Nestle Project—Market Strategy

History

Nestle SA, Switzerland is amongst the world’s largest food and beverages companies. The company is progressively evolving from a respected, trustworthy food and beverage company to a respected, trustworthy food, beverage, nutrition, health and wellness company. This objective is encapsulated in “Good Food, Good Life”. The principle activities of the group encompass: beverages, milk products, nutrition and ice cream; prepared dishes and cooking aids; chocolate, confectionery and biscuits; water; and pet care. It has 511 factories in 86 countries around the world.

Nestle India

Nestle India is a subsidiary of Nestle S.A. of Switzerland. Nestle India manufactures a variety of food products such as infant food, milk products, beverages, prepared dishes & cooking aids, and chocolates & confectionary. Some of the famous brands of Nestle are NESCAFE, MAGGI, MILKYBAR, MILO, KIT KAT, BAR-ONE, MILKMAID, NESTEA, NESTLE Milk, NESTLE SLIM Milk, NESTLE Fresh 'n' Natural Dahi and NESTLE Jeera Raita.After independence, in response to the then economic policies, which emphasized local production, Nestle formed a company in India, namely Nestle India Ltd, and set up its first factory in 1961 at Moga, Punjab, where the Government wanted Nestle to develop the milk economy. In Moga, Nestle educated and advised farmers regarding basic farming and animal husbandry practices such as increasing the milk yield of the cows through improved dairy farming methods, irrigation, scientific crop management practices etc. Nestle set up milk collection centres that ensured prompt collection and paid fair prices. Thus, Nestle transformed Moga into a prosperous and vibrant milk district. 

In 1967, Nestle set up its next factory at Choladi (Tamil Nadu) as a pilot plant to process the tea grown in the area into soluble tea. Nestle opened its third factor in Nanjangud (Karnataka) in 1989. Thereafter, Nestle India opened factories in Samalkha (Haryana), in 1993 and two in Goa at Ponda, and Bicholim in 1995 and 1997 respectively. Nestle India is now putting up the 7th factory at Pant Nagar in Uttarakhand. 

Today, Nestle is the world's largest and most diversified food company. It has around 2,50,000 employees worldwide, operated 500 factories in approximately 100 countries and offers over 8,000 products to millions of consumers universally. Nestlé India is a responsible organization and facilitates initiatives that help to improve the quality of life in the communities where it operates.

Marketing Mix of Nestle

Product• Being the world’s largest food and nutrition company almost six thousand products are being hosted under the brand named Nestle.

• Its products are very wide spread in range counting almost all daily use products as well as occasionally used products. The products includes coffee, bottled water, cereals, pharmaceutical products like lens care solutions, infant food, beverages, chocolates, candies, ice creams,  refrigerated foods, yogurt, milk cream a very unusual product that is pet food and the largest selling brand milkman. All these categories are subdivided to the diverse choices of customers including different sizes and flavors (Kowitt, 2010).

• Products that are introduced in the market are first screened through high profile research and development sector including food processing, micro analytical research and proper delivery of functionalities in the food products thus promising the healthy goods for consumers.

• Main raw material for its milk products are UHT treated and packed in tetra packaging, moreover the packaging is long lasting as well as tempting.

• As hygiene is a basic ethical question for edible products, so Nestle has a full concern and focus on this parameter.

• Nestle provides the product compliance to the customers including all legal supports.

• Nutrition quality is preferably determined and is provided on the packing of the product to facilitate consumers to check their preferences along with the expiry dates.

• Complaints if any are timely responded and suggestions are always welcomed.

Price• Flexible prices are the key factor of success of Nestle in global markets for example Milkpak being the largest selling brand is being sold out at the same price as that of other low quality products while maintaining its quality.

• Their marketing strategy includes a wide range of pricing strategy, and by doing this they can maintain their product rates at a sustainable position.

• Prices are affordable to almost all types of consumers as they have wide range of single product as in the case of beverages, fruit juices are affordable to low economy class and expensive tin packed beverages are also doing business in the market.

• Bulk purchase discount is also provided at the whole sale markets as well as at the market stores.

• Seasonal price variations are also seen, especially in the case of chocolate products, either by upsizing at the same price or reducing the sale price.

Place• Nestle products have their main business area in Europe from where they get almost 90 percent of the sales and revenues.

• Nestle is running globally, its setup being run in 86 countries. So, the sales are also done globally and are impulsive ones.

• The products are not directly thrown into the market, rather a full procedure is followed including all the essentials from Manufacturer, Distributor, Wholesaler, Retailer and finally to Consumer.

• Nestle products are available in all its variety at the maximum outlets, as the company is always looking forward to expand its outlets.

Promotion• Promotion strategies of the company are very well planned and they always pay multiples of the expected amounts.

• Advertising on electronic and print media along with sign boards having tempting figurations of the brand always proves good for the brand

• Sometimes limited economy offers boost up the popularity of brand especially in the case when new induction to the market is made.

SWOT Analysis

Strength

Nestle’s LC1 division has many strengths. Their first is that they have a great CEO, Peter Brabeck. Brabeck emphasizes internal growth, meaning he wants to achieve higher volumes by renovating existing products, and innovating new products. His explanation of renovation is that “to just keep pace in the industry, you need to change at least as fast as consumer expectations.”(Hitt, 2005) And his explanation of innovation is “to maintain a leadership position, you also need to leapfrog, to move faster and go beyond what consumers will tell you.” Brabeck has led Nestle into a position to better achieve the internal growth targets with his. Another 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.

Weakness

The main weakness of the LC-1 division of Nestle is that they were not as successful as they thought they would be in France. The launch in France was in 1994, but since the late 1980s, Danone had already entered the market with a health-based yogurt. The second weakness is that LC-1 was positioned as too scientific, and consumers didn’t quite understand that LC-1 was a food and not a drug.

Opportunity

One opportunity that Nestle has is that health-based products are becoming more popular in the world, including in the United States. Consumers are becoming more health conscious, and realize that living longer isn’t only by luck and genetics. LC1 has not been introduced in the United States yet. Nestle also has an opportunity of being even a larger market leader in Germany with LC-1. Within two years of launching the product in Germany, they had captured 60% of the market. This was due to the fact that they differentiated the product, and Germans simply preferred the taste. Another opportunity of LC1 is that, because they are a market leader, they can introduce more health-based products in Germany.

Threat

A threat to Nestle is the fact that some markets they are entering are already mature. Danone had an established leadership position in the yogurt market in France. Since Danone was the first to arrive in the market, they have always been the market leader there. Also consumers in France liked the taste of LC-1, but researchers believe they did not repurchase the yogurt because they preferred the taste of Danone products better. Another threat to Nestle is that there is intense competition in the United States yogurt market. General Mills’ Yoplait division is the leader in the yogurt market in the United States. Yoplait has been the leader for years and is constantly innovating new health products.

Future Plans

• Nestlé India’s objective is to manufacture and market the company’s products in such a way so as to create value that can be sustained over the long term for consumers, shareholders, employees and business partners.

• Nestle aims to create value for consumers that can be sustained over the long term by offeringa wide variety of high quality, safe food products at affordable prices.

• The company continuously focuses its efforts to better understand the changing lifestyles of modern India and anticipate consumer needs in order to provide convenience, taste, nutrition and wellness through its product offerings.

Factors for success

The culture of innovation and renovation, continuous improvement and the thrust on value-for-money and affordability have helped the company to focus on adding value for the consumer. The company has continuously focused on operational efficiency; improving product availability and visibility and initiated efforts to make its products more relevant to the consumers. This has been supported by the distribution of smaller stock-keeping units (SKUs).

There has been continuous focus on the seven value drivers, namely:

• Sales growth

• Profit margin

• Working capital intensity

• Fixed capital intensity

• Income tax rate

• Cost of capital

• Value growth duration

Nestlé’s Competitive Strategies

Nestlé describes itself as a food, nutrition, health, and wellness company. Recently they created Nestlé Nutrition, a global business organization designed to strengthen the focus on their core nutrition business. They believe strengthening their leadership in this market is the key element of their corporate strategy. This market is characterized as one in which the consumer’s primary motivation for a purchase is the claims made by the product based on nutritional content.

In order to reinforce their competitive advantage in this area, Nestlé created Nestlé Nutrition as an autonomous global business unit within the organization, and charged it with the operational and profit and loss responsibility for the claim-based business of Infant Nutrition, HealthCare Nutrition, and Performance Nutrition. This unit aims to deliver superior business performance by offering consumers trusted, science based nutrition products and services.

The Corporate Wellness Unit was designed to integrate nutritional value-added in their food and beverage businesses. This unit will drive the nutrition, health and wellness organization across all their food and beverage businesses. It encompasses a major communication effort, both internally and externally, and strives to closely align Nestlé’s scientific and R&D expertise with

consumer benefits. This unit is responsible for coordinating horizontal, cross-business projects that address current customer concerns as well as anticipating future consumer trends.

Nestlé’s Initiatives

In their quest to embrace diversification, Nestle has adopted two initiatives. The first initiative is an extensive management training program at their own Swiss training facility. The individuals invited to this training are high potential managers who are expected to eventually join Nestlé’s executive management. The month long training focuses heavily on the benefits of diversification. Additionally, Nestle partners with the International Institute for Management Development (IMD) to provide additional education resources for their management all-stars. Finally, Nestlé’s executive managers are expected to give back to the company by acting as instructors and mentors at the training facility (Reichlin, 2004).

Nestle has also adopted a policy of promoting from within. By promoting individuals who have already gone through the company’s indoctrination process, they are guaranteed to have upper management that believes in the company’s ideals of improved performance via diversification. The direct contact between upper management and executive management trainees guarantees a solid foundation for this process. This promotion from within initiative also lends itself to the company’s decentralized management model (Reichlin, 2004).