NESTLÉ NESVITA Cereal Milk Drink

By Ma. Cristina Villanueva

INTRODUCTION

In 1994, NESTLÉ launched the first of its kind instant cereal beverage under the brand NESVITA
in the Philippines. This was the first product launched by NESTLÉ under the NESVITA brand name.
NESTLÉ NESVITA Cereal Milk Drink truly was a revolutionary product back then since it was harping
towards the benefits of convenience and healthy nutrition.

Since 1994 until the late 90’s, NESTLÉ NESVITA Cereal Milk Drink was the only instant cereal
beverage in the market. The NESVITA brand name has been synonymous already with instant cereal
beverage similar to that of Coca-Cola (or Coke) to soft drinks. However in recent years, other
manufacturers started to challenge NESVITA Cereal Milk Drink, low-priced brands targeted to different
age groups as well as different Socio Economic Class (SEC) of the market.

One of the biggest threats of the product, PT Kakao’s Energen, has been gaining a lot of
momentum in terms of market share due to its positioning as well as pricing. The product was initially
distributed to sari-sari stores, market stalls as well as small groceries in Visayas and Mindanao but is
now slowly being introduced to the supermarkets, groceries, conveniences stores as well, channels
wherein NESVITA Cereal Milk Drink is currently present1.

NESTLÉ recognized the emerging threat of Energen to its NESVITA business but also realized that
NESVITA may not be the right brand to challenge Energen due to its positioning and pricing strategy.
This was the reason why in March 2008, NESTLÉ launched a low-priced cereal beverage under the mega
brand BEAR BRAND called Busog Lusog Cereal Drink which is targeted to lower SEC’s as well as the
whole family.

The entry of BEAR BRAND Busog Lusog Cereal Drink proved to be a great strategy in challenging
Energen in the bottom of the pyramid consumers since it was distributed in channels where Energen is.
The primarily role of the brand is to shift current Energen users to BEAR BRAND Busog Lusog and attract
new users into the category. In the first 6 months of the launch of BEAR BRAND, it has been able to grab
share from Energen but it has also cannibalized a portion of NESVITA Cereal Milk Drink’s market share.

Since NESVITA Cereal Milk Drink is the biggest contributor and profit driver for the total NESVITA
business, the challenge that the NESTLÉ Management posed to the NESVITA team is how it can grow the
business further without changing its positioning as a “premium” cereal beverage brand targeted mainly
to Filipino adults who are into a healthy lifestyle.

1
* Energen has the same distributor as Kopiko (which is an emerging player in the pure soluble coffee category)
THE COMPANY

NESTLÉ Worldwide

NESTLÉ was founded in 1866 by Henri NESTLÉ, a Swiss pharmacist who developed a food for
babies who were unable to breastfeed. His first success was a premature infant who could not tolerate
his mother's milk or any of the usual substitutes. NESTLÉ's new formula saved the child's life. People
quickly recognized the value of this new product, and soon after, it was being sold in much of Europe.
Today, NESTLÉ is the world's leading nutrition, health and wellness company. It is the biggest food
company in the world with sales of CHF 107.6 billion in 2007, and net profit of CHF 10.6 billion. It has
factories and operations in almost every country in the world.

NESTLÉ in the Philippines

Although NESTLÉ products were already available in the Philippines as far back as 1895, it was
not until 1911 that the NESTLÉ and Anglo Swiss Condensed Milk Company was established in the
country, with its first sales office in Binondo, Manila. The Company was forced to suspend its operations
during World War II, but soon made a comeback after Liberation, under a new name: Filipro, Inc. In
1960, NESTLÉ S.A. and San Miguel Corporation entered into a partnership resulting in the formation of
Nutritional Products, Inc. (Nutripro). In 1962, Nutripro’s first factory started operations in Alabang,
Muntinlupa to manufacture NESCAFE. Through the years, other manufacturing facilities were
established in Cabuyao, Cagayan de Oro, Lipa, Quezon City, and Marikina to meet the growing demand
for NESTLÉ products in the country. In 1977, Filipro, Inc., the trading company, and Nutripro Inc., the
manufacturing company, merged under the name Filipro, Inc. In 1986, Filipro, Inc. changed to its
present name as NESTLÉ Philippines, Inc. In 1991, NESTLÉ pioneered food production and distribution in
the AIJV (ASEAN Industrial Joint Venture), a regional trade complementation program. The Company
participated in this program with the manufacture of breakfast cereals at the NESTLÉ Lipa Factory2, for
export to the ASEAN markets. In late 1998, NPI became a wholly owned subsidiary of NESTLÉ S.A.,
following the latter’s purchase and acquisition of San Miguel Corporation’s entire equity shareholding in
the company.

Today, NESTLÉ Philippines, Inc. (NPI) is a robust and stable organization, proud of its role in
bringing the best food throughout the stages of the Filipino consumers’ lives. The company employs
about 3,400 men and women all over the country. It is now among the top companies in the entire
NESTLÉ world. NESTLÉ produces and markets products under some of the country’s well known brands
such as NESCAFE, NIDO, MILO, NESTEA, MAGGI, COFFEE-MATE, BEAR BRAND, NESVITA, among others.
Its product range has expanded to include coffee, milk, infant nutrition, infant food, beverages, non-
dairy creamer, food, ice cream and chilled dairy, breakfast cereals, confectionery and pet care. Over
time, NESTLÉ’s quality and affordable products have become strong brands, number 1 or number 2 in
their various categories, and a part of the Filipino way of life.

2
Today, the Lipa Factory is the NESTLÉ Group’s ASEAN Supply Center for breakfast cereals.
The NESVITA Brand

Adult Nutrition is expected to grow dramatically in the coming years due to an increase in
awareness of the benefits of healthy living and healthy eating. In fact, the increasing costs of health care
and the key roles that governments play in promoting self-health maintenance further contribute to
supporting these trends. NESTLÉ has identified this opportunity for new consumer needs, as have other
competitive food companies. However, NESTLÉ’s extensive experience in nutrition as well as its best-in-
class R&D expertise provides it a significant advantage over competition. Beyond the business
opportunity, NESTLÉ sees this dairy and cereal-based Adult Health and Wellness Solutions as key pillars
in the strategic task of emerging as the trusted and most preferred Food and Beverage, Nutrition, Health
and Wellness company in the world. The importance of this initiative required a global and focused
approach to seize this significant opportunity. Therefore, the starting point was to create a Mega brand.
This is why NESVITA has been chosen as one of the leading international brand names for dairy and
cereal-based products which offer specific health benefits for adults.

NESVITA as a name can be interpreted as VITA for Life and Vitality in Latin, and in English for
Vital and Vitality, and can be easily associated with NESTLÉ. Hence, a good brand name potential to be
built as a strong NESTLÉ brand for a range of cross category products focusing on nutrition, health and
wellness.

NESVITA was first launched in 1991 in Taiwan as an instant cereal beverage in single serve
sachets to enter the rapidly expanding cereal beverage market. Changing eating habits, as well as the
trend towards convenience and healthy nutrition, have driven the subsequent launches of NESVITA
cereal beverage into China, Hong Kong, Thailand and Philippines in 1994.

In general, the good taste and good nutritional image of the NESVITA cereal beverage are the
generally perceived values of the brand. It has been recognized that this basic brand equity allowed for
the brand to be expanded firstly into different nutritional propositions, then more recently into different
product formats such as cereal bars, adult milk, and yogurt.

In the Philippines, NESVITA the brand was first introduced commercially via the NESVITA Cereal
Milk Drink product in 1994. At its launch it was seen mainly as a product for breakfast and an additional
fiber supplement. Around 2004 to 2006 the Carnation Powdered Milk brands were transitioned under
the NESVITA brand as NESVITA Pro-Bone Protection and NESVITA Pro-Weight Management. It was also
around this time where introduction of other specialized milks such as NESVITA Pro-Heart and NESVITA
Pro-Digestion were launched. What used to be NESTLÉ 0% Yogurt Drinks and Cups were also adapted
into the NESVITA Pro-Weight Management brand. NESVITA is now considered a MEGA BRAND in
NESTLÉ Standards! (See Appendix 1 in page 12 for listing of all NESVITA products currently sold in the
Philippines)
THE MARKET

Healthy lifestyle trend among adults

Living in a fast-paced environment, people seldom have time to take care of themselves because
of the numerous and sometimes “monotonous” tasks that has to be accomplished daily. These are just
some of the reasons why various diseases are very prevalent among adults such as heart disease,
obesity, osteoporosis, tuberculosis, and the like. When a person reaches the age of 30 years old, a
biological condition called “somatopause” occurs. This is simply a decline in overall body performance
characterized by slower metabolism, lower recovery, decreased mobility, shorter endurance, reduced
mental alertness and shorter memory.

People in general want to enjoy their life to the fullest. To enjoy life, one has to take care of
his/her body. There is NO quick solution to living a healthy life. It takes a lot of effort and commitment
in order to live a healthy lifestyle. Nowadays, there is a growing trend on healthy living amongst adults.
It can be in terms of eating the right food (high fiber, low calorie, no saturated fat, etc.) as well as
engaging in physical activities (gym, running/jogging, sports, etc.).

Because of this emerging trend there are a lot of food brands, specifically beverages focusing on
adult, health & wellness such as Del Monte, Lipton, NESVITA, Anlene, C2 , and many more. Even
traditionally “unhealthy” brands such as Coke (i.e. Coke Light and Coke Zero) and Pepsi (i.e. Pepsi Max)
have added “healthier” alternatives to their regular portfolio. Below are some of the brands under each
of the beverages that promote health and wellness:

o Softdrinks & Juices – Coke Light, Coke Zero, Del Monte Fit & Right, C2 Lite, FAB, etc.

o Milk & Yoghurt – Non-fat Milk such as NESVITA Pro-Weight and Anlene, NESTLÉ Low Fat
Fresh Milk, NESTLÉ Yoghurt

o Tea – Lipton Green Tea, Imported Green Tea variants

o Coffee – Nescafe sugar free, Nescafe FIT (Teavigo)

o Cereal Beverages – NESVITA Cereal Milk Drink, Energen, Quaker Q-Vital, BEAR BRAND
Busog Lusog

Total market for healthy beverages for adults, is approximately worth Php 44.5 billion.

Market Segment

NESVITA Cereal Milk Drink belongs to the Breakfast Cereals Category based on Nielsen’s definition. This
category is further divided into three segments namely ready-to-eat cereals, all-in-one cereals and hot
cereals. (See Exhibit 1 for the Breakfast Cereal Category and its segments)
 EXHIBIT 1: THE BREAKFAST CEREAL CATEGORY AND ITS

THE BREAKFAST CEREALS CATEGORY

TOTAL BREAKFAST
CEREALS CATEGORY

All-in-one
Ready-to-Eat HOT
cereals
cereals cereals

! Primarily designed to be ! Instant Cereal ! Needs to be cooked

consumed w/ milk Beverage (Quick Cooking) / Instant
CP PHILS

The Ready-to-Eat Cereals segment or popularly known as Breakfast Cereals are cereal based
ready to eat products made of wheat, corn, rice, oats and are primarily designed to be consumed with
cold milk (either powdered or ready to drink). The pioneer in this segment is the Kellogg Company
which came out with the first ready to eat cornflakes back in 1906.

Sub-segments and Players:

Kids - NESTLÉ Koko Krunch, Kellogg’s Frosties, Oishi Choco Flakes, etc.

Family – NESTLÉ Corn Flakes, Kellogg’s Corn Flakes, etc.

Adults – NESTLÉ Fitnesse, Kellogg’s Special K, Post Banana Nut Crunch

The Hot Cereals segment is primarily what we know as oats/oatmeal. The pioneer of this
segment is the Quaker Oats Company which came out with the first oatmeal product back in 1901.
Primarily consumed for breakfast and is known to be good in lowering cholesterol (soluble fiber content
in oats).

Sub-segments and Players:

Family – Quaker Oats, Golden Oats, Australia Harvest, NESVITA Oatmeal

Unlike the ready-to-eat cereals, oatmeal is still generally known as an all-family product being
passed down from generations to generations although recently there have been a lot of innovations in
the category such as instant oatmeal (just add hot water) and flavored oatmeal (chocolate, banana, etc.)
and fortified oatmeal (added vitamins & minerals)
 The All-in-One Cereals segment is composed of instant cereal beverages that are made of
cereals (i.e. wheat, corn, oats, etc.). Most of the brands like NESVITA Cereal Milk Drink can be
consumed either hot or cold. They are primarily consumed during breakfast as part of a meal or by
itself (“pantawid gutom”). NESVITA Cereal Milk Drink was the pioneer in this segment when it was
launched back in 1994. It was the only brand in the segment until the early 2000 when competition like
Quaker’s Q-Vital and Energen came into the picture.

Sub-segments and Players:

Kids – BEAR BRAND Busog Lusog, Nutrivim

Adults – NESVITA Cereal Milk Drink, Quaker’s Q-Vital and Energen

Market Size

The Total Breakfast Cereals category is worth Php 2.1 Bio per year. In terms of value (Php), the
Ready-to-Eat segment is the biggest contributor at 46% followed by Hot cereals at 39% and All-in-One
segment at 15%. The category as a whole is growing but it is the Hot Cereals segment that continues to
grow faster than the category at 18%. (See Exhibit 2 for the Market Size and Growth for each segment
of the category)

EXHIBIT 2: MARKET SIZE & GROWTH PER SEGMENT OF THE BREAKFAST CEREALS CATEGORY

Value Volume
Segment Value % Cont %Growth Volume % Cont % Growth
Ready-to-Eat 973 M 46% 6% 2,500 mt 26% 4%
All-in-One 308 M 15% 1% 871 mt 9% 4%
Hot Cereals 831 M 39% 18% 6,183 mt 65% 9%
Total Category 2.1 B 100% 10% 9,555 mt 100% 7%
Based on: 2008 MAT TY May Nielsen RTA

In terms of volume, the Total Breakfast Cereals category is about 10,000 Metric Ton category
per year. The Hot cereals segment is the biggest contributor at 65% followed by Ready-to-Eat segment
at 26% and All-in-One segment at 9%. The category as a whole is growing but it is the hot cereals
segment that continues to grow faster than the category at 9%.

Household Penetration by Segment

Based on AC Nielsen’s Retail Audit report as of May 2008 in a base of 14.5 mio households3, the Hot
Cereal segment has a penetration of 22%, the Ready-to-Eat segment has a penetration of 18% and the
All-in-One segment has the lowest penetration at 11%. This shows that there is still a lot of opportunity
for penetration for the total breakfast cereals category and in each of its segments. The highest
opportunity for penetration can be found in the All-in-One segment.

3
average of 5 members per household
The All-in-One Market Segment & Its Key Players

The All-in-One Segment has 3 key players -- NESVITA Cereal Milk Drink, Energen, and Quaker Q-
Vital. A new entrant has been launched last May 2008 which is the BEAR BRAND Busog Lusog. NESVITA
Cereal Milk Drink is the most expensive at around Php12.7, followed by Quaker Q-Vital at Php 11.4,
while Energen is priced lower at Php 5.9 and BEAR BRAND Busog Lusog priced lowest at around Php 5.6.

Customer profile of each player can be seen below:

NESVITA CEREAL MILK DRINK QUAKER Q-VITAL

" usage spans social status " slightly skews towards Class C
" Females " appeals to both genders
" cuts across age " cuts across age and working status
" more working than non-working

ENERGEN BEAR BRAND BUSOG LUSOG

" middle class " lower class
" predominantly females " Kids
" 31-40 years old

NESVITA Cereal Milk Drink is not only the market leader in the segment, at 55% in terms of
volume and 69% in terms of value but is the pioneer in this segment when it was launched back in 1994.
The closest competitor is Energen which is about 29% of the market. Followed by Quaker Q-Vital at 8%
and BEAR BRAND Busog Lusog at 3%. (See Exhibit 3 for Market Share of each player)

EXHIBIT 3: MARKET SHARE OF PLAYERS IN THE ALL-IN-ONE SEGMENT

MARKET SHARE VALUE VOLUME

NESVITA Cereal Milk Drink 69% 55%
Energen 16% 29%
Quaker Q-Vital 9% 8%
BEAR BRAND Busog Lusog 3% 3%
Based on: 2008 MAT TY May Nielsen RTA

NESVITA CEREAL MILK DRINK

Product description

NESVITA Cereal Milk Drink is an instant cereal beverage made of wheat, milk and vitamins. It’s
primary benefit is it’s fiber content which helps smoothen the digestion as well as the natural goodness
of milk (calcium) and vitamins (A, E & C).

NESVITA Cereal Milk Drink is primarily consumed during breakfast as part of a meal or by itself
(“pantawid gutom”) since this beverage is “filling” due its cereals flakes & rice crispies content. There
are also snacking occasions for the brand since it is considered a “healthier” alternative to the usual
merienda fare such as pansit, chips, and the like. A serving of NESVITA Cereal Milk Drink is about 120
calories, only 6% of RENI of a 2000 calorie per day requirement for an adult.

NESVITA Cereal Milk Drink comes in single serve sachets of 30g. Available in three variants:
original (50% of the business), sweet corn (27%) and choco malt (23%).

Product Positioning

NESVITA Cereal Milk Drink is targeted to females aged 18-29 years old as the cereal beverage
which makes you feel beautiful inside (healthy digestion brought about by the fiber content and
complemented by the goodness of milk & vitamins) and out (a healthy digestion shows outside as well)

Product Key Selling Points

• Quality product made by NESTLÉ, the most trusted food company in the world
• Wholesome goodness in every serving: wheat, milk & vitamins for only Php 12.75
• Available in three variants: original, sweet corn and choco malt

Product Packaging & Presentation

NESVITA Cereal Milk Drink is packed in single serve sachets. It can be bought per piece for trial or by
boxes of 10’s or by 5’s. (See Apendix 2 in page 13 for Packaging of NESVITA Cereal Milk Drink)

• NESVITA Cereal Milk Drink 30g single serve sachet

• NESVITA Cereal Milk Drink: Box of 5’s and 10’s

Product Segmentation

NESVITA Cereal Milk Drink targets the ABC segment of the market as can be seen in the
household penetration of the product (See Exhibit 4 for Household Penetration of NESVITA Cereal Milk
Drink). Its consumers are primarily females ages 18-29 years old, more working than non-working. These
are active people who engage in some form of physical activity or exercise. They put a premium on
convenience but are not willing to sacrifice on either taste or nutrition.
 EXHIBIT 4: HOUSEHOLD PENETRATION OF NESVITA CEREAL MILK DRINK

HH Penetration
SEC # of HH NESVITA % Contribution

AB 200,817.00 21% 3%

C 2,217,204.00 18% 31%

D 9,214,569.00 8% 62%

E 6,055,092.00 3% 5%

Product Usage

1. Open the sachet of NESVITA Cereal Milk Drink

2. Pour entire content to a mug or glass
3. Add approximately 150ml of hot or cold water (depending on preference)
4. Stir and enjoy!

Distribution – Availability and Visibility

NESVITA Cereal Milk Drink is available in all leading supermarkets, groceries, convenience stores
and selected drugstores nationwide. It is not available in smaller trade channels such as market stalls &
sari-sari stores because it is not the right channel for the product due to its premium price.

In the supermarkets & groceries, NESVITA Cereal Milk Drink is placed in the breakfast cereals
aisle/gondola together with Ready-to-Eat cereals and Hot Cereals. Being the market leader in the All-In-
One segment: NESVITA Cereal Milk Drink enjoys the biggest share of shelf space vs. it’s competitors
(60% of shelf share).

In the convenience stores and drugstores, it is situated near other single-serve

categories/products (i.e. coffee, tea, juice, oatmeal, etc.). It leverages on the NESTLÉ distribution
network
o Direct Key Accounts – SM, Robinsons, Shopwise, Puregold, Mercury Drug
o Via Distributors – Regional Key Accounts, Groceries, Market Stalls & Sari-Sari Stores

Promotion

NESVITA Cereal Milk Drink is heavily promoted in TV, Print, PR, Website, Movie sponsorship,
Sampling, Events, and more importantly in-store merchandising via Actmedia or traditional Point of
Purchase or Poinf of Sales materials. (See Appendix 3 in page 14 for current promotional materials of
NESVITA Cereal Milk Drink)
 During it’s early years, NESVITA Cereal Milk Drink was targeted to kids (tagline – NESVITA
breakfast you can drink) but eventually shifted to talking to adults since it was found out that adults are
the one who consume the product more than kids due to it’s healthy and convenient offering (i.e. fiber).

Last year, NESVITA Cereal Milk Drink re-launched the brand by having the beautiful Marian
Rivera as their celebrity brand endorser, arguably, the hottest female celebrity in the Philippines right
now. She was the perfect fit for NESVITA Cereal Milk Drink’s latest campaign: Feel Beautiful Inside &
Out.

*feel beautiful inside – via NESVITA = fiber, milk & vitamins

*feel beautiful outside – if you feel beautiful (good) inside, it shows outside as well

The ad featured Marian Rivera in her natural self (not as celebrity, not as Marimar, or any of her
alter egos) and how she stays beautiful inside & out. One of the key points of the ad was that Marian
only says the word “beautiful” twice. Thus, truly highlighting how a person can feel “beautiful” by taking
in a cup of NESVITA Cereal Milk Drink.

The campaign was also timed during the launch of her 2nd teleserye: Dyesebel to maximize the
affinity with its chosen female celebrity. Thus, this campaign enabled the brand to generate a lot of
awareness, consideration and trial. This was the first time that NESVITA Cereal Milk Drink used a
celebrity endorser in its ad campaign.

Pricing

NESVITA Cereal Milk Drink is the most expensive brand in the segment. Its direct competition
are Quaker’s Q Vital and Oishi’s Day to Day cereal drinks in terms of pricing. Low priced competition
primarily Energen is more than 50-55% cheaper vs. NESVITA

BRAND PRICE INDEX

NESVITA 12.7 100%

Q Vital 11.4 90%

Oishi Day to Day 9 71%

Nutrivim 6.6 52%

Energen 5.9 46%

BEAR BRAND Busog Lusog 5.6 44%

 It is my belief that to combat Energen, NESTLÉ decided to launch BEAR BRAND Busog Lusog
which is currently the cheapest cereal beverage in the market. Also unlike NESVITA, BEAR BRAND Busog
Lusog is available in the market stalls and sari-sari stores which can fight head on with Energen in terms
of distribution.

Substitutes

There are a lot of healthy beverages that are more established in the market such as coffee, tea,
juices, chocolate beverages, mineral water, etc. The cereal beverages or cereal drinks category is still a
very small segment but continues to grow. The main advantage still of this segment is that it is “filling”
versus other healthy beverages or drinks.

THE CHALLENGE

NESVITA Cereal Milk Drink is the most established product in the current portfolio of the NESVITA brand
here in the Philippines. This product drives approximately 50% of the business of total NESVITA.

A lot of players have started to challenge the product since its entry in 1994. In fact some of them,
particularly Energen, has been gaining edge with NESVITA Cereal Milk Drink, via its low-cost pricing and
extensive distribution.

Since NESVITA Cereal Milk Drink is but just one of the numerous products under the brand name
NESVITA, it cannot reposition itself without misaligning itself with the rest of the product portfolio under
the NESVITA brand. This limits the product’s options in a way to fight head on with the more aggressive
players of the market, at least in terms of price and positioning.

Given this situation how then can the brand grow further without changing its positioning as a
“premium” cereal beverage brand targeting mainly adults who are into a healthy lifestyle?