MANAGING GLOBAL NESTLE BRANDS

CASE STUDY

PRESENTED TO
MUHAMMAD AHMED BUTT

PRESENTED BY
SYEDA ILAHDADI TEHSEEN JAFFER
ID: 3483

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

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Acknowledgement

I would like to thank my Professor Muhammad Ahmed Butt whose teaching skills demonstrated to me
the learning techniques and perfect understanding of various concepts.

In addition to this I would also like to thank him for introducing me to Linguistics, and whose passion for
the “underlying concepts” had lasting effect on us.

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Introduction to Case

 Nestle S.A is a Swiss Company, established in 1905

 The company started with condensed milk and infant formula
 Now Nestle sells baby food, bottled water, cereal, chocolate and other confections, frozen food,
dairy, drinks, food service, health and sports nutrition, pet care and weight management
products.

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

Developments Since 2007

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

Core Competencies as Illustrated in the Case:

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

SWOT Analysis of Case

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

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

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

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

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

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

Strengths, Weaknesses, Opportunities and Threats (SWOT)

Location of Factor TYPE OF FACTOR
Favorable Unfavorable
Internal Strengths Weaknesses

 Ability to leverage strong brand  Increasing instances of

name to generate sales product recalls
 Ability to customize products to hampering brand equity
the local market conditions
 Strong global operations with
diversified revenue base
 Research and development
capabilities

External Opportunities Threats

 Transition to a 'nutrition and well-  Compliance issue

being' company resulting in penalty
 Focus on developing and emerging payments
Economies  Macro-economic factors
 Booming out of home eating  Allegations of unethical
market business activities

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Strategic Brand Objectives
Nestlé’s strategic brand objectives are to be recognized as the world leader in Nutrition, Health and
Wellness, trusted by all its stakeholders, and to be the reference for financial performance in its
industry. They believe that leadership is not just about size, it is also about their behavior. They
recognize trust is earned only over a long periods of time by consistently delivering on their promises.
These objectives and behavior are encapsulated in the simple phrase, “Good Food, Good Life”, a phrase
that sums up their corporate ambition. The Nestlé Roadmap is intended to create alignment for their
people behind a cohesive set of strategic priorities that will accelerate the achievement of their
objectives. These objectives demand from their people a blend of long-term inspiration needed to build
for the future and short-term entrepreneurial actions, delivering the necessary level of performance.
They are seeking to achieve leadership and earn that trust by satisfying the expectations of consumers,
whose daily choices drive their performances, of shareholders, of the communities in which they
operate and of society as a whole. They believe that it is only possible to create long-term sustainable
value for their shareholders of their behavior, strategies and operations are also creating value for the
communities where they operate, for their business partner and also for their consumers, and they call
this Creating Shared Value. They are now investing for the future to ensure the financial and
environmental sustainability of their actions and operations in capacity, technologies, capabilities, in
people, in brands, in R&D. Their aims to meet today’s needs without compromising the ability of the
future generations to meet their needs, and to do so in a way which will ensure profitable growth year
after year and a high level of returns for their shareholders and society at a large over the long-term.

 Diversified global food company. Scale and market reach, knowledge of global markets, greatly
improved operating efficiency, R&D and innovation
 In the past the firm’s revenue was 70% in markets was limited potential for growth, weak
profitability due to some of its acquisitions, some low-margin products
 Goal of 4% new organic internal growth, improved efficiency, health food industry, maintain
momentum
 Fierce competition, food-producing rivals had improved operating efficiency, possible brand
overextension

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

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

Nestle's Branding Strategy

The Nestle brand itself had played a key role in the company's globalization efforts. In 1996, about 40%
of the total revenues were generated from products covered by the Nestle corporate brand. Nestle's
logo was an important part of the company's corporate identity. The 'nest' was a graphic translation of
Henri Nestle's name, which meant "little nest."...

Internationalizing the "Kit Kat" Brand

When Nestle acquired Rowntree's brands in 1988, the major challenge before the company was
managing them. Rowntree had a "one product, one brand" policy. The brands Kit Kat, After Eights,
Smarties and Rolo were marketed with no mention of Rowntree. Rowntree's brands were not strongly
managed European brands. Before the 1980s, 'country managers' outside the UK in several European
countries managed Rowntree's business. They were free to run their units provided business objectives
were met. The orientation at Rowntree was short-term just to meet annual business objectives and
country managers added nothing to the overall organization.

Even though Kit Kat was a leading brand in UK, it was ignored outside the country. In the early 1980s,
Rowntree established Rowntree Continental Europe, which handled business responsibilities outside the
UK in Europe. However, this did not benefit Kit Kat, which was launched in Europe by Rowntree
Continental Europe as a multi-local brand...

Divesting Non-Strategic Brands

The success of the Kit Kat brand inspired Nestle to think and act 'glocally' i.e. establishing global as well
as local brand identity. Nestle had taken a similar approach to several other acquired sub-brands.

Moreover, Nestle introduced the Kit Kat brand in several other countries across the globe. Nestle's
brand management strategy included the divestment of non-strategic brands.

Nestle Current Position

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

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

Nestle’s Growth Drivers are:

 Nutrition, health and wellness

 Emerging markets
 Out-of-home consumption
 Premiumization

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

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