Good Food, Good Life

Project of International Business

Submitted by:
Muhammad Arif Shah
ID No: 2882
Semester: 5th
Under the Guidance of:
DR. SIR. AZMATULLAH KHAN
Lecturer in International Business (MKG)
City University of Information Technology

City University of Information Technology

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ACKNOWLEDGEMENT:

“To Him belongs the dimensions of the Heavens and the

Earth, it is HE, who give life and death and HE has the
Power over all things”

(Al-Quran)
All acclamation to ALLAH, who has empowered and enabled me to
accomplish the perspectives of the project successfully. First of all, I would like to
thank my ALLAH Mighty, who really helps me in every problem during the
completion of this project. I would like to express my sincere and humble gratitude
to ALLAH Almighty, whose blessings; help guidance has been a real source of all
my achievements in my entire life.

I wish to express my appreciation to my honorable & respectable Lecturer

i.e. DR. SIR AZMATULLAH KHAN, Lecturer in International Business, City University
of Information Technology, Peshawar, who help me a lot and introduced me to
new dimensions of knowledge. I am sure that the same support would be
continued to help to achieve the entire Programme / MBA Degree Objectives
smoothly in near future as well.

I express my deepest affection for my parents; who prayed for my success

and encourage me. I appreciate their patience, cooperation and love for me. It is,
of courses, the reward of their good wishes and kin blessing.

The acknowledgment will be incomplete without special thanks to all my

University peers, office colleagues for their excellent cooperation and nice
companionship.

(Muhammad Aarif Shah)

MBA (Finance)
ID No: 2882
EXECUTIVE SUMMARY:
Nestle is the world's leading Nutrition, Health and Wellness Company.
Nestlé is committed to increasing the nutritional value of their food products while
improving the taste. Nutrition, Health and Wellness is Nestlé’s strategic direction.
+ 140 countries, 449 factories globally with 220 in emerging market; 540,000
farmers’ receive assistance from 950 agronomists directly employed by Nestlé,
3,400,000 people earn livelihoods form nestle supply chain in emerging market.
CHF: 16.8 billon sales of products that went through 60/40+; CHF: 10.00 billion
sales of Nestle Nutrition; CHF: 5.00 billion sales achieved by products with
Branded active benefits; Plus 10,000,000 children through Nestlé programmes on
nutrition. 3.3 billion Increase expected in population in emerging markets (2000-
2050); CHF: 34.5 billion sales in emerging markets with organic growth of 8.6%
sale in 2009. 12.7 organic growth achieved by PPP initiatives.

Over 40% of foods spend in developed world is out of home; CHF: 5.8
billion sales of Nestlé professional. Nestlé's business objective is to manufacture
and market the Company's products in such a way as to create value that can be
sustained over the long term for shareholders, employees, consumers, and
business partners.

Global food producer, located in over 83 countries. It just because of Nestlé

provides quality brands and products and line extensions that are well-known, top-
selling brands. Nestlé does not favor short-term profit at the expense of
successful long-term business development. Research and Development is a key
competitive advantage for Nestlé. Without our R&D Nestlé could not have become
the food industry leader in nutrition, health and wellness. With 28 research,
development and technology facilities worldwide, Nestlé has the largest R&D
network of any food company. Nestlé’s research, development and technology
network, together with local market application groups, employs around 5,000
people.
NESTLE:
Nestlé S.A. is a multinational packaged foods company founded and
headquartered in Vevey, Switzerland, and listed on the SWX Swiss Exchange with
a market capitalization of over 87 billion Swiss francs. Nestle is the world's leading
Nutrition, Health and Wellness Company. Nestlé is committed to increasing the
nutritional value of their food products while improving the taste. Nestlé achieve
this through their brands and with initiatives like the Nutritional Compass and
60/40+.

Since Henri Nestlé developed the first milk food for infants in 1867, and saved the
life of a neighbor’s child, the Nestlé Company has aimed to build a business as the
world's leading nutrition, health and wellness company based on sound human
values and principles. While Nestlé Corporate Business Principles will continue to
evolve and adapt to a changing world, our basic foundation is unchanged from the
time of the origins of our Company, and reflects the basic ideas of fairness,
honesty, and a general concern for people.

Nestlé’s Objective:
“Our objective is to be the recognized leader in Nutrition, Health and Wellness and
the industry reference for financial performance”

Strategic Direction:
Nutrition, Health and Wellness is Nestlé’s strategic direction. We want you to be
able to make healthy choices about your food and beverages. We also believe that
good food sometimes means treating yourself.

People / Employee / Customer Come First:

Employees , people / Customers are more important at Nestle than system, while
necessary and valuable in running a complex organization should remain
managerial and operational aids but should not become ends in themselves it is a
questing of priorities.

Marketing & Distribution:

Marketing is based on the Principles of satisfying consumer needs. This is the
foundation for the environmental marketing approve of Nestle. Nestlé’s aim is to
minimize wastage in communication, publicity and promotional material, in
particular through more precise targeting of marketing activities. In distribution energy
efficient and pollution controlled methods are encourages where possible.

Principal risks and uncertainties:

The Nestles group enterprise Risk Management Framework (ERM) is designed to
identify, communicate, and mitigate risks in order to minimize their potential
impact on the group. A “Top Down” Assessment occurs annually and focuses on
the Group’s Global Risk portfolio, it involves the aggregating of individual “Top
Down” assessment of Zones, Globally Managed Businesses, and selected markets,
it is intended to provide a high level mapping of Group risk and allow Group
Management to make sound decision on the future operations of the company.

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THE NESTLÉ ROADMAP TO “GOOD FOOD, GOOD LIFE”:
Nestlé’s objectives are to be recognized as the world’s leader in Nutrition, Health &
Wellness, trusted by all its stakeholders, and to be the reference for financial
performance in its industry. Nestle believe that leadership is not just about size; it
is also about behavior, Trust, too, it about behavior, and we recognize that trust is
earned only over a long period of time by consistently delivering our promises.
These objectives and behaviors are encapsulated in the simple phrase, “Good
Food, Good Life”

Nestle is seeking to achieve that leadership and earn that trust by stratifying the
expectations of consumers, whose daily choices driver out performance. The
Nestle Roadmap is intended to create alignment for our people behind a cohesive
set of strategic priorities that will accelerate the achievement of our objective.
Nestlé is investing for the future to ensure the financial and environmental
sustainability of our actions and operations: in people, in brands, in R &D.

FOUR COMPETITIVE ADVANTAGES OF NESTLE:

Unmatched Product and Brand Portfolio:

90% of sales are No. 1 or No. 2 in their market, 28 brands had sales over CHF: 1
bio and achieved 5.8% organic growth in 2009, focused on 9 categories, e.g:
Nescafe coffee comes in may variations, adapted to local tastes an preference.

Unmatched Geographic Presence:

+ 140 countries, 449 factories globally with 220 in emerging market; 540,000
farmers’ receive assistance from 950 agronomists directly employed by Nestlé,
3,400,000 people earn livelihoods form nestle supply chain in emerging market.

People, Culture, Values and Attitude:

+100 nationalities working at Nestle, long term inspiration, short term action.
Devolved responsibilities and accountabilities, 42 % of local Management
Committee members native to country in developing countries.
Unmatched Research and Development Capacity:

CHF: $ 2.0 billion spend in R & D; over 5, 200 employee in Food & Beverages R &
D, 300 external R & D relationship- open innovations.

FOUR GROWTH DRIVERS: (KEY FACTS IN 2009)

Nutrition, Health and Wellness:

CHF: 16.8 billon sales of products that went through 60/40+; CHF: 10.00 million
sales of Nestle Nutrition; CHF: 5.00 billion sales achieved by products with
Branded active benefits; Plus 10,000,000 children through Nestlé programmes on
nutrition.

Emerging Markets and Popularly Position Products:

3.3 billion Increase expected in population in emerging markets (2000-2050); CHF:

34.5 billion sales in emerging markets with organic growth of 8.6% sale in 2009.
12.7 organic growth achieved by PPP initiatives.

Out of Home Consumption:

Over 40% of foods spend in developed world is out of home; CHF: 5.8 billion sales
of Nestlé professional.

Premonitions:

All products categories have specific Premonitions strategic; CHF: 2.8 billion sales
of Nespresso with 27.2% organic growth; 59% of coffee beans to be sourced
through Nespresso AAA sustainable quantity programme in 2010
FOUR OPERATIONAL PILLARS:
9 Innovation and renovation to ensure products are new or remain
revenant to out consumers.

9 Operational efficiency to have the highest quality, the lowest

cost, the best customer services,

9 Whenever, however, to have out products always in an arm’s

reached of our consumers.

9 Consumers’ communication to excite consumer and to learn

form our consumers.

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KEY FACTORS THAT LEAD NESTLE TO SUCCESS:
Nestlé is committed to the following Business factors in all countries, taking into
account local legislation, cultural and religious practices:-

• Nestlé's business objective is to manufacture and market the Company's

products in such a way as to create value that can be sustained over the
long term for shareholders, employees, consumers, and business partners.

• Global food producer, located in over 83 countries. Consistently one of the

world's largest producers of food products, with sales $107.6 billion in 2009;
sales and earnings in 2009 {organic growth: 4.1 % with RIG: 1.9%} were
better than expected, even in a down turned economy. It just because of
Nestlé provides quality brands and products and line extensions that are
well-known, top-selling brands including:-

9 Lean Cuisine, Yoplait, Maggie, and Dryer’s/Edy's, Haagen-Dazs, Stouffer's, Boost, Dibs,
Hot Pockets.

9 Chocolate and Candy: Kit Kat, Toll House, Butterfinger, Baby Ruth, Crunch Bar, the Willy
Wonka Candy line.

9 Pet Products: Purina, Alpo, Cat Chow, Fancy Feast, Friskies, Tidy Cat.

9 Drinks: Carnation, Perrier, Nesquik, S. Pellegrino, Nescafe, Coffee Mate, Taster's Choice,
Juicy Juice.

9 General Mills: subsidiary which makes Betty Crocker, Bisquick, Hamburger Helper,
Pillsbury, Old El Paso, cereals, fruit snacks, frozen pizza, canned soups, frozen vegetables,
ready-made frozen meals.

9 Gerber: baby formula, prepared baby foods, baby cereals, water, juice, yogurt, foods for
infants, toddlers and preschoolers.

9 Professional brands sold to restaurants, colleges, hotels, and food professionals including
Jenny Craig meals, Impact liquid meals for trauma patients, liquid meals for diabetics, and
OptiFast weight loss products.

• Nestlé does not favor short-term profit at the expense of successful long-
term business development.

• Nestlé recognizes that its consumers have a sincere and legitimate interest
in the behavior, beliefs and actions of the Company behind brands in which
 they place their trust and that without its consumers the Company would
not exist.

• Nestlé believes that, as a general rule, legislation is the most effective

safeguard of responsible conduct, although in certain areas, additional
guidance to staff in the form of voluntary business principles is beneficial in
order to ensure that the highest standards are met throughout the
organization.

• Nestlé is conscious of the fact that the success of a corporation is a

reflection of the professionalism, conduct and the responsible attitude of its
management and employees. Therefore recruitment of the right people and
ongoing training and development are crucial.

• Nestlé continues to maintain its commitment to follow and respect all

applicable local laws in each of its markets.

• Research and Development is a key competitive advantage for Nestlé.

Without our R&D Nestlé could not have become the food industry leader in
nutrition, health and wellness. With 28 research, development and
technology facilities worldwide, Nestlé has the largest R&D network of any
food company. Nestlé’s research, development and technology network,
together with local market application groups, employs around 5,000
people.

• Nestlé further strengthens its R&D capability through Innovation

Partnerships at each stage of the product development process – from early
stage collaborations with start up and biotech companies to late stage
partnerships with its key suppliers.

• Nestlé scientists also play their part in communicating the health and
wellness benefits of products to consumers. Nestlé nutritionists’ world-wide
work to ensure that all nutrition communication, both on and off pack, is
locally relevant, as well as scientifically sound.
 • Beyond sound nutrition, the future of foods will increasingly be driven by
science. Nestlé scientists are looking ahead to the foods of the future.
Nestlé R&D is translating nutrition and food science in two ways:-

1. From consumer needs into research priorities

2. From emerging science into consumer benefits, and services.

• Successful due in part to their unquestionable ability to keep major brands

consistently in the forefront of consumer's minds (and in their shopping
carts) by renovating existing product lines, keeping major brands from
slipping into saturation/decline and having superior access to distribution
channels.

Table shows the sales; Organic Growth & EBIT Margin:

PRODUCT’S DESCRIPTION: SALES: OG %: EBIT MARGIN:
Powered & Liquid Beverages: 19.30 9.50 21.70
Water: 9.00 -14 7.00
Milk Products and Ice Creams: 19.60 2.00 12.00
Nutrition: 10.00 2.80 17.40
Prepared Dish & Cooking Aids: 17.20 0.80 12.9
Confectionery: 11.80 4.30 13.60
Pet Care: 12.80 7.90 16.3
Pharmaceutical Products: 7.80 6.70 33.50

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.
FACTOR THAT MIGHT BE AFFECTED THE EARNING
RESULT OF NESTLÉ’S
• In today's health conscious societies, they can introduce more health-based products, and
because they are a market leader, they would likely be more successful. Still no yet
introduced products which are free allergen such gluten free peanut free.

• Nestlé’s reputation is based on consumer’s trust. Any major event triggered by a serious
food safety or other compliance issue could potentially impact upon Nestlé’s reputation /
brand image

• Still Nestlé’s is not in position to open Nestlé Café's in major cities of developing countries
to feature Nestlé products.

• Nestlé’s operate +100 countries, in developing countries they raised indirect employment,
but there is no impact on direct employment. It is because; they posted their own mangers
on the key posts. That why in developing countries are unable to develop diverse force,
which is necessary for growth.

• They launched a new premium line of higher cacao content chocolates dubbed Nestlé
Treasures Gold, in order to cash in on the "recession economy" in which consumers cut
back on luxury goods, but regularly indulge in candy and chocolate. Americans want
luxury chocolates, and high-end chocolate is immune to the recession (so far), because it is
an inexpensive indulgence

• Nestlé’s reputation is based on consumer’s trust. Any major event triggered by a serious
food safety or other compliance issue could potentially impact upon Nestlé’s reputation /
brand image

• Nestle has factories in + 83 different countries and its products are sold in more than 140
countries in the world. Security, political stability, legal and regulatory, macroeconomics,
foreign trade, labor, and / or infrastructure risk badly affect the Nestlé’s ability to do
business in country or region i.e. Afghanistan, Iraq etc.

• Raw chocolate ingredient prices are soaring; dairy costs alone rose 50% in 2008, this cuts
heavily into their profit margins and often gets passed on to consumers, by shrinking the
packaging in a way that is almost unnoticeable-therefore the consumer is paying the same
prices for less product. They should ensure the consumers not to take more prices for less
product.

• Nestle is dependent on sustainable supply of number of raw materials, packaging materials

and service/ utilities. Any major even triggered by natural hazard (drought, flood, etc)
shifted in production pattern. And may cause of dropping in raking.

• Nestles is dependent on sustainable supply of finished goods for all products categories. A
major even in one of Nestlé’s key warehouse facility could poetically lead to supply
disruption and impact upon Nestlé’s financial results.

• They have major competitors, like Hershey's, Cadbury-Schweppes (owned by Pepsi), Lindt
and Ghirardelli, Kellogg's, Post, Starbucks, Beech-Nut, Quaker, Kraft Foods, Dannon, Del-
Monte, Iams, Earth's Best, Heinz, Frito-Lay (owned by Pepsi), PepsiCo has the capabilities
to avail the market share of Nestle. PepsiCo may affect the profitability of Nestle, because,
PepsiCo have strong distribution / communication channels like Nestle.
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