Nestle international operations

6 Companies Owned (and 1 Major Licensing Deal) by Nestlé

Nestlé’s major strategic deals over the past five decades include producers of vitamins, baby
food, pet food, frozen food, and a meal delivery service—and even a giant licensing agreement
with Starbucks that dwarfs the size of many of its takeovers. More recently, the company has
made no secret of its desire to expand into healthier foods, as obesity becomes a bigger
problem.
Early in 2021, it also sold for $4.3 billion its regional spring water brands, purified water
business, and beverage delivery service in the US and Canada. Additionally, Nestlé has stated an
interest in acquiring organic goods, which are becoming more and more well-liked among
consumers who care about the environment and their health.

1. Starbucks Corp. Licensing Deal

In Nestlé’s history, a licencing arrangement is among the most significant transactions
rather than an acquisition. It is one of the biggest—and possibly most profitable—deals
in the history of the organisation, so we’ve included it in our tale. For the right to sell
coffee branded with the Starbucks logo in retail establishments other than Starbucks
locations, Nestlé agreed to pay Starbucks Corp. (SBUX) close to $7.2 billion in 2018.
This agreement only permits Nestlé to sell Starbucks products in physical stores; it does
not permit Nestlé to brand Starbucks products.

2. Gerber Products Co.

Nestlé purchased the 1927-founded Gerber Products Co. In 2007. Gerber was owned by
the pharmaceutical giant Novartis AG and had yearly revenues of around $2 billion at
the time of the acquisition. 14.4% of Nestlé’s overall revenue in 2020 came from its
Nutrition and Health Science division, which also sells Gerber. Before acquiring Gerber,
Nestlé had a relatively small footprint in the baby food industry in the United States. In
order to grow the Gerber brand, Nestlé has prioritised the creation of non-GMO (non-
genetically modified organism) and organic goods.

3. Purina Pet Care

The Robinson-Danforth Commission Co., which subsequently became Nestlé Purina Pet
Care, was established in 1894. With well-known brands including Friskies, Pro Plan, and
Felix, the company now known as Nestlé Purina Pet Care has significantly increased its
global sales since joining Nestlé. 16.6% of Nestlé’s overall revenue in 2020 came from
the Pet Care division.
 Ralston Purina complemented the business’ aggressive growth strategy while also
broadening its customer base beyond its traditional emphasis on consumer food and
drink.

4. Atrium Innovations Inc.

Atrium Innovations is a maker of vitamins and nutritional supplements. It started as a
subsidiary of a Canadian biotech company before being spun off in 2006. It was acquired
in 2014 by an investment consortium led by private equity firm Permira Funds. As
consumers grew more health-conscious, Nestlé moved toward healthier brands and
purchased Atrium in 2017. The deal boosts Nestlé’s participation in the vitamin and
supplement market and serves a dual purpose: It expands Nestlé’s overall business and
helps it to market itself as a healthier company.

5. Stouffer’s
In 1973, Litton Industries Inc., a defence contractor that had grown to include retail
goods like microwave ovens, sold Stouffer’s to Nestlé. Consumers liked frozen dinners at
the time of the acquisition, and Stouffer’s was a well-known brand. An early partnership
between Nestlé and Stouffer’s served as a model for further forays into healthier
cuisine. Stouffer’s introduced its popular Lean Cuisine brand of low-calorie frozen
entrees in 1981.

6. Freshly
In 2020, Freshly was acquired by Nestlé, which kept it operating independently with full
control over its subscription price and product line. Through its acquisition, Nestlé was
able to take advantage of the recent growth of meal delivery services like Blue Apron
while expanding its exposure to the expanding demand for nutritious meals.

7. The Bountiful Company

In the spring of 2021, Nestlé paid $5.75 billion to acquire The Bountiful Company’s core
brands, which included Nature’s Bounty, Solgar, Osteo Bi-Flex, and Puritan’s Pride. In
order to position Nestlé Health Science as a global leader in nutritional supplements,
vitamins, and minerals, the company plans to merge these brands into it. The deal is
anticipated to be finalised in the second half of 2021.

Nestle modes of entry in international markets

Nestlé encountered substantial obstacles to market expansion in the 1990s. The balance of
power was shifting away from large-scale producers like Nestlé and toward supermarkets and
inexpensive chain stores, notwithstanding the stagnant population in western countries. Nestlé
made the decision as a result to shift its attention away from mature areas like North America
and its domestic market in Switzerland and toward growing markets like India and China. The
fundamental reason for the company’s desire to increase its market share in emerging markets
is that as the population rises and market economies are favoured by the government, there
are more lucrative business options available to those with middle-class incomes.

International business strategies

1. Ratio of increase in income
As a person earns more money and has less time to prepare meals at home, they will
automatically switch to branded items, according to Nestlé’s strategy, which links the
ratio of income growth to use of branded food products.

2. Enter emerging markets

Selling goods that are appropriate for the local market, such as infant formula, milk, and
noodles, has helped the company create a sizable customer base in new areas before its
rivals.

3. Small niche
Instead of using general or one-size-fits-all approaches, Nestlé concentrates its
marketing efforts on a variety of little niche sectors. Nestlé continues to pursue its
objective of controlling niche markets by securing at least 85% of the market share for
each food product it introduces. Nestlé has, for instance, captured up to 85% of the
market for instant coffee in Mexico, 66 % of the market for powdered milk in the
Philippines, and 70% of the market for soups in Chile by employing this method, mouth
& hair. To boost its profit margin, Nestlé launches an upscale variation of the same
brand when income levels climb in each niche market.

4. Customization
Nestlé’s worldwide brand identity is based on customization rather than universalism,
which implies that, from an internal perspective, it uses local ingredients and other
technologies that are in tune with the region where it is produced.
 And a brand that is well-known worldwide.
Nestlé's transfer of products from local
farmers to manufacturers is greatly
hampered by the personalization of its
products. For instance, Nestlé adopted a
new strategy to deliver its products to
local warehouses that are convenient for
local farmers to use for the production of
milk because the infrastructure in Nigeria
is crumbling, the trucks are old, and the
political environment is unsuitable to carry
out the processes successfully.

Although this may appear to be an expensive option, the local farmers have increased
their milk supply and output by thrice, which Nestlé has determined to be beneficial in the long
run.

5. Autonomy to local branches

Nestlé provides local branches located in many nations liberty to decide on price and
distribution. By expanding its product line to include tomato ketchup and wheat-based
goods like noodles and tofu, Nestlé has increased its growth. In order to serve all food
items across the region, Nestlé has expanded into 5 nations: Turkey, Egypt, Syria, Dubai,
and Saudi Arabia.

6. Buying small companies

Nestlé is also buying local companies in China and adapting its own portfolio for the
Chinese market. Since many Chinese find coffee too bitter for their liking, Nestlé is
working on a new “formula” to offer Smoovlatte, a coffee drink that tastes like melted
ice cream. The company wants to be seen as a company that makes healthy food.