Introduction

Nestl began in Switzerland in 1867 when Henri Nestl, a pharmacist launched his
product Farine Lacte Nestl, a nutritious gruel for children. Nestl, which means
little nest, is used in both the company name and the logotype and symbolizes
security, family and nourishment. Nestl is today the world's biggest food and
beverage company and employs roughly 280,000 people in over 86 countries and
have factories or operations in nearly every country in the world. The Nestl family
has grown to produce products that include chocolates, soups, coffee, cereals,
frozen products, yoghurts, mineral water and other food products. Nestl has
continued to expand its product portfolio in the early 70s to include pet foods,
pharmaceutical products and cosmetics.
Nestl's strategy is directed by several fundamental principles such as innovation
and renovation which ensures that the existing products grow and maintain a
balance in geographic activities and product lines. Long-term potential is never
sacrificed for short-term performance or profit. The Company's priority is to bring
the best and most relevant products to people, wherever they are, whatever their
needs, throughout their lives.
The companys business principles are vital to its framework for corporate
responsibility. This framework also enables it to create shared value with suppliers,
partners, customers and consumers across the world. Nestls corporate
responsibility involves more than what the regulations and laws require, ensuring
greater trust from individuals and organizations that does business with them.
Nestls main business principle is based on decentralization, meaning
headquarters sets the overall strategy and ensures that it is carried out by each

country but they are responsible for the running of its business. This approach is
best summed up as: 'centralize what you must, decentralize what you can'. Nestl
believes that they should think about their organizations globally but they deal with
people by interacting with them locally. Thinking globally - acting locally

An Analysis of Nestle Case Issues

SWOT analysis of Nestl
Strengths:
1. Nestl is recognized as one of the largest and most powerful food producer
globally, having factories in nearly every country over the world and employ over
280,000.
2. Nestl are low cost operators and produces low cost products that ensure them
having the upper hand on competition and benefits the consumer by providing
affordable products.
3. Nestl has a powerful brand positioning in the consumers mind and its product
portfolio contains roughly 6,000 brands and is ranked as the largest bottled water
corporation that operates in an environmental friendly manner.
4. Globally, Nestl is the biggest ice-cream producer, having a market share of
approximately 17.5% (2006).
5. The business strategy of CEO, Peter Brabeck stresses the importance of internal
growth by increasing sales volume by renovating existing products and innovating
new products. His explanation of renovation is that to just keep pace in the
industry, you need to change at least as fast as consumer expectations. Brabeck
explains that, to maintain a leadership position, you also need to leapfrog, to
move faster and go beyond what consumers will tell you. this strategy has led
Nestl achieving their internal growth targets.
6. The joint venture of Nestl and General Mills benefitted both parties due to the
experience and brand recognition of General Mills. General Mills products are

widely distributed and have the leading brand of yoghurt in the U.S. The trust
consumers have for General Mills brand and Nestl joining them has made Nestl
a force to be reckoned with in the nutritional food market. It has also established
joint ventures with giants like Coca Cola, and LOreal that are useful in providing
knowledge on different technological aspects.
7. Nestl uses two forms of research, qualitative and quantitative so as to
understand consumer opinions and trends.
Qualitative research involves setting up small focus groups of consumers
who express their ideas and opinions about their needs and views on
different products.
Quantitative research involves professional market researchers interviewing
thousands of people.
Market research helps the company to keep in touch with an ever changing
environment in which social attitudes and buying patterns are continually shifting

Weakness:
1. Nestls timing in launching their product line in France was a big setback in
gaining the market in the region especially for the dairy line. Danone beat them to
the punch and has profited greatly from this. For the U.S Nestl entered a mature
market and could not achieve satisfactory sales.
2. The lack of product information has caused misconceptions of some of their
product ingredients, especially with the launch of LC-1, a healthy yoghurt drink
which was withdrawn from some countries due to low sales.

3. The joint venture of Nestl and General Mills has restricted Nestl to be
innovative, the success General Mills has experienced in the yoghurt market made
them reluctant to expand their product line and so given competition an
opportunity to exploit possible markets that Nestl could have provided.
4. A boycott against Nestl that started 1977 until today was prompted by the
company's promotion of breast milk substitutes (infant formula) and has been
accused of unethical methods of promoting infant formula over breast-milk to poor
mothers in developing countries. This has put Nestl in a precarious position on
their ethical values as a company.
5. The tainted Nestl formula scandal has caused inoperable damage to the
companys image. The contamination of Nestls baby formulas In China caused
the death of 3 children and more than 6,000 fell ill after consuming the
contaminated milk. Many health departments all over the world recalled most of
the companys top-selling infant milk formulas after the products tested positive
for high levels of melamine a chemical that causes severe kidney damage.
6. Nestle product brand recognition is associated with displaying health benefits on
their products but Regulators like FDA (Food and Drug Administration) and AMA
(American Medical Association) are urging Nestl on removing such advertising
displays after research proved that some products has no such attributes like low
cholesterol and low fat properties. Parents have also reported a diabetic epidemic
due to the consumption of such goods.
7. The enormous diversification portfolio of the firm makes it impossible to run
every division smoothly, logistics cost is fairly high and the supply chain is of a
complex stature.

Opportunities:
1. Due to the increase of the health awareness in the society, more health based
products are required.
2. There is a huge market for anti-allergy products or a product for Lactose
intolerant consumers.
3. Providing incentives to the retailers can increase sales volume.
4. Asian consumers are mostly price conscious rather than health conscious. Nestl
has an opportunity to have extensive strategies implemented to gain the market in
those countries.
5. Most countries are recovering from the global recession, and now is the time to
increase production rates to meet consumer demands.
Threats:
1. Slack quality control can cause contamination of products and stricter control
should be implemented The FDA has been a continuous threat for the growth of
Nestl through bad publicity.
2. The rise of inflation especially during and after the recession can hold two major
threats:
To maintain affordable product prices causes a decrease in profit margins.
The increase of product prices can lessen the financial loss but can decrease
the sales.

3. Package shrinking has cut cost for Nestl but has also caused dissatisfaction for
consumers as they pay more for a lesser product.
4. For some products the market has matured or has been saturated which makes it
even harder for Nestl to introduce or maintain new or existing products.
5. Malnutrition in developing countries and obesity in first world countries creates
a logistics problem and product development becomes a complicated issue.

Alternatives in solving these issues

Product Solution:
Consumers are becoming more health conscious, and realize people are looking to
adopt healthier lifestyles. Governments have supported this and have promoted the
benefits of healthier living; this has created a market for healthy and nutritious
food. Consumers want to buy good tasting foods that can allow them to have
healthier diets. Nestl is keen to capture a greater share of this growing market.
Nestl's ongoing strategy is to develop a 'Wellness' approach that builds on its
tradition of producing nutritional products. Nestl introduced and developed its
Sveltesse ('slimness' in French) range. The range began with yoghurts and dairy
products and globally now includes bottled water, ice cream, cereal bars and frozen
prepared meals. For Nestl to fill this market gap they need to use the EVR
(Environment, Value and Resources) business tool to decide whether this strategy
is appropriate. The strategy the business chooses must match these three elements.
Nestl's Wellness strategy must:
E - (Environment) Match the strategy to the Environment in which the
business operates. For Nestl, it is a social environment, where consumers
need nutritional products for a healthier lifestyle.
V - (Values) Ensure the strategy is consistent with the organization's Values.
Nestl key principle is that of meeting consumers' needs for nutrition,
enjoyment and quality they can trust.
R - (Resources) Ensure the company has the necessary Resources to support
the strategy. With its science and technology base, Nestl is well funded and
equipped to develop the required science-based improvements to existing
products.

After developing an appropriate strategy Nestl has to look to ensure all its
products maintain the standard and provide better nutritional benefits.
This involves:
Keeping certain product lines even if it has a low profit margin to ensure
customer choice variety.
Reformulate products to have more nutritional value by reducing sugar, fat
and salt quantity in the products.
Launching new products with scientifically proven nutritional benefits.
The company needs to educate consumers about healthy lifestyles and
proper nutrition.
Ensuring all products show nutritional facts and what health benefits the
product can offer.
Nestl Nutrition aims to deliver better business performance by offering consumers
trusted, science based nutrition products and services. They believe reinforcing
leadership in this market is the key element of their corporate strategy. This market
is considered that the consumers main motivation for purchasing Nestl products
is based on nutritional value.
Public Relations Solution:
Nestls policies on eco-efficiency, sustainability and the policy towards the use of
water have projected the companys desire to ensure a better life for all. Nestl still
means to go forward, developing new policies and initiatives on eco-efficiency,
responsible business practice and sustainability. Nestl will also work with national
and international bodies to improve sustainability.
Joint Ventures Solution:
General Mills operates internationally mainly through joint ventures, but also
through purchasing existing companies. General Mills has a fifty-fifty joint venture
with Nestl in the cereal division; their products are available in more than 130
countries. The successful joint ventures have allowed the companies to share their

resources and capabilities to gain a lucrative competitive advantage. General Mills

functions horizontally using the acquisitions, mergers, and alliance technique. This
allows the company as a whole to gain more market power and coverage
throughout the world. Nestl would gain considerable control of the market
through joint ventures or purchasing existing companies.

Choosing the best alternative

The best alternative is not by implementing one solution but a list of solution
according to their category or division. The following categories need to be
addressed in order to provide the best possible solution:
Product:
Meeting consumer expectations
Ensuring an affordable yet healthy product
Maintain a consistent standard
Improve quality control
Marketing:
Invest more in advertising
Invest more in public relations especially for bad publicity
Should become more actively involved in fund raisers and charitable
institutions
Be more transparent with product values

Discussion questions
What have been the key success factors for Nestl?
1. Global brand strategy: Nestl has products that resonate all over the world
under a unified brand. These brands have the reputation of a global food
company and the products have their own specific attributes.
2. Best quality at the lowest cost: The quality standard of Nestl made it a
differentiator. Nestl goes to great lengths to enhance their relevance to consumers
when considering the taste, appearance and price of their products. Nestl's
existing products grow and succeed through renovation while maintaining a
balance of quality in geographic activities and product lines.
3. Highly developed HR (Human Resource) department: Nestl regards its
personnel as its most valuable asset. The HR department of Nestl takes great care
and precaution when hiring personnel. Management of Nestl believes in open
door policy and highly discourages bureaucracy in the operational process and
believes that a happy employee is a productive employee.
4. Localization amidst globalization: Nestl has successfully achieved
localization in the increasingly globalized food industry. (Product planning,
production, marketing and services form a strategy of localization)
Where is Nestl vulnerable? What should it watch out for?
Most U.S. cities implemented a new policy to banish all bottled water from
municipal buildings. Unlike Coca-Cola and PepsiCo - two of the big-four
international bottled water companies - Nestls beverage division is almost
completely dependent on bottled water.

Nestl got into the bottled water business when it bought Perrier in 1992. For over
a decade Nestl bought a large number of small regional bottled water companies
around the world. Today Nestl owns over 70 brands worldwide. The majority of
these products are non-flavored still bottled water. Producing mainly regular
bottled water has left Nestl vulnerable to the rapid downturn in sales of bottled
water. Nestl reported a 1.6% drop in bottled water sales in 2008; as a result the
company would cut investment in its bottled water division.

What recommendations would you make to senior marketing executives going

forward? What should the company be sure to do with its marketing?
1. Pricing strategy: A key benefit of maintaining a strong brand image in a
competitive market is being flexible in the pricing strategy.
2. Promotional strategy: Nestl has used a wide range of promotional tactics,
with the increase of internet users more emphasis should be done on on-line
promotions
3. Distribution strategy: Sales of confectionery depend heavily on its availability,
with market research showing that well over 60% of all purchases are made on
impulse. Joint ventures with distribution companies should be considered.
4. Point of sale merchandising: Instantly recognizable packaging also helps to
tempt customers in buying the product, some product packaging should be
redesigned.

5. Focus on Foreign Direct Investment: Being a global organization Nestl

should focus more on their international strategy.

Conclusion
Nestl is not complacent about its position, it still means to go forward, developing
new policies and initiatives on eco-efficiency, responsible business practice and
sustainability. Nestl will also work with national and international bodies to
improve sustainability. For example, the 2002 World Summit on Sustainable
Development set a target to decrease by half the number of people without access
to safe drinking water by 2015: Nestl will share its knowledge with others to help
reach this goal. Nestl will continue to protect water, increase the efficient and
responsible use of water and encourage its partners and stakeholders to use water
in a responsible way

Bibliography and References

http://thebovine.wordpress.com/2008/11/27/nestle-ordered-to-recall-melaminetainted-baby-formula-in-south-africa/
http://www.nestle-baby.ca/en/products/formula/starter/goodstart_probiotic.htm
http://en.wikipedia.org/wiki/Nestl%C3%A9_boycott
http://www.scribd.com/doc/13826325/Nestle-Marketing
http://www.scribd.com/doc/21544545/Introduction-Nestle-Was-Founded-in-1866by-Henri-Nestle-And
http://www.thetimes100.co.uk/case-study--sustainability-water--7-122-5.php
http://kylelacy.com/does-negative-social-media-and-pr-really-hurt-a-brand/
http://www.oppapers.com/essays/Nestle-s-3-Key-Success-Factors/436484
http://www.polarisinstitute.org/nestl%C3%A9%E2%80%99s_sinking_division
http://www.wikiswot.com/SWOT/3_Consumer_Packaged_Goods_(CPGs)/Nestle.h
tml
http://www.freeswotanalysis.com/consumer-goods-swot/125-nestle-swotanalysis.html
http://www.nestle.com/AllAbout/AtGlance/Introduction/Introduction.htm
http://www.nestle.com/Resource.axd?Id=C6C11013-FF1A-40F4-994D7BAFFC270218
http://money.cnn.com/magazines/fortune/mostadmired/2010/full_list/