DEMAND FORECASTING

Demand forecasting is the activity of estimating the quantity of a product or

service that consumers will purchase. Demand forecasting involves techniques
including both informal methods, such as educated guesses, and quantitative
methods, such as the use of historical sales data or current data from test
markets. Demand forecasting may be used in making pricing decisions, in
assessing future capacity requirements, or in making decisions on whether to
enter a new market. Demand forecast modelling considers the size of the
market and the dynamics of market share versus competitors and its effect on
firm demand over a period of time. In the manufacturer to retailer model,
promotional events are an important causal factor in influencing demand.
These promotions can be modelled with intervention models or use a
consensus to aggregate intelligence using internal collaboration with the Sales
and Marketing functions. Sometimes it is appropriate to forecast demand
directly. For example, a baker might extrapolate historical data on bread sales
to predict demand in the week ahead. When direct prediction is not feasible,
or where uncertainty and changes are expected to be substantial, marketing
managers may need to forecast the size of a market or product category. Also,
they would need to forecast the actions and reactions of key decision makers
such as competitors, suppliers, distributors, collaborators, governments, and
themselves – especially when strategic issues are involved. These actions can
help to forecast market share. The resulting forecasts allow one to calculate a
demand forecast.

METHODS OF DEMAND FORECASTING

Methods based on qualitative assessment:-

1. Unaided judgement.
2. Prediction market.
3. Delphi technique.
4. Game theory.
5. Judgemental bootstrapping.
6. Simulated interaction.
7. Intentions & expectations survey.
8. Conjoint analysis.
Methods based on quantitative data:-

1. Trend projection method =>

a. Fitting trend line by observation.
b. Least square linear regression.
c. Time series analysis.
d. Moving average & annual difference.
2. Barometric method.
3. Regression method.
4. Simultaneous equation.

NEED FOR DEMAND FORECASTING

 COMPANY PROFILE

Nestlé India is a subsidiary of  Nestlé S.A. of Switzerland. Nestle was founded

in 1867 in Geneva, Switzerland by Henri Nestle. Nestle's first product was
"Farine Lactee Nestle", an infant cereal. In 1905, Nestle acquired the Anglo-
Swiss Condensed Milk Company. Nestle's relationship with India started 1912,
when it began trading as The Nestle Anglo-Swiss Condensed Milk Company
(Export) Limited, importing and selling finished products in the Indian market.
With seven factories and a large number of co-packers, Nestlé India is a vibrant
Company that provides consumers in India with products of global standards
and is committed to long-term sustainable growth and shareholder
satisfaction. The Company insists on honesty, integrity and fairness in all
aspects of its business and expects the same in its relationships. This has
earned it the trust and respect of every strata of society that it comes in
contact with and is acknowledged amongst India's 'Most Respected
Companies' and amongst the 'Top Wealth Creators of India'.

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.

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 KIT KAT NESTLÉ NESTLÉ MILKYBAR
NESTLÉ KIT KAT MILKYBAR CHOO Éclairs
CHUNKY NESTLÉ BAR-ONE NESTLÉ MILKYBAR
NESTLÉ MUNCH NESTLÉ Milk Crispy Wafer
NESTLÉ MUNCH Chocolate
POP CHOC POLO
NESTLÉ MILKYBAR NESTLÉ Éclairs
 ANALYSIS AND INTERPRETATION

SWOT ANALYSIS :
STRENGTH:
 Innovation
 Great marketing strategy
 Customer oriented product
 Brand strength
 Strong R&D activities

WEAKNESS:
 Declining market share
 Geographic concentration

OPPORTUNITY:
 Growing demand in the chocolates market
 Strategic acquisitions
 Increasing demand for confectionaries

THREATS:
 Government regulations
 Rising raw material prices
 Intense competition
 SALES REPORT OF NESTLÉ

PRODUCT 2005 2006 2007 2008 2009

Chocolate & confectionery 10,794 11,399 12,248 12,370 12,798
All calculations based on non-rounded figures.

sales(in million)
13000

12500

12000

11500
sales(in million)

11000

10500

10000

9500
2005 2006 2007 2008 2009

2005
Chocolate, confectionery and biscuits reached 2.6% organic growth. The
product group was held back by issues in its big UK and Russian businesses.
Elsewhere, there were good performances. Chocolate did well in Japan,
Canada, Australia and some emerging markets. Even in the UK, Aero was the
fastest growing major brand in the market, with over 30% growth.
Confectionery, in particular the Wonka brand, performed well in the US, its
biggest market, while Biscuits were strong in Latin America, their key region.

2006
With sales of CHF 11.4 billion in 2006, chocolate, confectionery and biscuits
reached 2.6% organic growth, with real internal growth of 0.5%. This product
group achieved high single-digit growth in Zone AOA and Latin America. Kit Kat
performed particularly well globally, benefiting from the growing consumer
preference for lighter chocolate products.

2007
Confectionery: sales of CHF 12.2 billion, 2.3% real internal growth and 5.3%
organic growth. All three categories - chocolate, sugar and biscuits - grew, led
by emerging markets in Latin America and Asia. Kit Kat had a strong year,
particularly in Oceania, South Asia and most markets in Europe. Double-digit
growth was seen in the tablet segment, driven by premium dark chocolate
products such as Perugina Nero in Italy. Increased focus on core strategic and
strong local brands resulted in an EBIT margin improvement of 10 basis points
overall.

2008
Confectionery: sales of CHF 12.4 billion, 8.0% organic growth and 1.4% real
internal growth. The EBIT margin improved by 150 basis points reflecting in
part the successful reorientation of the European business. The relaunch of the
"Best Ever" KitKat and the launch of KitKat Senses continued successfully in
Western Europe. These initiatives, as well as a continued strong performance
in emerging markets, resulted in this product category's strong performance.
The category continued to focus on both the lower income and the premium
and super-premium segments. The upmarket move resulted in the roll out of
dark chocolate products and a new range of chocolates designed by Pierre
Marcolini sold exclusively in Nespresso boutiques in Switzerland and France.

2009
The slight difference in the figures for water and nutrition between the “Sales by operating
segment” and “Sales by product” tables is due to the fact that some water and nutrition
products are also sold by operating segments other than Nestlé Waters and Nestlé Nutrition.

Confectionery 4.3% organic growth, -1.0% real internal growth, EBIT margin
increased by 50 basis points to 13.6%. The chocolate business grew strongly in
the Americas as well as in Asia, Oceania and Africa. In Europe, Great Britain,

France and Switzerland were among the better performers, whilst Russia
experienced weaker results. Kit Kat once more achieved excellent results with
organic growth of 7.1%, benefiting from increased brand support.

TREND PROJECTION FOR THE FUTURE

Year SALES(in TIME SQUARE OF XY

million)(Y) DEVIATION(X TIME
) DEVIATION(X
)
2005 10794 -2 4 -21588
2006 11399 -1 1 -11399
2007 12248 0 0 0
2008 12370 1 1 12370
2009 12798 2 4 25596
N=5 ∑Y=59609 ∑X=0 ∑X2=10 ∑XY=4979

Equation for trend value is Y= A+BX

∑Y=NA+B∑X .......(1)

∑XY= A∑X +B ∑X2 .........(2)

59609 = 5A

A=11921.8
Putting the values in (2) we get,

4979=10B

B=497.9

Therefore, Trend value for years

2010= 11921.8+497.9*4(x=4) =13913.4 millions

2011 =11921.8+497.9*5(x=5) =14411.3 millions

2012 = 11921.8 + 497.9*6(x=6) =14909.2 millions

Line graph of trend projection for the future

sales for future

15000

14800

14600

14400
sales for future
14200

14000

13800

13600

13400
2010 2011 2012
 Findings

 Nestle has its brand positioning in mind of consumers.

 There is a constant increase in market share of nestle from 2005-06 i.e.,

2.6%. it increased to 5.3% in 2006-07 where it again increased in 2007-
08 to 8.0% and in 2008-09 it decreased to 4.3% still the sales increased
in this period.

 As trend projection for future shows there will be consistency in

increasing sales.
 Suggestions

 Nestle can introduce variety in chocolates to fulfil the growing demand.

 People are more conscious for health so they can work on that also.

 Require more concentration for more coverage of area.

 Do work for declining market share.

 Conclusion

Nestle is a leading FMCG company in India and from last three consecutive
years has shown accelerated growth in FMCG portfolio. Customers in India are
also spending more in FMCG as their standard of living is growing. It has placed
itself successfully in the position of market leader in FMCG products. Though
there was some downfall in sales and profit of the company in the beginning of
this decade but after that it has shown considerable rise in both sales and
profit. The future of the company is also looking bright as FMCG market in
India is still expanding and so we can safely conclude that nestle will be able to
secure its number one position in FMCG product.
 Bibliography

In order to make this project we have taken the help of the following websites
& books:

 www.wikipedia.com
 www.nestle.in
 www.scribd.com
 www.google.com

Besides it various books are also consulted to prepare project report.

AUTHOR’S NAME BOOKS

M.L. Jhingan Managerial Economics

Ashish Benerjee Principle of Economics

H.L. Ahuja Modern Microeconomics

Theory and Application

C.K.Kothari Research Methodology