Case Study Report

Nestlé : Corporate Strategy Analysis

MBSA 1323-02
STRATEGIC INNOVATIVE MARKETING
SEMESTER 2 SESSION 2021/2022

Prepared by:
1) Nur Shafiza Bt Izhar (MBS211257)
2) Chong Eva (MBS211292)
3) Harintharavimal Balakrishnan (MBS211287)
4) Yap Jing You (MBS211243)

Executive Summary
 In summary, primary problems facing Nestlé as mentioned above included global
recession, trend of food consumption shifting to healthier choices and strong competition in
brand improving among market players to enlarge market share as much as possible. In order to
adapt with external environment changes and minimise disruption, it is crucial for Nestlé to
adjust business strategy and reallocate business resources such as emphasis in R&D towards the
functional food segment. Divest in the lowest operating profit margin segment would be
suggested in order to reallocate resources into a more profitable segment. Acquisition in
healthcare and prepared food segments may be business opportunities for Nestlé in growth of
market share. Innovation is Nestlé’s most valuable resource although it is time and cost
consuming. By readjusting strategy focusing on innovation in scientific based functional
products to target different consumer requirements Nestlé would be able to develop more
differentiated products and create new market demands dynamics. Nevertheless, Nestlé’s sincere
intentions towards fulfilling social responsibilities and enhancement of public image is essential
as a role model in industry and improve business sustainability. The strength, weakness,
opportunity and threat assessment revealed the future growth potential of Nestlé and the
challenges it needs to overcome in order to achieve it.

Introduction

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 Established in 1867 by Henri Nestlé, Nestlé is a multinational food and drink processing
conglomerate corporation with its headquarters in Vevey, Switzerland. The company’s products
range from baby food, breakfast cereals, bottled water, coffee and tea, dairy products, snacks,
medical food, frozen food, ice cream, confectionery and pet foods. Today, Nestlé owns over
twenty-nine brands with annual sales revenue of close to CHF 80 billion and 270,000 employees
worldwide.

This case study presents a brief investigation on the corporate strategies directions taken
to overcome strategic issues in terms of position of its product and marketing strategies from
2009 to 2011. The study also discusses the primary reasons for the financial challenges faced by
Nestlé and the measures taken by the management to overcome them. Nestlé’s diversification
plans to mitigate risks, its acquisition strategies for nominal growth of related business segments
and the successful potential business strategies were highlighted in detail. As the value creation
is an important aspect taken into consideration for market share dominance, the study debates the
appropriate marketing strategies that can be utilised to overcome its competitors and supply
chain constraints.

In addition, the efficiency of organisation structure and chain of command is also

reviewed. The adaptation of Nestlé to the health-conscious consumer trend is elaborated further
to understand the factors involved in continuous product innovation strategies and product
marketing strategies. The strength, weakness, opportunities and threat analysis summarise the
potential growth of Nestlé and its future market segment. The future growth prospects of Nestlé
based on the new marketing and product development strategies was also discussed in brief.

Answers

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Q1. What are the primary reasons for Nestlé’s financial difficulties, such as declining sales?
To what extent does Nestlé have control over these factors?

According to a case study, total sales of Nestlé had reduced for 3 consecutive years by
late 2012 especially in the chocolate and confectionery segment which reduced 27% of revenue
since 2008. One of the main reasons is due to widespread recession in US and Western Europe
which made up Nestlé's primary market.

Health awareness in reducing sugar intake impact revenue of confectionery (chocolates)

would be another reason for declining sales of Nestlé. As the obesity rate in developed countries
has been increasing for years, governance and advocacy groups have voiced out against high
sugar content snacks while banning vending machines grounded in schools in the US and Europe
to reduce sugar intake among students and children.

On top of that, major competitors of Nestlé focused on brand development and enhanced
competition in the confectionery industry. The Hershey Company as Nestlé’s biggest competitor
intended to make acquisitions as priority in order to increase market share. Mars Inc operates
similar segments as Nestlé’s pursue strategy of differentiation through strong branding of sugary
and confectionary product lines. By purchasing Cadbury in 2010, Kraft Foods became the
biggest player in the global candy market.

To the best of our opinion, Nestlé is unable to control the external factors mentioned
above. However, the declining net revenue due to market saturation and increasing cost of goods
is a challenge to be addressed.

Q2. Is Nestlé too diversified? Which units would you divest, if any?

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 Yes, Nestlé is too diversified. As Nestle invested in too many market segments, it is
difficult for them to promise a desirable profit margin for each segment. Diversified market
segments also lead to diversified resources as well. Furthermore, aggressive competition in each
of the market segments may worsen compression of profit margin. Intention of Nestle to increase
in revenue does not mean to increase in profit margin as it may result in increase of costing as
well. Instead of maintaining current diversified market segments they should divest the lowest
profit margin segment which is Nestlé water with lowest operating margin at 8% and reallocate
resources on innovation for segments with higher profit margin such as functional food segment.

Although diversification mitigates business risk and boosts growth opportunities, it has
its major setbacks as well. Diversification, which requires expansion of product range to cater
more product segments, indirectly increases the chances for manufacturing mistakes to occur.
Lack of specialisation in a particular product poses a downside on product quality and
manufacturing efficiency. Besides, product differentiation may require a new manufacturing
process and technique which in return costs more on the capital expenditure. The cost of
investment could be on the high range for some which impedes the turn around cycle time on the
return of investment. The overall effect of over-diversification may be reflected on capital
growth of the company, likewise seen Nestlé.

Q3. Should the company engage in more acquisitions? If so, in which business segments?

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 Yes, Nestlé should engage in more acquisitions in nutrition and healthcare and prepared
food markets segments. As health awareness has been rising in developed countries due to high
obesity rates, market demands for functional food such as weight management and nutrition
supplement products increased relatively. Besides that, rising concern of parents towards baby
nutrition enhanced demand for infant formula and baby food. As for the prepared dishes cooking
aid segment, operating profit margin is around the middle portfolio which is nearly 14.5%.
Acquisition strategy of Nestlé towards Chef America and Kraft Foods frozen pizza division
proved that it is effective in growth of market segment.

Q4. What are Nestlé’s most valuable resources? Can the company make use of any of them
to build a more successful strategy? What would the strategy look like?

Nestlé’s most valuable resources

One of Nestlé’s strongest functional resources is by innovation through their seven lines of
business. Apart from acquisition on existing product lines, intensive research, and development
to innovate their existing lines of products or making a new entrance of improved scientific-
based product will bring the company forward and towards achieving their principles and values.

Successful strategy
Lines of product by sequence from the highest would be powdered and liquid beverages.
Followed by milk products and ice cream, prepared dishes and cooking aids, pet care, nutrition
and healthcare, chocolate, confectionery, biscuits and finally water. The strategic product
innovation should be invested in each of their product lines according to their performance rating
mentioned.

Strategy Outlines
We go by each line of products offered by Nestlé;

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(a) Powdered & Liquid Beverages
This line of product can be refined in a healthier form. The advantages of these lines are
they can provide convenient and easily available-packed beverages. In view of the current
market, the time required to prepare those beverages plays a vital role in shifting their
preferences. Common issues contributing to the demands like thirst after sports, fatigue after
long office work, housewives taking a break for a drink, protein supplement to replace the
missed mealtimes or for bodybuilding, vitamin supplement easily available in drinks’
preparation, and many other values that can be added into innovating the products.
Differentiating each product directed at each demand, slowly but surely will reach the customer’s
needs and increase their levels of needs into a necessity. This will result in greater sustainability
of the products.

(b) Milk Product & Ice Cream

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 As formula milk specially made for smaller children may bring out the previous scandal
and many other sensitive issues by contrasting the WHO’s effort in supporting exclusive
breastfeeding² and natural weaning, formula milk should not be the company’s priority.
As for general milk products, based on general statistics, calcium absorption dropped by
0.21% per year after 40-year-old compared to 12-24% of calcium absorption during their
younger ages³. Intensive innovation should be directed into developing or improving the milk
product not pertaining only to pregnant mothers, those with joint problems, the mild product
range should be the prophylaxis or preventive supplements as to prevent them from even having
the first sign and symptoms, thus ensuring greater quality of life ahead.

In addition to that, milk products with gut-friendly elements (gut-protecting probiotics)

could be beneficial for the older generation, not necessarily for the ones already with the disease.
So instead of having 2 kinds of beverages (milk product for calcium and “Yakult” for gut
protection), combining it will give the impression of a more cost-effective and time-saving
option for the consumer. Ice cream on the other hand, in some home remedies in addressing
common illness in children affecting their oral intake and subsequently leads to dehydration and
requiring admission, they suggested ice cream intake as to soothe the throat with rash.

For example, the current outbreaks of HFMD₅, painful rash will be widely distributed on
both palms and soles as well as in the throat which cause the children to refuse feeding and
drinks. There is no specific treatment or antibiotic to fight HFMD and the only way to rapidly
recover from the disease is only by ensuring adequate hydration and nutrition. Innovation of
Nestlé’s Ice Cream products to be less-sugary but palatable ice-creams, wide ranges of flavours
will come in handy during such crises. In fact, those diseases are recurrent and very common,
and it even can be a lifesaver for the parents who have trouble with hospital admission and to
stay long at the hospital due to other children or work commitments. Lifesaving here of course
by adhering to the standard medical attention needed and the ranges of ice cream provided to
ease off their home remedies if not indicated for admission.

(c) Prepared Dishes & Cooking Aids

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 Current working generation nowadays, especially women who are commonly in charge
of the kitchen, tend to chase the time. Any available prepared dishes with assured calorie content,
premium taste, and quality, meeting some demands of reducing or gaining weight, easy
preparations will add on the value of the product. Collaboration with influential health-cautious
personnel will add onto the value of the product. Wide options should be made available in terms
of packaging, appearance, price deal packages by weekly, online shopping and many more
should be offered to gain their preferences. Extra effort and R&D should be invested as this may
contribute into the customer’s main meals daily especially those singles and married but away
from family due to work commitments.

(d) Pet Care

According to the studies, pets have been proven to reduce stress₄ and improve pet
owner’s overall health condition as it lowers the stress hormone, cortisol and increase the good
hormone which is the oxytocin but not everyone can manage to handle the pet care first hand.
Thus, Pet Care businesses should not be left behind. Collaboration with veterinary doctors by
offering online consultation for common cases and subsequently adapting the product line in
addressing the common issues faced will bring the company a long way. Integrated approach
with the ones directly managing the common issues faced by pet owners will bring in trust in the
product and the product innovation also can be directed towards the right way in order to be
useful, proven efficacy, trusted and preferred brand.

(e) Nutrition And Healthcare

Current generation is a bit sceptical upon starting medication for illnesses, they would
rather take supplements to control their illnesses. That is why more pharmaceutical companies
are directing their way there. As the line of business is in between food and pharmaceutical, it
would be a great opportunity to be the one filling the gap as most food businesses are readily
aware of the standard taste preferences and product images preferred by the customers. By
shifting the purpose of the food into “supplementing health”, in order to naturally bring back
their optimal health status, will create the crucial value in the food product. Other examples that
are currently happening is, even though the “organic” vegetables cost more and smaller in

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quantity, more and more health-conscious customers are willing to invest on current healthy food
to ensure they would not need to invest on lifelong medication adherence.

(f) Chocolate, Confectionary, & Biscuits

The general lines seem to be unavoidable to be directly related to diabetes and obesity
but, according to Paracelsus, “Poison is in everything, and nothing is without poison. The
DOSAGE makes it either a poison or a remedy.” Nestlé’s chocolate range can be brought
towards the benefit of dark chocolate by adjusting their level (dosage) of cocoa content. Some
benefits of dark chocolate are, protecting the heart, improving memory and cognitive functions,
reducing stress, and improving mood, controlling appetite, supporting skin health and it even
supports a healthy blood sugar level¹. Thus, the values to be added on innovative chocolate and
confectionery ranges should be directed towards a healthier benefit in which many are unaware
of.

As for biscuits, coming from wheat sources, it contributes to the carbohydrate intake, thus
requiring the consumers to reduce the other carbohydrates sources like rice by Malaysian. It
should be improved to induce satiety as well as providing a satisfying taste to replace the craves
for normal rice. The added source of fibre should be offered as to further improve digestion and
excretion and manage the weight optimally.

(g) Water
Water is currently easily and widely available. That is why the competition is very
aggressive. Nestlé already has a strong brand name and established its brand loyalty worldwide.
By separating their water product apart from the other highly demanding product range would be
a huge loss for the company. Their water product range should be offered together with their
other lines of products. Whether by a compliment or by a package. A more environmentally
friendly sourcing of the water should be regularly and publicly demonstrated to capture the
attention and preference of customers especially those existing ones.

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Q5. Do you believe that Nestlé is genuinely interested in creating shared value or is it
simply public relations? What are the advantages of pursuing such an objective? Are there
any disadvantages?

Yes, and it was proven by the shifting in direction of the company’s strategic purpose
towards Creating Shared Value from as early as 2005 in which they evaluate the consumer’s
concerns and societal impact from their overall operation of being a food producer. It was way
before the issue of increasing health threats in terms of obesity and unhealthy sugary snacks that
was brought forward in 2008. Nestlé demonstrated that they were ahead of the issue, and they
care about the impact on the consumers and not solely focusing on developing and innovating
their current food and beverages lines.

Advantages of pursuing such as objective

To ensure that their line of products and strategies are not damaging the consumers in any
way and in turn ensuring their sustainability in the future. Sooner or later, the way of living,
especially through foods and beverages, have a major impact on each consumer both directly and
indirectly.

By being in the food industry, besides complying to the FDA and other advocacies rules
and regulation, the direction of innovation in food supply, by being one of the major competitors
in the market, Nestlé should held an important responsibility as to set up a good role, by
initiating a healthier product ranges, benefiting both sides, continuously monitoring the health
effect and even possible future health demand that can be solved by their food and beverages
range. By this, the major advantage that can be anticipated is that the strong value created and
publicly demonstrated will amplify the brands loyalty and customers’ preferences.

Disadvantages
Any option or decision made must have at least one disadvantage or complications.
While the company is reallocating their resources into R&D in innovating a healthier food and
beverages products, the other competitors may fill up the gaps along the way by taking shortcuts
maybe by joint venture with medical or pharmaceutical companies’ promotions, may even made

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acquisitions of those medical lines of business as to enhance their brand image and be at the top
of the game while R&D in Nestlé is still in progress. They may create a new competition in
gaining those pharmaceutical or medical companies to completely change the value of their
brands and subsequently their product lines.

Q6. Do you expect that top management really understands each of the businesses in which
Nestlé is involved? If not, then what can top managers contribute to turning around the
company? In other words, if you were the CEO, what would you do?

No, the designated Board Members manage diverse parts of the global business. The
Board is the ultimate governance body of the Company. The role of the Board is to provide
leadership and approve the strategic direction of the Company in the long term interests of, and
to maximise value for the Shareholders, guide and monitor the management of the Company in
achieving its strategic plans and desired culture in accordance with the Company’s core values,
to review, approve and monitor the Company and its subsidiary companies’ risk management
systems across its businesses, and to oversee overall good governance practice, management and
performance of the Group.

The Chairman and the CEO have separate distinct functions, a clear division of
responsibilities, ensuring a clear and proper balance of power and authority to facilitate an
accountable and high performing Board. This also ensures that no one has unfettered powers of
decision. The Chairman provides leadership to the Board, instils good corporate governance
practices and oversees the Board in the effective discharge of its fiduciary duties. In performing
this role, the Chairman shall work closely and facilitate the effective communication with the
CEO and the management.

To develop leadership skills, it is important to first recognize and understand what these
leadership skills essentially consist of. Fundamentally, a leader is someone who leads, who
influences others and inspires them. Manager gives proper direction to the organisation, the
communications system and the structure. He ensures that the long term objectives are translated
into concrete plans of actions and understood and supported by people working at various levels.

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These plans are ultimately implemented through the organisation structure. Another major
responsibility of the manager is a system of communications which enables managers throughout
the organisation to be aware, and the manager responsible for the systems stay informed of the
changes that are taking place.

A well-crafted, appreciated and supported mission is at the heart of a manager who may
also be a leader of leaders and it may reflect his own current assessment of where the firm should
go or he may continue to carry out the long term plans established by his predecessor.
Pragmatism is the ability to make things happen and achieve positive results. This can happen
only when leaders utilise resources in an efficient and effective way. A visionary strategic leader,
as an agent of change, should lay down the rules of the game in concrete terms and resolve all
contentious issues in a proper way.

Both formal and informal networks should be used by the leader to inform people about
priorities and strategies and ensure that these are implemented expeditiously. Lateral
communication should be encouraged, in addition to upward and downward communication
channels, between various departments and divisions so that managers learn from other parts of
business and profit from each other’s best practices. The strategic leader must champion the
relationships between the company and its major stakeholders.

Q7. Is it fair that Nestlé is held to such high standards with regard to its responsibility to
society? Why or why not? How can Nestlé improve and maintain its public image?

Yes, whatever form these corporate ventures take, they are definitely a win-win situation
for both the company and the community alike. Now more than ever, there is a growing
importance for companies to ramp up their focus on social responsibility. "Social responsibility,"
in simple terms, means a business’s obligation to pursue achievable and good long-term goals for
its people and the world at large. As corporate social responsibility is not compulsory, many
companies might not feel the need to engage in it. However, there are several reasons that prove
that it is important for companies to prioritise social responsibility.

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CSR can help companies attract and retain employees
One of the major reasons people apply to various companies is because of their CSR
strategy. From my perspective, a CSR strategy shows a company is compassionate and treats all
people, including employees, well. And a business that is committed to improving the world is
likely to attract more talent. This shows how important employees take social responsibility.
CSR efforts also help foster a more productive and positive work environment for employees. It
promotes volunteering and positive efforts from employees.

CSR can improve customers' perception of the brand

The competition in the business world of today is stiff, and it can be quite challenging for
a company to set itself apart in the eyes of customers. However, businesses that take social
responsibility seriously can win consumers, as well as develop a platform to market and earn
their audience's attention. Simply put, social responsibility can help people see your company as
a positive force in society. The projects you and your team take on can help raise awareness for
important causes and keep your business top of mind.

CSR is also important when it comes to branding. To have a successful brand and retain
customers, businesses must create trust with their target audience. A CSR strategy helps a
company build a good reputation which can earn trust and loyalty among consumers. Consumer
loyalty goes a long way in helping a business stay afloat. Part of what makes a functioning
business is customers; without them, the business simply would not exist. For their loyalty,
consumers expect brands and businesses to not be all about making a profit, but to give back to
society. According to a 2015 survey by Nielsen, more than 50% of consumers are willing to pay
more for a product or service if the business prioritizes sustainability. This proves that consumers
will opt for and stick with companies that aren't just profit-oriented.

CSR shows a sign of accountability to investors

Businesses that are socially responsible can also appear more attractive to investors.
Investors in a business have one common goal, to have greater returns than invested funds. Some
of the investors view businesses that are able to manage finances while still helping their

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communities as accountable and transparent in their dealings. According to a 2016 report by
Aflac, investments in CSR are not typically viewed by investors as a waste of money, but rather
an "indicator of a corporate culture less likely to produce expensive missteps like financial
fraud." The study said 61% of investors consider CSR a sign of "ethical corporate behavior,
which reduces investment risk."

CSR can enable companies to better engage with customers

CSR can help businesses better engage with customers. Many forms of CSR involve
businesses interacting directly with members of society, who may also be customers or potential
customers. Companies can get direct feedback on what they are doing right and what the
company needs to improve on. Word-of-mouth is still an effective form of advertising, and
customers who have been part of the social responsibility created by a company are able to tell
other potential customers about the business.

So, how can Nestlé improve and maintain its public image?

The differentiation of a product and service from others is now a crucial need for survival
in severe competition. Accepting the relationships between consumers and their brands has
realistic significance to marketers because it has a noteworthy effect on the revenues of the
company. Here matter three significant factors that are, favourability, strength and uniqueness of
brand. If the customers’ mind has a favourable attitude towards a brand, then the brand message
will affect them more intensely rather than competitors. Consequently, brand image is a vital
determinant of a buyer’s activities.

Observing the packaging of a product is attaining more weight to sell a product, a study
developed at Patterson Zoconist Cussons in Nigeria found that packaging is important when
companies consider their processes of branding. As it directly or indirectly plays a key role for
communicating the image and identity of the organisation. Hence the result found by the study
determined that 98% of the variance occurred due to the packaging and also other aspects like
brand name, price. As on one side there is the growing and enormous importance of the

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packaging, on the other side some users of the products also complain about it. Some critics in
the business argue that the designs of the packaging, its labelled wording, colours and variety of
other aspects, sometimes give the wrong impression about the product to the customer. This in
result creates the difficulty to make a comparison among products provided at one place. So,
their buying decisions may change which will ultimately affect the sales. The comparison of a
product in packaging can be further detailed among the type of consumers. For example,
different age of consumers demands different styles of packaging. Hence when we consider the
choice of children products then there is the need to focus on two clients, first the parents who
shop the products for their children and the second children who actually use that product.
Therefore, having the wrong decision at this point will certainly affect the brand. And it is also
observed that maximum users judge the product by the packaging style. Companies need to
communicate their information to its consumers about their products.

Along with selecting appropriate advertising campaigns, the selection of favourite

celebrity to promote a brand is also necessary especially when it is selected on the demand of
customers. Selecting brand personality means hiring a celebrity/famous person for a brand and
spreading communication to the consumers through his/her message, which can influence the
users to purchase that product especially when there is the involvement of fashion, style integrity
and love. One of the functions that a specific brand performs is the relational function which
contributes that a brand personality makes it possible to form a relation with the customers.
Brand personality traits provide symbolic meaning or emotional value that can contribute to
increasing consumers’ brand preferences. Successfully positioning is required basically. Positive
brand image creates a positive effect on the customer’s action to buy a product by boosting
loyalty, chance to charge high prices and spreading the positive word of mouth about the image
of the company. Successfully positioned personality traits can change the preferences of
customers. Building the brand image in the minds of the customers is necessary.

Word of Mouth is described as, a way in which consumers spread the information about a
product/service that can encourage others to buy or to reject to consume a product. Word of
mouth is considered as a multi-dimensional concept which is being explained in 3 ways,
“Experiential”, “Consequential” and “Intentional” word of mouth. Among these three,

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experiential word of mouth is more important. Whereas the experiential WOM is the
consequence when the consumers consume a particular product or a service and hence in the end
either fulfil the expectations or there exists some deviation in their expectations. And
consequential is the form of communication in which a company provides information to the
consumers through the advertisements, whereas intentional WOM is observed when
organisations specify the famous personalities for the advertisement of their brands. These
variables affect the purchasing decisions. In purchasing a product most of the customers now
rely on word of mouth and the observational learning which they get from other customers.

As a result, some of the customers change their decisions after getting information by
word of mouth while some don't. It is investigated that word of mouth can make a rapid response
from the customer, rather than the expense made through advertising. About 20% to 50% of the
decisions of consumers to buy a product are now accelerated by word of mouth. This word of
mouth is now spreading through social networks even the customers create the web pages to
admire or penalise brands. And this affects the sales and return on investment. As word of mouth
is spreading more from the digital media, therefore today in the world, companies are using
digital media to distribute the information about the company; its performance, quality, products.
The company does that indirectly to improve their brands.

Q8. How else can Nestlé gain market share and continue to grow in the chocolate and
confectionary market?

Nestlé, being a global company, essentially has a heterogeneous consumer market since
people in different regions and with varying demographics have different needs, tastes and
preferences. This is also true for the chocolate and confectionary market segment since different
people will have differences in their choice of chocolate and confectionery. Despite these
differences, the various market segments form homogenous groups that can help in making
marketing efforts more coherent. There are several things that Nestlé can do in order to increase
their market share. These include market expansion, agglomeration of brands, improved
efficiency and reach of their distribution systems and expanding to new markets.

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 A recommendation for Nestlé should apply “think globally and act locally” as well as
thinking out of the box ideas in their product and distribution with the help of strategic global
marketing. Recent advertising has proved that pushing new products is hard therefore Nestlés
should rethink their strategy and promote their old reliable sellers. Perhaps instead of Nestlé
continuing to develop already made brands such as Kit Kat Truffle they could promote the old
brands but also come with new products altogether, not by-products. On the other hand, Nestlé
has encountered foreign competition because foreign competition has acquired its own domestic
talent. Nestlé should invest heavily into establishing its brand name in foreign countries to attract
talent.

Another good way for Nestlé’s to infiltrate the European market would be by appealing
to Soccer fans by sponsoring a soccer side. Sponsorships can be quite extensive but by doing it
makes the brand much more easily recognisable. Because confectionery is so often impulse
buying, consumers will choose the brand they know which will be the brand they have seen the
most. So by advertising more effectively like sponsorships. Overall, for Nestlé to stay
competitive it must stay in touch with what Cadbury and other chocolate brands are doing.
Nestlé’s must compete with Cadburys reintroduced best selling blocks otherwise they are losing
a large percentage of the market. It could also make its brand more recognisable by sponsoring
sport clubs so public awareness grows.

Q9. How can Nestlé adapt to the growing consumer trend toward healthy snacks?

It is a well proven fact that consumption of healthy foods accompanied with regular
exercises manages optimum body weight. The spurring trend of healthy lifestyle has demonised
sugary confectionery and biscuits to a point that they deemed to be unhealthy despite it arguably
consisting of essential minerals and fibres. The health-conscious consumers are collectively
forming new trends with reduced consumption of sugars, forcing Nestlé-like companies to re-
evaluate the flavour profiles of their products. Consumers were opting for fruits, nuts and other
healthy ingredients as substitutes for confectionaries, biscuits and bakery.

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 In order to adapt, Nestlé needs to expand its products into plant-based food segments and
products with nutritional boost. The move is mainly to bring in a new emphasis on health and
wellness of the consumers. As consumers strive to enjoy better health conditions to be able to
fight off potential illness, it becomes a viable option for Nestlé to manufacture and market snacks
that offer nutritional boost. The exploration into new market segments of vitamins, supplements
and even super-food variety, will spur segmental growth for confectionery. The combination of
healthy ingredients such as cereal grains and dried fruits will elevate the nutritional value of the
products. It will make the products to be deemed as healthy and, of course it tastes good at the
same time. The variety of ingredients will also mitigate the supply-chain risk as it reduces the
reliance on a single type of ingredient to produce products in the confectionary segment.

Nestlé can also expand its product domain into dietary meals to cater consumers who are
fighting against obesity. A product with balanced levels of carbohydrate, vegetables, healthy fats,
fruits and lean protein will turn the tables of the obesity epidemic from market threat to market
opportunity for its snacks segment. The survivability of the market share depends heavily on
product innovation, customers and consumers trends change around the world, they expect new
products, improved products.

As the customers crave for new products as consumers tend to develop new food and
beverage habits, the product innovation of Nestlé would be able to cater to those. Besides that,
the introduction of lean-low carbohydrate food targeted towards ketogenic diets would cater an
entirely new market segment with committed customers. In order to meet the customers’ specific
need and demand, a brief marketing mix may be adopted by Nestlé to capture the market share of
healthy snacks.

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The product segment ventures and marketing mix also emphasises on Nestlé’s first three
principles of operations, which were nutrition, health & wellness, quality assurance and product
safety, and consumer communication.

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Q10. If you had extra money to invest right now, would you consider investing in Nestlé?
Explain your answer in terms of the strengths, weaknesses, opportunities and threats
facing the company.

Generally, there are three major ingredients for value creation; Growth potential,
profitability ratios and capital efficiency. The strength, weakness, opportunities and threats
(SWOT) analysis as shown below depicts the growth opportunities.

As seen from the income statement, there has been a gradual decrease in revenue from 2009 to
2011. It is believed that lower sales are predominantly due to decreasing expenditure/sales ratios
over the years. The limited marketing expenditure of Nestlé has enabled its competitors to
capture a larger market share, impeding its growth.

The rise in the margin of cost of goods sold was due to rise in ingredient price, which
shows the global competition for ingredients. Due to competition and limited supply, Nestlé has
recorded a lower profitability ratio for its existing products. Thus, product diversification may be
beneficial to mitigate the profitability risk and ensure healthier profit margins. The decreasing

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investment in R&D also indicates that Nestlé lacked the resources to innovate its products or
embark on product diversification plans. In accordance with the balance sheet, the gradual rise in
the accounts receivables from 2009 to 2011 due to slow moving goods in the logistics phase,
show the supply chain woes that Nestlé faced.

Despite the recent significant challenges and stagnant growth, the growth opportunities
outweigh the threats and weaknesses. With a combined economic and population growth,
followed by health-conscious economic policies by many developing nations creates attractive
business opportunities. Accompanied by rising income levels and purchasing power, it’s more
likely that consumers will begin to prefer quality food with health benefits.

In addition, by focussing its initial marketing strategy for the growth of just a handful
strategic brands, Nestlé will be able to reduce risk and align its marketing resources on its key
niches. With the goal to build a commanding market position in nutritional food will spur its
growth potential in the near future. With the above-mentioned growth potential and market share
opportunity, YES, we would consider investing in Nestlé from a long-term perspective.

REFERENCES

Nestlé Wikipedia; https://en.wikipedia.org/wiki/Nestl%C3%A9

The rise of the healthy snack; Nutraceutical Business Review, 27 July 2021
https://nutraceuticalbusinessreview.com/news/article_page/The_rise_of_the_healthy_snack/
178191

Nestle Company Website; https://www.nestle.com/

A case study on Nestle, Anshuman Singh, Farah Khalifa Alazmi, Journal of International
Conference Proceedings, Vol 2, No 2, 2019

4 P's of marketing: How to achieve the perfect marketing mix, Team Asana, Asana, 2022,
https://asana.com/resources/4-ps-of-marketing

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