PROJECT REPORT

ON
CONSUMER PERCEPTION AND MARKET STRATEGY IN
NESTLE

At
“NESTLE INDIA LTD"

SUMITTEDE TO: SUBMMITTED BY:

(Dr.Manoj Mehrotra) Rakesh Sharma
Roll no: 2008037

NCR BUSINESS SCHOOL MODINAGAR{GHAZIBAD}

 Table of Contents

Contents Page No.

Introduction 3

Objective of the Study 13

Scope of the study 14

Nestle India 17

Some Acquisitions & Mergers 55

Swot Analysis 73

Conclusion & Recommendation 78

Limitations 79

Bibliography 80

2
 Introduction

Customer Perception Theory (CPT)

Customer Perception Theory (CPT) illustrates and explains one

method through which advertising is effective. There are two
basic concepts that need to be accepted in order for CPT to be
understood: cultural filtration, perceptual reality.

Cultural filtration is simply the reason that people perceive day

to day life differently from one another. Each person is unique
and has had a unique set of life events that shape the way they
experience. An easy way of understanding cultural filtration is
by comparing the cultural filter to a pair of sunglasses. When
we wear tinted glasses we view the world as being the color of
the lens, the same applies with our cultural filters. We gather
our experiences on a wide variety of topics (politics, education,
experience, vocabulary, travel, geographic location, cultural
knowledge, tradition, family, heritage, race, ethnicity,
sexuality, habits, etc) and form our own unique cultural filter. It
is through this unique filter that we experience everything,
including advertising. In the model above the pink tinted
rectangle represents the cultural filter.

With cultural filtration in place, we can proceed through the

steps of the model which define the theory. The process of
CPT starts with the consumer: an individual toward which the
message is directed. The consumer must first have a perceived
need or want, and then actively experience an advertisement in
the product category where the need or want exists. It is a
catalyst for the model if this advertisement occurs at strategic
timing in the process. After exposure, the consumer forms an

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opinion about the product. This perception becomes the reality
of that product to the consumer. It is possible that this truth
could change with exposure to competitive messages from a
wide variety of sources (other media, friends, advice columns
etc). If, however, the product is perceived, and therefore
assigned the truth, of being positive it is then evaluated as to
whether or not it fills the need or want. If it does indeed fit the
need, it is likely that the consumer will proceed to the purchase
stage of the model. In the purchase stage the consumer
decides to purchase or not to purchase the product. Again,
there are a number of variables surrounding this decision, as
surround each step and decision in the model.

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 Marketing strategy

A marketing strategy is a process that can allow an

organization to concentrate its limited resources on the
greatest opportunities to increase sales and achieve a
sustainable competitive advantage. A marketing strategy
should be centered around the key concept that customer
satisfaction is the main goal.

Key part of the general corporate strategy

A marketing strategy is most effective when it is an integral

component of corporate strategy, defining how the organization
will successfully engage customers, prospects, and competitors
in the market arena. It is partially derived from broader
corporate strategies, corporate missions, and corporate goals.
As the customer constitutes the source of a company's
revenue, marketing strategy is closely linked with sales. A key
component of marketing strategy is often to keep marketing in
line with a company's overarching mission statement.

Basic theory:

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1) Target Audience

2) Proposition/Key Element

3) Implementation

Sectorial tactics and actions

A marketing strategy can serve as the foundation of a

marketing plan. A marketing plan contains a set of specific
actions required to successfully implement a marketing
strategy. For example: "Use a low cost product to attract
consumers. Once our organization, via our low cost product,
has established a relationship with consumers, our
organization will sell additional, higher-margin products and
services that enhance the consumer's interaction with the low-
cost product or service."

A strategy consists of a well thought out series of tactics to

make a marketing plan more effective. Marketing strategies
serve as the fundamental underpinning of marketing plans
designed to fill market needs and reach marketing objectives.
Plans and objectives are generally tested for measurable
results.

A marketing strategy often integrates an organization's

marketing goals, policies, and action sequences (tactics) into a

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cohesive whole. Similarly, the various strands of the strategy ,
which might include advertising, channel marketing, internet
marketing, promotion and public relations can be orchestrated.
Many companies cascade a strategy throughout an
organization, by creating strategy tactics that then become
strategy goals for the next level or group. Each one group is
expected to take that strategy goal and develop a set of tactics
to achieve that goal. This is why it is important to make each
strategy goal measurable.
Marketing strategies are dynamic and interactive. They are
partially planned and partially unplanned. See strategy
dynamics.

Types of strategies

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Marketing strategies may differ depending on the unique
situation of the individual business. However there are a
number of ways of categorizing some generic strategies. A
brief description of the most common categorizing schemes is
presented below:
Strategies based on market dominance - In this scheme, firms
are classified based on their market share or dominance of an
industry. Typically there are three types of
market dominance strategies:

Leader

Challenger

Follower

Porter generic strategies –

8
strategy on the dimensions of strategic scope and strategic
strength. Strategic scope refers to the market penetration while
strategic strength refers to the firm’s sustainable competitive
advantage.

Innovation strategies - This deals with the firm's rate of the

new product development and business model innovation. It
asks whether the company is on the cutting edge of technology
and business innovation. There are three types:
Pioneers
Close followers
Late followers

Growth strategies - In this scheme we ask the question, “How

should the firm grow?”. There are a number of different ways of
answering that question, but the most common gives four
answers:
Horizontal integration
Vertical integration
Diversification
Intensification
A more detailed scheme uses the categories:
Prospector
Analyzer
Defender
Reactor

Marketing warfare strategies –

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This scheme draws parallels between marketing strategies and
military strategies.
Strategic models
Marketing participants often employ strategic models and tools
to analyze marketing decisions. When beginning a strategic
analysis, the 3Cs can be employed to get a broad
understanding of the strategic environment. An Ansoff Matrix is
also often used to convey an organization's strategic
positioning of their marketing mix. The 4Ps can then be utilized
to form a marketing plan to pursue a defined strategy.

Ways to Overcome Marketing Challenges Forever

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For most small business owners, marketing is an overwhelming
concept. They need marketing solutions that ensure a smooth-
running, profitable business yet most don't know where to
begin or how to focus their efforts.
90% of small businesses don't even have a marketing plan. It's
difficult to reach your destination if you don't know where
you're going!

If you're a small business owner looking for ease, focus and

marketing success, we recommend that you focus on just
following tactics:

Establish a memorable and unmistakable brand identity:

The secret to business success is determined by your ability to

powerfully communicate your business with laser precision and
your ability to deliver a clearly-defined and consistent
experience.
In a nutshell... it's called branding, and, when done right, it
ensures a thriving business with all the customers and profits
you need. The secret is to establish a powerful brand identity
that sings distinction. And establish that identity before you
launch any marketing activities.

1. Create a deep connection with your core target audience -

your potential raving fans!

2. Who wants and needs what you have to offer? The only
wrong answer is "everyone." If you're a pediatrician, you
may see infants and children. Are they your target
audience? No! They are your patients, but it's the parents

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 you need to connect with to get the kids in your door. And
it's not just any parents - it's a definite group of parents.

3. In marketing, you get a lot more "bang for your buck" if

you focus your spending on a well-defined group of
people that you enjoy working with. The better you define
this group, the more effective your marketing can be.

4. Design compelling offerings that pull customers in like a

magnet.

5. 80% of all purchase decisions are based on emotion. It's

your job as a marketer to know how your customers want
to feel and to get them to visualize how your services can
meet their needs. People want to know, "What's in it for
me?" Tap into the emotion and create offerings that touch
your customers.

Objective of study

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1. Provide our customers with superior quality products.
2. Provide our shareholders with rapid growth & fair returns.
3. Provide our employees a challenging & satisfying work
environment.
4. To be a good corporate citizen & contribute positively to
the society in which we operate.

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 Scope of the study

India is on the move and so are the markets in India. Apart from
economic changes, India is also facing social changes like changes in life style,
hobbies etc. New fashions, Adventures holidays, etc. are in today.
Further, food habits of Indians are changing rapidly. Chocolates which were
believed to be kid’s preference are now being consumed by kids, teenagers, and
adults. Chocolate market in India (Currently 20 000 tones) is growing at a fast
rate annually.
To take advantage of the growing market, international
confectionery companies are getting ready to woo the proverbial Indian Sweet
tooth. An influx of worlds leading Chocolate players is expected.
Further, since Confederation of Indian Industry (CII) is a
representative body of the Indian Industry, it receives its inquiries for pertinent
marketing information from various domestic and international players, who want
to invest in India.

In the above context, the prime objective of this report is to prepare a marketing
plan for any brand that is planning to enter the India Chocolate Market.
Therefore, this report is generic (broad-based) to the extent that it does not focus
on any single brand. However, this may prove to be a relevant marketing guide
for any brand launch in India.
 Data analysis

Company profile

FMCG refers to consumer non-durable goods required for daily or frequent use.
Typically, a consumer buys these goods at least once a month. The sector
covers a wide gamut of products such as detergents, toilet soaps, toothpaste,
shampoos, creams, powders, food products, confectioneries, beverages, and
cigarettes
Typical characteristics of FMCG products are:
Individual items are of small value. But all FMCG products put together account
for a significant part of the consumer's budget.
The consumer keeps limited inventory of these products and prefers to purchase
them frequently, as and when required. Many of these products are perishable.
The consumer spends little time on the purchase decision. Rarely does he/she
look for technical specifications (in contrast to industrial goods). Brand loyalties
or recommendations of reliable retailer/ dealer drive purchase decisions.

Trial of a new product i.e. brand switching is often induced by heavy

advertisement, recommendation of the retailer or neighbours/ friends.
These products cater to necessities, comforts as well as luxuries. They meet the
demands of the entire cross section of population. Price and income elasticity of
demand varies across products and consumers.
The FMCG sector has been the cornerstone of the Indian economy. Though, the
sector has been in existence for quite a long time, it began to take shape only
during the last fifty-odd years. To date, the Indian FMCG industry continues to
suffer from a definitional dilemma. In fact, the industry is yet to crystallize in terms
of definition and market size, among others. The sector touches every aspect of
human life, from looks to hygiene to palate. Perhaps, defining an industry whose
scope is so vast is not easy.

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After witnessing booming sales and flooding markets with innumerable products,
FMCG companies have had to abruptly apply the brakes and look for various
ways to save costs. The MORE THAN RS. 43,000 crore (listed companies)
FMCG industry in India, which has been on a roll for many years, faces tough
times ahead, although many segments still shows good growth.

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 Nestle India

Nestle India is a subsidiary of Nestle S.A. of Switzerland headed by Mr.Martial

G.Rolland, Chairman And Managing Director. With six factories and a large
number of co-packers, Nestle India is a vibrant company that provides
consumers in India with products of global standards and is committed to long
term sustainable growth and shareholder satisfaction. The Company employs
over 4500 people and for the full year 2005 Nestle India recorded net sales of
Rs. 20477 Mio.
Nestle has been a partner in India's growth for the past nine decades and has
built a very special relationship of trust and commitment with the people of India.
The culture of innovation and renovation within the company and access to the
Nestle Group's proprietary technology/ Brands, expertise and the extensive
centralized Research and Development facilities helps the company to create
value that can be sustained over the long term. Nestle India manufactures
products of truly international quality under internationally famous Brand names
such as Nescafe, Cerelac, Maggi, Milky Bar, Milo, BarOne, Nestea and Kit Kat
and in the recent years the company

has also introduced products of daily consumption and use such as Nestle Milk,
Nestle Dahi, Nestle Butter, Nestle Fruit 'n milk ready to drink beverage and
Nestle Pure Life bottled drinking water.

Nestle India Ltd, 51% subsidiary of Nestle SA, is among the leading branded

food player in the country. It has a broad based presence in the foods sector with

leading market shares in instant coffee, infant foods, milk products and noodles.

It has also strengthened its presence in chocolates, confectioneries and other

semi processed food products during the last few years. The company has

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 launched Dairy Products like UHT Milk, Butter and Curd and also ventured into

the mineral water segment in 2001. Nestle’s leading brands include Cerelac,

Nestum, Nescafe, Maggie, Kitkat, Munch and Pure Life. PRODUCT

Quality is the essential ingredients in all of our brands and the reason why
millions of people choose Nestlé’s products every day. Our consumers have
come to trust in Nestlé’s commitment to excellence and turn to Nestle brands to
maintain nutritional balance in a fast paced world.

BABY FOODS
The production of infant food goes right back to the origins of the Nestle
Company. Henri Nestlé’s `Farine Lace’s was the first product to bear the Nestle’
name.
In 1867 a physician persuaded Henri Nestle’ to give his product to an infant who
was very ill—he had been born prematurely and was refusing his mother’s milk
and all other types of nourishment. Nestlé’s new food worked, and the boy
survived from the very beginning, Nestle' product was never intended as a
competitor for mother’s milk.
In 1869, he wrote; “During the first months, the mother’s milk will always be the

most natural nutrient, and every mother able to do so should herself suckle her

children.”

The factor that made baby foods success in the early days of the Nestle'

company—quality and superior nutritional value—are still as valid today for the

wide range of infant of infant formula, cereals and baby food made by Nestle'.

The World Health Organization (WHO) recognizes that there is a legitimate

market for infant formula, when a mother cannot or chooses not to breast feed

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her child. Nestle' markets infant formula according to the principles and aims of

the WHO International Code of Marketing Breast Milk Substitutes, and seeks

dialogue and cooperation with the international health community and in

particular with the WHO and UNICEF, to identify problems and their solution.

Nestlé’s expertise as the world’s leading food manufacturer

Gained over more than 125 years, is put the disposal of health authorities, the

medical profession and mothers and children everywhere.

Milk based products and baby food contributes to 34% of Nestlé’s turnover. For

ensuring regular procurement of good quality milk, Nestle' has developed a

network around its Moga factory for collection of fresh milk everyday from the

farmers. Nestle' has a dominating 87%market share in the baby weaning foods

with its Cerelac and Nestum brands. Infant milk powder is sold under the

Lactogen and Nestogen brands. Brand loyalties are very high in categories

such as infant food and weaving cereals, enabling the company to command a

price premium.

DAIRY BRANDS

Nestle' has long been a major player in the dairy industry, originally with well

known shelf stable brands such as Nido, Nespray, La Lechera and Carnation,

then building a strong international presence in Chilled dairy and Ice cream under

the Nestle' brand.

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Innovation and renovation play a major role in the development of milk based

products as well as of breakfast cereals, managed as a joint venture with

General Mills.

The area of nutrition, with its benefits to health and wellbeing, is having a

significant impact on the development of our business. A wide range of proven,

science based solutions such as starter and follow-up formulas, growing-up

milks, cereals, eternal diets, oral supplements and performance foods are

actively developed and successfully brought to market under the Nestle' brand.

BREAKFAST CERAELS

although cereals have been with mankind in form or another for millennia, it was

not until the mid 19th century that scientific research, technological innovation

and then influence of a group of American health reformers, gave rise to the

currently foodstuff we know today as breakfast cereal.

Nestle' has a joint venture with General Mills outside North America, Cereal

Pardoners Worldwide, which is active in more than 80 countries.

The joint venture began in 1990 and its rapid growth has been characterized by

branding and lately the launching of breakfast cereal brands into the fast-growing

cereal bar market.

ICE CREAM

There are many myths and stories as to the invention of ice cream: was it Macro

Polo who brought it back from China (along with pasta)? Probably not,

considering he most likely never visited China.

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The story of its popularity is however connected with the invention of technology

to make it on an industrial scale and to keep it cold once made. Before

refrigeration techniques, food was frozen with the aid of ice mixed with salt which

was either stored in ice house or shipped from cold countries. But then at the end

of the 19th century, both making and freezing it became easier and together with

the invention of the ice cream cone made the product boom.

Today the United States is the absolute leader in terms of volume consumed but

the highest per head consumers are in New Zealand. Flavors you’d never

thought of and yet they’re commercially available:

Sorbets- Smoked Salmon, Tomato, Cucumber Ice-Creams – Garlic, Avocado,

Sweet Corn.

CHOCOLATE & CONFECTIONARY

The story of chocolate began in the New World with the Mayans, who drank a

dark brew called cacahuaquchtl. Later, the Aztecs consumed chacahoua and

used the cocoa bean for currency. In 1523, they offered cocoa beans to Cortez,

who introduced chocolate to the Old world, where it swiftly became a favorite

food among the rich and noble of Europe.

From the beginning, turning raw, bitter cocoa beans into what one 17 th century

writer called “the only true food of the gods” has been a fine art, a delicate

mixture of alchemy and science. Centuries ago it was discovered that by

fermenting and roasting the beans, an almost otherworldly flavor could be

created.

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In 1875, after years of trying, a 31-year old candy madder in Vevey named

Daniel Peter figured out how to combine milk and cocoa powder. The result –milk

chocolate.

Peter, a friend and neighbor of Henri Nestlé’s started a company that would

quickly become the world’s leading maker of chocolate. For three decades the

company called Peter, Cailler, Kohler relied on Nestle for milk and marketing

expertise. In 1929, the almost inevitable merger took place as Nestle’ acquired

Peter, Cailler, and Kohler.

Indian chocolate market is growing day by day. Premium segment is opening

upon. The companies like Cadbury’s are launching indigenous product made to

international standards of the 20,000 tonnes chocolates market worth about Rs

400 crore, Cadbury’s accounts for around 65% of market share followed by

Nestlé’s around 23%. Amul has 5% of the share, with the minor players taking

the Rest.

5 STARS: As energy bar, earlier targeted to teenager, before launch of perk 5

star energy bar positioning made it snacking chocolate with Nestle' pitching Bar-

one in 1993 gaian it “For those in between times”.

MUNCH: Munch is the market leader in the chocolates. It is the largest selling

chocolate in India & is followed by Cadbury’s Dairy Milk.

E’CLAIRS: competing in the chewable toffee segment, E’clairs was relaunched

by Cadbury’s during the mid-90 with a new name milk-e’clairs. Its worth is 4000

tones now. Nestle' also presents here NESTLE' E’CLAIRS. Due to launch of

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multigrain’s Cadbury can not pay attention to brands like Mr. Pop Candy

Lollypop.

KIT-KAT: Kit- Kat which was launched in India in 1995, today leads the

chocolate coated wafer bars category. It has 11.5% share of chocolate market.

But Cadbury’s perk is with9%.

PRODUCT PRICE WEIGHT

KIT- KAT Rs. 14 36 gm.

PERK Rs. 10 2x17.5 gm.

Nestle' forayed into chocolate & confectionary in 1990 and has cornered a fourth

share of the chocolate market in the country. The category contributes 14% to

Nestlé’s turnover. It has expanded its products range to all segments of the

market the Kit-Kat brand is the largest selling chocolate brand in the world. Other

brands include Milky Bar, Marbles, Crunch, Nestle Rich Dark, Bar-one, Munch

etc.

Amul is also competing in this category especially in western regions of India. But

Nestle' still has its own position in the market. The sugar confectionary portfolio

consists of Polo, Soothers and Frootos. All sugar confectionary products are sold

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under the umbrella brand Allen’s. Nestle' has also markeys some of its imported

brands like Quality Street, Lions and After Eight. New launches such as Nestle’

Choco Stick and Milky Bar Choo at attractive price points to woo new consumers

chocolate confectionary sales registered a strong 21.5% of growth in 2005 aided

by good volume growth in Munch, Kit-Kat and Classic sales. Nestle' relaunched

Bar-One during the year 1993.

PREPARED FOODS

Convenience foods—packaged soups, frozen meals, prepared souses and

flavorings----date back more than a century. With the industrial revolution came

factory jobs for women and less time to prepare meals.

The problem was so widespread that it became the object of intense study in

1882 by the Swiss Public Welfare Society, which offered a series of

recommendations, including an increase in the consumption of vegetables.

The society commissioned Julius Maggi, a miller with a reputation as an

invention and capable businessman, to create a vegetable food product that

would be quick to prepare and easy to digest. The results –two instant pea soups

and an instant bean soup --- helped launch one of the best known brands in the

history of the food industry. By the turn of the century, Maggi & Company was

producing not only powdered soups, but bouillion cubes, sauces and flavorings.

Maggi merged with Nestle' in 1947.

Buitoni the authentic Italian brand, which has been producing pasta and sauces

in Italy since 1827, became part of the Nestle' Group in 1988.

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Ready to cook food/ cooking aids are sold under the umbrella brand name

Maggie. Culinary product account for about 14% of Nestlé’s turnover. Maggie is

the market leader in the noodles (45% market share), the Ketchup (43% market

share) and soups (41% market share) categories.

Other products sold under the umbrella brand Maggie, are ready-to-cook

gravy/sauces, soups, seasonings, as well as traditional Indian foods such as

pickles and instant snack mixes (dosa mixes). New taste variants are

continuously launched to add variety to the product offerings.

HLL, Heinz, Knor & Indo Nissin Foods are Major competitors in this category.

Gits mixes, Top Raman, Hot serve, are some products that are in competition to

products under Maggie brand. But Maggie has used Quick and Easy cooking as

its Unique Selling Preposition that worked to distinguish the Nestle' to lie ahead

than all brands. HLL as brand Wagon is the part of our daily life uses creative

selling prepositions to maintain its position as the top FMCG firm in India. Its

marketing strategies (including launch, pricing & distribution strategy are good

enough to shatter the competition, so Nestle' is working as an early worker to

remain and lead in the market.

The distribution network of Indo Nissin food is strong enough & it has covered a

large portion of market in very short time. Its distribution network is not very long

& the prices are also low. The company had adopted a low budget promotional

strategy and is very fine at merchandising. These all are working together for the

good of the company.

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Nestle' has the advantage of great brand image & it is actually working for

maintenance and growing it.

BEVERAGES

In 1937, Nestle' scientists perfected a powered coffee product that was

introduced in 1938 under the brand name Nescafe’- the world’s first

commercially successful soluble coffee.

It became so popular during World War II that for one full year the entire output of

the Nescafe’ plant in the United States (more than one million cases) was

reserved for military use only. Since then, Nescafe’ has become one of the

world’s best-known brands. In addition, Nestle' is a major producer of chocolate-

based and malted drinks.

Its leading brands, Nesquik, Milo and Nescau are very popular with a growing

number of young people around the world. Nestle' ready-to-drink beverages

Nestea and Nescafe’ are sold in various forms (cans, bottles). These are

distributed by Nestlé’s join-venture with the Coca-Cola Company, Beverages

Partners Worldwide. Nestle' is also present in fruit juices (Libby’s) as well as

espresso coffee in capsules (Nespresso).

Beverages like coffee, tea and health drinks contribute to about 30% of Nestlé’s

turnover. Beverages sales registered a 155 yoy growth during 2005. while about

14% of sales come from domestic market, exports contribute to about 16% of

sales.

Nestle' Nescafe’ dominates the premium instant coffee segment. Nestlé’s other

coffee brand Sunrise has also been relaunched under the NESCAFE’ franchise

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to leverage on the existing equity of the brand. Nestle' has focused on expanding

the domestic market through price cuts and product repositioning. However it has

been losing share in the domestic market, where it has a 37% market share.

The major competitors are Coca-Cola, which launched coffee & tea under brand

name Georgia in 2002. Its tea in four flavors which are classic, Adark, Masal &

Elaichi and coffee in three variants Classic, Cappuccino & Mochaccino to suit the

taste of customer. They adopted the strategy to distribute vending machine to

even small retailer so as to cover a large market. Tata coffee also Works against

Nestle'. But n is still the market leader in terms of market share, Customer’s

choice & quality.

Milo, brown-malted beverages was launched in 1996. It has an estimated

volumes share of about 35 in the malted food drink segment.

Cadbury’s Bournvita & HLL with Boost are the major players in

the market along with Milo. Bournvita is with largest market share of 35%. The

promotional strategies of Nestle' for Milo are working fast for the good of Milo.

Nestle' has launched non-carbonated cold beverages such as Nestea Iced Tea

and Nescafe’ Frappe during 2002.

BEVERAGES

Nestle' Food Services provides food and beverages professionals with a wide

selection of branded products. Our solutions meet the growing opportunities to

service consumers in out-of-home channels.

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Beverages solutions featuring well known consumer brands such as Nescafe’,

Nestea and Nesquik as well as host professional brands including Minor’s,

Chief and Davigel are part of the diverse portfolio of Nestle' Food Services.

Working to meet the need of Food Service operators across a wide spectrum of

business channels such as quick service restaurants supports our commitment to

giving consumers the brands and quality they come to expect and rely on in the

home as well as out of the home.

BOTTLED WATER

Nestle' brgan its entry into the water business in 1969 with a 30% stake in the

owners of the Soci’e’te’ Ge’ne’le Des Mine’rale’s De Vittal. It acquired a

controlling interest in SGEMV in January 1992, and went on in May of the same

year to buy the entire Perrier Group.

In 1992, Nestle' was the first company to dare to launch a mineral water, Valvert,

in five different countries at once. It’s originally lied in the use of an all-new

plastic, P.E.T. (Polyethylene teraphthalate), which is stronger and more elastic

than the PVC used since 1968. Besides P.E.T. is recyclable.

By the end of 1997, the group was present on every continent, and the purchase

of San Pellegrino gave it the leadership in the Italian market. In 1998 f or the

first time in its history, Nestle' associated its name with bottled water: Nestle’

Pure Life.

The brand was launched in Pakistan and soon appeared in Brazil, followed by

Argentina, Thailand and Philippines, China and Mexico in 2000. in 2001 India,

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Jordan, and Lebanon followed and in 2002, Egypt, Uzbekistan and then United

States.

Nestle’ Pure Life is drinking water that has been treated and rematerialized

using a standardized industrial process to ensure purity and quality and is

marketed in emerging countries.

A second product with the Nestle' name was launched in May 2000, this time in

six European countries: Nestle’ Aquarelle. A natural spring water currently from

nine different springs in France, Germany, Belgium, Hungry, Italy and Spain,

Nestle' Aquarel also uses the multi-source concept to satisfy new consumer

expectations, especially for water with a low mineral content that the whole family

can drink.

In April 2002, the group changed its name to Nestle' Water’s, a token of Nestle'

decisive commitment to the bottled water market, which now represents 9% of its

sales. Today, Nestle' Water’s is established in 130 countries and markets about

70 different brands. The group is able to offer top quality brands ad innovative

packaging to meet the individual needs of the water consumer all over the world,

whenever, wherever and however thanks to the wide variety of its offer in terms

of distribution and product mix.

PETCARE

Nestle' entered the pet care business with the purchase of carnation in 1985, and

we consolidated our position in Europe with acquisition of the spillers brand in

1998, and further with the acquisition of Ralston-Purina in 2001 creating Nestle'

Purina Pet Care.

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Carnation for its part developed the Friskies brand in the United States in the

1930s and in selected markets in Europe and Asia since the 1960s. Today

Nestle' is well-positioned with a balanced portfolio of internally developed and

recently acquired brands.

Technologies to develop and add value continually for pets and their owners are

engineered into our current product range. These include state-of-the-art

nutritional innovations, such as products which help maintain feline urinary tract

health or innovations for the most discriminating of pets and their owners. Nestle'

has already become an industry leader and we continue to develop our

international presence.

CONSUMER SERVICES

At Nestle' we are committed to offering consumers high-quality food products that

are safe, tasty and affordable. The Nestle' seal of guarantee is a symbol of this

commitment.

We also believe in maintaining regular contact with our consumers. This applies

both to how we present our products and to how we address our consumer’s

questions and concerns. When Henri Nestle' prepared his first boxes of infant

formula for sale, he put his address on the packages so people would know

where to go if they had questions. Today our consumer relationship panel with

the words “Talk to Nestle'” expresses the same commitment.

This is why we have a worldwide Nestle' consumer services network devoted to

caring for our consumers. Our people have expertise in a wide range of areas

30
such as nutrition, food science, food safety and culinary expertise. They provide

the prompt, efficient and high quality service that consumers expect from Nestle'.

In addition we teach them talk with consumers and above all, to listen. Listening

helps us to understand what people want. Nestle' uses the insights gained from

relationships with consumers to driver product development.

At Nestle' we care for our consumers because our success depends on meeting

their needs and expectations. Through listening and understanding we can make

products that they will want to use all through their lives.

PROMOTION

Promotion is an attempt to influence customers. Its aim is inform & remind the

prospective consumers of the company’s offer & to advocate the cause of its

production in the minds of its audience. Thus informing, reminding & advocating

about the company’s product are real purpose of the promotion component of the

mix.

NIL has rightly understood the production of a good product is not enough to

ensure success in the market, unless target customers are aware of its

existence, features and products. So company has framed a very strong and

very wide communication plan.

31
ADVERTISING

NIL is associated with MUDRA advertising company in India. It has properly

studied the market and developed the commercials in several languages. NIL

has booked spot for the advertising in almost all the channels.

EXHIBITIONS & TRADE SHOWS

It also participates in trade shows & exhibitions.

IN 1997, at Jawaharlal Nehru Stadium in an exhibition NIL displayed its all old

and new products. This was the time when MILO was launched in India.

AHARA 97, Here Nestle' India Ltd. presented its wonderful world of Nestlé’s

recipes along with its products. It also exhibited the various to make Maggie

tastier. This shows that Nestle' never leave its product even if it is market leader

& is the good source of its revenue.

FOOD EXPO 98, organized by CII & attended by over 100000 people. The

Mumbai branch of NIL ensured high visibility for its products like products under

Maggie brand, MILO & chocolates by setting the venue ablaze with Nestlé’s hues

Vic banners, umbrellas posters & product displays.

INTERNATIONAL FOOD CONFEDERATION 1998: IFCON provided opportunity

for the leading, international food scientists, technologists & research institutes to

reflect massive change sweeping across the food processing sector.

FOOD EXPO 1999:

In October in Chicago NIL participated there also.

32
CHILDREN SPORT MEET 98:

At DPS R. K. Puram children between age group of 4-13 years put their best foot

& arm forward. Attired in colorful MILO T-Shirts & Caps they participated in 12

events.

FREE GIFTS

Like giving school Kit i.e., pen scale etc, with Maggie.noodles & chocolates, Free

Cricket bag or a sport watch, badminton racket, bag etc on the payment of a very

minimal amount of Rs. 10 with Milo.

OTHERS

Some other examples of exhibition in which NIL participated are:

India international trade fare (IITF).

 Nestle' Hungama 1998.

 Maggie Display Contest.

 Splendor 1999.

 Boarding School Development Campaign.

 Moga Summer School Camp.

The competitors of NIL are also very Active and they also participate in these

events and sponsor some event in there own ways & methods. HLL participates

in most of the regional trade shows through its retailers. It displays its new

products at large. HLL is the 1st largest company of India in terms of advertising &

33
promotional expenditure. It also invents largely on window display contests retail

level.

Amul promotes its products by using emotional appeal in order to

use the emotional aspects if Indian citizen. It uses kiosks and hoardings to

promote its product range. The promotional expenses of Amul are not so big as

that of the MNC’s but still it is a respected firm in our eyes.

Cadburys under its promotional campaign that are designed by Ogilvy & Mather

the adv shows the power of positioning with emotional benefits and it really works

for Cadburys & leaves it with dramatic increase in sales.

NESTLE IN THE RACE OF TOP BRANDS

A 50 country A.C. Nielsen survey finds out which brands have been successfully

extents across categories across the globe. Business today presented an

exclusive cross-section of the findings with a slant on India. Nestlé’s the topper

among Top mega foods & Beverages Brands.

CADBURY SCHWEPPES NESTLE

GLOBAL RANK 329 31

COUNTRY Britain Switzerland

MKT. VALUE (US $ MILLION) 11962 82997

PROFIT (US $ MILLION) 1049 5805

34
The brand value of Nestle is greater than $ 1 billion. In global Brand scoreboard

Nestle has got 60th Rank (2005) with:

BRAND VALUE % RANK

2005($ billion) 2004($ billion) CHANGE 3 2

Nestlé 4.46 4.43 +1 60 ………

India

From chocolates to baby formula the Swiss food giant keeps the world pantry

stocked.

Nestle India is ranked 6th top ad spender of the year in 2002. It spended Rs.

129.92 crores on TV&AD.

BUSINESS TODAY

The 4th BT Stewart study reveals that NIL is the 9th largest wealth creating

company in India with Money value added (MVA) of 4681 & High positive

Economic value added (EVA) of 100.

MVA is the difference between capital invested & its market valuation. EVA is the

economic profit after deducting the cost of all the capital employed (both Debt &

Equity) in all the business to generate operating profit.

35
A RESEARCH BY BUSINESS INDIA OF TOP 100 SUPPER BRANDS

IN TERMS OF SALES

Nestle' India is ranked 49th among super hundred companies for the year 2004 & 2005

in terms of sales.

2007 (in crores) 2008 (in crores) % change

NESTLE INDIA 1820.50 1936.30 6.36%

CADBURYS & AMUL WERE NOT THERE IN THE LIST OF TOP 100

IN TERMS OF PROFIT

Profit is the major objects of every organization. In terms of profit sample list

Nestle' India is ranked 32nd in 2005 & 37th in 2004 with profit of 259.60 crores in

2005 & 173.20 crores in 2004 with a change of 46.88%.

Cadbury was ranked 90th with 73.60 crores in 2003 & 59.70 crores in 2002.
PROFIT RANK
2005 (In crs.) 2004 (In crs.) 2005 2004 Change

Nestle' 259.60 173.20 2 7 9.88

India
Cadburys 73.60 59.70 0 0 3.28
India

IN TERMS OF MARKET CAPITALISATION

36
Market capitalization is an important barometer of Indian incorporation’s

performance. And many a management today is very concerned about market

capitalization & how it compares with that of its peers. Hence there is a growing

concern among promoters to see how they can reward their shareholders and

see that the stock prices reflect the performance. Nestle' was ranked as followed.

MARKET CAP. RANK

2005 (in crs.) 2004 (in crs.) 2004 2005 Change

Nestle' India 1707.12 70.81 1 6 26%

IN TERMS OF ASSETS

With the current management focus on efficiently, the asset to turn over ratio

assumes importance because Corporate India has undertaken a major

restructuring exercise, resulting in trimmer balance sheet & improved sales &

profitability on smaller assets bases.

NFA RANK
2008 (In crs.) 2007 (In crs.) 2008 2007 % Change

Nestle' India 4.92 5.06 68 63 0.15%

Cadburys 4.93 4.37 67 75 0.56%
India

IN TERMS RETURN ON CAPITAL EMPLOYED

So, Nestle' India continues to deliver strong top line and bottom line growth

driven largely by domestic foods business. A diversified product portfolio coupled

37
with continues new launches should see the growth momentum continuing into

the foreseeable future. The parent company has been increasing its commitment

to the Indian subsidiary via launch of new products and is also increasing its

stake at progressively higher levels. Already in first half of 2006its holding has

increased by further 1% by more than 5% over the last12 months, all through

open market purchases. The high growth to NIL is coupled with High ROCE

……. What more can an investor want? Impressing percprmance of NIL in the

past is likely to continue due to several reasons:

• Consumption of its main categories in the foods business is even now,

largely an urban phenomenon .there is enough scope to increases

consumption of its products in the larger towns before thinking about

tapping the semi urban and rural areas.

• Trends like nuclear families, working couples and general paucity of time

in urban areas coupled with increasing awareness about health and

hygiene will drive the growth of convenience products in the processed

foods industry.

• The company has been gaining market share in certain categories lid

chocolate and malted beverage .this trend many well continue as Nestles

share even now in this categories is very low.

WELL DIVERSIFIED PRODUCT PORTFOLIO INNOVATIVE APPROACH

The company predict portfolio is well diversified and management is always

loading for new categories of new products in exiting categores.also the

38
company a my has been at the forefront launching new price points for existing

predicts such as chocolate and new innovations such as y to drink coffee

sachets.

PRODUCT PROFILE
“POLO”

Background

POLO is one of Nestlé’s key strategic confectionery brands worldwide, and

represents Nestlé’s first entry into the large 50,000 tonne p.a. (organized sector)

Indian Sugar confectionery market.

While mint leaves are widely used as a culinary ingredient, and the taste is well

liked and accepted, the mint confectionery habit is a very limited one. NINTO, the

only national brand, has a volume of 250 tons p.a. There are also a couple of

small regional brands: GOLD and ZERO. And of course, smuggled POLO sold

for between Rs. 8/- to Rs. 12/- for 26 g roll (samples available in your market as

well)

The underdeveloped state of this market is perhaps due to the almost complete

absence of any sustained, national level, marketing inputs. A related market

which has responded well to marketing inputs in mentholated sweets

(Vicks/Halls/Strepsils etc.) which is estimated at over 5000 t.p.a.

39
POLO will therefore, have to pioneer the development of the market for mint

confectionery. This is an opportunity for us to firmly establish ourselves and

dominate this market over the long run.

Marketing Plan

Objective: Minimum tonnage of 700 tons in 1995

Product & Positioning: POLO will be launched in two packs:

1. A 25 g roll containing 16 sweets; 20 rolls to a shrink wrapped display outer; 30

display outers to a shipping carton: Net weight 30x20x25g = 15 kg

Standard case : 15 kg

2. A single piece flow pack containing one sweet. To be packed into polybasic

and shipping cartons. Sizes not yet finalized. This pack has been very successful

in Thailand as a low unit cost trail/sampling/impulse purchase pack.

Each sweet will be white in color and round in shape with a hole in the middle,

and will carry "POLO" branding in raised letters on one side. The mint flavor will

be mild and refreshing. The attempt will be to be as close a possible to the

international product while using local (vegetarian) raw materials.

POLO is small convenient enough to fit in almost any pocket or handbag and can

be taken anywhere. The discreet nature of POLO makes it very acceptable.

Once the tube is opened, it is easy to reseal to keep the product fresh. POLO is

enjoyable and social: to offer someone a POLO does not suggest they need a

breath freshener.

40
Different people have different ways of eating POLO: some people crunch

POLO, others suck them until they disappear on the tongue. The tongue can play

games with POLO, and this, combined with the hole, provides a unique and very

personal eating experience. POLO should never be eaten in a hurry: its mild

refreshing mint flavor should be savored.

While POLO is targeted at people of all ages (in metros/mini metros, A&B SEC)

the target for POLO advertising will be adults, 15-35 who are warm, sociable,

friendly, with a sense of humor.

The advertising will seek to position POLO as "the mild, refreshing mint sweet

with the hole that's universally acceptable" and do this in a manner which is

appealing, attractive, and above all, liked by consumers, because consumers will

be attracted to the personality of the brand.

GENERATE IMPULSE

It is a startling fact that 70% of confectionery is bought on impulse?

Purchases of confectionery (for self consumption as well as for gifts) are not in

general, pre-planned.

Peoples are attracted by seeking something known to delicious

They recognize a familiar brand and buy on impulse.

How can we obtain maximum impulse sales?

By having:

41
1. A popular brand

2. An eye catching pack

3. Good advertising

4. The most prominent display position

GENERATE EXCITEMENT

1. Breaking away from our normal retailers' margin of 10% and 12.5%, they offer

the retailers a wholesome margin of 20%, and a TPP of 5% adding up to a

25% margin!! For the first time in Nestle history.

2. To encourage faster movement and therefore greater profits for the retailers,

they have:

• A very attractive packaging and a low price

• Attractive POS and Dispensers for key outlets

• Each grey box is printed and shrink wrapped, to act as a dispenser!

3. Grab the hottest spot in any outlets:

• The cash counter

• The front counter

• The check out counter

4. Their selling in Norms are:

42
• 'A Class - 2.5 grey boxes

• 'B' class - 1 grey box

Their emphasis is on wide distribution, without loading anyone outlet.

CRUX OF THE MATTER

For the first time they have a product, which is affordable by everybody at Rs. 3/-.

It is convenient to carry and eat; where no barriers are put on distribution. So,

let’s show the world what widespread distribution is all about.

Nestle have done it in the past. There is an opportunity to reassert their

supremacy. A recent survey by A&M Magazine rated Nestle as having the best

relations with the trade in India. Now use this strength for POLO

To recap:

Go all out to sell POLO: the mint with a hole.

• 70% confectionery sells on impulse

• For success they have:

- a good product at affordable prices

- Wholesale retail margin

- an eye catching pck

- good advertising

What they need:

43
- a prominent display

- widest possible distribution

Their objectives:

- Each and every Nestle outlet

- Unconventional outlets

How do they get to these outlets?

- Cycle boys

- Wholesalers

2008 Sales Volume: POLO (In standard cases)

October -995

November - 755

December - 850

44
ON TEAMMATE

It consists of an ORG synopsis, its analysis and a report on the various studies

present within the organization to come out with facts and hypotheses which may

be helpful in facilitating the launch of Teammate.

The findings are:

1. Total milk powder market size - 66200 tons (including IMF)

2. Size of the market for tea whitening = 26000 tons.

Factors working for Teammate

1. Price index of 93. This should expand the market and corner a huge chunk of

the expanded market.

2. Higher value for money perception of such a brand

3. Industry likely to be increasingly price competitive due to increasing

availability of liquid milk in future

4. High growth of economy segment

5. Whitener market growing rapidly (Due to switching from IMF's whitening

tea/coffee to dairy whiteners)

6. 65% of non IMF milk powders used for tea whitening

7. Great distribution strength of Nestle

8. High on proteins (An attribute considered important by consumers).

45
Factors working against Teammate:

1. Increasing availability of liquid milk

2. Danger of odd smell/taste (Ref. Customers have complained of odd

smell/taste in Everyday Dairy Whitener (EDW). Necessary to be very careful

in a soya based whitener).

3. None enhanced with vitamins/minerals this. (This is an attribute considered

important by users of Amulspray)

4. Single purpose product

5. Danger that EDW may be cannibalized

6. High brand loyalty to existing brands

7. People switch to milk powders after having used an IMF (Where does

Teammate fit in this natural progression).

Facts gleaned from ORG data

EDW losing market share heavily due to entry of Amulya.

EDW is the market leader (if Amulspray misuse is exlcuded) in Metors, class I, II,

III and IV towns (This implies great distribution strength). However, EDW is losing

market share in metros, class II and III towns. It is gaining in class I and IV towns.

46
EDW is the leading brand outlet wise with highest sales through grocers, general

stores and chemists. However, it is losing market share in groceries and general

stores.

East and south are the largest markets.

West Bengal, Kerala, UP and Madhya Pradesh register the highest sales in the 4

zones.

South and West zone are the fastest growing with North Zone declining

Andhra Pradesh, Maharasthra, West Bengal and Rajasthan are the fastest

growing states in the 4 zones. Madhya Pradesh, Punjab and Haryana are

declining.

500 gram refill pack registers the highest volumes

Calcutta and Madras are the highest volume metros followed by Delhi, Bombay

and Bangalore. However, Bangalore is the fastest growing market followed by

Calcutta.

a) Amongst the metros EDW is the market leader in Bangalore, Bombay,

Calcutta & Delhi with Amul WMP leading in Madras

b) Sapan Dairy special & Amulya have registered the fastest growing overall in

the 5 metros.

EDW has registered declines in North, East and South Zones but has registered

growth in the West Zone.

47
Before launching Teammate, a survey was conducted by Nestle India Limited so

that it could launch Teammate at the right target market at the right time at the

right price and to the right people.

Estimation of size of market for tea whitening

Two separate studies judged that size of market for tea whitening is 39% of total

milk powder sales and 65% of milk powder (non IMF) sales. Both are close

enough and the size of the market for tea whitening is 26000 p.a.

Characteristics of the market

a) Economy segment - 47000 - 51000 tons

Premium segment - 15000-19000 tons

b) Non IMF market has been growing at 10% p.a. with the economy segment

growing at a faster rate than the premium segment.

c) Nestle has a 78% of the premium segment but only an 18% share of the

economy segment

d) Dairy Whiteners comprise the fastest growing segment. Thus, the time is ripe

for a brand like Teammate to be launched in the market as a whitener in the

economy segment.

Use of milk powder:

1. As a milk substitute when real milk is in short supply

2. As an additive/thickening agent

3. As a taste enhancer in tea/coffee

48
Value for money perceptions of consumers (based on):

1. Lesser quantity required for whitening

2. Thicker milk constancy

3. Larger, economy packs (1 kg packs preferred by many consumers).

4. A sweet taste which mean lesser sugar consumption.

ATTRIBUTES CONSIDERED IMPORTANT

ATTRIBUTES % OF RESPONDENTS IN FAVOR

Dissolves easily 89%

Tasty milk 59%

Vitamins/Proteins 59%

No smell in milk 56%

Variety of uses 51%

Economical to use 51%

Sweet taste 48%

Before launching Teammate following attributes have to be considered.

49
• to save on excise, they do not enhance the product with vitamins

• 12% of consumers have found EDW to have an odd smell/taste. They shall

have to ensure that the taste is good and that there is no smell to ensure

acceptability (especially since it is a soya based product)

• Variety of uses that a product can be put to 'was as important consideration'.

Teammate may fall short here. However, if Bonus is a success, then it is

possible that Teammate could be used to make soya milk or soya curd.

• Teammate would have a price index of 97-99 and it is recommended that it

has a sweet taste so that consumers have to use less sugar thus enhancing

their value for money perceptions.

Competitors of Teammate

• EDW

• Amulya

• Anikspray

These brands are used mainly for tea whitening, are easy to dissolve and

perceived as brands for modern people.

Dangers of cannibalization

With EDW being the market leader in the tea whitening category, the danger of

cannibalization by Teammate is great. One possible way out is to position EDW

as a multi purpose powder and Teammate as a brand specifically for tea

50
whitening. However, this may lead to diffused positioning of EDW and depressed

sales of Teammate.

PRICE INDICES OF THE EXISTING BRANDS

BRAND PRICE INDEX

Amulspray fix 100

Amulspray tin 108

Amulya WMP tin 121

Amulya fix 105

Sapan D. Special Fix 115

Sapan D. Tin 125

EDW bag 113

EDW tin 133

Everyday Goldfix 158

Sagar 97.5

Milkcare IF 158

Milkcare FP 158

Lactodex FP 158

Dexolac IF 164

Glacto tin 128

LFP flx 143

LFP tin 153

LIF tin 153

NSTG flx 114

51
 NSTG tin 114

MILO

BACKGROUND

Milk additive market in India in formally here for the last three to four decades.

Over 2 decades, there have been only two large players in the beverage

segment - Bournvita and Boost. Horlicks and Complan are traditionally more

strong brands in the South. Mumbai, being the base for Cadbury India Limited,

Bournvita has been the strong brand here. Cadbury's aggressive sales

distribution in Western Region is largely responsible for this. On communication

front, Bournvita has had changed in positioning twice, Milk additive brands are

traditionally positioned on three benefits - Taste, Nutrition or Energy.

Bournvita is positioned closer to taste and energy benefit while Horlicks,

Complan are closer to nutrition associated with the needs of growing children. As

per an article in A&M magazine published in October 1995, brown beverage

market was nearly under saturation with diminishing growing rate, and the

possibility of a new entrant in this field was minimal.

MARKETING PLAN

Objective: Launching of international brand 'Milo' in India.

PRODUCT AND POSITIONING

52
In August 1996, Nestle launched its internationally known Milo brand in India.

Initially, launch was limited to Tamil Nadu. Estimated market of brown beverages

in 1995 was 15,000 tons and market was growing with 6% per annum growth

rate. Milo was launched with a pricing index of 100, 99 and 94 respectively of

Milo. Boost and Bourn vita. With a slogan that said "Win with Milo" and its

association with energy and sports, it was launched in an attractive pack of green

color.

In February 1996, Milo was launched in the city of Mumbai. The launch was a

rather simple one with lease media hype. Instead of this, sampling was done in

schools and at the places where direct trial to the end user could be included.

There are few sports competitions also organized in schools as a launching

strategy for Milo.

After the months of launch of Milo, it was necessary to understand how Milo in

doing on the retailer front and what is the retailer's response on various issues

associated with distribution of Milo. At the same time, it was necessary to

understand the awareness of Milo in consumers and their purchase and

consumption habits of milk additive brands. Milo being a relatively new brand in

India, Nestle carried out a research on its own.

Recall of different brands - All the brands had similar overall recall if the TOM

spontaneous aided recalls are added. However, in total spontaneous recall (TOM

and unaided added), Bournvita had a 100% recall, followed by Boost with 76%.

60% retailers had a spontaneous recall of Milo and no one recalls Maltova.

53
PROMOTION

Retailers most preferred option was of 'On pack Incentive'. This is followed by

price-offs and extra quantity. Practically no retailer like redemption's discount

coupons or contests kind of options. As consumers are not really concerned

much if 4 to 5 rupees off is given or 20 to 50 gms is given extra, gifts turned out

to be the best incentives. Bournvita and Maltiva is considered to be giving

highest promotion and Milo had not offered any promotion since its launch. Milo

should have been launched with a heavy promotion offer so as to induce trial, but

it is not so. Milo had a biter taste, so it is not preferred as a drink for children. Milo

had offered trade promotion only during the time of its launch. This is in the form

of Rs. 5/- against display for a week.

INDUSTRIAL SCENARIO

The processed foods sector, which currently accounts for less than 2% of total
food consumption in the country, is slated to grow at a fast pace. The Indian
Government has identified Food Processing as a high potential industry and has
been creating a policy environment conducive to its growth. Historically, the
policy framework favoured small and unorganized players while the MNC players
were restricted from adding capacities. This led to the mushrooming of a vast
unorganized sector. Large players with strong marketing network and brand
equity were forced to source from third party producers. During the last few
years, however, several food products have been de-reserved from small-scale

54
sector. MNC’s as well as domestic players have made aggressive investments in
the sector. Quantitative restrictions on import of several food products have been
lifted, leading to greater availability of imported products. MNC’s are able to offer
a wider product range, without the need to establish a manufacturing base.

COMPETITION

Baby food and Instant coffee are categories where brand loyalties are very
strong and Nestle is the market leader. HLL is a significant competitor to Nestle
in instant coffee; while Heinz is the main competitor in the baby foods market.
The market for culinary products, semi-processed foods such as noodles, ready
mixes for Indian ethnic breakfast and sweets, is largely an urban market. HLL
and Indo Nissin Foods are the main competitors in these product segments.
Nestle has also achieved a significant 25% share in the chocolate/confectionery
market. The company has recently expanded its dairy products portfolio to
include, milk, curd and butter. The company also forayed into the bottled water
segment with the launch of its Perrier brand in the premium mineral segment and
Pure Life in the purified water segment.

SOME ACQUISITIONS & MERGERS

1866: Company Foundation.

1905: Merger Between Nestle' & Anglo-Swiss Condensed Milk Company.
1929: Merger with Peter Cailer-Kohler Chocolate Suisse S. A.
1947: Merger with Alimentana SA (Maggie).
1969: Vittel (equity interest)
1971: Acquisition of Ursina-Franck (Swiss).
1974: Acquisition of L’ Oreal (France).
1977: Acquisition of Alcon (2002: partial IPO).

55
1985: Acquisition of Carnation (USA).
1988: Acquisition of Buitoni-0-Perugina (Italy).
1988: Acquisition of Rowntree
1992: Acquisition of Perrier (France)
1998: Acquisition of San Pellegrino and Spillers Petfoods
2000: Acquisition of PowerBar
2001: Acquisition of Ralston Purina
2002: Acquisition of Scholler and Chef America
2004: Acquisition of Movenpick , Powwow and Dreyer’s
2007: Acquisition of Valio (ice cream activities)
2008: Acquisition of Wagner, Proteika, Musashi

SOME STRATEGIC ALLIANCES

1981: Galderna
1989: With Clintec (USA).
1989: CPW (USA) (Cereal Partner World Wide).
1990: Nestle' – Walt Disney (USA).
1991: Cooperation with Coca Cola (USA).

LAUNCH STRATEGY

56
Let us begin by recalling a few basic principles of Confectionary distribution.

Selling to cost much. Confectionary is easy every one buy’s it because:

• It tastes great.

• It does not cost much.

• It is all bought frequently.

All this is true. It is also a fact that 70% of confectionary is bought on impulse.

Therefore, whosoever taps the impulse takes the major part of the business.

HOW TO TAP THE IMPULSE?

Buying consumers are usually form one of the three different frames of mind:
First, Mr. Positive, He knows what he wets to ask for.
Second, Mr. Peck-ish. He wants ht confectionary but, makes up his mind after
seeing the displays.
Third, Mr. Impulse he does not go to buy the confectionary but is drawn by the
display & buys on impulse.

HOW CAN WE OBTAIN MAXIMUM SALES?

 A popular Brand.
 Eye catching Pack.
 Good advertising.
 The most prominent display position.

DISTRIBUTION STRAGEGY

57
The aim of Nestle India Ltd. is to cover & open the largest possible number of out

lets in every nook & corner of the country.

HOW IT IS PROCEEDING?

Confectionary can be sold almost any where. In our regular outlets also. Some of

the major and most approachable outlets are:

 A school & college canteen.

 Airport terminal.

 Cinema hall.

 Pan/cigrates kiosks.

 Railway station/train vendors.

The company is looking to ensure that:

Any where the people congregate the aim is the representation in all these

outlets as their distribution objective. Exclusive retail coverage is to focus to on

whole seller, where endless stock could be dumped and from where stock

reaches almost all outlets in the country.

The whole seller channel could give us representation in outlets especially pan

shops where they are not present.

DISTRIBUTION NETWORK OF NIL

MANUFACTURER

C & F AGENTS (1%-3-%

Margin)
58
 SUPER STOCKIST (3%-6%)

STOCKIST (3%-5%)

DISTRIBUTOR (4%-7%)

ORGANISED RETAILER (6%-

18%)

MARKETING STARTEGY

The marketing strategies of NIL are aggressive enough and are designed
keeping in mind.
The changing taste and preferences of consumers.
Attached cost structure.
Working capital management.
Broad based wide products offering is preparing NIL for paradigm shift from Low
Growth Premium Products to High Volume Based Growth Portfolio that will take it
to a strong double digit sales growth with improved profitability.

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 CHANGED PRODUCT PORTFOLIO

According to Mr. Donati, MD of NIL, “The raising profits will not be zeroed down.
Sales growth is important but achieving higher profit is even more important. So
products that don’t make money would be axed out. Nestlé’s product portfolio
has been pruned (macaroni for instance was withdrawn) and it has revamped its
supply chain.”

TEST MARKETING

NIL tests marketed many of its products before launching them in the market, so
as to nullify the risk of failure and large sunk cost. Some of the products that
were test marketed are:
1. Maggie Chinese noodles.
2. Maggie imli sauce.
3. Nestle' Maxi munch.
4. Nestle' Kream-o-cook.
5. Nestle' Fruitips Pagtilles.
6. Nescafe’ Redimi
7. Nestle' Dairymaid.
8. Nestle' has developed special machine for Nestle' Iced tea.

ROLE OF MAJOR PRODUCTS IN MAKING NIL A GRAND SUCCESS

Nestle' India Limited works a lot before launching a product. It does a lot of test
marketing & other marketing efforts for making its product & thus a company a

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grand success. Nestle' believes in renting mind space by creating perception for
the brand in the prospects mind so that it stands apart from the competing brand
& approximates much more closely to what the customer wants. It covers that
space in the customer’s mind as if they have won a long term lease and always
keep out ‘squatters’. The market conditions before & after the launch of some
major brands of Nestle' are given as under.

MAGGIE NOODLES

Maggie Noodles were launch in 1983, where their was a latent need for the
Indian market to make foray into the fast food segment. Previous there was no
trend of instant noodles in India, most of the people were aware of Chinese
noodle only.
In 1982 when Food Specialized Ltd. (associated with Nestle' considered
launching Maggie instant noodles, the company had the option of choosing from
several alternative positions. The product could have been launched, for the sake
of argument, as the means of cooking tasty Chinese dishes at home, or as a “TV
Dinner”, or as a ‘mini meal’.
Through consumer research the company felt that the most profitable position
would be as a tasty, instant snack, made at home & initially aimed at children.
The target market was the in-home segment of the very substantial snack
category. This positioning decision automatically determined the competition
which included all snack products in general. These would range from ready to
eat snacks-biscuits, wafers & peanuts-to ready prepared snacks such as
samosas. All were bought out items.

Maggie noodles were launched in Delhi in January 1983 and it became an

overnight success. The annual target for that market was increased from 50

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tones to 600 tones. The Indian market was tipped to became the second largest
Nestle' market for this product worldwide, next only to Malaysia.
Maggie Noodles, as market results show, found a vacant, strong position and sat
on it as “TASTE TO COOK, GOOD TO EAT” any time snack.

RICH SOUPS (1989): traditionally at home the soup was made from Boiled
vegetables & was used as filler. Maggie soups were convenient, healthy, tasty &
notorious. In first half of the decade the soup market of Maggie grew up to 2500
tones, a large enough size to attract competition in a short time & in 1995
competition sets in.
The company’s market research team gets the latest information regarding the
changing taste and preferences, and suggested steps to improve the product.
Aggressive consumer benefit strategy propelled the market, to touch the 500
tones in subsequent 2-3 years.

MILK MAID

Milkmaid was launched in 1962 by Nestle' as a creamer or whitener for tea and
office. The most interesting thing about Milkmaid is that it has been repositioned
4 times without any considerable changed in packaging & product remained
totally unchanged. But off course it is the illustration & headlines that really
determines the position which the consumer will give the brand in her mind.
This repositioning strategy proved to be a great success for Nestle' each time the
volume of sales got an upward shift & that too by a large denomination. They
believe that the perceived image of the product belongs not to the product but

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rather is the property of the consumer’s mental perception. So the strategy
should be:

“Looks beyond the Product at the Customer & Use Knowledge to

Repositioning the Brand”
Five important rules for a successful repositioning:
Renovation.
Innovation.
Customer communication
Product must be a low cost & highly efficient operator.
Product availability: wherever, whenever & however.
Some time later milkmaid was positioned as “Tastiest milk maid”.

The concept was that you can get 1.6 liters of sweetened milk by adding water in
that condensed milk. This positioned was visualized as it had relevance at a time
when fresh milk was in short supply in some parts of India.

Once again, we saw Milkmaid in yet another position as a topper on fruits, cakes,
jelly etc. and then last time through a natural evolution-backed by consumer
research & sound marketing judgment - we saw Milkmaid’s Present position: Milk
maid for desert Recipes. In due course, the packaging was smartened up &
changed to reflect the ‘recipe’ on culinary products; the label depicts a desert,
gives the recipe on the reverse side & announces a ‘free recipe booklet’.
From the time of the dessert recipe positioning (1982), milkmaid achieved a sales
volume increase of 116% by 1988. Sales growth has been relatively steady tear
after year (an average growth about of 20% annually), suggesting that more
households are responding to this position. It is significant that even in traditional
milk shortage areas, Milk maid usage now is largely in line with the culinary

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(dessert) positioning. This implies that housewives, who may have earlier
perceived Milkmaid as a substitute for milk, have now given it a different place in
their “frame of reference”. Recently Nestle Has Launched Milkmaid in a easy
squeeze tubes which is attracting children also.

Positioning above all, is a matter of the perception of your brand that we wish to
do the product and more what we do to the product and more what we do to the
consumer’s perception of the product.

NESCAFE (1918-1938)
After the end of world war 1st their were crises for Nestlé’s Government contracts
dried up following the hostilities, and the civilian consumer, who had grown
accustomed to condensed & powdered milk during the War switched back to
fresh milk when it became available again. In 1921 company recorded its 1st loss.
Nestle management responded quickly and brought in Swiss Banking export,
Louis Dapples to recognize the company. He streamlined the operations to bring
production in line with sales and reduce the company’s outstanding debt. The
manufacturing of chocolates became the company’s second most important
activity.
New products appeared steadily:
Malted milk
Milo
Powdered butter milk for infants &

Nescafe (1938)

The Brazilian coffee institute approached Louis Dapples in 1930, seeking new
product to reduce Brazil’s large coffee surplus. Eight years of research produced
a soluble powder that revolutionized coffee drinking habits world wide.

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The most interesting thing to talk about Nescafe is its Brand personality. It is the
personality that marketer wishes to attach to his brand & which actually enters
the targets customer’s mind.
In March 1989, the students of IIMC, conducted a small scale survey on
personality of some major brands & and Nescafe was one among them Nescafe
was compared to gold café-both were 100% pure instant coffees, both heavily
advertised & both premium priced. Gold café was a successful competitor of
Nescafe. The respondents were asked to describe the personality of the brands
in terms of ‘Mr. Nescafe’ & ‘Mr. Gold café’. The respondent in one group based
there observation on the advertisements of two brands. While other group made
observations on the basis of other factors such as ‘history of the company’,
‘marketing strategy’, etc. one might describe them as the first group’s findings
better because those reflected the consumer’s point of view better.

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 MAJOR PRODUCTS & YEAR OF INCEPTION

NIL is running with about 80 brands in India. Some major products under those
brands are till the year 2003 is as follows:

PRODUCTS YEAR OF INCEPTION

MILKMADE 1962
NESCAFE 1964
LACTOGEN 1968
MAGGI NOODLES 1983
MAGGI SAUCES 1985
SUNRISE 1983
EVERY DAY 1986
MAGGI SOUPS 1989
ECLAIRS 1991
BARONE 1993
NESTLE BONUS CHOCOLATE 1995
KIT-KAT 1995
POLO 1995
MILO 1996
NES TEA 1996
NESTLE SLIM MILK 2003

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RECENTLY LAUNCHED PRODUCTS

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Set Dahi
New Tomato and Curry Flavors in Maggie Noodles
New Dal and Atta in Maggie Noodles
A new confectionery – Nestle Choco Stick
Soft Chewy fudge Milky bar Choo
Nestle` recently launched products Tea Iced Tea
Nestle slim milk
The company is also setting up ‘CAFÉ NESCAFE’ and ‘COFFEE CORNERS’
across metros and mini-metros in India.

NESTLÉ: 4.6% ORGANIC GROWTH IN FIRST QUARTER

Group-wide organic growth of 4.6%
6.3% sales increase at constant exchange rates
Swiss franc sales down 7.5% as a result of a 13.8% negative foreign exchange
impact
The overall organic growth of 4.6% in a difficult quarter, aggravated by late
Easter, is mainly due to our successful drive for innovation and our strong market
positions. Our consolidated sales clearly took a hit from the strong Swiss franc,
but we expect this effect to taper off in the course of the year. “We are confident
that the rest of the year will bring an acceleration of growth and that we will
therefore achieve our stated objective of improving the Group's performance in
constant currencies for 2006."
The Nestlé Group's consolidated sales for the first three months of 2006
amounted to CHF 19.7 billion. In constant currencies, sales increased by 6.3%,
reflecting organic growth of 4.6% (real internal growth 2.5%, pricing and others
2.1%), as well as a small contribution from acquisitions, net of divestitures. As a
result of the strong Swiss franc, the adverse foreign exchange effect was 13.8%.
Foreign exchange factor held back consolidated sales, and real internal growth
was impacted by the late Easter date and the competitive situation in Japan.
Additionally, in keeping with the Group's policy of ensuring margin improvements,

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Nestlé raised prices in several product categories to reflect cost increases.
Nevertheless, the Group expects its strong brands, its broad distribution network
and its capacity for innovation to lead to an improvement in sales growth as the
year goes on.

OBJECTIVES OF NIL

1. Be in every way the leading company in Indian food industry.

2. Ensure high quality standards in everything we undertake.
3. Provide our consumers with superior quality products.
4. Provide our shareholders with rapid growth & fair returns.
5. Provide our employees a challenging & satisfying work environment.
6. To be a good corporate citizen & contribute positively to the society in
which we operate.

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 MICHAEL PORTER’S MODEL FOR COMPETITIVE ADVANTAGE

There should be continuous efforts towards competence by drawing down

costs and improving product quality. According to Michael Porter’s 5-point
model for competitive edge, any corporate entity needs to counter threats
posed by the following five market forces.

Potential Entrants Competitors Activities

Suppliers Buyers
THE CORPORATE
ENTITY

Substitutes

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 POTENTIAL ENTRANTS

With the increase in growth rate of the market and wide spread acceptance of
chocolates in Indian Market, companies like Mars, Sara Lee etc. are eyeing
the chocolate market. American Hershey foods etc., also plans to enter in it.
Though these companies would facilitate further growth of the market, they
would also want a share of the pie further; a favorable duty structure would
facilitate import of international products than new manufacturing units being
set up.
SUPPLIERS

A Bar of chocolate on an average contains about one-third cocoa, and the

remaining includes malt, milk and sugar (Milk and malt are readily available in
India). Hence, it becomes extremely important to manage the key raw
material supplies well, in order to have a competitive advantage over the
other players in the market. Corresponding to the chocolate capacity of 24000
tonnes (1999-estimate), the production of cocoa in the country has remained
stagnant at 6000 tonnes. Therefore, cocoa is being imported to meet the
industry requirement. Hence, cost effective sourcing of cocoa becomes of
paramount importance. Various measures such as identifying cocoa growing
areas, village adoption programmed, etc, can prove to be extremely beneficial
in providing a sourcing advantage over competition.

COCOA PRODUCTION-FUTURE

Since, Cocoa is an inter crop, it does not require additional land. Hence, with
proper policy measures, its production can be beefed up. The Government of
India has been taking keen interest in order to provide a boost to cocoa
production. The Budget ’97 had a provision of about Rs. 20 crores for cocoa

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production development. Measures adopted to give a fillip to cocoa
production include the following:
Cocoa Board merged with Cashew Board on the request of the
Confectionery’s Manufacturer’s Association. A 10 fold increase possible with
proper policy measures.
Other Measures- Village adoption programmes, training programmes for field
people in order to increase yields in the old cocoa gardens, better pest control
measures, etc.

BUYERS

As far as buyers are concerned, there is sufficient demand growth (growing at

22.6%). Further, entry into the chocolate industry would further augment the
growth of the chocolate market.

SUBSTITUTE

Indian sweets and confectionery items are the nearest substitutes for
chocolates. However, there is a shift away from heavy sweets towards lighter
sweet offerings like chocolates. Proper segmentation and positioning can
make a brand distinctively different from other confectioneries available in the
market. (E.g. Kit Kat).

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 SWOT ANALYSIS

The SWOT Analysis shows the relationship between critical variables of the
company. The SWOT matrix has a wider scope. The TWOS matrix is a
conceptual framework for a systematic analysis that facilitates the external
threats and opportunities with the internal weaknesses and strengths of the
organization.
It has been common to suggest that companies identify its strengths and
weaknesses as well as opportunities and threats in the external environment.
But what is often overlooked is that combining these factors may require
distinct strategies choices. To systematize these choices, the TWOS matrix
has been proposed. ‘T’ stands for threats, ‘W’ stands for weaknesses, ‘O’
stands for opportunities and ‘S’ stands for strengths. A marketing opportunity
is aware of buyer need in which a company can perform profitably. An
environment that would lead, in the absence of defensive marketing action, to
deterioration in sales or profit. An ideal business is high in both major
opportunities and low in major threats.
A speculative business is high in both major opportunities and threats.
A mature business is low in opportunities and high in threats.
The TWOS matrix starts with the threats because in many situations a
company undertakes strategic planning as a result of a perceived crisis,
problems or threats.

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 STRENGTHS
1. High brand equity ……… consumer & dealer regarding Nestle' as
company delivery quality product.
2. Company processes an extensive powerful distribution network.
3. Company processes a dedicated & experienced sales staff.
4. Strong base in monitoring & controlling market.
5. Distributions are highly dedicated towards performance & experience.
6. Nestle India Limited (NIL) has a very strong parent company Nestle
S.A. support with 51% of equity share holding, which is the world's
largest food company.
7. NIL's milk products sold under Milkmaid and Everyday brands are
market leaders. NIL has strong brand value in other products like Kit-
Kat, Polo, Milo, Maggi and Nescafe.
8. NIL - State of the Art Technology and production systems ensuring
high technological/high value and optimum cost advantage to its
product portfolio.
9. Idealization of products to suit local tastes are critical for success and
NIL is converting its international products into Indian tastes products.
10. Nestle has altogether 570000 outlets in more than 3000 towns. This is
one of the major strengths of the company.
11. NIL most of the products are being produced according to Indian
tastes, priced within Rs. 25/- so that they are afforded by most of the
people easily, advertised and promoted according to regional culture
and values and is available to most of the consumers easily, at their
nearby shops.

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 WEAKNESSES

1. Company takes time in handling return claims on authorized whole

seller.
2. Warehousing norms are not followed which account for increased
breakage.
3. Restricted website minimizes marketing opportunities.
4. Yearly initiatives are not so motivating.
5. A high percentage of turnover and profits coming from a few products
categories like Coffee/Maggi.
6. NIL has been in India since last 39 years yet its growth has been very
slow. After the opening up of the economy, it has started growing but
till then it did not launched much products.
7. The profits of NIL are also reduced because of increased Royalty
payments that NIL is making to its parent Nestle, Switzerland. The
higher royalty payments are made on account of new international
brands launched by NIL in India.
8. NIL factories are not to meet the demands of products with the supply.
9. NIL's products range is so large that it is not able to give proper
attention to all the products, their marketing strategies are not properly
worked out as many of its products are dieing. There was an
embarrassing starter like Nestea an iced tea, Nesfit - a glucose rich
energy drink, Bonus, Milo is not given much of promotion.
10. Recently, there are difference between the Nestle S.A. parent
company and Nestle India Limited and because of this there are in the
top management of the NIL. Even its M.D Daravis E. Ardeshin has also
resigned.
11. Proof financial distribution as the NIL is unnecessarily giving its
shareholders high dividend, which could be avoided and be used for
investment in plants for their capacity expansion.

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 OPPORTUNITIES
1. Great quality.
2. Mass market is growing with established performances.
3. Growing middle class is increasing opportunities.
4. Great taste.
5. Low differentiation in market brands.
6. Credit facility given to dealers.
7. India being the second most populated country in the world, NIL has lot
of opportunities of launching and selling new products and earning a
record profit from this country.
8. As NIL has been in India since last 39 years, it has understood the
culture, values, tastes and psychology of the Indian consumer and so it
can easily develop Indianised products that will be acceptable to the
Indian consumer.
9. Food industry is the second highest growing industry in India and
offers a lot of opportunities for NIL in India.

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 THREATS

1. Tough competition especially in premium segment.

2. Characteristics of premium segment that it is never brand loyal.
3. Tough competition (indirect) with barista, café coffee day.
4. Mere availability of best sellers from the parent’s portfolio does not
guarantee a winner. Since most of these products would be fighting it
out with their global competitors and then Indian counterparts on the
Indian turf.
5. It faces fierce competition in almost all the segments it participates in
like. It duels with Top Ramen in the instant noodle market, Kit-Kat vs.
Perk, Polo vs. Minto, Milkmaid vs. Mithai Mate (launched by Amul at a
staggering 60% discount to the market leader), Milo vs. Horlicks,
Complan and Bournvita.
6. Recent turmoil and increased internal politics together with lack of
apathy from their parent company is going to affect the performance of
the company in the short to mid term.
7. Because of the present Swadesi prime and changing public opinion
towards MNCs will affect NIL's future.

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 CONCLUSION & RECOMMENDATIONS

1. Although product line is very good & has good width & depth, but NIL
should try to make stronger brand equity in Dairy products, Amul is still
leader.
2. It should work more on concept of CRM (Making new customers &
retaining old ones.
3. Cash discounts must be given.
4. More competitive pricing to be done in the premium segment.
5. Increase their sales force to make more frequent visits to the sales
person.
6. Should also look for rural markets.
7. Quick handling of problems of stockiest & dealers.
8. Online ordering facility & electronic payment through website can save
a lot of time.
9. Due to sluggishness in a FMCG market, most of the companies are
under pressure to maintain volume & market share. NIL should draw
out an action plan to improve sales through new product launches.
10. Company should concentrate on all round cost saving & productivity
gain, to neutralize the adverse impact of increased excise of
confectionary.
11. The market strategy of the firm is a complete and unbeatable plan or
an instrument designed specially for attaining the marketing objective
of company. The formulation of the marketing strategy consists of two
steps:-
12. Segmentation & target market selection.
13. Assembling the marketing mix.

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 Limitations

A Project that is undertaken, any research that is carried out or any venture
that is to be accomplished is not without its share of limitations. Limitations
are present irrespective of the scale of intensity of the research undertaken. I
was no exception. I too came across limitation but was not discouraged.
Nearly all the companies maintain a certain degree of secrecy. There were
hesitations while providing an outsider with the information & feedback
regarding the company’s strategies & even financial data. To overcome this
shortcoming secondary sources were tapped for required information. These
sources were checked for ensuring their Authenticity bias. Numbers of visits
were made for procuring a single appointment.
Though sample size is large enough it is cost so diversified to be called as
exact.
Inadequacy of time & other resources proved to be a strong limitation. The
data collected from consumers may not be exactly what they think & use as
they might have misinterpreted the objective of research.
Throughout the study utmost care has been taken to avoid biases, errors so
as to ensure authenticity and accuracy. But there is possibility for some
discrepancies to come in between due to following limitations:
Respondents may give their biased opinion, as they know the identity of
interviewer.
My study is based on responses of executives of mentioned companies of
concerned department only, which may not give a true picture.
Last but not the least and the most deciding factor paucity of time.
But I have put in my honest efforts to make this project a useful one for every
one who reads it.

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 BIBLIOGRAPHY

INTERNET SITES
www.nestle.com
www.google.com
www.yahoosearch.com

MAGAZINES
BUSINESS TODAY
BUSINESS WORLD
BUSINESS STANDARD
MARKETING MANAGEMENT BY PHILIP KOTLER

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