Nestl Spain: Caja Roja

Nerea Escribano Corporate Image & Reputation MS Corporate Communication December, 2011

QUESTION 1: EVALUATE THE IMAGE AND REPUTATION OF CAJA ROJA, FERRERO ROCHER, AFTER EIGHT AND BACI.

NESTL CAJA ROJA

FERRERO ROCHER

- Market leader for two decades - First boxed chocolates to be sold in traditional food stores and supermarkets. - Familiar image, not a luxury or for an special ocasion item - High price: 10% more expensive than Ferrero Rocher. - Sold mainly in marginal outlets and small supermarkets (II)

- New in the adult targeted chocolate market. - Follower competitor in a growing market with an aggressive advertising campaign. - Universal flavor - Luxury and high quality product with a sophisticated image - Sold mainly in hypermarkets and small supermarkets (II)

AFTER EIGHT

BACI

- Very loyal segment of consumers (product with a particular flavor composition) - Not present in consumers minds (I) - Sold mainly in hypermarkets and marginal outlets (II)

- Not present in consumers minds (I) - Sold mainly in hypermarkets and marginal outlets. (II)

(I) In a piece of research done in December 1992, After Eight and Baci were spontaneously recalled by less than 1% of housewives. (II) Information developed from Exhibit 66B, 6C, 6D and 6E and included at the end of the document.

QUESTION 2: EVALUATE HOW IMAGE AND REPUTATION AFFECTS TO SALES RESULTS In 1972 Nestl launched Caja Roja in which different kinds of chocolates appeared side by side. These were the rst boxed chocolates to be sold in traditional food stores and supermarkets in Spain, but as we have seen in the previous question, Nestl Caja Roja was sold mainly in marginal outlets. Until 1989 Nestl had been the clear leader in boxed chocolates in Spain. In 1988 acquired the British Rowntree (After Eight and Quality Street) and the Italian Perugina (Baci) with the aim to reinforced its leadership in Spain. In September 1989 Ferrero launched their Ferrero Rocher in Spain with an aggressive advertising campaign. Nestls Product Manager thought that they would be able to maintain the leadership, only reinforcing their range of products with the new acquisitions and increasing the advertising budget. Nevertheless, Nestls strategy did not work, and Ferrero increased its market share sharply year by year until Nestl Espaa lost its leadership in boxed chocolates in 1992, as we can see in the chart below:

Market'Share'Evolu/on'
50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 1989$ 1990$ 1991$ 1992$ Otros Ferrero Nestl

In my opinion, the erroneous positioning of Caja Roja (there was a contradiction between the image perceived by the consumers and the image expected by the company) and the efforts to introduce the new products without dening their targets were the main reasons for Nestls market share lost.

COMPANY

CONSUMERS

EXPECTED IMAGE

PERCEIVED IMAGE

Alternative Consumption To be consumed at home Because today is today To be sold in supermarkets

Still perceived as a present Only 50% of buyers consumed it at home

Bought in marginal stores

As a result, Ferrero Rochers market share grew almost 20% from 1989 to 1992, thanks of consumers perceived this product to be consumed it at home, and also because of the products different sizes and formats, which helped the impulse purchase (3 chocolates boxes, for example). Caja Rojas formats. with an average net contents around 300 grams, made this kind of impulse purchase more difcult.

Chocolate Market Share by Brand and Year

60.00%

50.00%

40.00% 8.00%

11.48%

21.43%

27.63% Ferrero Rocher

30.00%

Baci After Eight Caja Roja

20.00% 28.42% 10.00% 28.00% 26.30%

23.62%

0.00% 1989 1990 1991 1992

QUESTION 3: WHAT SHOULD CAJA ROJA HAVE DONDE TO MAINTAIN THE LEADERSHIP? In my opinion, the main mistake was not to make a convenient research work in 1988 to evaluate the image perceived by consumers of Nestls Caja Roja at that time and analyze the target of the new products: After Eight, Quality and Baci. Instead of this, they increased the advertising budget, and heavily promoted After Eight (as Ferreros direct competitor) when they sensed that this product was for a more limited segment of consumers.
70.00%$ 60.00%$ 50.00%$ 40.00%$ 30.00%$ 20.00%$ 10.00%$ 0.00%$ 1989$ 1990$ 1991$ 1992$ Nestl$ Ferrero$ Merci$ Otros$

Es#mated)media)adver#sing)expenditures)

The increase in media advertising made by Nestl between 1990 and 1991 had no results, because it was erroneously focused in promoting After Eight and Baci. This promotion has no the expected results as we can extract from the piece of research done in December 1992. In my opinion, because of its format (bigger sizes) and the point of being a classical boxed chocolate assortment, Caja Roja had in the early 90s and nowadays, the image of a kind of present more than for self consumption.

INFORMATION ABOUT RETAILERS DEVELOPED FROM EXHIBITS 6B, 6C, 6D AND 6E

Caja Roja - Retailers

32%

19% Hypermarkets Small Supermarkets Large Supermarkets Traditional Food Stores Self Service 24% Marginal Outlets

6% 9%

10%

After Eight- Retailers

19%

Hypermarkets 6% 49% 5% Small Supermarkets Large Supermarkets Traditional Food Stores Self Service 6% Marginal Outlets

15%

Baci- Retailers

40%

35%

Hypermarkets Small Supermarkets Large Supermarkets Traditional Food Stores Self Service Marginal Outlets

1% 19%

4% 1%

Ferrero Rocher- Retailers

13%

9% 36%

Hypermarkets Small Supermarkets Large Supermarkets

10%

Traditional Food Stores Self Service Marginal Outlets

10%

22%