Professional Documents
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Nestle Marketing and Advertising Strategy
Nestle Marketing and Advertising Strategy
Nestle Marketing and Advertising Strategy
ON
Enrollment No:-40120501715
(2015-2018)
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This is to certify that the project work title MARKETING & ADVERTISING
STRATEGY OF NESTLE INDIA LIMITED ” by Shubham Sharma,
40120501715 is an authentic work carried out by him under my guidance and
supervision in the Bachelor of Business Administration From BLS Institute of
Technology and Management . The report submitted has been founded satisfactory
for the partial fulfillment of the degree of B.B.A
-------------------------
DR. S.K SENAPATI
(PROJECT SUPERVISOR)
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STUDENT DECLARATION
Shubham Sharma
ENROLLMENT NO.
40120501715
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ACKNOWLEDGEMENT
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TABLE OF CONTENTS
TOPICS PAGE
S.NO. NO.
1.
2. INTRODUCTION 7
3. THE SPIRIT OF NESTLE 12
4. KEY OBJECTIVES:
Production 13
Sales and marketing
People
Finance
5. SALES ANALYSIS 15
6. NEW PRODUCT LAUNCHES 23
Milk Product
Chocolate and Confectionery
Beverages
Culinary
Food Service.
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19. METHODOLOGY 41
32. CONCLUSIONS 61
33. BIBLIOGRAPHY 69
34. QUESTIONNAIRE 71
INTRODUCTION TO MARKETING
concerned itself with how to build the best sales force. All the time
marketers has faced a number of tough decisions. The marketers had to
determine product features and quality, establishing accompanying
sources, set the price, determine the distribution channels, decide how
much to spend on marketing, & decide how to divide these resources
among advertising, sales force & other promotional tools.
Today, the time has changed from the previous years. Today, the market
place is enormously more complex. Domestic markets, at on time safe
from foreign invaders, are now the happy hunting grounds of giant global
corporations as well as global Niche specialists. New products are
launched at an astonishing placed & are available worldwide in a short
time. Communications media are proliferating. New Distribution
Channels and formats keep apparition. Competitors are every there &
hungry.
The whole marketing system moves like this. In this diagram I will trying
to show how marketing system moves between the seller & buyer. In this
Diagram there are buyers and sellers who transact over a particular
product or particular class. These buyers and sellers are connected by four
flows. The seller send goods & services and communication to the
marketing, in return they receive money and Infrastructure.
Evolution of marketing as a business discipline
The evolution of marketing as a business discipline provides an insight
into it emergence as one of the most important functions of management
in any business. The evolution of marketing as a business discipline
comprises of following stages:-
a. The stage of barter
b. The stage of money economy
c.The stage of industrial evolution
d.The stage of competition
e.The emergence of marketing
Marketing Management
We will discuss what exactly the marketing is in the language of “Philip
Kotler”.
“Marketing is a Social and Managerial process by which individuals &
groups obtain what they need & want through creating, offering and
exchanging products of value with others”.
According to Philip Kotler, “A human activity directed at satisfying needs
& wants through exchange process”.
Basically there are different concepts of marketing which are very
important for marketing. These concepts are need, wants and Demand.
The starting point in the discipline of marketing is to identify the needs of
consumer. Every person has some need. These needs are not created by
marketers or society, they exist in the very texture of human biology and
human conditions. Wants are the desires for specific satisfaction of these
deeper needs people needs are few but there wants are many.
Demands are wants for specific products that are backed up by the ability
& willingness to buy them.
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INTRODUCTION TO ADVERTISING
“Doing business without advertising is like working at a girl in the
dark; you know what you are doing but no body else does.”
Advertising is Multi-dimensional. It is a form of mass Communication, a
powerful marketing tool, a component of the economic system, a means of
financing the mass media a Social institution, an ART FORM, AN
INSTRUMENT OF Business management, a field of employment & a
profession.
Advertising today is very necessary. Today we are exposed to large
number of commercial messages that at any time in the past. Newspapers
& magazines are full of advertisements, today, from not only the quantity
increased even the quality of advertising has improved considerably.
The means of advertising such as the radio, television, the cinema &
BillBoards etc., have also amply contributed to the growth of this
industry. Advertising which has become a marketing force helping mass
selling & distribution.
Now, I will be discussing the definition of advertising the simplest
definition of advertising is the “Public announcement”.
According to American Management Association, “Advertising as any
paid form of non personal presentation of ideas Goods & Services by an
identified Sponsor”.
Advertising as a tool of Communication
Advertising is as old as man. There is Semblance of advertising in the
many activities of a human being especially those activities, which
influence other either favourably or otherwise. A baby crying for its feed
want to communicate to persuade, to influence & to lead to some action.
All this has been a part of human life almost from the time it took shape.
Advertising is the most visible marketing tool, which seeks to transmit an
effective message from the marketer to a group of individuals. Though
marketers use advertising, basically it is a communication process.
Benefits of advertising
1. Advertising establishes a link between the manufacturer and the
consumer. It is a form of mass communication. Through
advertising, the advertiser reaches a Vast Number of Consumers
and makes his Product known to them.
2. Advertising keeps the consumers well-informed about the products
& Services-styles, features, sizes, colours, specifications, price etc.
3. Advertising expands markets, builds up volume, gives a market
share & profitability, and reduces prices.
4. Advertising guides the consumers in his product choice. It gives
the information about the product, the benefits it offers.
5. Advertising contributes to consumer welfare. It helps consumers in
a variety of ways. It tells what to buy, how to buy & why to buy.
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KEY OBJECTIVES
Production
To optimize production costs while enhancing product quality so as to
make Nestle products even more competitive in the market place.
Sales and Marketing
To reach a sales turnover of 3000 crores by the year 2000.
To double the turnover every years.
People
To help employees to retain a long-term perspective and integrate
them fully with the company's business goals.
To retain a broad perspective while addressing individual needs
To view growth as a continuous process.
To concentrate on attitudinal changes by developing leadership skills,
an appreciation of interdependence between units and the
enhancement of a sense of belonging to Nestle.
Finance
To maintain profit levels above the average for the food industry in
India.
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KEY FACT
This section offers a quick and simple overview of NESTLE, making it an
excellent place to begin learning more about the World’s Largest Food
Company. Here introduction is given with some key facts and figures,
including 2001 Financial Information, Company Profile, Historical
Development and Main Brand.
Financial Information
In millions of CHF 2001
Sales 81 422
EBITDA (a) 12 516
as % of sales 15.4%
EBITA (b) 9600
as % of sales 11.8%
Trading Profit 9 186
as % of sales 11.3%
Net Profit 5 763
as % of sales 7.1%
Capital expenditure 3305
Equity 29 904
Total Assets 65 524
Research and development costs 1 038
Market Capitalization, end December 146 864
(a) Mainly Pharmaceutical products and Water, managed on a worldwide
basis.
(b) Mainly corporate expenses, research and development costs,
amortisation of goodwill
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SALES ANALYSIS
By Geographic Area
In Million of CHF 2001 (%)
Europe 25/706 36.7
North and South America 22/262 31.8
Africa, Asia and Oceania 13/493 19.3
Other Activities 8/537 12.2
69/998
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495 factories
Group’s total work force: 225, 808 people.
Historical Development
1866 Company’s foundation
1905 Merger between Nestle and Anglo-Swiss Condensed Milk
Company
1929 Merger with Peter-Cailler-Kohler Chocolates Suisses. S. A.
1947 Merger with Alimentana S.A. (Maggi)
1971 Merger with Ursina-Franck (Switzerland)
1985 Acquisition of Carnation (USA)
1988 Acquisition of Buitoni-Perugina (Italy)
1988 Acquisition of Rowntree (GB)
1992 Acquisition of Perrier (France)
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POLO 1993
Nestle Bar one (roasted peanuts) 1993
Tasters choice (dust tea) 1993
Contadina Snack Dressing 1993
Cerelac (wheat-soya) 1994
Milkmaid Dessert Mixes (custard powder, 1994
gulab jamun , Kesar Kulfi, Shahi Rabri)
Maggi Tonite’s special (Gravy sauces) 1994
Nescafe Premix 1994
Everyday premix 1994
Nestle Bonus(chocolate) 1995
Kit -Kat 1995
Toffo 1995
POLO (Paan) 1995
Nestle MILO 1996
Milkmaid Dessert mixes (Kalakand) 1996
Maggi Pickles( lime ,mango , mixed , mango 1996
punjabi, lime sweet.
Maggi Dosa Mixes (masala, plain, sambhar) 1996
Maggi Soups (Chicken Sweet Corn, Hot and 1996
Sour, Rasam)
POLO (Spearmint) 1996
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Dairy Product
Nido, Nespray, Carnation, Milkmaid/ La Lechera, Gloria, Neslac,
Barenmarke.
Breakfast Cereals
Nestle
Coffee Creamers
Coffee-mate
Infant Foods and Dietetic Products
Nestle, Nan, Lactogen, Cerelac, Nestum, Guigoz
Culinary Products (Bouillons, soups, seasonings, prepared
dishes, canned food, pasta, sauces)
Maggi, Crosse and Blackwell, Libby's, Thomy, Builtoni,
Contadina
Frozen Foods
Findus, Stouffer's Buitoni, Maggi
Ice Cream
Nestle, Frisco, Dairy Farm, Magnolia, Motta, Camy , ect.
Refrigerated Products (yogurts, desserts, pasta sauces)
Nestle, Locatelli, Vismara, Buitoni, Contadina
Chocolate and Confectionery
Nestle, Crunch, Cailler, Frigor, Chokito, Sarotti, Galak/Milkybar, Yes,
Kit Kat, Quality Street, Smarties, Baci, After Eight, Baby Ruth,
Butterfinger, Lion, Nuts, Rolo, Aero, Polo, etc.
Food Services and Professional Products
Chef, Davigel, Santa Rica
Pet Care
Friskies, Fancy Feast, Aplo, Mighty Dog, Gourmet.
Specialized products for the food industry
Food Ingredients Specialties (FIS)
Ophthalmological products
Alcon
Cosmetics
L'Oreal
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Children as Consumers
Nestlé has developed the following principles for advertising to children:
communications (including advertising, events, sponsorships) to
children should should not be disguised as programming or
editorial;
advertising to children should not attempt to undermine the
authority, responsibility or judgement of parents or care providers;
advertising to children should not portray children in unsafe
situations nor encourage them to accept invitations from people
they do not know;
food and beverage communication should not demonstrate either
unsafe or irresponsible consumption.
Human Resources and the Workplace
Nestlé regards its management and employees as its most valuable assets.
Involvement at all levels starts with open communication, whether on
specific aspects of the business, or about the activities of the Company in
general. Suggestions for changes and proposals for improvements of
Nestlé's practices are encouraged.
The Company's business practices are designed to:
promote a sense of identification among all employees all over the
world, and apply a number of common rules while at the same time
adapting the expression of these rules to local customs and
traditions;
encourage training, and the improvement of professional skills;
offer opportunities for promotion based upon merit, irrespective of
race, religion, sex or nationality. Professional skills, experience,
and the capacity and willingness to apply Nestlé management
principles are the criteria for promotion.
offer competitive salaries and social benefits. Working hours,
wages and overtime pay comply with applicable local laws and are
in line with conditions offered by similar companies.
limit factory overtime to a reasonable level;
create a safe working environment for each employee;
respect the right of employees to join legally recognised labor
unions;
treat every employee with respect and dignity, and not tolerate any
form of physical or sexual harassment or abuse; preclude the use of
forced labor or involuntary prison labor.
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CEO'S VISION
According to Mr. Carlo Mavia Donati Opportunities (CEO) "New
opportunities have opened up with the emergence of a new middle class.
Today the Indian youth is much more open to international trends the
media and communication revolution has also exposed the Indian people
to new life styles. And in the process, this has created new opportunities
for our products" and Donati is pretty clear-he will ensure that Nestle
grabs these opportunities.
THE NESTLÉ POLICY ON THE ENVIRONMENT
CEO's Statement
Over the past several decades, significant progress has been achieved
towards protecting the world's environment. This objective remains a
fundamental duty and a collective responsibility that must be shared
between the public, governments and the private sector.
As the World Food Company, Nestlé is dedicated to providing consumers
with the best food throughout life. Our Company's primary function is the
transformation of perishable raw materials into finished products that
meet consumers' expectations for safety, quality, convenience, and value.
From our earliest days, we have recognized the need to protect the
environment in our business activities. Exercising this commitment,
which is part of our broader commitment towards the good of the
community, remains central to our business today and tomorrow.
The Nestlé Policy on the Environment was published in 1991 to define
our world-wide strategy on environmental issues and to state our long-
standing commitment to environmentally sound business practices. It is
communicated internally within the Nestlé Group and externally to all
interested parties and institutions. Following its publication, the Nestlé
Environmental Management System (NEMS) was established to
consolidate all environmental measures taken by the Nestlé Group. The
NEMS is being implemented across our entire business.
Today, preserving natural resources and minimizing waste has become a
part of day-to-day business for our employees and is an integral part of
our strategy to achieve global competitiveness. The 1999 update of the
Nestlé Policy on the Environment reiterates our strong environmental
commitment and reflects our priorities as we move into the new
millennium. It also recognises developments in the international
environmental arena.
The application of the Nestlé Policy on the Environment at every level of
our operation forms an essential part of the Nestlé Corporate Business
Principles and enables us to contribute to sustainable development —
meeting the needs of the present, without compromising the ability of
future generations to meet their own needs
Compliance
Nestlé is committed to the application of these principles in all countries,
and wherever they are not in conflict with relevant local legislation where
it operates.
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Peter Brabeck-Letmathe
Chief Executive Officer
Nestlé Corporate Business Principles
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USA MARKET
Nestlé USA is named America's Most Admired Food Company for the
fourth consecutive year.
As many of its rivals seek growth through consolidation, Nestlé instead
looks within for ways to boost sales...In the process, it has posted sales
growth of more than 4%, higher than the industry average of 2.5%.
Together, Nestlé's disparate Internet ventures present a mountain of
opportunity...U.S. CEO Weller's Net-savvy unit is leading the global
company in its e-enterprise
Their vision as part of the world's leading food company is to provide
families with the best food and beverages throughout their lives. Our
success is based on the quality of our products and on relationships we
continually build with our customers, our employees, our communities
and our suppliers - who continually look to our company to be the very
best. Our commitment to achieving this vision is a source of Nestlé pride.
For well over a century, Nestlé has been making the very best food and
beverage products for families around the world. We believe that food
should provide for the spirit as well as the body, and strive to ensure that
every product we prepare also enriches the experience of life itself. We
believe it is our unique understanding of the integral role of food in good
living that's helped us to become a part of the world's largest food
company. Corporate Governance Principles
Since its foundation in 1866, Nestlé has
built consumers' trust through the quality of its products;
respected the social, political and cultural tradition of all countries
in which it operates;
taken a long-term approach to strategic decision-making, which
recognises the interests of our shareholders, consumers, employees,
business partners as well as those of all the national economies in
which we operate.
Nestlé's commitment to good Corporate Governance goes back to its very
early days. Today, as both legislation and international recommendations
indicate growing public interest in the issue, we take the opportunity to
publish the Nestlé "Corporate Governance Principles" that reflect and
highlight our ongoing commitment.
Legislation and International Recommendations
Nestlé complies with the laws applicable in the countries in which it
operates;
ensures that the highest standards of conduct are met throughout
the organisation by complying in a responsible way with the Nestlé
Corporate Business Principles, which guide company activities and
relationships world-wide in each sector of business interest;
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DISTRIBUTION NETWORK
THE DISTRIBUTION CHAIN NOW
FMCG Manufacture
Clearing and forwarding agents (1-3% margins)
Super stockists (3-6% margins)
Stockists (3-5%)
Distributor (4-7%)
Organized retailer (6-15%)
WHAT RETAIL CHAINS WANT
FMCG manufacturer
Organized retailer (current 6-15% margin + 11-21% savings from
disintermediation)
The retail demands
What FMCG companies What retail chains
give wants
6% to 15% Margins At least 20%
7-10 days Credit days 15-30 days
12 days Minimum stock levels 7 days
20% to 25% Stock outs Less than 5%
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Methodology
The nature of the project work has been exploratory as no hypothesis, is
taken to be tested. Though the conclusions drawn could be taken as the
hypothesis and further tested by the research work undertaken in the
relevant field. The reason for choosing the exploratory research design is
the fact the project report has been primarily based upon the secondary
sources of data and whose authenticity could be assured of.
The reluctance of the company's personnel in parting with much of
information led the project report to be based substantially on the
secondary source of data. The sources of data used in data collection are
the following:
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Primary sources
In order to gather information about the various products, I personally
visited a number of retail markets and collected data pertaining to the
prices of the products offered. The market visits were useful in knowing
the comparative prices and quality of the offered brands vis-à-vis the
competitive brands. Detail regarding the packaging of the products were
collected were collected and I also inquired about the various sales
promotion schemes followed by the three companies.
By interviewing these retailers valuable information was collected. I
inquired from them about their marketing advertising and distribution
strategies.
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Secondary sources
Information was collected from secondary sources such as public
libraries, newspapers, business magazines.
Beside these the use of Internet was also made in collecting relevant
information. The data collected from the above mentioned sources has
been adequately structured and used at appropriate places in the report.
This particular way of data collection was used because of its low cost
(except data collected through surfing the internet) and less time
consumption.
The information gathered included:
Their annual reports (Procter & Gamble and Johnson and Johnson).
Pamphlets.
Posters.
Press clippings.
News releases.
Newsletters.
Pictures.
Mc Curtty has popularized a four factor classification of these loots called
the 4 p. These are:
MARKETING MIX
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One must also target the others customers because this is not exactly the
right time to expand the market but to make the existing customers buy
again. For grabbing others share one must try to attack on the rivals
achelles heal with high dose of speed & surprise, catching him unawares
e.g. LML followed the same strategy in UP, MP & Rajasthan where its
competitors position was relatively weak. Nestle again repositioned the
chocolate bar one. Nestle has been coming with the different productsand
trying to target the different segments.
Nestle is also trying to give the customer more choice, so that they can
choose the product which they like. The company is also trying to bring a
variety of products in every segment.
The companies should also try to offer emotional value to the customer a
Pt. New customers can't be attracted with the same benefits as in good
tones. For, the resistance to experiment, whether with a new product or a
brand is much higher unless that is, the benefit can mow down the barrier.
According to Puris Lintas Mehra consumers look for safe choices during a
recession. This is not the time for new brands to come in, unless their
attributes are very strong.
Price:
Is an important tool to break down barrier to a product or brand
acceptance. According to Siddhartha 'Shunv' Sen,59, the CEO of Suadra
Advisory Services "Statinzg the price upfront can lower the consumer's
expectation from a brand". But one can't be convinced of the value
connotation of year brand, the customer will still use the expensive, but
more trusted product although in smaller quantities or a fewer occasions
than before to project her budget So what next ? The price warriors must
make their offer either qualitatively different or quantitatively superior to
the competition. And then slip in the lower price to seal the deal. This
double differentiation will double your impression in the customer's mind.
In consumer durables the demand for these goods falls rapidly in a
recession the consumer postponing his buy as long as he can. The
marketers in this time must lure the customers with much more than then
their lower prices but by schemes such as exchange offers.
Nestlae has been always pricing the products as premium price. The
strategy of the nestle is to set the priceas premium. The price is always
set as that price that can be afforded by the customers .the company
should set the price for those also who have low spending budgets, they
can not only service the old customers but also bring in new for whom
earlier price was the main barrier.
Price One can reach for the consumers purse on the basis of price but to
stay there on the basis of price is pretty cough.az Because every one tries
to imitate the low prices if the players are new. To ensure price as a
sustained competitive advantage, the differentiation should be continuos.
Imitation should be warded off, consumers kept interested & build image
around price rather than as a discount player.
Promotion:-
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Vice President
(Marketing)
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MARKETING STRATEGY
Nestle has adopted a four pronged growth strategy:
1. Gunning the market with new products and brand extensions.
2. Expansion of the distribution network to small towns for extensive
availability
3. Reduce prices and introduce smaller packages for products to make
them more affordable (a tool to enter price sensitive markets).
4. Focus on employ training and develop a positive attitude through
enhanced manpower development.
5. By year 2000 it expects chocolate and confectionery to account for
one in every third rupee in sale.
In the late 1996 fear of breading complacency by not having a continuous
improvement, gave birth to an international sales and marketing
improvement teams (SMIT).
SMIT maps the latest in helping towards the target of year 2000. The
SMIT exercise is a major global initiative of Nestle to enhance sales and
marketing productivity. Linked with the already existing BECA project,
which in turn emphasizes on excellence by improving the distribution set
up, this gave rise to the following growth objectives for the year 2000:
Ensure direct coverage of all urban towns in India.
Expand distribution to reach I million retail outlet on a regular basis.
Work in partnership with the distributor for the achievement of these
objectives.
Provide sustainable solution to optimize our secondary sales from
distributor to retailer.
PRODUCTION
As a part of Nestles efforts towards continuous improvement and
excellence in Manufacturing operation, a Maga Improvement Team (MIT)
was put in place at the Maga factory. The team comprised of international
experts from Nestle Technical Service (NESTEC) and the local staff. In
1996, it embarked on a program with the single-minded objective of
optimizing production costs while enhancing the product quality so as to
make Nestle products even more competitive in the market place.
Drawing upon Nestle's global experience and manufacturing expertise in
75 countries the team identified the following areas for detailed study:
Process improvement to ensure the optimal usage of resources
Improvement of operational efficiency
Cost optimization.
As series of small but critically important initiatives ranging from
redesigning laboratories to palletisation of raw materials and packaging
material utilization, manufacturing and filling loses and labor man-hours
resulting in substantial savings and improved productivity and machine
utilization. In addition, several non-tangible benefits in the form of
systems for sustainable improvement in areas like factory maintenance
planning tools, down time recording systems and performance
measurement tools were also realized.
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This project was highly successful and the company is now implementing
its key learning's of MIT in its other factories.
In a country as vast and diverse as India, Supply Chain Management is
absolutely critical to rapid growth. Through BECA, Nestle has
concentrated heavily on streamlining and improving their supply chain
management in order to make it more dependable, more cost effective and
most importantly, more responsive to market needs.
For better supply chain integration the planning of key operations-
purchase, production, distribution and sales are synchronized to ensure
that every body works towards a common business plan. Monthly
objectives are broken down into weekly and 9wherever necessary) into
daily plans and monitored regularly to ensure smooth implementation and
quick corrective action when needed. Major benefits accrued thus far
include reduction in working capital through lower inventories of finished
goods and materials, better stock availability and reduction in
obsolescence of materials.
In addition to traditional performance indicators, quantifiable
performance measures have been identified and implemented in all
functional areas such as sales planning, production output, quality
assurance, material ordering transportation and warehouse management.
These measure are monitored regularly to gauge the extent of
improvement and identify root problems for taking corrective actions.
Teams have been put in place at all factories and sales offices to ensure
the implementation is continuous and self-sustaining. Areas of
improvement are regularly identified and time bound action plans
established. For this purpose, standard tools such a Total Quality
Management (TQM), Kaizen, 5S and Small Group improvement activity
(SGIA) are being extensively used.
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ADVERTISING STRATEGY
Nestle, a cash rich company has plenty of marketing prowess. This can be
credited to a strong and sound advertising strategy.
Nestle in the year 1995 had an advertisement spending of Rs. 43.3 crores
(net). Tracing Nestle advertising responses the ad campaign by HTA of
'Hot and Sweet' was a runway success this ad was actually meant to fend
off a challenge from H.J. Heinz. The Maggi range of sauces were
introduced in 1985 but sales didn't catch up until 1990. At this point the
popular and memorable campaign of Javed Jaffrey and Pankaj Kapoor was
launched by Producer Pralad Kakkar. This commercial was an instant
success. The volume of sales kept rising from an initial growth of 13% to
20% in the next year. Today the sales figure for Maggi Sauces is growing
at a steady 6% per year.
Another noteworthy campaign was that of POLO (the mint with a hole),
devised by Mudra advertising agency. This campaign was awarded 11
industry ad awards.
In 1996 the advertisement budget has been approximately Rs. 56 crores
where again innovation was the main focus. The new nationwide product
launch of Maggi Macaroni Snack and Mithai Magic have been designed
by Mudra. The macaroni ad with its use of "Hinglish" and a catchy beat
(which is the latest trend amongst the Indian Advertisers) appeals well to
the target audience and the Mithai Magic Commercial does keep the
secret of the contents in the box, intact.
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Nestle India has changed its product mix within the past five years. In
2000, the largest segment was Surplus Fat, while in 1996, the largest
segment was Other Foods. During the past four years, sales of Surplus Fat
increased 1,374.2% (from 472.07 million Indian Rupees to 6.96 billion
Indian Rupees), while during the same period, sales of Other Foods
experienced an increase of only 22.8% (from 3.99 billion Indian Rupees
to 4.90 billion Indian Rupees).
Although sales at this company increased, they increased at a slower rate
than the three comparable companies in 2000. The sales increase of 8.0%
was less than those at Alaska Milk Corporation (up 14.7%), Smithkline
Beecham Consumer Healthcare (41.2%), and Pure Foods Corporation
(18.9%).
The company currently employs 2,963. With sales of 15.82 billion Indian
Rupees (US$329.38 million) , this equates to sales of US$111,164 per
employee.
Sales Comparisons (Fiscal Year ending 2000)
Sales Sales Sales/ Largest
Company
(US$mlns) Growth Emp (US$) Region
India
Nestle India 329.379 8.0% 111,164
(100.0%)
Alaska Milk Corporation 73.122 14.7% 93,268 N/A
Smithkline Beecham
178.707 41.2% N/A (100.0%)
Consumer Healthcare
Pure Foods Corporation 243.899 18.9% 64,729 N/A
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For the 52 weeks ending 10/19/01, the stock of this company was down
0.3% to 505.95 Indian Rupees. During the past 13 weeks, the stock has
fallen 4.5%.
During the 12 months ending 12/31/00, earnings per share totalled 12.30
Indian Rupees per share. Thus, the Price / Earnings ratio is 41.13.
Earnings per share rose 20.4% in 2000 from 1999. Note that the earnings
number includes a $.35 pre-tax charge and $.11 pre-tax credit in 2000.
This company is currently trading at 3.08 times sales. This is at a higher
ratio than all three comparable companies, which are trading between
0.51 and 2.15 times sales. Nestle India is trading at 18.91 times book
value. The company's price to book ratio is significantly higher than that
of all three comparable companies, which are trading between 0.81 and
4.94 times book value.
Summary of company valuations
Price/ Price/ 52 Wk
Date P/E
Company Book Sales Pr Chg
Nestle India 10/19/01 41.1 18.91 3.08 -0.30%
Alaska Milk Corporation 10/19/01 7.2 0.81 0.51 10.53%
Smithkline Beecham Consumer
10/19/01 N/A 4.94 2.15 N/A
Healthcare
Pure Foods Corporation 10/9/01 7.9 1.83 0.60 35.00%
The market capitalization of this company is 48.78 billion Indian Rupees
(US$1.02 billion) . The capitalization of the floating stock (i.e., that
which is not closely held) is 34.89 billion Indian Rupees (US$726.33
million) .
Dividend Analysis
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Profitability Comparison
Gross Earns
EBITDA
Company Year Profit bef.
Margin
Margin extra
Nestle India 2000 20.3% 15.6% 7.5%
Nestle India 1999 18.8% 15.7% 6.7%
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SWOT ANALYSIS
Strength
The basic Aim of Nestle is to become the leading company in the Indian
food industry. It was linked to India from the starting of the century
(1900). Through exports, manufacturing in India only began in 1962. In
very short span it had established itself as a major player in Indian food
industry.
The remarkable growth has been achieved through.
a. Rapidly creating greater has manufacturing capacity.
b. Taking steps to ensure availability of good quality of products.
c. Strengthening of distribution and sales network particularly in rural
areas.
d. Sales and marketing are among the major strength of the Nestle.
Weakness
a. Nestle aims only of capturing young market, which is quiet clear from
the advertisements in India.
Opportunities
Threats
a. Cadbury In creasing popularity of Cadbury's products in markets is a
major threat to Nestle.
b. Introduction of foreign food product in India is another threat to
Nestle.
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LIMITATIONS
Sample size: The sample size chosen was 250 for the whole Delhi metro
where there are so many people. This could have affected the results,
which may not hold true in all parts.
Concerned persons were not available despite appointments at some
times. It was difficult to tap the distributors and the ASM of nestle.
The marketing and the advertising managers were not ready to give any
infomationabout the company . They were not willing to tell about any
strategy of marketingand advertising . so very less information can be
gas\thered about the strategy of marketing.
The distributors were reluctant to share information regarding the trade
insights.
CONCLUSIONS
Sales growth in 2001 led by a robust 20% growth in volumes
Nestle’s domestic sales registered a 18.5% volume growth during the first 9 months of 2001.
Exports registered a 31% yoy volume growth. In value terms, domestic sales grew by 15.8% yoy to
Rs12.1bn, while Exports grew by 26.4% yoy to Rs2.4bn.
Jan-Sep Jan-Sep % yoy
Volume Growth (tons) 2001 2000
Domestic 105718 89176 18.5
Exports 13402 10216 31.2
Total 119120 99392 19.8
Value Growth (Rs mn)Domestic 12107 10454 15.8
Exports 2424 1918 26.4
Total 14531 12372 17.5
Beverages leading volume growth, value growth being led by culinary
segment
Beverage sales have grown at a fast pace of 42% in the first 9 months of
2001 driven by rising exports and revised pricing strategy in domestic
market. Growth in value terms is however lower due to a sharp 15%
decline in realizations. Culinary product sales grew by 20% in volumes
and 22% in value. Volume growth in chocolate & confectionery segment
was 12%, which was higher then market leader and average industry
growth, signifying that the company has been able to improve market
share in the category.
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Turnover Contribution by
Turnover Growth
contribution
Volume Value Volume Value Realization
Milk & Nutrition 47 43 15 13 -1.4
Products
Beverages 18 29 42 21 -15.1
Culinary Products 24 14 20 22 1.9
Chocolates & 11 14 12 20 6.8
Confectionery
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2. Exports:
Export Sales for the year at Rs2655mn have grown by 32% in volume
terms, over the last year. This has been mainly due to the higher exports
of NESCAFE to Russia, buoyant sales of Instant Tea and good
performance of the culinary products. However, depressed green coffee
prices in domestic and international markets kept the export realisations
low. Measures taken for tapping new market and product opportunities
have also contributed to this growth. The export competitiveness of value
added instant coffee manufactured in India continues to be adversely
affected by the purchase tax levied on green coffee. Efforts continue to
tap new market and product opportunities.
3. Dividends:
Interim dividend of Rs. 8.00 per equity share, including Rs4.50 per equity
share out of undistributed profits of the previous financial years, was paid
during 2000.
4. Business Development:
In line with the Company's objective to provide superior value in every
product category and market sector, efforts were focussed to provide
quality products to customers at attractive price points. While the
Company continued to generally maintain price points across all the
product categories, the pricing of some products were also reduced to
meet consumer expectations.
MAGGI Noodles re launched in 1999 in response to popular consumer
taste preference, continued to boost sales during 2000 in the culinary
segment. New flavour profiles were introduced in the bouillon business.
The market continued to react positively to the initiatives taken in the
recent past to grow the consumption of instant coffee in the domestic
market. The new NESCAFE pricing and bringing the popular SUNRISE
brand under NESCAFE umbrella to benefit from its association continued
to strengthen the category. NESCAFE Frappe a blend of coffee, mocha
and vanilla, which makes a delicious frothy cold coffee was launched in
select metropolitan cities in the third quarter. This was another strategic
launch and seeks to address consumer with preference for cold drinks.
NESCAFE Frappe has received encouraging response.
In the area of Chocolate and Confectionery NESTLE MUNCH Crisp
wafer biscuit with chocolayer, which was launched in select markets
in1999, was rolled out nationally during 2000 and had good growth.
Continuing with the efforts to meet consumer expectation on price points,
the pricing of KITKAT was also reduced during the later half of the year.
Moulded Chocolates and Eclairs also showed satisfactory growths. This
has also helped in improving the infrastructure and distribution reach of
the Company in the Chocolate and Confectionery segment.
In the milk and cereal categories, EVERYDAY Dairy Whitener and
cereals had satisfactory growth. NESTLE Growing up Milk, a new
product offering superior nutrition, launched in 1999 was rolled out
nationally during the year.
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The Company has also entered the Chilled Dairy business with the recent
launch of NESTLE Dahi in select cities of the North. The initial response
has been very encouraging and the Company is working on plans to
further leverage the international expertise of Nestle Group, Switzerland
in the area of Chilled Dairy.
The performance of other products were generally in line with
expectations. A few products whose performance was not considered
satisfactory are under constant review for corrective action.
The directors were pleased to report the implementation of the two new
projects undertaken by the Company during 2000 packaged milk and
packaged drinking water. Both the projects seek to leverage the
worldwide experience and knowledge of Nestle Group, Switzerland who
are the leaders in these product categories.
In line with its objective of long term growth and entry in significant
value added food segments, the Company forayed into the Ultra Heat
Treated (UHT) liquid milk business in April 2000 by launch in Mumbai.
Packaged UHT milk seeks to address growing consumer concerns on
adulteration and product safety and brings with it reliability, complete
hygiene and safety. It offers convenience to the consumer, in terms of a
shelf life without any deterioration in the product quality and easy usage
without refrigeration or boiling. UHT Milk has received encouraging
response and has been rolled out in select cities of the West, South and
North.
The project for bottled water was implemented at the Samalkha factory
and water launched in February, 2001 under the brand NESTLE PURE
LIFE and is available in select cities. NESTLE PURE LIFE contains a
balance of essential minerals and a light pleasant taste and is
manufactured under stringent quality control. The packaging has been
specially designed to maximise safety for the consumer and protect from
possible tampering.
The new categories like bottled water and liquid milk are lower margin
categories and will require considerable investments. The Company sees
them as strategic and as requiring support on a sustained basis.
The two new Sales Branches at Bangalore and Chandigarh set up in 1999
to further strengthen the flexibility of the Sales organisation and for
speedier response to the market conditions, have started showing positive
results during the year. With a view to expand distribution and increase
penetration in smaller towns, a concerted drive was undertaken to make
products affordable and accessible to consumers. Initiatives taken include
more penetrative pricing and smaller packs covering brands such as
EVERYDAY Dairy Whitener, MAGGI Noodles, MILO Chocolate Energy
Drink and NESCAFE Instant Coffee. The response has been encouraging.
The Alternative Trade Channel unit created in 1999 undertook initiatives
to tap the opportunities for out of home consumption, particularly for
instant coffee and chocolate and confectionery and to extend availability
of product to nontraditional outlets. The outcome of these initiatives has
been encouraging and is being consolidated.
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7. Community Health:
Recognising its responsibility to the community in which it operates, the
Company over the years has been taking initiatives in the area of
community health at locations around its factories. Some of the initiates
taken in the recent past are:
a) Provide Government and village schools with facilities for toilets and
hygiene drinking water including deep bore wells, where necessary.
b) Support to health officials in Pulse Polio programmes.
c) Sponsorship of treatment of TB patients at clinic run by NGO.
d) Healthcare Programmes with focus being on well being of employees
and their families covering vaccination, awareness programmes and health
check up.
The company performance is much better in comparison to its
competitors.
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Questionnaire
Tel.: Name :
Personal: Age :
Class :
School/
college :
Tel.:
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