Introduction

Nestlé, the world’s largest food company, has made a huge name for themselves over the

past century. They create value in many different ways with over 2,000 different brands. In this

analysis, I will dissect Nestlé’s 2018 annual review and analyze how Nestlé has created value for

themselves. They have used their many capitals as resources to create this long-term value.

Capitals including financial, manufactured, natural, human, relationship and symbolic. I will also

be summarizing their company’s risks and giving some extra recommendations that Nestlé could

do to increase their company’s image and value.

Company Overview

With over 300,000 employees, Nestlé has 447 factories spread out across the world. They

are also sold in 189 countries (Nestlé, 2019). The company was originally founded back in 1866,

and has had many name changes since then. They are a publicly traded company from

Switzerland, which is where their national headquarters are. Nestlé first started out selling baby

food, but has since then grown to sell a wide range of products. Their products range from

different types of food products to all sorts of different drinks. They also sell more powdered and

liquid beverages than any other company.

Value Creation

Being the large company Nestlé is, they create value in many different ways. Some ways

they talked about creating new value were mainly increasing their growth. With increasing their

growth, they expect to improve their margins and ultimately maximize long term shareholder

value. One way they are focusing on increasing their growth is attracting different communities,
including plant based and people with healthier lifestyles in mind. As Nestlé grows their brand,

they are also developing ways to make their products healthier and more appealing. While

reading through their long-term value creation model, I found this to be a common trend of how

they are attempting to make their products better. This includes addressing their underperforming

products, and attempting to make them more appealing to consumers. Not only is it important

for them to adjust their current products, but also expand their range of products in the product

line. This includes adding plant based products as this is a new trend that is appealing to more

and more people. Adding and adjusting their current product lines would be a part of their

natural and intellectual capitals.

When Nestlé makes adjustments to their products and adds new additions to their brands,

this is creating new outcomes for their company and value creation. I expect these outcomes to

be increased customer diversity. This would become an output because of the new communities

they are reaching by creating new products. Another outcome to adjusting their product

ingredients and overall health factor is sales. I expect their sales to rise once they make this

change because consumers will be influenced to buy their products based on health value.

Overall, adding these new products and making these adjustments will create tons of long-term

value to their company.

Resources

Financial Capital
 One of the main resources for Nestlé is their financial capital. Their main focus is single

year metrics, talking about other years less than the

current one in review. To get the best idea of Nestlé’s

financial resource, I read through their 2018 financial

statement. Nestlé starts off by comparing their sales for

2018, which was a little over 91 million (Nestlé, 2019).

This is two million above their 2017 sales which came

in a little over 89 million. Although these are their sales

numbers, this does not equal Nestlé’s total profit for the

year. After they took out the costs to operate and many

other expenses, their 2018 profit was a little over ten

million. This is a huge step up from their total profit in

(Nestlé Worldwide Sales in 2018) 2017 of 7 million. This means they have eliminated

some of the costs it takes to run Nestlé and maximized

their profits.

Nestlé then goes on to show a breakdown of their products and the sales numbers each

one brought in as shown in the photo above. Not by any surprise, their powdered and liquid

beverages is their highest selling product. This is the reason they sell more of liquid and

powdered beverages over any other company. Their powdered and liquid beverage sales came in

a little over 21 million. However, their second highest selling product is their nutrition services.

Their services include therapies in many different areas, a few including pediatrics, cancer,

obesity, food allergy, and aging. Their sales for this product came in just over 16 million. I was

extremely surprised to learn that this is Nestlé’s second highest selling product, as I thought it
may be one of their food products. As Nestlé breaks down their sales in each region of the world,

their highest sales are in the USA. This does makes sense because they are a huge company here.

Although, I am surprised that Switzerland is not higher on this list because they are from there

and their headquarters is based in Switzerland. As you can see, due to the size of the company

and their diverse range of products, they have a lot of financial resources.

Manufactured Capital

Another huge resource for Nestlé is their manufactured capital. This includes their

buildings, factories, and equipment. As I previously stated, Nestlé has 447 factories around the

world in 85 different countries (Nestlé, 2019). These factories and the amount they have spread

across the world is something that Nestlé is extremely proud of. They use these factories to make

sure that their products are able to reach different cultures and people no matter where they live

in the world. They talked more about the financial side of their manufactured assets in their

financial statement. The land and buildings value tends to go down over time, and has gone

down since 2017. This is mainly due to depreciation buildings have over time. The same thing

happens with their vehicles as vehicles depreciate once you take them off the sales lot. However,

their tools, furniture, machinery and other equipment has gone up in value since 2017 (Nestlé,

2019). Nestlé’s gross value of their manufactured resources comes in a little over 57 million

dollars.

Natural Capital
 Natural capital is a huge part of Nestlé’s

business as they move towards a cleaner and

more environmentally friendly company. They

start talking about these measures in one of the

(Nestlé’s “For the planet” Chart)
first pages of their annual review. They had a

2.6% decrease in greenhouse gas emissions per ton of product they produced. Out of their 447

favorites across the world, 293 of these factories achieved zero waste as seen in the picture

above, this is over 50% of their overall number of factories (Nestlé, 2019). Another way they are

moving towards an environmentally friendly company is changing the way they get their

electricity from renewable sources. So far, 34% of their electricity comes from renewable

sources, but they are trying to increase this number each year. Nestlé also placed packaging and

plastics at the top of their agenda, thus announcing their goal to make 100% of their packaging

recyclable or reusable by 2025. As a company, they have realized that not only do their

customers care about where their products are coming from, but also what they are coming in.

This has allowed them to also realize what their top priorities as a company should be in order to

not only appeal to the customer’s needs, but also the environment’s needs.

Not only are they creating environmentally-friendly packaging solutions, they are also

creating plant based products and promoting sustainable nutrition. Not only does Nestlé realize

their customers are moving towards recyclable and reusable products, but they are also moving

towards different lifestyles including vegan and dairy free. This is the main focus on their line

for dairy free and meat alternatives. This movement will allow a whole new range of consumers

to contribute towards Nestlé’s company and sales, providing a ton of value for their company.

Human Capital
 Nestlé’s human resources is also a huge part of their company and brand. They pride

themselves on the diversity they create throughout their company. One part of this diversity

includes enhanced a gender balanced workplace and women empowerment. This is something I

particularly found extremely interesting because not a lot of companies make not only diversity,

but also gender balance a priority in their workplace. This is one way Nestlé sustains a positive

relationship with their employees. Nestlé also believes that the work environment that they

provide their employees is extremely important, this is why they have continuous employee

feedback given at all times to ensure that no issue is forgotten. They encourage employees to

express themselves and work in freedom, also encouraging union participation.

Relationship Capital

Relationships with Nestlé’s stakeholders is extremely important to them and is one

capital they don’t take lightly. When they talk about stakeholders they mean employees,

consumers, business partners and the communities they operate in. These relationships are the

way they sustain value and create even more value for their company. In their annual review,

Nestlé directly recognizes that they need to continually earn the trust of all their stakeholders,

this is why their relationship with each one of them is so important. These stakeholders and their

view of Nestlé is directly effecting the companies value. Nestlé recognizes that keeping their

stakeholders trust is done through creating great products, and the way they manage their

business. “We cannot maximize long-term sustainable value creation for shareholders at the

expense of other stakeholder.” This is why Nestlé believes creating shared value is so important.

Another relationship that Nestlé felt was extremely important is that with the youth of the

world. In 2017, they launched the Global Youth Initiative (GYI) to create opportunities for

younger people that want to be involved in economic issues (Nestlé, 2019). They started this
initiative in hopes to better connect with their consumers and ensure that they remain relevant.

Since Nestlé has realized how important the relationship capital is when running a successful

business, they have cracked the code to sustaining the value they are creating.

Symbolic capital

As you can see, Nestlé’s relationship with their stakeholders is extremely important to

them. Not only is this capital important to their business, but their reputation and symbolic

capital is as well. Nestlé knows that to be successful you must have a strong and trustworthy

reputation in order to create a positive relationship with your stakeholders. They also realize that

any serious issue regarding the safety of their products could cause a major negative effect to

their brand’s image, this is why they have many procedures in place to ensure their products are

of the highest quality at all times. Not only does the safety of their products affect their image,

but also the health of their products. Nestlé realizes that the nutrition of products are becoming

even more important to consumers, and processed food could make a bad impression to

customers. This is why Nestlé has placed major objectives towards improving the quality of

ingredients and health of their products. It is essential for consumers to think of Nestlé as a brand

you can trust for your health and wellness, as this is a major impact on their reputation.

Structural Capital

Risks & Externalities

The risks that Nestlé has to worry about the most is their dependence of the supply of

materials. There are many things that could affect this, including water supply, weather patterns,

production shifts, and many other factors. Nestlé has created protocols for these situations and

ensures that there is usually enough supply for when these situations arise (Nestlé, 2019).
Weather patterns pose another threat to Nestlé as natural disasters can and do occur from time to

time. These disasters can have a major impact on their supple chain and their ability to operate in

that particular location. Another risk for Nestlé is the safety of their food products. Although

there are many procedures in place to ensure food quality and safety, it is a risk that can affect

their company. Financial risk is another thing that Nestlé talks about in their annual report. Their

liabilities could be affected by any change in the financial market.

Recommendations

Nestlé has already created a great foundation for sustainable long-term value in their

company. They have set their priorities in the right spots so that they may keep their brand

reputable and trustworthy towards all of their stakeholders. If there were capitals that Nestlé

could talk about more in their report to their stakeholders, it would be their human resources and

their environment in the workplace. I had a difficult time finding information on their human

capital and employee engagement. One way that Nestlé could better their brand’s image would

be to advertise the change they are making towards meatless, dairy free, and more nutritious

ingredients. This was talked about a lot throughout their annual review and it is something I had

not known about until reading the review. If Nestlé made consumers more aware of this change,

they may be more drawn to Nestlé’s products and following the change going on in their product

lines.

Conclusion

Overall, Nestlé has created a brand with amazing values and resources so that it may be a

valuable company for years to come. With business already in 189 countries, they are on their
way to taking on the world’s food and beverage service. Nestlé has already created a trust-

worthy brand, but it is their top priority that their customers can trust what ingredients are in the

products they are buying from Nestlé. Nestlé’s main capital resources are financial, relationship,

and natural. They have figured out exactly what the consumers these days want to see and have

made many changes in order to please their customers and fulfill their needs. Not only is Nestlé

fulfilling their consumer’s needs, but also the environments needs. Since they are going to great

lengths to increase the reliability of their products ingredients, one thing they could change is

getting this information out for the world to see. Nestlé’s brand is headed in the right direction

and I have no doubt that they will be able to create value for years to come.
 References

Engaging with our people. (n.d.). Retrieved March 3, 2020, from

https://www.nestle.com/csv/impact/employment-diversity/engaging-with-our-people

The Nestlé Company History. (n.d.). Retrieved March 3, 2020, from

https://www.nestle.com/aboutus/history/nestle-company-history

Nestlé. (2019). 2018 Annual report. Retrieved from https://www.nestle.com/investors/annual-

report

Nestlé. (2019). 2018 Financial report. Retrieved from

https://www.nestle.com/sites/default/files/asset-
library/documents/library/documents/financial_statements/2018-financial-statements-
en.pdf

Nutritional Therapies. (n.d.). Retrieved March 3, 2020, from

https://www.nestlehealthscience.com/nutritional-therapies

Photo References

“Nestle Worldwide Sales in 2018”. Nestlé. (2019).

https://www.nestle.com/sites/default/files/asset-
library/documents/library/documents/annual_reports/2018-annual-review-en.pdf

“Nestlé’s ‘For the planet’ Chart”. Nestlé. (2019). https://www.nestle.com/sites/default/files/asset-

library/documents/library/documents/annual_reports/2018-annual-review-en.pdf