestle had 3 Choices

BackwardIntegration

Strengthen Local Efforts

The three options as in the case

Higher prices increase

attractiveness to farmers.

Which Certificate to benefit the

farmers most?

Which certification would improve

beans quality received by Nestle?

Long term problems might occur

with overproduction

Better livelihood would remain

unchanged

Working Closely with individuals

Consumers prefer Fair-Trade

Certification coffee

Supply Seedlings and Technical

assistance

Diversify farmer’s sources of

income

Difficulty to change farmers

mindset

Greater control over sustainable

farming development

Secures reliable supply of high-

quality coffee beans

Removing Intermediaries

Not Common, usually coffee farms

make forward integration

Higher Prices to Farmers

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

• Large distribution

system

• Research and

development capability

• Global recognized brand

• Efficient R&D system

• Criticism over high-

water usage, selling

contaminated food

• Expand production

capacity in key markets

• Increase control over

coffee beans quality

• Cost cutting by reducing

markup

• Government unstable

regulations

• Huge investment

• Property limited

ownership for 99 year

SWOT Analysis

Recommendations

How Nestle can move forward in their mission in Sustainability

Moving forward in China – A combination of Solutions

STRENGTHEN LOCAL EFFORTS

WORK WITH NGOS TO CERTIFY FARMERS

PAY HIGHER PRICES TO FARMERS





✓Working Closely with individuals, build their capabilities.

✓Allows Nestle to identify the gaps in the farms.

✓Also, the right certification program for farmers.






✓Nestle should align their CSV with 4C.

✓ Partnership with NGOs to certify farmers.






✓Nestle can guarantee the quality of the beans.

✓Nestle can pay higher prices with a piece of mind.


Thank You

References

• Supply Chain infographic: https://www.visualcapitalist.com/from-bean-to-brew-the-coffee-supply-chain/

• The Economic of Coffee: https://www.visualcapitalist.com/the-economics-of-coffee-in-one-chart/

• CSV Initiative: https://www.nestle.com/csv

• Nescafe Grown Respectfully Report: https://www.nescafe.com/gb/cup-of-respect/grown-respectfully

45

https://www.visualcapitalist.com/from-bean-to-brew-the-coffee-supply-chain/

https://www.visualcapitalist.com/the-economics-of-coffee-in-one-chart/

https://www.nestle.com/csv

https://www.nescafe.com/gb/cup-of-respect/grown-respectfully

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