MANAGING GLOBAL NESTLE BRANDS CASE STUDY

PRESENTED TO MUHAMMAD AHMED BUTT PRESENTED BY SYEDA ILAHDADI TEHSEEN JAFFER ID: 3483

Contents
Contents ......................................................................................................... Error! Bookmark not defined. Acknowledgement ........................................................................................................................................ 3 Introduction to Case ..................................................................................................................................... 4 History of Case .............................................................................................................................................. 4 Developments Since 2007......................................................................................................................... 4 Core Competencies as Illustrated in the Case: ......................................................................................... 4 SWOT Analysis of Case .................................................................................................................................. 4 Strength .................................................................................................................................................... 4 BRAND IMAGE ....................................................................................................................................... 4 Weaknesses .............................................................................................................................................. 5 Opportunities ............................................................................................................................................ 5 Threats ...................................................................................................................................................... 5 Strengths, Weaknesses, Opportunities and Threats (SWOT) ............................................................... 6 Strategic Brand Objectives ............................................................................................................................ 7 Corporate Strategy........................................................................................................................................ 7 Nestle's Branding Strategy ............................................................................................................................ 8 Internationalizing the "Kit Kat" Brand................................................................................................... 8 Divesting Non-Strategic Brands ............................................................................................................ 8 Nestle Current Position ................................................................................................................................. 8 Recommendations to Management ............................................................................................................. 9 Conclusion ..................................................................................................................................................... 9

Acknowledgement
I would like to thank my Professor Muhammad Ahmed Butt whose teaching skills demonstrated to me the learning techniques and perfect understanding of various concepts. In addition to this I would also like to thank him for introducing me to Linguistics, and whose passion for the underlying concepts had lasting effect on us.

Introduction to Case
Nestle S.A is a Swiss Company, established in 1905 The company started with condensed milk and infant formula Now Nestle sells baby food, bottled water, cereal, chocolate and other confections, frozen food, dairy, drinks, food service, health and sports nutrition, pet care and weight management products.

History of Case
Nestle was in a good position, but needed to grow initially The company was able to increase its competitive advantage by continuing to innovate or renovate products, acquire firms that fit its brand, and divest itself of lines that were not contributing to earning.

Developments Since 2007

Current CEO is Paul Bulcke The company continued to acquire and divest itself of product lines and brands Global economic downturn Invests in countries where raw materials are produced Increased emphasis on environmental awareness and free trade and sustainable farming techniques in developing countries

Core Competencies as Illustrated in the Case:

Global market share and brand recognition Innovation and market predictions Ability to acquire new firms and divest itself of unprofitable lines in order to strengthen branding and earnings Successful programs to increase efficiency

SWOT Analysis of Case

Strength
BRAND IMAGE Marketing strategies established by the company are innovative and lure customers. Financial, marketing and sales strategies are formulated by gauging the Periodic research carried out to judge market trends. It is a large scale organization, with abundant funds and has the capability of acquiring weaker firms by throwing them out of competition for example for this strength of the company Multinational. 4

Growing Sales and profits. Major shareholder in the food industry of Pakistan. Aggressive Marketing. Efficient Distribution networks throughout the country. Quality Products. Environment Friendly. Skilled labor. Educated staff. Large number of offerings. Pre purchase virtual display. Good background of the company. Easy to approach outlets. Solid Financial position Strong supply chain network

Weaknesses
The target market of Nestle MilkPak is upper middle and high class because lower middle and poor class cannot afford to buy UHT milk due to its premium price. It is a main weakness of MilkPak that there are different companies of milk but the name of nestle MilkPak is always stand in the last because of low advertising and marketing.

Opportunities
There are substantial growth opportunities considering the average yield of Pakistani animals at only 1,100 liters/annum as compared to 6,000 liters/annum for animals in Europe and USA. There are nearly 20 million milk producing animals in the country, mostly in Punjab (80%). The overall milk market in Pakistan is 20 billion liters, out of which processed milk contributes only 3 million liters. Nestl MilkPak along with other processed milk businesses contribute only 2% to this large market. Nestl MilkPak has expanded its product range by entering the cold dairy market recently by launching Nestl plain yogurt and now fruit yogurt is also added to it. To expand the cold dairy products range, Nestl fruit yogurt is the latest addition to this group. The cold dairy market offers many opportunities for the company which can capitalize these products by banking on its superior quality milk. The coffee brand also offers many opportunities for the company to expand by tuning the taste of the masses towards coffee. Credit policy can be adopted to increase sales

Threats
Price fluctuations due to rupee devaluation as raw material are imported. The uncertainty of economic conditions poses a great threat as the major funds invested in the country come from outside Pakistan.

The present economic crisis in the world, led to the withdrawal of foreign management from the company and the investment has come to a halt. Competition with Nestls owns smuggled brands. Effect of Seasonalitys upon sales. Imported raw material, in some of the companys products. Major Player may enter target market Legal and ethical issues. Market segment growth could attract new entrants. Economic slowdown can reduce demand. Two main competitors Haleeb and Olpers are main threat for MilkPak especially the Olpers is growing very fast. Inflation is getting higher and higher so the purchasing power of the people is decreasing day by day. There is no entry barrier for new entrants as the Olpers has come in the market. Taste of consumer has already developed which is hard to change. Current market situation

Strengths, Weaknesses, Opportunities and Threats (SWOT) Location of Factor TYPE OF FACTOR Favorable Unfavorable Internal Strengths Weaknesses

Ability to leverage strong brand name to generate sales Ability to customize products to the local market conditions Strong global operations with diversified revenue base Research and development capabilities

Increasing instances of product recalls hampering brand equity

External

Opportunities

Threats

Transition to a 'nutrition and wellbeing' company Focus on developing and emerging Economies Booming out of home eating market

Compliance issue resulting in penalty payments Macro-economic factors Allegations of unethical business activities

Strategic Brand Objectives

Nestls strategic brand objectives are to be recognized as the world leader in Nutrition, Health and Wellness, trusted by all its stakeholders, and to be the reference for financial performance in its industry. They believe that leadership is not just about size, it is also about their behavior. They recognize trust is earned only over a long periods of time by consistently delivering on their promises. These objectives and behavior are encapsulated in the simple phrase, Good Food, Good Life, a phrase that sums up their corporate ambition. The Nestl Roadmap is intended to create alignment for their people behind a cohesive set of strategic priorities that will accelerate the achievement of their objectives. These objectives demand from their people a blend of long-term inspiration needed to build for the future and short-term entrepreneurial actions, delivering the necessary level of performance. They are seeking to achieve leadership and earn that trust by satisfying the expectations of consumers, whose daily choices drive their performances, of shareholders, of the communities in which they operate and of society as a whole. They believe that it is only possible to create long-term sustainable value for their shareholders of their behavior, strategies and operations are also creating value for the communities where they operate, for their business partner and also for their consumers, and they call this Creating Shared Value. They are now investing for the future to ensure the financial and environmental sustainability of their actions and operations in capacity, technologies, capabilities, in people, in brands, in R&D. Their aims to meet todays needs without compromising the ability of the future generations to meet their needs, and to do so in a way which will ensure profitable growth year after year and a high level of returns for their shareholders and society at a large over the long-term. Diversified global food company. Scale and market reach, knowledge of global markets, greatly improved operating efficiency, R&D and innovation In the past the firms revenue was 70% in markets was limited potential for growth, weak profitability due to some of its acquisitions, some low-margin products Goal of 4% new organic internal growth, improved efficiency, health food industry, maintain momentum Fierce competition, food-producing rivals had improved operating efficiency, possible brand overextension

Corporate Strategy
Nestl describes itself as a food, nutrition, health, and wellness company. They believe strengthening their leadership in this market is the key element of their corporate strategy. This market is characterized as one in which the consumers primary motivation for a purchase is the claims made by the product based on nutritional content. In order to reinforce their competitive advantage, Nestl created Nutrition as an autonomous global business unit within the organization, and charge it with the operational and profit and loss responsibility for the claim-based business performance by offering consumers trusted, science based nutrition products and services. The Corporate Wellness Unit was designed to integrate nutritional value-added in their food and beverage businesses. This unit will drive the nutrition, health and wellness organization across all their food and beverage businesses. It encompasses a major communication effort, both internally and externally, and strives to closely align 7

Nestls scientific and R&D expertise with consumer benefits. This unit is responsible for coordinating horizontal, cross-business project that address current customer concerns as well as anticipating future consumer trends. Nestl business-level strategy is integrated cost leadership or differentiation with wide range of products and low cost operators. Nestl strategic leadership is to force the business to become more efficient, to create a regional manufacturing network, integrate the companys business on a global scale and to reduce marketing expenditures by exploiting the synergies between brands. Their strategy to develop R&D network by improving existing products and creating tomorrows nourishments, two third of companys R&D activities are dedicated to renovating existing products, the remaining third is reserved for radical product innovations, improve on operational level and a number of organizational changes.

Nestle's Branding Strategy

The Nestle brand itself had played a key role in the company's globalization efforts. In 1996, about 40% of the total revenues were generated from products covered by the Nestle corporate brand. Nestle's logo was an important part of the company's corporate identity. The 'nest' was a graphic translation of Henri Nestle's name, which meant "little nest."... Internationalizing the "Kit Kat" Brand When Nestle acquired Rowntree's brands in 1988, the major challenge before the company was managing them. Rowntree had a "one product, one brand" policy. The brands Kit Kat, After Eights, Smarties and Rolo were marketed with no mention of Rowntree. Rowntree's brands were not strongly managed European brands. Before the 1980s, 'country managers' outside the UK in several European countries managed Rowntree's business. They were free to run their units provided business objectives were met. The orientation at Rowntree was short-term just to meet annual business objectives and country managers added nothing to the overall organization. Even though Kit Kat was a leading brand in UK, it was ignored outside the country. In the early 1980s, Rowntree established Rowntree Continental Europe, which handled business responsibilities outside the UK in Europe. However, this did not benefit Kit Kat, which was launched in Europe by Rowntree Continental Europe as a multi-local brand... Divesting Non-Strategic Brands The success of the Kit Kat brand inspired Nestle to think and act 'glocally' i.e. establishing global as well as local brand identity. Nestle had taken a similar approach to several other acquired sub-brands. Moreover, Nestle introduced the Kit Kat brand in several other countries across the globe. Nestle's brand management strategy included the divestment of non-strategic brands.

Nestle Current Position

Strong sales, operating cash flow, and returns to shareholders Continued momentum, but with volatile currency values and raw materials prices 8

Consumer confidence shaky, but balanced by emerging markets 2011 goal of 5-6% organic growth and EBIT margin improvement Focus on functional goods with higher margin, which means increased spending in R&D

Nestles Growth Drivers are: Nutrition, health and wellness Emerging markets Out-of-home consumption Premiumization

Recommendations to Management
Continued focus on sales in emerging markets such as Asia, Africa and Latin America Perhaps raw material can be sourced from some of these emerging markets, provided there is stability Follow through with constant streamlining of operating processes to increase efficiency Increased advertising: due to Nestle strong position it can afford to advertise when their competitors might be able to, at the same level Continued to strengthen presence in frozen and convenience food industry, as well as the area between health food and pharmaceuticals Strengthen the connection to Nestle commitment to green movement and sustainable farming to brands Tighten up brand cohesion; may be necessary to continue to divest product lines that are not a good fit for the company

Conclusion
Through smart strategic management decisions Nestle succeeded and became a multinational Today, Nestle is still the largest food and nutrition company in the world in terms of sales.