INDEX

CHAPTER 1
OJECTIVE
RESEARCH METHODOGY
CHAPTER 2
INTRODUCTION
COMPANY PROFILE
CHAPTER 3
ANALYSIS OF DATA
PRODUCTS
CHAPTER 4
CONCLUSION
LIMITATIONS
BIBLOGRAPHY
ANNEXURE

EXECUTIVE SUMMARY
The current millennium has unfolded new business rules most
the significant of them being that company has to constantly
look into minds of the customer. Customer loyalty plays a
significant role and today securing that loyalty requires quality
right price and of course last but not the least i.e. creating
awareness about their service. As a trainee, I was given
knowledge about the way and style of their working, their
routine and their environment. It was a great experience in
getting under such a reputed company, which has in it the
ability to retain customer.

OBJECTIVE
To identify the services and products offered by
NESTLE.
To study and analyze the customer perception and
preference about NESTLE.
Finally to draw the various conclusion and
recommendation on the on the basis of study
conducted.

RESEARCH METHODOLOGY

Managers need information in order to introduce products and

services that create value in the mind of the customer. But the
perception of value is a subjective one, and what customers value
this year may be quite different from what they value next year. As
such, the attributes that create value cannot simply be deduced
from common knowledge. Rather, data (information) must be
collected and analyzed. The goal of Marketing Research
(analysis) is to provide the facts and direction that managers need
to make their more important marketing decisions.
The analysis involves the following steps:
Define the problem.
Determine research design.
Identify data types and sources.
Determine sample plan and size.
Collect the data.
Analyze and interpret the data.
Prepare the research report.

For the purpose of study, data from the in-house survey conducted
by the marketing department (secondary data) has been used and
also for coming out with the recommendation. It was also felt that
mere secondary data would not provide in-depth information for
the analysis, hence it was decided that interactive discussions with
the managers and the head of every department would help in an
in-depth and true understanding of challenges faced by the
department.
The methodology adopted was to gather relevant information from
the appropriate department, correlate the information obtained and
to present the information in a logical and systematic manner.

INTRODUCTION
Nestle India Ltd. is a part of the Nestle SA group which is one of the largest manufacturing
companies in the world. Henri Nestle founded the company (with its headquarters in Vevey,
Switzerland) in 1867. Nestle has two major divisions - Le Societe des Produits which
looks after the production and marketing and Nestec Ltd. which provides the technical
assistance to the group companies. Since its inception in 1867, the company has diversified
it product range from the infant weaning formula (which was its first product) to beverages,
confectionery, ice creams and pet foods among others. In a span of 130 years the company
has ranked 26th among the worlds largest corporations and boasts of a turnover of $
48932.5 million and employee strength of 221,144 people spread over 75 countries
worldwide (Annexure A).

Nestle has long been viewed as one of the most multinational

of the multinationals. This is because today only 2% of its
turnover comes from Switzerland. Out of the remaining 98%,
Europe contributes 43.5%, North and South America
contribute 36.5% and Africa and the Asia Pacific Regions
contribute 18%.

Company Profile
Although Nestle has been associated with India since the
beginning of the century through the importing and trading of infant
food and condensed milk, manufacturing in India only began with the
setting up of the factory in Moga in 1962. The first product to be
manufactured was Milkmaid. In the last 35 years the company has
shown rapid progress and has increased its product range to 80
products as of October 1997. Nestle India Ltd. now ranks 22nd
amongst Indias most valuable companies (Annexure B) . Its gross
revenue has increased from Rs 1001.1 crores to Rs. 1213.8 crores in
1996. This remarkable growth has been achieved through -

Rapidly creating greater manufacturing capacity, both at factories

as well as with co-packers.

Taking measures to ensure availability and improved quality of key

raw materials - fresh milk in particular.

Strengthening of the sales and distribution network (particularly in

smaller towns)

Ambitious and cohesive manpower training and development

programs for the personnel of the company across all disciplines.

The companys exports also resulted in a very successful year in

this area as exports grew by 27% to Rs. 250.8 crores in 2003. The
main contributors to this increase were the export of tea and coffee to
USA, Japan, Russia, Hungary and Taiwan.

Nestle India Ltd. wants to further increase its operations in India

and has started construction of its sixth Factory at Bicholim, Goa for
the manufacture of culinary products (a key thrust area) for this
purpose.

The Spirit of Nestle

Organisational excellence is never achieved through a one time
effort; It is always a process of continuous

improvement across a

number of areas of operation.

A key factor for Nestles success has been its quest for
continuous improvement through ushering in greater productivity and
more efficiency in everyday operations.

Despite the infrastructure

impediments in India, Nestle has set itself high standards of business

performance. This is reflected through the essence of the company - its
mission statement.

Nestles mission

To be in every way the leading company in the Indian food

industry and a good corporate citizen by providing our consumers with
superior quality products, our shareholders with rapid growth & fair
returns and our employees with a challenging and satisfying work
environment.

To translate this spirit into a planned and measurable process,

Nestle has set up key objectives across all divisions.

Key Objectives

Production

To optimise 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 2003

To double the turnover every three years

People

To help employees to retain a long term perspective and integrate

them fully with the companys 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.

10

Finance

To maintain profit levels above the average for the food industry in
India.

The Business Excellence and Common Application (BECA) initiative

essentially translates the spirit of the Journey towards excellence into
an organised, systematic and measurable approach. The aim is to aid
the achievements of the companys key objectives of rapid growth by
ensuring that all operations incorporate the spirit of meaningful
planning, effective cost control and efficient implementation. BECA is
about planned improvement in everything we do

Factories

Nestle has 6 factories in India. These are

1. Moga (punjab) : The Nestle factory in Moga has the pride of being
the first and most comprehensive factory of Nestle India. Set up in
1962, it represents the core competence of Nestle India in the
manufacture of milk products (Everyday, Milkmaid), beverages, culinary
products (Maggi sauces, noodles, soups etc.), weaning cereals
(Cerelac) and infant milk formulae.

2. Choladi ( Tamil Nadu): The factory in Choladi started production in

1967. Situated about 60 miles from Calicut, the factory today has 81
11

employees and produces 1.5% of the total turnover of Nestle India. It is

a 100 percent export oriented unit which processes freshly picked tea
leaves into soluble instant tea.

3. Nanjagud (Karnataka): Production in this factory began in 1989

with the manufacture of Nestle instant coffee and Sunrise. Today in
addition to instant coffee the factory also manufactures health
beverages. The plant to manufacture MILO was also commissioned at
this factory. This factory employs 145 people and is cited as a model in
terms of environment protection for its installations to purify waste
water as well as for its provisions for recycling coffee wastes.

4.Samalakha (Haryana): This factory was set up in 1993. Located 70

kilometres from Delhi ,

it manufactures weaning cereals , culinary

products ,health beverages and milk products. Recently the expansion

of manufacturing capacity for Milkmaid Dessert Mixes was undertaken
at this factory as this new and unique product category is viewed to
have great potential in the future.

5.Ponda (Goa): This Kit-Kat factory was set up in Goa in 1995 at a

cost of Rs. 50 crores. It represented a major step by Nestle towards
becoming the Number 1 Chocolates and Confectionery Company in
India.

6.Bicholim (Goa)

12

The construction work at this new factory is progressing with

speed. This factory will soon commence the manufacture of culinary
products, which is a key thrust area for the company and will include
latest technological improvements relating to this category of products.

As a part of Nestles efforts towards continuous improvement and

excellence in Manufacturing operation, a Moga Improvement team
(MIT) was put in place at the Moga factory. The team comprised of
international experts from Nestle Technical Services (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

Nestles

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

A 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 labour man
hours resulting in substantial savings and improved productivity and
13

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 .

This project was highly successful and the company is now

implementing its key learnings 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

synchronised to ensure that everybody works towards a common

business plan. Monthly objectives are broken down into weekly and
(wherever 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
14

functional areas such as sales planning, production output, quality

assurance,

material

ordering

transportation

and

warehouse

management. These measures 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.

The efficacy of this hierarchical structure is seen in Nestles

performance over past few years of various products.

By 1989 the company had achieved a sales figure of

approximately Rs. 258 crores. 1989 was the year of launches. Seven
new product lines were launched in this year. This was also the year in
which the Nanjagud factory was set up. By the year 1992, this sales
figure was touching Rs 500 crores. In the 1995 the pace of launches
quickened and since the construction of the factory at Samalakha, 20
new products have been introduced. By 2003, Nestle had about 76
different products in its portfolio with various new products in the
pipeline as well. The sales figure now touched Rs. 1214 crores. Thus
sales grew by 450% over a period of one and a half decades.
15

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 2003 it expects chocolate & 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 &
marketing improvement teams (SMIT).

SMIT maps the latest in helping towards the target of year. 2003.
The SMIT exercise is a major global initiative of Nestle to enhance
sales & marketing productivity. Linked with the already existing BECA
project, which in turn emphasises on excellence by improving the
16

distribution set up , this gave rise to the following growth objectives for
the year 2003

Ensure direct coverage of all urban towns in India.

Expand distribution to reach 1 million retail outlets 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.

17

NEW PRODUCT LAUNCHES

To put all the product launches into perspective, Nestle now has
80 products including various flavours and variants this awesome list of
80 products for most companies is an overfull palate. Nestle India Ltd.
Still have a variety of new products in the pipelines. It believes in
slowly colonizing as much territory as fast as it can, adapting to native
conditions and then work at holding off the advancing herds. Nestle
products can be broadly classified into 5 main ranges -

Milk Products

Chocolate and Confectionery

Beverages

Culinary

Food service

Milk Products

18

This category which comprises of condensed milk, baby milk

foods , milk powders , acidified infant food , and other milk products,
showed a slump in 1996 as sale of milk products fell from Rs 31.4
crores in 1995 to Rs 31.2 crores in the said year. Consumer offtake
remained depressed throughout this year as a consequence of high
price increases necessitated by substantial increases(+50%) in the
cost of basic raw materials( fresh milk ) , over the past two years .

However Nestle retained its leadership in the infant food market

with Cerelac, Lactogen and Nestum and even introduced a new flavour
of Cerelac - Cerelac Rice in 1996.

Chocolates and Confectionery

Nestle pursues the objective of accounting for one in every three

rupees in its sales figures through chocolates and confectionery. This
has thus been one of the thrust areas in Nestle.

Nestle this year

widened its range of flavours in POLO, backed by its tremendous

success in the Indian Market by adding POLO Spearmint to its
Portfolio.

This new flavour has also received an encouraging

response in the market according to market analysts.

Milkybar also retained its position as the number one white

chocolate brand in India, however it did not record a significant
increase in sales as a majority of Indian tastes still do not accept this
flavour.
19

This year however, was a year of tremendous success for Kit

Kat .This internationally renowned brand gained a large increase in the
Market share in the past year and Nestle officials are hopeful that this
will further increase in the coming years. However this Brand along
with it success has brought with it its share of Controversy as the Union
of India has launched a Litigation against the Kit Kat family pack.

In 1997 Nestle added to its range of confectionery by

introducing SPLASH, A soft hearted, hard boiled sweet this is being
promoted as a sweet unique to India and is positioned to a target
audience in the age group of 4 to 12 years and anyone with a soft
heart is a potential customer. Priced at Rs. 1 for a 7.5 gram candy
splash has been introduced selectively in the South and has been
speculated to repeat Polos performance. Nestles officials claim that
this candy has the potential to grab a quarter of the 700 crores
confectionery market.

The most recent of Nestle affairs with the confectionery market

has been the introduction of Mithai Magic which is a little Mithai , a
little magic .This new product was launched in September 1997 ,in
time for the Diwali purchases of sweets . This brand has been
positioned somewhere between chocolates and traditional sweets and
the company is employing a push strategy to promote this brand.

20

Beverages

This year has been very successful in the beverages market for
Nestle .The sales of beverages has increased from Rs 323.3 crores in
2002 to Rs 398.8 crores in 2003.

Nestles Flagship Nescafe which was pegged at Rupees 1040

per Kilogram before the launch of Tata Cafe, met with stiff competition
from Tata Cafe priced at Rupees 550 per Kg once it was introduced .
Tata cafe claimed to have garnered a market share of 17% by
December 1996. This forced Nestle to cut prices of Nescafe to Rupees
840 per Kg. However Nescafe still retains 83% market share in the Rs
177 Crores market for pure instant coffee.

Nestle Sunrise also showed an increase in sales and captured

20 % of the Rs 253 crores market in Mixed instant coffee.

This year Nestle also launched MILO, an internationally renowned

chocolate energy drink, and the response for this has been
encouraging.

Nestle has also introduced Tasters Choice tea bag pitched against Taj
mahal tea bags.

21

Culinary Products

The market in culinary products had witnessed a high growth

consequent to aggressive pricing decisions on existing products and
the introduction of a variety of new products to match the needs of the
Indian Housewife. Encouraged by this success Nestle launched Maggi
Macoroni Snack in three flavors - Chicken , Masala and Tomato. Nestle
officials say that this would consolidate Maggis position as the number
1 culinary brand in India. The product focuses on convenience and
innovation as its Unique Selling Proposition. This snack has opened a
new segment for the maggi brands. The brand is positioned as youthful
and is represented by the twists and curls of the macaroni snack. It is
speculated to be introduced in a phase manner nation-wide to be
placed in the 7.5 lakh outlets that Maggi noodles sells in .

In the spirit of catering to Indian tastes Maggi introduced maggi

pickles in five variants benchmarked to give the ghar ka swad. Maggi
Dosa Mix was also introduced to offer superior quality and added
convenience. Apart from this Milkmaid Kalakand Mix, a traditional north
Indian sweet of premium quality was added to the milkmaid dessert
mixes. Maggi soup also launched three new variants. Maggi Rassam in
particular was noticeable as yet another attempt to make traditional
Indian cooking a little bit easier.

22

Food Service

Food service items basically deal with the out of home

segments, which would include vending machines. Nestles food
service business is poised for rapid expansion to meet the growing
need for such a reliable, time saving and cost effective service in this
modern age .

Nestle wants to sell 500 million cups of tea and coffee through
its vending machines in the year 2003. It currently has 3500 vending
machines at assorted locations (both public and private). In 1995
Nestle food service did well to vend 40 million cups of Nescafe and
Tasters Choice tea. Its 2003 sales were placed at 59 million cups of
Nescafe and 36 million cups of tea, this figure was however way below
the expected sales for the year.

Distribution strategy

It is an indisputable fact that fundamentally all consumers

marketing must first assure availability of the product to the consumer.
In India, the urban population alone is of a whooping 250 million
consumers -an unbelievable potential for any FMCG . The potential
being spread across more than 4000 towns have to be very effectively
and efficiently tapped. Nestle till now was retailing in a limited number
of towns with only 200 towns accounting for 70 % of their business. For

23

Nestle to be a leader in the food industry, expanding the distribution

network for more retail outlets was a must.

To meet this challenge, Nestle is working towards an objective

of increasing the retail base to 1,000,000 outlets by the year 2003. This
network is feasible as Nestle has a triangular distribution structure thus
the span of control is still retained. The Distribution Network is
explained in figure 2.

In order to achieve these distribution objectives Nestle has

formulated an international sales and marketing improvement team
(SMIT). SMIT focuses on a single objective -provide sustainable
solutions to optimize the distributor and retailer sales through a step by
step approach starting with analysis of market followed by identification
of the probable retail outlets and finally selection of the same .The
team also focuses on proper implementation of resources and timely
follow ups for effective solutions.

Advertising Strategy

24

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 2002 had an advertisement spending of Rs

43.3 crores (net) . Tracing Nestles 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
ranges of sauces were introduced in 1985 but sales didnt catch up
until 1990 but till 2003 it got considerable market share. 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 2002 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 English
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.
25

Training is an integral and indispensable part of Nestle . I regard the

importance of training a highly as research and development .It is a
major investment in the Future of the company and imperative because
it is an investment in people
- Mr. Helmut Maucher
Chairman and CEO Nestle S A
Group
Nestle India Ltd. has an employee base of 3040 people and
aims to be

in the top quartile of the FMCG companies .For this

purpose it follows a very stern and rigorous recruitment policy .

Recruitment Policy

Recruitment of fresh management trainees and sales officers is

done every April-May. These graduates are generally selected from the
best institutes in the country through a series of interviews. They are
then put through a probation period of 12-18 months. Although Nestle
does not offer some of the highest pay packets in the industry, it is
considered a growth oriented company.

Training and Development

Continuous development of skills and attitudes of employees is

critical to the achievement of excellence. At Nestle therefore training

26

and development of human resources is viewed as a long term

investment .

If you are planning for one year , Plant wheat;

If you are planning for ten years, plant a tree;

If you are planning for life, train people.

- Old Chinese proverb

This proverb goes with the organizations most enduring beliefs

worldwide -

That long term planning is the key to Nestles global success

That Nestles most valuable assets are its people

Nestles policy is to rely on a more decentralized form of

management by building in the habit to Think Nestle.

At Nestle India training and development is an integral part of

the business plan and strategy in line with the objectives for the year
2003 and aims to -

27

Help employees to retain long term perspective and integrate them

fully with the companys business goals

View the growth of both the personnel and the company as a

continuous process .

Concentrate on attitudinal changes by developing leadership skills,

an appreciation of interdependence between units and the
enhancement of a sense of belonging to Nestle .

In 2003 Nestle India benefited greatly from the training program

offered at the Rive Reine International Training Center at Vevey,
Switzerland. This training program helped facilitate the transfer of
common Knowledge (technical, marketing, and finance) across the
Nestle Group and ensure interdisciplinary approach to learning and
uniform progress with a tailor-made approach for all.

Company Training needs -

analysis of training needs of Managers

self development programs for staff at HO

programs for company orientation and information sharing

28

programs aimed at computer training and computerization

Establishment of contact with leading management institutes with a

view to use the same for meeting local training requirements

Nestles Corporate Culture

As we had discussed before, Nestle is one of the most

multinational of multinationals and is spread over 75 countries
worldwide. This implies that it has employees from diverse cultural
backgrounds. Nestle respects the distinctive culture, mentality and
traditions of every employee in every country. What Nestle aims at is to
incorporate its own culture into its employees without stifling the
individual employees culture and identity. When we went to Nestle we
could feel the existence of a distinctive

work culture amongst the

management - the staff seemed highly motivated & cheerful

and

everybody had pin up boards in front of their tables with reminders ,

motivational messages and even time logs (the Nestle people seemed
as if they availed of the benefits of time management) .

29

Nestle has a diverse product range and so it also has diversified risks
Thus Management on Information systems plays a vital role in Nestle
to provide information to the Sales and Marketing as well a the
finance department

.The Electronic Data Processing Department

looks after Management Information Systems .

Apart from this, Nestle has a vast distribution network. In order

to support the BECA process, an integrated computer system has been
put in place across the company to link all functional areas and
locations. This common linked system will improve information
availability, aid quick decision-making and improve supply chain
integration.

30

Nestle India Ltd., is a part of the Nestle SA group, which

is one of the largest manufacturing companies in the
world. The company (with its headquarters in Vevey,
Switzerland) was founded by Henri Nestle in 1867.
Nestle has two major divisions- Le Societe des Produits
which looks after the production and marketing and
Nesstec Ltd. which provides the technical assistance to
the group companies. Since its inception in 1867, the
company has diversified it product range from the infant
weaning

formula

beverages,

(which

was

confectionery, ice

its

first

creams

product)

and

pet

to

foods

among others. In a span of 130 years the company has

ranked 26 th among the world's largest corporations and
boasts

of

turnover

of

$48932.5

million

and

an

employee strength of 221,144 people spread over 75

countries worldwide (Annexure A).
Nestle

has

multinational

long

been

of the

viewed

as

multinationals.

31

one

of

This

the
is

most

because

today only 2% of its turnover comes from Switzerland.

Out of the remaining 98%, Europe contributes 43.5%,
North and South America contribute 36.5% and 18% is
contributed by Africa and Asia Pacific Regions.

OVERVIEW

Although Nestle has been associated with India since the

beginning of the century through the importing and
trading of infant food and condensed milk,
manufacturing in India only began with the setting up of
the factory in Moga in 1962. The first product to be
manufactured was Milkmaid. In the last 35 years the
company has shown rapid progress and has increased its
product range to 80 products as of October 1997. Nestle
India Ltd. now rank 22 nd amongst India's most valuable
companies (Annexure B). Its gross revenue has
increased from Rs. 1001.1 crores to Rs. 1213.8 crores in
1996. This remarkable growth has been achieved
through:

Rapidly creating greater manufacturing capacity, both

at factories as well as with copackers.
32

Taking measures to ensure availability and improved

quality of key raw materials-fresh milk in particular.

Strengthening of the sales and distribution network

(particularly in smaller towns).

Ambitious

and

development

cohesive

programs

manpower

for

the

training

personnel

of

and
the

company across all disciplines.

The

company's

exports

also

resulted

in

very

successful year in this area as exports grew by 27% to

Rs. 250.8 crores in 1996. The main contributors to this
increase were the export of tea and coffee to USA,
Japan, Russia, Hungary and Taiwan.

Nestle India Ltd. wants to further increase its operations

in India and has started construction of its sixth Factory
at

Bicholim,

Goa

for

the

manufacture

of

products (a key thrust area) for this purpose.

33

culinary

The spirit of Nestle

"Organizational excellence is never achieved through a
one time efforts; It is always a process of continuous
improvement across a number of areas of operation."

A key factor for Nestle's success has been its quest for
continuous improvement through ushering in greater
productivity and more efficiency in everyday operations
Despite the infrastructure impediments in India, Nestle
has set itself high standards of business performance.
This is reflected through the essence of the company-its
mission statement.

Nestle's mission

"To be in every way the leading company in the Indian

food industry and a good corporate citizen by providing
our

consumers

with

superior

quality

products,

our

shareholders with rapid growth and fair returns and our

employees

with

challenging

environment."

34

and

satisfying

work

To translate this spirit into a planned and measurable

process, Nestle has set up key objectives across all
divisions.

35

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

broad

perspective

individual needs
36

while

addressing

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.

Key Fact

This section offers a quick and simple overview of

NESTLE, making it an excellent place to begin learning
more about the Worlds Largest Food Company. Here
introduction is given with some key facts and figures,
including

2001

Financial

Information,

Company

Profile, Historical Development and Main Brand .

37

SALES ANALYSIS

By Geographic Area

In Million of CHF

2006
(%)

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
By Main Product Group
Other
Activities
12.2%

Europe
36.7%

Africa, Asia
and Oceania
19.3%

North and
South
Am erica
31.8%

In Million of CHF

2001(%)

38

Beverages
Milk

19/142

Products,

Nutrition

and

Ice 334

27.4
27.6

Cream
Prepared Dishes and Cooking Aids

17/660

25.2

Chocolate and Confectionery

10/663

15.2

Pharmaceuticals

3/1999

4.6

Chocolate
and
Cofectionary
15.2%

Pharm aceutic
als
4.6%

Prepared
Dishes and
Cooking Aids
25.2%

Beverages
27.4%

Milk
Products,
Nutrition and
Ice Cream
27.6%

39

Breakdown of 2006 Trading Expenses (in %)

Percentage
Raw Materials

26.2

Packaging

8.8

Salaries and Welfare Expenses

16.6

Depreciation

4.1

Other Trading Expenses

34.5

Total Trading Expenses

90.2

Trading Profit

9.8

Go to Financial Guide for additional facts and figures.

Company Profile

Trading Profit
5.2%

Raw Materials
13.8%
Packaging
4.6%
Salaries and
Welfare
Expenses
8.7%
Depreciation
2.2%

Total Trading
Expenses
47.4%

Other Trading
Expenses
18.1%

Chairman of the Board: Helmut O. Maucher

40

Chief Executive Officer: Peter Brabeck-Letmathe

Worlds leading food company

Switzerlands largest industrial company

Worldwide operations

495 factories

Groups total work force: 225, 808 people.

Historical Development

1866

Companys foundation

1905

Merger between Nestle and Anglo-Swiss Condensed

Milk Company

1929

Merger

with

Peter-Cailler-Kohler

Suisses. S. A.
1947

Merger with Alimentana S.A. (Maggi)

1971

Merger with Ursina-Franck (Switzerland)

1985

Acquisition of Carnation (USA)

41

Chocolates

1990

Acquisition of Buitoni-Perugina (Italy)

1992

Acquisition of Rowntree (GB)

1994

Acquisition of Perrier (France)

1998

Acquisition of Spillers (GB)

2002

Divestiture of Findus brand and parts of Nestl's

frozen

food

business

in

Europe.

Divestiture of Hills Bros, MJB and Chase & Sanborn

roast and ground coffee brands (USA).
2006

Acquisition of PowerBar.
Factories

Nestle has 6 factories in India. These are

1. Moga (punjab)

The Nestle factory in Moga has the pride of being the

first and most comprehensive factory of Nestle India.
Set up in 1962, it represents the core competence of
Nestle

India

(Everyday,

in

the

Milkmaid),

manufacture
beverages,

42

of

milk

products

culinary

products

(Maggi sauces, noodles, soups etc.), weaning cereals

(Cerelac) and infant milk formulae.

2. Choladi ( Tamil Nadu)

The

factory

in

Choladi

started

production

in

1967.

Situated about 60 miles from Calicut, the factory today

has 81 employees

and produces 1.5% of the total

turnover of Nestle India. It is a 100 percent export

oriented unit which processes freshly picked tea leaves
into soluble instant tea.

3. Nanjagud (Karnataka)

Production

in

this

factory

began

in

1989

with

the

manufacture of Nestle instant coffee and Sunrise. Today

in

addition

manufactures
manufacture

to

instant

health
MILO

was

coffee

beverages.
also

the
The

factory
plant

commissioned

at

also
to
this

factory. This factory employs 145 people and is cited as

a model in terms of environment protection for its

43

installations to purify waste water as well as for its

provisions for recycling coffee wastes.

4.Samalakha (Haryana)

This factory was set up in 1993. Located 70 kilometres

from Delhi ,

it manufactures weaning cereals , culinary

products ,health beverages and milk products. Recently

the expansion of manufacturing capacity for Milkmaid
Dessert Mixes was undertaken at this factory as this new
and unique product category is viewed to have great
potential in the future.

5.Ponda (Goa)

This Kit-Kat factory was set up in Goa in 1995 at a cost

of Rs. 50 crores. It represented a major step by Nestle
towards

becoming

the

Number

Confectionery Company in India.

6.Bicholim (Goa )

44

Chocolates

and

The construction work at this new factory is progressing

with

speed.

This

factory

will

soon

commence

the

manufacture of culinary products, which is a key thrust

area

for

the

company

and

will

include

latest

technological improvements relating to this category of

products.

As

part

of

Nestles

efforts

towards

continuous

improvement and excellence in Manufacturing operation,

a Moga Improvement team (MIT) was put in place at the
Moga

factory.

The

team

comprised

of

international

experts from Nestle Technical Services (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

manufacturing

upon

Nestles global

expertise

in

75

experience

countries

the

and
team

identified the following areas for detailed study -

Process improvement to ensure the optimal usage of

resources

45

Improvement of operational efficiency

Cost optimization

A 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 labour man hours

resulting

in

substantial

savings

and

improved

productivity and machine utilization. In addition, several

non

tangible

benefits

in

the

sustainable

improvement

in

maintenance

planning

tools

form

of

areas
down

systems
like

time

for

factory
recording

systems and performance measurement tools were also

realized .

This project was highly successful and the company is

now implementing its key learnings of MIT in its other
factories.

In a country as vast and diverse as India, supply chain

management is absolutely

46

critical

to rapid growth.

Through

BECA,

streamlining

Nestle

and

has

concentrated

improving

their

heavily

supply

on

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

synchronised

to

ensure

that

everybody

works

towards a common business plan. Monthly objectives are

broken down into weekly and (wherever 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

47

ordering

transportation

and

warehouse

management.

These measures 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 timebound action plans established. For

this

purpose,

standard

Management(TQM),

tools

Kaizen,

such
5S

and

Total
Small

Quality
Group

improvement activity (SGIA) are being extensively used.

The efficacy of this hierarchical structure is seen in

Nestles performance over past few years of various
products.

By 1989 the company had achieved a sales figure of

approximately Rs. 258 crores. 1989 was the year of
launches. Seven new product lines were launched in this
year. This was also the year in which the Nanjagud
factory was set up. By the year 1992, this sales figure

48

was touching Rs 500 crores. In the 1990s the pace of

launches quickened and since the construction of the
factory

at

Samalakha,

20

new

products

have

been

introduced. By 1996, Nestle had about 76 different

products in its portfolio with various new products in the
pipeline as well. The sales figure now touched Rs. 1214
crores. Thus sales grew by 450% over a period of one
and a half decades.

49

TODAY

NESTLE

IS

PRESENT

IN

DIFFERENT

MARKETS WITH THE FOLLOWING MAIN BRANDS

Soluble coffee

Nescafe, Taster's Choice, Ricore, Ricoffy.

Roast and Ground Coffee

Hills Bros., MJB, Bonka, Zoegas, Loumidis

Mineral Water

Perrier, Contrex,

Vittel,

Valvert,

Quezac,

Arrowhead,

Poland Spring, Buxton, Vera, Blaue Quellen, Calistoga,

Santa Maria, San Pellegrino.

Other beverages

50

Nesquik, Nescau, Nestea, Milo, Carnation, Libby's Caro.

51

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

52

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.

53

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

54

NEW PRODUCT LAUNCHES

To put all the product launches into perspective, Nestle

now

has

80

products

including

various

flavors

and

variants this awesome list of 80 products for most

companies is an overfull palate. Nestle India Ltd. still
has a variety

of new products in the pipelines. It

believes in slowly colonizing as much territory as fast as

it can, adapting to native conditions and then work at
'Holding off the advancing herds'. Nestle products can be
broadly classified into 5 main ranges:

Milk Product

Chocolate and Confectionery

Beverages

Culinary

Food Service.

55

Milk Products

This category which comprises of condensed milk, baby

milk foods, milk powders, acidified infant food, and
other milk products, showed a slump in 1996 as sales of
milk products fell from Rs. 31.4 crores in 1995 to Rs.
31.2 crores in the said year. Consumer off take remained
depressed throughout this year as a consequence of high
price increases necessitated by substantial increases (+
50%) in the cost of basic raw materials (fresh milk),
over the past two year.

However Nestle retained its leadership in the infant food

market with Cerelac Lactogen and Nestum and even
introduced a new flavor of Cerelac-Cerelac Rice in 1996.

56

Chocolates and Confectionery

Nestle pursues the objective of accounting for one in

every

three

rupees

in

its

sales

figures

through

chocolates and confectionery. This has thus been one of

the thrust areas in Nestle. Nestle this year widened its
range of flavors in POLO, backed by its tremendous
success in the Indian Market by adding POLO Spearmint
to its Portfolio. This new flavor has also received an
encouraging response in the market according to market
analysts.

Milkybar also retained its position as the number one

white chocolate brand in India, however it did not record
a significant increase in sales, as a majority of Indian
tastes still do not accept this flavor.

This year however, was a year of tremendous success for

Kit Kat. This internationally renowned brand gained a
large increase in the Market share in the past year and
Nestle officials are hopeful that this will further increase
in the coming years. However this brand along with its
57

success has brought with it its share of Controversy as

the Union of India has launched a Litigation against the
Kit Kat family pack.

In 1997 Nestle added to its range of confectionery by

introducing SPLASH, "A soft hearted, hard boiled sweet"
this is being promoted as a sweet unique to India and is
positioned to a target audience in the age group of 4 to
12 years and "anyone with a soft heart" is a potential
customer. Priced at Rs. 1 for a 7.5-gram candy Splash
has been introduced selectively in the South and has
been speculated to repeat Polo's performance. Nestle's
officials claim that this candy has the potential to grab a
quarter of the 700 crores confectionery market.

The most recent of Nestle affairs with the confectionery

market has been the introduction of Mithai Magic, which
is "a little Mithai, a little magic." This new product was
launched in September 1997, in time for the Diwali
purchases of sweets. This brand has been positioned
somewhere between chocolates and traditional sweets

58

and

the

company

is

employing

a push

strategy

to

promote this brand.

The

latest

launch

of

Nestle

in

the

Chocolate

and

confectionery division is Charge.

Beverages

This year has been very successful in the beverages

market for Nestle. The sales of beverage have increased
from Rs. 323.3 crores in 1995 to Rs. 398.8 crores in
1996.

Nestles Flagship Nescafe, which was pegged at Rupees

1040 per kilogram before the launch of Tata Cafe, met
with stiff competition from Tata Cafe priced at Rupees
550 per Kg., once it was introduced. Tata cafe claimed to
have garnered a market share of 17% by December
1996. This forced Nestle to cut prices of Nescafe to
Rupees 840 per Kg. However Nescafe still retains 83%
market share in the Rs. 177 Crores market for pure
instant coffee.

59

Nestle Sunrise also showed an increase in sales and

captured 20% of the Rs. 253 crores market in Mixed
instant coffee.

This year Nestle also launched MILO, an internationally

renowned chocolate energy drink, and the response for
this has been encouraging.

Nestle has introduced Tasters Choice tea bag pitched

against Taj Mahal Tea bags.

Culinary Products

The market in culinary products had witnessed a high

growth consequent to aggressive pricing decisions on
existing products and the introduction of a variety of
new

products

to

match

the

needs

of

the

Indian

Housewife. Encouraged by this success Nestle launched

Maggi Macoroni Snack in three flavors-Chicken, Masala
and

Tomato.

Nestle

officials

say

that

this

would

consolidate Maggis position as the number 1 culinary

brand in India. The product focuses on convenience and

60

innovation as its Unique Selling Proposition. This snack

has opened a new segment for the maggi brands. The
brand is positioned as Youthful and is represented by the
twists and curls of the macaronic snack. It is speculated
to be introduced in a phase manner nationwide to be
place in the 7.5-lakh outlets that Maggi noodles sells in.

In

the

spirit

of

catering

to

Indian

tastes

Maggi

introduced maggi pickles in five variants benchmarked

to give the "ghar ka swad". Maggi Dosa Mix was also
introduced

to

offer

superior

quality

and

added

convenience. Apart from this Milkmaid Kalakand Mix, a

traditional north Indian sweet of premium quality was
added to the milkmaid dessert mixes. Maggi soup also
launched three new variants. Maggi Rassam in particular
was

noticeable

as

yet

another

attempt

traditional Indian cooking a little bit easier.

61

to

make

Food Services

Food service items basically deal with the out of home

segments,
Nestle's

which

food

would

service

include

business

vending
is

poised

machines.
for

rapid

expansion to meet the growing need for such a reliable,

time saving and cost effective service in this modern
age.

Nestle wants to sell 500 million cups of tea and coffee

through its vending machines in the year 2000. It
currently

has

3500

vending

machines

at

assorted

locations (both public and private). In 1995 Nestle food

service did well to vend 40 million cups of Nescafe and
Tasters Choice tea. Its 1996 sales were placed at 59
million cups of Nescafe and 36 million cups of tea; this
figure was however way below the expected sales for
the year.

62

In 2001 and 2002 nestle has come with a number of

new products like it has come with many of the
diary products like milk. The milk is avaliable in
the market in the full cream , toned and double
toned

milk. The nestle has also come with the

dahi, butter which is available in the market but at

very few shops .

NESTLE

has also come with the products which

target

the

children

like

FRUITIPS,MILKYBAR

CHOO,NESTLE CHINESE MAGGI NOODLES.

63

will

BIBLIOGRAPHY
www.nestle.com
www.google.com
NEWSPAPER
MAGZINES

64

ANNEXURE

Financial Results and Operation

2006(Rs. in millions)

1996(Rs. in millions)

Gross Revenue

12144

10011

Gross Profit (BIT)

1343

1183

Interest

506

315

Depreciation

227

165

Provision for Tax

68

171

Profit after taxation

542

532

Extraordinary tax

14

116

528

416

Profit brought forward

215

145

Reserves written back

49

130

Balance available for

792

691

Payment
Profit after taxation and
extraordinary item

appropriation

65

Interim dividends paid

353

321

Final Dividend proposed

97

Transfer to debenture

42

54

56

343

215

redemption reserve
transfer to general
reserve
Surplus carried in Profit
and loss Account
Gross Revenue increased by 21% during the year, and crossed
the 1200 crores mark . Domestic sales grew by 19% and exports
(including sales to Nepal ) grew by 27 %. Net profit after tax grew by
27% - From Rs 41.6 crores to Rs 52.8 crores.

Throughout 2003, there was a marked lack of buoyancy in the

domestics

market caused primarily by increased inflation and the

financial liquidity squeeze which affected all segments of the industry

and trade .

Interest costs rose substantially on account of higher funding

needs to service recently commissioned projects as well as to meet
increased exports for which materials often had to be purchased in
advance .

66

Considering the recessionary market conditions, Nestles overall

sales and progression during 2003 can be considered satisfactory.

Financial Information

In millions of CHF

2006

Sales

81 422

EBITDA (a)

12 516

as % of sales

15.4%

EBITA (b)

9600

as % of sales

11.8%

67

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

Market Capitalization, end December

1 038
146 864

(a) Mainly Pharmaceutical products and Water, managed

on a worldwide basis.
(b) Mainly corporate expenses, research and
development costs, amortisation of goodwill

68