FOOD & BEVERAGE

Company: Nestle India Ltd.

General Overview
Nestle, one of the leading FMCG Company of India with a simple yet effective philosophy
summed up in 4 words: Good Food Good Life. Today, it is the biggest food and drink company
in the world, operating in 194 countries and producing everything from face cream to dog food.
Till date it has launched more than 2000 products. 29 of its brands have annual sales of over 1
billion making it a huge success with a vision to be a leading, competitive, Health and Wellness
Company. Also it has contributed towards the society helping million lives to live a better life.

Management
Nestlé has a Board of Directors, led by our Chairman Paul Bulcke, who was the former Nestlé
CEO. Worldwide, Nestlé has over 220 000 employees from nearly every country collaborating
within a unifying corporate culture. They have relatively low employee turnover (approximately
5% annually), and the average length of service of Nestlé employees at retirement is 27 years in
the 20 largest markets, representing over 80% of their business.

However, one reason that retention rate is high is that they pay highly competitive wages. For
instance, in the Philippines, starting hourly wage is 21/2 times the legal minimum. They also
make sure that working hours and overtime pay complies with local laws and conditions.

At Nestlé India, they have a range of Learning and Capability building initiatives that are
designed to improve personal performance while achieving business goals. They are
continuously updated and modified to meet the evolving business needs.
History
Nestlé was formed in 1905 by the merger of the Anglo-Swiss Milk Company, established in 1866
by brothers George and Charles Page, and Henri Nestlé, founded in 1866 by Henri Nestlé. The
company grew significantly during the First World War and again following the Second World
War, expanding its offerings beyond its early condensed milk and infant formula products.
The end of World War II was the beginning of a dynamic phase for Nestlé. Growth accelerated
and numerous companies were acquired. In 1947 Nestlé merged with Maggie, a manufacturer
of seasonings and soups. From then it has continued to acquire and expand its business
activities in corporate sector.

SWOT ANALYSIS
Nestlé’s Strengths
1. Research and development: One of its key competitive advantages is research and
development capabilities. Nestlé’s superiority in R&D against its rivals provides a
sustainable competitive advantage and long-term success.

2. Extensive distribution system: With its diversified product portfolio Nestle has been
successful in penetrating Urban as well as rural markets. Locally adapted distribution
methods & decentralization in supply chain has helped the company to achieve the
target.

3. Large workforce: Nestle have engaged 340000 odd global workforce who are
continuously working to make its products available in every nook & corner of the world.

4. Broad Product portfolio: Nestle has more than 8000 brands under its name which
ranges from Coffee & Mineral water, Soups & sauces etc. Wide portfolio allows it to
better satisfy various consumers’ needs and target wider segment.

5. Environmental sustainability: Nestle put substantial efforts in environmental

sustainability practices and take innovative initiatives in improving its quality of
products. In 2017, 253 of Nestle factories reached zero waste production.
Nestlé’s Weaknesses
1. Legal & consumer issues: Although Nestle is global food giant but it got into
controversies over the years like Nestle baby formula boycott, Child labor by suppliers,
Chocolate price fixing etc. which resulted in negative word of mouth.

2. Price fluctuations: Nestlé’s grocery sales are achieved majorly through huge retail
giants like Walmart, Tesco, and Kroger. Any reduction or increase in prices by these
retailers can affect Nestlé’s sales.

3. Brand structure: It has many brands under the same umbrella group so managing such
large number of individual brands can create conflict of interest.

4. Social criticisms: Nestle has become a target of media attention many times. The claim
to privatize water, misleading labeling, and a lawsuit for chocolate making using child
and slave labor are some of the examples that have to weaken its market reputation.

Nestlé’s Opportunities
1. Online shopping: Nestle has a remarkable opportunity to boost its e-commerce sites
and online shopping platform. Although Nestle has its online stores in a few countries,
expanding its services to more areas will prove a rewarding decision for the company.

2. Market for breakfast cereals: Nestlé’s cereals and oats market have shown fast growth
in recent years. Thus, penetrating this market more would be highly lucrative for the
company.

3. Ready -to-drink tea and coffee market: The demand for tea and coffee is continuously
on the rise, rendering a profitable opportunity for Nestle to groom this market more.

4. Partnerships: Strategic alliances with other food and beverage giants are also a great
opportunity for the company to increase its revenues and profits.
Nestlé’s Threats

1. High Competition: With increasing number of local & national players it’s becoming
very hard for the companies to differentiate themselves from others. There is also
threat from counterfeit products destroying its brand image in the market.

2. Price of commodities: Increasing price of commodities will result in further increase in

the price. Further increase in price will result in decrease in sales, margins & brand
switching.

3. Buyers power: With highly diversified consumer goods market where there are lots of
brands claiming different sorts of benefits, it’s very difficult for consumers to stick to a
particular brand & hence results into brand switching.

4. Government regulations and prices: Government regulations can affect the business
operations of Nestle. Additionally, the increasing prices of commodities force the
company to increase the prices of its products leading to sales reduction.

COMPETITIVE ANALYSIS
1. UNILEVER
Being the world’s largest food manufacturer, Nestlé faces a tight competition from its
close rival Unilever.
Unilever has a workforce of about 230,000 employees and operates in about 160
countries with its headquarters being in London for food and Rotterdam for home and
personal care. The company is edging Nestlé in terms of the quality of its products which
has made it the second player in the Western European ready meals market having a
market share of 8,6%, 0.3 points behind leading Nestle.
Nestle, however, has a large portfolio of prominent consumer brands and this increases
its shelf space even as the private brands grow. This gives it an advantage over its
competitors who don’t have such strong brand.
 2. DANONE
Yet another top Nestle competitor, Danone is a French food processing company that is
established in the year 1919 and headquartered in Barcelona, Spain. The company
produces various categories of products that cater to baby food, coffee, dairy products, ,
bottled water etc. Due to their great quality of products, Danone is considered as one of
the top Nestle competitors.
Danone reported a 38% jump in its earning due to its increased share prices. An
increase in its sales for yoghurt also boosted the increase in earnings. Nestle, however
manages to position itself in the market through the adoption of a new accounting
method which facilitated a reduction in its cost of sales. Though its sale was lower for
the year, Nestlé managed to match its peers which have made it a leading manufacturer
in the midst of the tough competition.

CONCLUSION
Nestlé has placed itself as a prominent food, nutrition, and health and wellness company.
Though there is growing competition, Nestlé has managed to stay on top and it plans on
maintaining its dominance.

As per the study there are 3 things to focus on:

1. The levels of penetration are still relatively low and that is something to focus on.
2. Considerable cranked up pace of innovation and renovation will also be a clear engine of
growth for the company.
3. Sharply positioning, resourcing and monitoring activities across the geographies will
provide incremental opportunities for growth. If able to put together these three things
well, they should be able to have a healthy performance this year as well.

Also for beverages, Nescafe is a huge opportunity. They have also re-launched Nescafe Gold
and that has got off to a good start. Some very rapid progress is happening in these brands.