INTRODUCTION Nestle India Ltd. is a part of the Nestle SA group which is one of the largest manufacturingcompanies in the world.

Henri Nestle founded the company (with its headquarters in Vevey,Switzerland) in 1867. Nestle has two major divisions Le Societe des Products which looks after the production and marketing and Nestec Ltd. which provides the technicalassistance to the group companies. Since its inception in 1867, the company has diversifiedit product range from the infant weaning formula (which was its first product) to beverages,confectionery, ice creams and pet foods among others. In a span of 130 years the companyhas ranked 26th among the worlds largest corporations and boasts of a turnover of $48932.5 million and employee strength of 221,144 people spread over 75 countriesworldwide (Annexure A).Nestle has long been viewed as one of the most multinationalof the multinationals. This is because today only 2% of itsturnover comes from Switzerland. Out of the remaining 98%,Europe contributes 43.5%, North and South Americacontribute 36.5% and Africa and the Asia Pacific Regionscontribute 18%. Company Profile Although Nestle has been associated with India since thebeginning of the century through the importing and trading of infantfood and condensed milk, manufacturing in India only began with thesetting up of the factory in Moga in 1962. The first product to bemanufactured was Milkmaid . In the last 35 years the company hasshown rapid progress and has increased its product range to 80products as of October 1997. Nestle India Ltd. now ranks 22ndamongst Indias most valuable companies (Annexure B) . Its grossrevenue has increased from Rs 1001.1 crores to Rs. 1213.8 crores in1996. This remarkable growth has been achieved through Rapidly creating greater manufacturing capacity, both at factoriesas well as with co-packers. Taking measures to ensure availability and improved quality of keyraw materials fresh milk in particular. Strengthening of the sales and distribution network (particularly insmaller towns) Ambitious and cohesive manpower training and developmentprograms for the personnel of the company across all disciplines The companys exports also resulted in a very successful year inthis area as exports grew by 27% to Rs. 250.8 crores in 2003. Themain contributors to this increase

were the export of tea and coffee toUSA, Japan, Russia, Hungary and Taiwan.Nestle India Ltd. wants to further increase its operations in Indiaand has started construction of its sixth Factory at Bicholim, Goa for the manufacture of culinary products (a key thrust area) for thispurpose The Spirit of Nestle Organisational excellence is never achieved through a one timeeffort; It is always a process of continuousimprovement across anumber of areas of operation. A key factor for Nestles success has been its quest for continuous improvement through ushering in greater productivity andmore efficiency in everyday operations. Despite the infrastructureimpediments in India, Nestle has set itself high standards of businessperformance. This is reflected through the essence of the company - itsmission statement. Nestles mission To be in every way the leading company in the Indian foodindustry and a good corporate citizen by providing our consumers withsuperior quality products, our shareholders with rapid growth & fair returns and our employees with a challenging and satisfying workenvironment.To translate this spirit into a planned and measurable process,Nestle has set up key objectives across all divisions. Key Objectives Production To optimise production costs while enhancing product quality so asto make Nestle products even more competitive in the marketplace. Sales and marketing To reach a sales turnover of 3000 crores by the year 2003 To double the turnover every three years People To help employees to retain a long term perspective and integratethem fully with the companys business goals To retain a broad perspective while addressing individual needs To view growth as a continuous process To concentrate on attitudinal changes by developing leadershipskills, an appreciation of interdependence between units and theenhancement of a sense of belonging to Nestle.

Finance To maintain profit levels above the average for the food industry inIndia.The Business Excellence and Common Application (BECA) initiativeessentially translates the spirit of the Journey towards excellence intoan organised, systematic and measurable approach. The aim is to aidthe achievements of the companys key objectives of rapid growth byensuring that all operations incorporate the spirit of meaningfulplanning, effective cost control and efficient implementation. BECA isabout planned improvement in everything we do Factories Nestle has 6 factories in India. These are 1. Moga (punjab) : The Nestle factory in Moga has the pride of beingthe first and most comprehensive factory of Nestle India. Set up in1962, it represents the core competence of Nestle India in themanufacture of milk products (Everyday, Milkmaid), beverages,culinary products (Maggi sauces, noodles, soups etc.), weaningcereals (Cerelac) and infant milk formulae. 2. Choladi ( Tamil Nadu): The factory in Choladi started productionin 1967. Situated about 60 miles from Calicut, the factory today has 81 employees and produces 1.5% of the total turnover of Nestle India. It isa 100 percent export oriented unit which processes freshly picked tealeaves into soluble instant tea. 3. Nanjagud (Karnataka): Production in this factory began in 1989with the manufacture of Nestle instant coffee and Sunrise. Today inaddition to instant coffee the factory also manufactures healthbeverages. The plant to manufacture MILO was also commissioned atthis factory. This factory employs 145 people and is cited as a model interms of environment protection for its installations to purify wastewater as well as for its provisions for recycling coffee wastes. 4.Samalakha (Haryana): This factory was set up in 1993. Located 70kilometres from Delhi , it manufactures weaning cereals , culinaryproducts ,health beverages and milk products. Recently the expansionof manufacturing capacity for Milkmaid Dessert Mixes was undertakenat this factory as this new and unique product category is viewed tohave great potential in the future. 5.Ponda (Goa):

This Kit-Kat factory was set up in Goa in 1995 at acost of Rs. 50 crores. It represented a major step by Nestle towardsbecoming the Number 1 Chocolates and Confectionery Company inIndia. 6.Bicholim (Goa The construction work at this new factory is progressing withspeed. This factory will soon commence the manufacture of culinaryproducts, which is a key thrust area for the company and will includelatest technological improvements relating to this category of products.As a part of Nestles efforts towards continuous improvementand excellence in Manufacturing operation, a Moga Improvement team(MIT) was put in place at the Moga factory. The team comprised of international experts from Nestle Technical Services (NESTEC) andthe local staff. In 1996, it embarked on a program with the singleminded objective of optimizing production costs while enhancing theproduct quality so as to make Nestle products even more competitivein the market place. Drawing upon Nestles global experience andmanufacturing expertise in 75 countries the team identified thefollowing areas for detailed study Process improvement to ensure the optimal usage of resources Improvement of operational efficiency Cost optimizationA series of small but critically important initiatives ranging fromredesigning laboratories to palletisation of raw materials and packagingmaterial utilization, manufacturing and filling loses and labour manhours resulting in substantial savings and improved productivity and machine utilization. In addition, several non tangible benefits in theform of systems for sustainable improvement in areas like factorymaintenance planning tools , down time recording systems andperformance measurement tools were also realized .This project was highly successful and the company is nowimplementing its key learnings of MIT in its other factories.In a country as vast and diverse as India, supply chainmanagement is absolutely critical to rapid growth. Through BECA,Nestle has concentrated heavily on streamlining and improving their supply chain management in order to make it more dependable, morecost effective and most importantly, more responsive to market needs.For better supply chain integration the planning of keyoperations - purchase, production, distribution and sales aresynchronised to ensure that everybody works towards a commonbusiness plan. Monthly objectives are broken down into weekly and(wherever necessary) into daily plans and monitored regularly toensure smooth implementation and quick corrective action whenneeded . Major benefits accrued thus far include reduction in workingcapital

through lower inventories of finished goods and materials, better stock availability and reduction in obsolescence of materials.In addition to traditional performance indicators, quantifiableperformance measures have been identified and implemented in all functional areas such as sales planning, production output, qualityassurance, material ordering transportation and warehousemanagement. These measures are monitored regularly to gauge theextent of improvement and identify root problems for taking correctiveactions.Teams have been put in place at all factories and sales officesto ensure the implementation is continuous and selfsustaining. Areasof improvement are regularly identified and time bound action plansestablished. For this purpose, standard tools such a Total QualityManagement(TQM), Kaizen, 5S and Small Group improvement activity(SGIA) are being extensively used.The efficacy of this hierarchical structure is seen in Nestlesperformance over past few years of various products.By 1989 the company had achieved a sales figure of approximately Rs. 258 crores. 1989 was the year of launches. Sevennew product lines were launched in this year. This was also the year inwhich the Nanjagud factory was set up. By the year 1992, this salesfigure was touching Rs 500 crores. In the 1995 the pace of launchesquickened and since the construction of the factory at Samalakha, 20new products have been introduced. By 2003, Nestle had about 76different products in its portfolio with various new products in thepipeline as well. The sales figure now touched Rs. 1214 crores. Thussales grew by 450% over a period of one and a half decades. Marketing Strategy Nestle has adopted a four pronged growth strategy: -1.Gunning the market with new products and brand extensions.2.Expansion of the distribution network to small towns for extensiveavailability.3.Reduce prices and introduce smaller packages for products tomake them more affordable (a tool to enter price sensitive markets).4.Focus on employ training and develop a positive attitude throughenhanced manpower development.5.By year 2003 it expects chocolate & confectionery to account for one in every third rupee in sale.In the late 1996 fear of breading complacency by not having acontinuous improvement, gave birth to an international sales &marketing improvement teams (SMIT).SMIT maps the latest in helping towards the target of year.2003. The SMIT exercise is a major global initiative of Nestle toenhance sales & marketing productivity. Linked with the alreadyexisting BECA project, which in turn emphasises on excellence by improving the distribution set up , this gave rise to the following growthobjectives for the year 2003 Ensure direct coverage of all urban towns in India.

Expand distribution to reach 1 million retail outlets on a regular basis. Work in partnership with the distributor for the achievement of theseobjectives. Provide sustainable solution to optimize our secondary sales fromdistributor to retailer. NEW PRODUCT LAUNCHES To put all the product launches into perspective, Nestle now has80 products including various flavours and variants this awesome list of 80 products for most companies is an overfull palate. Nestle India Ltd.Still have a variety of new products in the pipelines. It believes in slowlycolonizing as much territory as fast as it can, adapting to nativeconditions and then work at holding off the advancing herds. Nestleproducts can be broadly classified into 5 main ranges Milk Products Chocolate and Confectionery Beverages Culinary Food service Milk Products This category which comprises of condensed milk, baby milkfoods , milk powders , acidified infant food , and other milk products,showed a slump in 1996 as sale of milk products fell from Rs 31.4crores in 1995 to Rs 31.2 crores in the said year. Consumer offtakeremained depressed throughout this year as a consequence of highprice increases necessitated by substantial increases(+50%) in thecost of basic raw materials( fresh milk ) , over the past two years .However Nestle retained its leadership in the infant food marketwith Cerelac, Lactogen and Nestum and even introduced a new flavour of Cerelac - Cerelac Rice in 1996. Chocolates and Confectionery Nestle pursues the objective of accounting for one in every threerupees in its sales figures through chocolates and confectionery. Thishas thus been one of the thrust areas in Nestle. Nestle this year widened its range of flavours in POLO, backed by its tremendoussuccess in the Indian Market by adding POLO Spearmint to itsPortfolio. This new flavour has also received an encouragingresponse in the

market according to market analysts.Milkybar also retained its position as the number one whitechocolate brand in India, however it did not record a significantincrease in sales as a majority of Indian tastes still do not accept thisflavour. This year however, was a year of tremendous success for KitKat .This internationally renowned brand gained a large increase in theMarket share in the past year and Nestle officials are hopeful that thiswill further increase in the coming years. However this Brand along withit success has brought with it its share of Controversy as the Union of India has launched a Litigation against the Kit Kat family pack.In 1997 Nestle added to its range of confectionery by introducingSPLASH, A soft hearted, hard boiled sweet this is being promoted asa sweet unique to India and is positioned to a target audience in theage group of 4 to 12 years and anyone with a soft heart is a potentialcustomer. Priced at Rs. 1 for a 7.5 gram candy splash has beenintroduced selectively in the South and has been speculated to repeatPolos performance. Nestles officials claim that this candy has thepotential to grab a quarter of the 700 crores confectionery market.The most recent of Nestle affairs with the confectionery markethas been the introduction of Mithai Magic which is a little Mithai , alittle magic .This new product was launched in September 1997 ,intime for the Diwali purchases of sweets . This brand has beenpositioned somewhere between chocolates and traditional sweets andthe company is employing a push strategy to promote this brand. Culinary Products The market in culinary products had witnessed a high growthconsequent to aggressive pricing decisions on existing products andthe introduction of a variety of new products to match the needs of theIndian Housewife. Encouraged by this success Nestle launched MaggiMacoroni Snack in three flavors - Chicken , Masala and Tomato. Nestleofficials say that this would consolidate Maggis position as the number 1 culinary brand in India. The product focuses on convenience andinnovation as its Unique Selling Proposition. This snack has opened anew segment for the maggi brands. The brand is positioned as youthfuland is represented by the twists and curls of the macaroni snack. It isspeculated to be introduced in a phase manner nation-wide to beplaced in the 7.5 lakh outlets that Maggi noodles sells in .In the spirit of catering to Indian tastes Maggi introduced maggipickles in five variants benchmarked to give the ghar ka swad. MaggiDosa Mix was also introduced to offer superior quality and addedconvenience. Apart from this Milkmaid Kalakand Mix, a traditional northIndian sweet of premium quality was added to the milkmaid dessertmixes. Maggi soup also launched three new variants. Maggi Rassam inparticular was noticeable as yet another attempt to make traditionalIndian cooking a little bit easier.

Food Service Food service items basically deal with the out of homesegments, which would include vending machines. Nestles foodservice business is poised for rapid expansion to meet the growingneed for such a reliable, time saving and cost effective service in thismodern age .Nestle wants to sell 500 million cups of tea and coffee throughits vending machines in the year 2003. It currently has 3500 vendingmachines at assorted locations (both public and private). In 1995Nestle food service did well to vend 40 million cups of Nescafe andTasters Choice tea. Its 2003 sales were placed at 59 million cups of Nescafe and 36 million cups of tea, this figure was however way belowthe expected sales for the year. Distribution strategy It is an indisputable fact that fundamentally all consumersmarketing must first assure availability of the product to the consumer.In India, the urban population alone is of a whooping 250 millionconsumers -an unbelievable potential for any FMCG . The potentialbeing spread across more than 4000 towns have to be very effectivelyand efficiently tapped. Nestle till now was retailing in a limited number of towns with only 200 towns accounting for 70 % of their business. For Nestle to be a leader in the food industry, expanding the distributionnetwork for more retail outlets was a must.To meet this challenge, Nestle is working towards an objectiveof increasing the retail base to 1,000,000 outlets by the year 2003. Thisnetwork is feasible as Nestle has a triangular distribution structure thusthe span of control is still retained. The Distribution Network isexplained in figure 2.In order to achieve these distribution objectives Nestle hasformulated an international sales and marketing improvement team(SMIT). SMIT focuses on a single objective -provide sustainablesolutions to optimize the distributor and retailer sales through a step bystep approach starting with analysis of market followed by identificationof the probable retail outlets and finally selection of the same .Theteam also focuses on proper implementation of resources and timelyfollow ups for effective solutions.