INTRODUCTION

FMCG companies have now realized that India lives in its rural villages. So that rural marketing has become the latest marketing mantra of most FMCG majors. The lure of an untapped market has driven the marketers to chalk out bold new strategies for targeting the rural consumer in a big way. 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 kids preference are now being consumed by kids, teenagers, and adults. Chocolate market in India (Currently 28 000 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. Nestle also piled primarily on the urban consumers. After understanding the great potentiality rural India possesses, Nestle is also experimenting in big way to bring the much needed volumes and help itself to bank upon the volume driven growth, in this severe competitive FMCG sector where the dispersion or market penetration plays a big role. So Nestle is eying on the market penetration and it is being targeted by devising different marketing strategies. The rational behind Nestle going for the market penetration is to acquire new consumer base by making the products available to the every interior of the country and increase its sales, to sustain growth. The company is having a marketing strategy to drive penetration through wholesale marketing. But is it a right marketing strategy? Or will it prove to be an expensive mistake? If they want to increase their penetration then how and where they should go for? These are the issues Nestle is facing today.

This project is a market research and it touches every aspect of the current wholesale marketing and predicament associated with it. It also juxtaposition that how penetration, can be possible through wholesale marketing, what is the cost of doing it and maintaining it. This project gives an insight into the every feasible aspect that is associated in Driving penetration through wholesale marketing, for Nestle. 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. 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. 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.

CHAPTER 1 LITERATURE REVIEW

1.1 COMPANY PROFILE

NESTLE FOODS INDIA LTD.
Nestle Foods India is a Transnational company (TNC) with its worldwide operations in over 70 countries. The founder of Nestle was Henry Nestle who from a modest beginning founded the company in 1866 at Switzerland for manufacturing milk powders for babies. At that time Switzerland faced one of the highest infant mortality rates and the milk formula saved the lives of many infants whose mothers were unable to breast feed successfully. 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 is often quoted by most as "multinational of multinationals." There is a good reason, as less than 2% of the turnover comes from the domestic market in Switzerland and rest from its other operations worldwide. At present Nestle in the world's largest food company with its international headquarters at Vevey, Switzerland. With almost 500 factories world wide it employs many people directly or indirectly. Nestle is under first 50 companies of Fortunes five hundred list. It is present over all five continents of the globe in over 80 countries. It is having 200 operating companies, one basic research center and 17 technological development centers and around 2,76,000 employees.
5

Nestls Philosophy
When Henri Nestle introduced the first commercial infant formula in 1867, he also created a symbol of the Bird's nest, graphic translation of his name, which personifies the company's business. The symbol, which is universally understood, evokes security, motherhood and affection, nature and nourishment, family and tradition. Today it is the central element of Nestls corporate identity and closely parallels the company's corporate values ad culture.

Mission Statement
At Nestl, our research makes it possible for everyone to enjoy better food for a better life. Good Food is the primary source of Good Health throughout life. We strive to bring consumers foods that are safe, of high quality and provide optimal nutrition to
6

meet physiological needs. In addition to nutrition, health and wellness, Nestl products bring consumers the vital ingredients of taste and pleasure. As consumers continue to make choices regarding foods and beverages they consume, Nestl helps provide selections for all individual taste and lifestyle preferences.

Research is a key part of our heritage at Nestl and an essential element our future. We know there is still much to discover about health, wellness and the role of food in our lives, and we continue to search for answers to bring consumers Good Food for Good Life. Promote awareness of the effect of our lifestyle both on ourselves and on our environment. Exist as a financially successful, non-hierarchical, democratic organization where workers participate in the creation and running of their working Environment, as an example to encourage others to do likewise. Provide an environment that encourages and helps people to develop and achieve their potential. Actively support co-operatives, fair trade, environmental issues and community activities.

Vision Statement
Your VISION defines your long-term dream. It should not be

achievable. That may sound ridiculous, but the objective is for your vision to always be just slightly out of your reach. It's what you constantly strive to attain, and it becomes your reason for being.

1.2 ORGANISATION HISTORY

In 1860s Henri Nestle, a Swiss pharmacist, established the world-renowned Nestl brand amid a spirit of innovation and goodwill. In 1866 he developed a food for babies whose mothers were unable to breastfeed. His first success was a premature infant who could not tolerate his own mother's milk or any of the usual substitutes. The value of the new product was quickly recognized when his new formula saved the child's life, and soon, Farine Lacte Henri Nestl was being sold in much of Europe. In 1905 Nestle merged with the Anglo-Swiss Condensed Milk Company. By the early 1900s, the company was operating factories in the United States, United Kingdom, Germany and Spain. World War I created new demand for dairy products in the form of government contracts. By the end of the war, Nestl's production more than doubled. The first Nestle factory to begin production in the United States was opened in Fulton, Oswego County, New York. The factory however was closed in 2001, after the company decided that the cost of restoring, and updating the factory could not financially be justified. Employees of the factory were furious, and raised the company flag upside down the day the closing was announced. After the war, government contracts dried up and consumers switched back to fresh milk. However, Nestls management responded quickly, streamlining operations and reducing debt. The 1920s saw Nestls first expansion into new products, with chocolate the company's second most important activity. Nestl felt the effects of World War II immediately. Profits dropped from US$20 million in 1938 to US$6 million in 1939. Factories were established in developing countries, particularly Latin America. Ironically, the war helped with the introduction of the company's newest product, Nescafe, which was a staple drink of the US military. Nestls production and sales rose in the wartime economy. The end of World War II was the beginning of a dynamic phase for Nestl. Growth accelerated and companies were acquired. In 1947 came the merger with Maggi seasonings and soups. Crosse & Blackwell followed in 1950, as did Findus (1963), Libby's (1971) and Stouffer's (1973). Diversification came with a
8

shareholding in LOreal in 1974. In 1977, Nestl made its second venture outside the food industry by acquiring Alcon Laboratories Inc.

The Brazilian president, Lula da Silva, inaugurates a factory in Feira de Santana (Bahia), February, 2007. In 1984, Nestls improved bottom line allowed the company to launch a new round of acquisitions, notably American food giant Carnation and the British confectionery company Rowntree Mackintosh in 1988, which brought the Willy Wonka Brand to Nestle. The first half of the 1990s proved to be favorable for Nestle: trade barriers crumbled and world markets developed into more or less integrated trading areas. Since 1996 there have been acquisitions including San Pellegrino (1997), Spillers Petfoods (1998), and Ralston Purina (2002). There were two major acquisitions in North America, both in 2002: in June, Nestl merged its U.S. ice cream business into Dreyer's, and in August a US$2.6 billion acquisition was announced of Chef America, Inc. In the same time frame, Nestle came close to purchasing the iconic American company Hershey's, though the deal fell through. Another recent purchase includes the Jenny Craig fitness firm for US$600 million.

In December 2005 Nestl bought the Greek company Delta Ice Cream for 240 million. In January 2006 it took full ownership of Dreyer's, thus becoming the world's biggest ice cream maker with a 17.5% market share.[3] In November 2006, Nestle purchased the Medical Nutrition division of Novartis Pharmaceutical for $2.5B. In April 2007 Nestl bought baby food manufacturer Gerber for $5.5 billion.

NESTLE OVER THE YEAR

Nestle was established because of Henris concern for his fellow citizens. Henri, who had a passionate interest in pursuing his work ideals, hoped that his efforts would one day benefit society. He produced the first milk cereal food for children, an achievement that even today, is recognized as one of the major advances in public health throughout the world. While the original business was based on milk and dietetic foods for children, numerous other food products have been added to the range over the years. These include chocolate, instant beverages, culinary, refrigerated and frozen products, ice cream, mineral water and pet food. Nestls other products include numerous chocolate bars as well as Nescafe coffee and Perrier water.

10

TABLE1.2 OUR BRANDS Milk Products & Nutrition NESTL EVERYDAY Dairy Whitener NESTL EVERYDAY Slim NESTL EVERYDAY Ghee NESTL Milk NESTL Slim Milk NESTL Fresh 'n' Natural Slim Dahi NESTL Jeera Raita Chocolates&Confectionery NESTL KITKAT NESTL KIT KAT LITE NESTL MUNCH NESTL MUNCH POP CHOC NESTL MILKYBAR NESTL MILKYBAR CHOO NESTL BAR-ONE

11

NESTL NESVITA NESTL NIDO NESTL MILKMAID NESTL MILKMAID Fruit yoghurt NESTL MILKMAID FUNSHAKES NESTL CEREVITA

NESTL FUNBAR NESTL Milk Chocolate NESTL clairs POLO POLO Power mint POLO Zero NESTL TANG EEZ

Beverages NESCAF CLASSIC NESCAF SUNRISE NESTL MILO NESCAF Mild

Prepared Dishes & Cooking Aids MAGGI 2-MINUTE Noodles MAGGI Vegetable Atta Noodles MAGGI Dal Atta Noodles MAGGI Rice Noodles Mania MAGGI Sauces MAGGI Pizza Mazza MAGGI Healthy Soups MAGGI Healthy Soup- Sanjeevni

12

1.3 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 sector. MNCs 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. MNCs are able to offer a wider product range, without the need to establish a manufacturing base.

1.4 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.

13

1.5 PROBLEM STATEMENT

Problem defining is the most crucial aspect of any research. It helps in understanding the background of the problem by analyzing it in an appropriate environmental context. This helps in translating the exact problem faced by the management into marketing research problem. A wholesaler plays a pivotal role in the distribution channel of any company especially in a FMCG Company. Wholesalers are important as they carry out the role of the Conduit in any companys distribution network and cater to a large pool of retailers which a distributor of a company cannot cater. So retailers who come from distant places and whose purchasing power is less are been taken care by the wholesalers. So wholesalers can be impetus to drive the penetration in the market. The main problems that new product faces is that of getting experienced and effective channel members. As existing marketing marketer/manufacturer can piggy back on the existing channel structure. A new company will have to provide greater incentives convince channel members to stock the product offering. Quick handling of problems of stockiest & dealers. The biggest problem in distributing a product category like chocolates is lack of infrastructure. The product needs to be kept in refrigeration (more so, in summers)-limiting the points at which it is available (ideal temperature needed for chocolates is 18 to 25 degrees). Hence, summer see sales suffer. Demand falls by almost two-thirds in the summer months. 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. In India 70% of population lives in villages and so this population plays a pivotal role in the turnover figures of any company, especially FMCG Company. As many of the competitors of Nestle is going rural to increase its consumer base, Nestle is also in the purview to increase its penetration in the every interiors of the country, so that every product of Nestle should be available to every part of the country and on the
14

other hand to increase the consumer base and its sales figures. So the Problem statement can be summaries as following Nestle wants to go rural as many FMCG companies are doing so, including its competitors. Management decision problem is whether to take step to carry out the penetration through wholesalers or not? Management is unaware of the current level of penetration in the up-country market? If Penetration through wholesalers is possible then how to go about it? The customers can be tapped directly through the distribution channel or not or penetration en-route wholesalers would be the optimum solution? What is the profile of the customers to have the knowledge regarding the consumer behavior and their buying behavior?

15

CHAPTER 2 PRODUCT DESCRIPTION

16

2.1 DISTINGUISH CHARACTERISTICS OF THE INDUSTRY

FMCG companies sell their products directly to consumers. Major features which distinguish this sector from the others are as follows:

LOW CAPITAL INTENSITY

Most product categories in FMCG require relatively minor investment in plant

and machinery and other fixed assets. Therefore shortage of product for want of capacity would be a rare phenomenon. The turnover is typically five to eight times the investment made in a Greenfield plant at full capacity. This is also due to the fact that the business being marketing driven, players do not integrate backward. Also, the business has low working capital intensity as bulk of sales from manufacturers takes place on a cash basis.

HIGH INITIAL LAUNCH COST

Nonetheless, there is a large front-ended investment made in new products

including cost of product development, market research, test marketing and most importantly its launch. To create awareness and develop franchise for a new brand requires enormous initial expenditure is required on launch advertisements, free samples and product promotions. Launch costs are as high as 50-100% of revenue in the first year and these costs progressively reduce as the brand matures, gains consumer acceptance and turnover rises. For established brands, advertisement expenditure varies from 5 - 12% depending on the categories. It is common to give occasional push by re-launches, which involves repositioning of brands with sizable marketing support.

TECHNOLOGY
Basic technology for manufacturing is easily available. Also, technology for

most products has been fairly stable. Modifications/ improvement rarely change the basic process. Nonetheless, major global players spend enormous sums on R&D due to their ability to spread cost over the wider base of their global operations. Their R&D efforts are towards:
17

Cost effective manufacturing process without compromising on quality and functional performance.

Research driven formulations, which give cutting edge. High standards of hygiene/ purity for personal care and food products. Standardized formulation, which can be used across countries.

MARKETING DRIVE
In relative terms, marketing function has greater importance in FMCG

companies. The players have to reach out to mass population and compete with several other brands which essentially offer similar products. The perceived differences are greater than the real differences in the product.

MARKET RESEARCH
Consumers' purchase decisions are based on perceptions about brands. They

also keep on changing with fashion, income and changes in lifestyle. Unlike industrial products, it is difficult to differentiate products on technical or functional grounds. With increasing competition, companies spend enormous sums on product launches. Market research and test marketing become inevitable.

BALANCE SHEETS ARE MISLEADING

The most critical asset for FMCG companies is represented by its brands and

distribution network. Brands are bought and sold like any other assets. Typically, when an FMCG business is sold, the value of the brand is several times of that of tangible assets. However as per the current accounting practices in most countries, investment made in building of brands are written off as revenue expenditure. This is due to high risk involved with a new brand, subjectivity involved in its valuation, lack of consistency and difficulty in separating a brand's value from that of tangible assets employed in the business. While a successful brand will pay back the investment several times, in case of brand failure, entire investment has to be written off. High return on net worth of most established companies is also misleading due to the fact that the assets sans brands are considerably understated in the balance sheet
18

THIRD-PARTY MANUFACTURING
Manufacturing of products by third party vendors is quite common. Third

party manufacturing used to give fiscal advantages particularly of excise duties. These have been considerably diluted in the past 7 years of reforms. In the last budget the government proposed to change the basis of excise levy to MRP basis. A total of 43 product categories have been brought under the MRP net in the subsequent budgets. Besides excise benefits, third party manufacturing also provides other benefits.

TABLE 2.1

THE INDUSTRY CHRONOLOGY

YEARS 1990 March 1995 - Excise Duty increased to 15 percent Excise duty further increases to 28.75 % Cocoa Prices Zoom 1998

DEMAN RUPEES DS TERMS 12 000 350 crores tones

GROWTH RATE 2% 3% Drops to 6-7 %

2005

2006 2007

Excise duty reduced to 25 %, further to 20 percent and finally to 18 %. Import Nestle launches Kit-Kat-sets up a new unit. Production Arrangement with CAMPCO continues. Mars selects production site. Market zooms up due to greater marketing thrust by players (especially Nestls) Chocolates-Selected import Item Chocolates-Open General License 20 000 tones Quantitative restriction lifted 32000 tones

2 3%

2 3% 2 3.6 %
19

The Indian Chocolate market can be sliced into four parts. 1. MOULD CHOCOLATE SEGMENT- comprising slab chocolates like Dairy milk chocolates, etc. These are made by pouring the ingredients into moulds. 2. COUNT LINE SEGMENT - comprising bars like 5 star, Bar One, Perk, Kit Kat, etc. These have ingredients other then chocolate and are usually Bar shaped, making for chunky bites. 3. CHOCO-PANNED

SEGMENT- comprising chocolate forms like

Butterscotch, Nutties, Tiffins, etc. Panned varieties have different cores/centers which are covered with a layer of chocolate. 4. SUGAR-PANNED SEGMENT - comprising chocolate forms such as Gems, Chocolate clairs, etc. These generally have a sugar coating on the outside. The rejuvenation exercise of Nestls, was one of the key reasons behind the churning up of the countrys Rs.350-crore chocolate market to a growth rate of 32 percent in 2005, from a mere a few years earlier .

Chocolate Market shares

OTHERS AM UL 1% 5%

CADBURY
NESTLE 20%

NESTLE AMUL OTHERS

CADBURY 74%

Fig.2.1
20

2.2 NESTLE FOODS INDIA LIMITED- HISTORIAL HIGHLIGHTS

Incorporated in 1959 as Food specialties, Nest India (NIL) was promoted by Nestle Alimantana, Switzerland, which presently holds 51% equity stake in the company. Manufacturing in India began with the startup of the Mega Factory in 1962. Nestls first unit at Moga, Punjab is manufacturing: Milk products Infant milk formulae Weaning cereals Culinary products Beverages

It is the main manufacturing unit of Nestle India Limited. The second factory at Choladi, Tamil Nadu to produce beverages i.e. 100% EOU for instant tea was set up in 1967.

The third plant in Nanjangud, Karnataka was set up in 1989 to produce Instant Coffee Health Beverages

The fourth plant at Samalkha, Haryana, was set up in 1993, to produce Weaning cereals Culinary products Health beverages Milk products

The fifth plant at Ponda, Goa was set up in 1994 to produce: Wafers Waffles

21

The sixth plant at Bicholine, Goa was set up in 1997 for manufacture of culinary products. Nestle India is now putting up another factory at Pant Nagar in Uttaranchal. Nestle India will invest over Rs 100 crores in the factory. This is the seventh plant of Nestle India and like the other plants, this plant will also be of international standards. This factory at Pant Nagar will initially manufacture culinary products including its very popular MAGGI. The factory will benefit from and will be closely aligned with the research and Development Facilities of Nestle Group and its proprietary, world class technology. Nestle India; the largest food company in the country is continuously looking at new niches in the market place for its various products.

In milk products Nestle has made a considerable mark. For instance, the company was the first to introduce a Dairy Whitener with its product 'Everyday'. And till today that product is a brand leader despite the presence of a host of other brands in the field. IN the case of Milkmaid condensed milk, Nestle relaunched the product as desert maker and has seen the sales graph climbing since. In baby foods, Nestle has made its strong hold with Lactones and Cerelac. Nestle is also popular in pure ghee segment. Its Everyday pure ghee has gained a quite satisfactory market share; Nestle has also entered into fitness food products. Nestle today is a household name. Nestle extended the product line in coffee by bringing in Dolco, and then Sunrie. In 1990, NIL entered the chocolate business introducing Nestle Premium chocolate. Nestls products are sold under brand names such as a Milkmaid, Everyday, Cerelac, Nescafe, Maggi, Lactones, and clairs etc. It launched the world famous Kit Kat chocolates in 1995. During the year 1996 Milo the world's largest selling chocolate energy food drink was launched.

22

2.3 MAJOR PRODUCTS

Fig 2.2

23

RECENTLY LAUNCHED PRODUCTS

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

NESTL: 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 2007." The Nestl Group's consolidated sales for the first three months of 2007 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,
24

Nestl 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.

TABLE 2.2 SALES BY MANAGEMENT RESPONSIBILITIES AND GEOGRAPHIC AREA

Jan.-March 2007

Jan.March 2006

Organic Growth Jan-March 2007 % 6 +1.8

RIG Jan-March 2007 % -0.4

In CHF million Zone Europe 6 '628 5 '154 3 '633 1 '740 1 '156 1'311

6'778

Zone Americas Zone Asia, Oceania and Africa Nestl Waters

5'978

+4.8

+1.9

3'291

+3.2

+1.9

1'719

+10.9

+10.7

Other Activities * Total

1'947 9'713

+9.4 +4.6

+8.4 +2.5

The growth rate in Western Europe reflects the importance of chocolate and ice cream to that Zone, both of which were impacted by the late Easter date. There should be some improvement, therefore, in the first half. Canada and the US performed well, but there was some slowness in Latin America. Importantly, however, the key markets of
25

Brazil and Mexico both achieved positive RIG and organic growth. Most Asian markets are growing at a good rate, with Greater China outperforming its ambitious target of double-digit RIG. In Japan measures were taken to improve the quality of sales in the ready-to-drink business. The water business and Alcon again delivered good growth, capitalizing on their leadership positions in their respective markets. Among the product groups, beverages, especially soluble coffee and coffee mixes under the Nescafe brand, and powdered beverages, under brands such as Milo and Mosque, did well, as did the specialty roast & ground coffees. There was good progress also in the chilled and the frozen culinary sector; the recently acquired Chef America achieved double-digit growth. The performance of chocolate and confectionery was impacted by the late Easter, as well as by price increases.

SALE

In CHF million

2006 2007

Fig 2.3

26

2.4 RESEARCH OBJECTIVES

Development of a sound marketing strategy is an essential part of starting a business. The marketing strategy determines the use of the company's resources and tactics to achieve its specific marketing objectives based on the needs and desires of its stakeholders, including customers, employees, investors and rivals. The marketing strategy is typically designed around three elements: selecting a target market, specifying the market strategy and creating a marketing mix. Selection of a Target Market Identifying the target market may be the most important decision a company makes in the strategic planning process. The company must first specify whom it is trying to attract based on its own strengths and weaknesses, the intensity of the market competition and the potential costs and gains. Businesses may treat the entire market - called mass marketing -- or target one or more specific segments or groups in the market -- market concentration or multi-segmentation. Specification Businesses must decide which market position they want to take. The company that gains the largest market share and dominates the competition becomes the market leader. The market challenger is the position when a company confronts the leader of the market. The market follower is a company that follows and copies the leader rather than attacks it. Many small businesses choose to fill a market niche: a position that specializes in a narrow segment of a large market. Creation of a Marketing Mix After selecting the target market, specifying the position that the company wants to take and researching the needs and preferences of customers, the company must define its marketing mix along the "4Ps" -- product, price, promotion and place -- to achieve a competitive advantage. For example, its product must be of higher quality, its prices must be lower, its promotion must be more effective, and its distribution must cost less than its competitors must.

27

CHAPTER 3 MARKETING STRATEGY OF NESTLE

28

3.1 MARKETING STRATEGY

IMPROVED PENETRATION
Improved penetration of brands is an important consideration in the Companys vision of sustained growth. Expansion of distribution and reach was a focus area. Some of the initiatives that are expected to contribute significantly include introduction of single serve convenience packs at affordable price point, such as NESCAFE Redimix and MAGGI Hot Cup Soup Powder. The initiative to automate distributor operation has continued and is expected to be complete during 2005. This will help NIL achieve greater speed and transparency in the flow of information, ensure better levels of customer contact and enable faster response to consumer needs.

OUT-OF-HOME CONSUMPTION
The Company continued to strengthen initiatives to facilitate availability of products for out of-home consumption. These initiatives were supported by a number of new product launches. The development of NESTEA Instant Tea premix for hot vending offers consistency and convenience as compared to tea bag preparation; NESCAFE Frappe premix fort cold vending has been introduced in Quick Serve Restaurants; Low Sugar NESCAFE premix has been developed for health conscious consumers; MAGGI Hot Cup Soup dispensed through vending machines is an innovative and pioneering concept in the market. Large number of Nestle Consumption Zones including Cafe NESCAFE, Coffee Corners and multibrands stalls were set up and innovative vending machines were introduced for Iced Tea. Sustained focus on continuously improving the value to the consumer, helped to introduce vending machines with eight beverage options to offer consumers a range of specialty beverage at the same location. On the manpower development front, programmed during the year continued to be focused on the operational front more particularly sales and production. To support the growth plans and distribution strategy, and simultaneously improve the operational efficiency, the on strengthening chain continued to receive attention during the year.

29

INNOVATION, FROM NESTLE

RENOVATION

AND

TECHNOLOGY

The continuous efforts on product innovation and renovation during the year has contributed significantly to the performance of the Company during the year and would remain a key element even in the future to sustain leadership and profitable growth, especially in a market that is becoming increasingly competitive under the General License Agreement with Nestle Group, NIL has the license for know- how, patents, brands and other intellectual property, in relation to the products manufactured and/or sold by your Company. Access to proprietary technology of Nestle and the fruits of extensive centralized Research and Development is available on a continual basis. The excellent performance of the Company over the years has been greatly influenced by these inputs.

COMMUNITY DEVELOPMENT
Initiatives by the Company, for community development continued to be focused on programmed in the areas where the factories are located. These programmed gives importance to providing drinking water facilities in schools, supporting and participating in immunization programmers, providing basic facilities to local schools and arranging medical camp.

SUPPLY CHAIN (DISTRIBUTION STRATEGY)

Thrust on strengthening the supply chain continued to receive attention during the year and the Company advanced towards becoming the Best in Class Supply Chain in the FMCG sector. Distribution costs were contained by increase and efficient use of railways for primary dispatches. Simultaneously, the vehicles transporting raw and packing to factories were used for finished goods dispatches too, thereby saving freight costs. Efforts in collaborative logistics with other companies and third party services providers have begun to yield benefits. In order to improve response to customer demand, forecasting was given considerable attention. This has led to an empowered demand planning role that ensures optimized inventory as well as satisfaction of consumer demand. Initiatives in e-connectivity with the distributors and also with the suppliers are further aligning our efforts in this direction.
30

3.2 MARKETING STARTEGIES OF NESTLE INDIA LIMITED

Marketing strategy is the complete and unbeatable plan designed especially for attaining the marketing objective of the firm. The marketing objectives indicate what the firm wants to achieve; the marketing strategy that decides the success at the business unit level which in turn decides the total corporations success. The link between marketing strategy and overall success is indeed direct and vital. And in this linkage lies the significance of marketing strategy. Nestle India ltd. has an aggressive marketing strategy which is very well understood when one goes through the in-depth study of the 4-Ps of the marketing and price strategies with respect to its products. One comes to the conclusion that NIL has a well defined roadmap to success i.e. to reach its ultimate objective of realizing customer satisfaction through value for price products.

PRODUCTS
Quality is the essential ingredients in all of our brands and the reason why millions of people choose Nestls products every day. Our consumers have come to trust in Nestls 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 Nestls `Farine Laces 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 illhe had been born prematurely and was refusing his mothers milk and all other types of nourishment. Nestls new food worked, and the boy survived

31

from the very beginning, Nestle' product was never intended as a competitor for mothers milk. In 1869, he wrote; During the first months, the mothers 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 companyquality and superior nutritional valueare 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 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. Nestls expertise as the worlds 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 Nestls turnover. For ensuring regular procurement of good quality milk, Nestle has developed a network around its Mega factory for collection of fresh milk every day 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. Other milk products include dairy whiteners (21% market share ) sold under the Every Day and Tea Make brands, sweetened condensed milk and ready to cook mixes for traditional Indian sweets sold under the Milkmaid brands. The company also markets ghee (6% market share) under the Every Day) brand. Nestle has expanded its milk product portfolio with the launch of new dairy products such as
32

UHT milk, Curd and Butter. Huge investments arte being made in building a diversified dairy business and the distribution infrastructure for the same. Milk products sales registered a 10.6% growth during 2006. The major competitors are HLL with Milkana, Amul with Amulya, Britannia with Britannia Dairy Whitener, and Kwality with Kream Kountry. Britannia with 11% of market share, Amul with 19%, and HLL with 8%, Kwality with 4% of it, Rest of the market share lies with local players like Nova, Indiana etc. local players are very active & some of them are operating under the small scale industries. Nestle is still the market leader in the long term & is continuously on the 4-Ps to grow further.

DAIRY BRANDS
Nestle' has long been a major player in the dairy industry, originally with wellknown 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. 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.
33

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. 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 youd never thought of and yet theyre commercially available: Sorbets- Smoked Salmon, Tomato, Cucumber Ice-Creams Garlic, Avocado, Sweet Corn. The ice cream cone is the most environmentally friendly form of packaging. A system from Damascus, Ernest E Hamwi is credited with its invention. Apparently during the 1904 St Luis Worlds fair. His waffle booth was next to an ice cream vendor who ran short of dishes. Hamwi rolled a waffle to contain ice cream and the cone was born.

34

3.2 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. 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 Nestls started a company that would quickly become the worlds 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 Nestls are launching indigenous product made to international standards of the 20,000 tonnes chocolates market worth about Rs 400 crore, Nestles accounts for around 65% of market share followed by Nestls around 23%. Amul has 5% of the share, with the minor players taking the Rest. Though with much smaller portfolios, Nestle is putting up a touch fight from the treat for kids, chocolate are now being positioned as near- meal substitute. Thanks to the initiative taken by Nestls India. The market has become broad based in the sense that adults are important target segments now. The repositioning of Nestls dairy milk in 1994 as real taste of life grew the entire category of milk chocolates by 20%. If facilitated the repositioning of Nestle brands in the basket.

35

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 Nestls Dairy Milk.

ECLAIRS: competing in the chewable toffee segment, clairs was relaunched by

Nestls during the mid-90 with a new name milk-clairs. Its worth is 4000 tones now. Nestle' also presents here NESTLE' ECLAIRS. Due to launch of multibrands Nestle 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 Nestles perk is with9%.

PRODUCT KIT- KAT PERK

PRICE Rs. 14 Rs. 10

WEIGHT 36 gm. 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 Nestls turnover. It has expanded its products range to all segments of the market the

36

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 under the umbrella brand Allens. Nestle has also markeys some of its imported brands like Quality Street, Lions and After Eight. New launches such as Nestle Choc Stick and Milky Bar Choo at attractive price points to woo new consumers chocolate confectionary sales registered a strong 21.5% of growth in 2006 aided by good volume growth in Munch, Kit-Kat and Classic sales. Nestle relaunched Bar-One during the year 1993.

3.3 PREPARED FOODS

Convenience foodspackaged 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 bouillon 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. Ready to cook food/ cooking aids are sold under the umbrella brand name Maggie. Culinary product account for about 14% of Nestls turnover. Maggie is the market leader in the noodles (45% market share), the Ketchup (43% market share) and soups (41% market share) categories.
37

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. 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 worlds 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 worlds 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
38

Nestls joint-venture with the Coca-Cola Company, Beverages Partners Worldwide. Nestle' is also present in fruit juices (Libbys) as well as espresso coffee in capsules (Nespresso). Beverages like coffee, tea and health drinks contribute to about 30% of Nestls turnover. Beverages sales registered a 155% growth during 2007. While about 14% of sales come from domestic market, exports contribute to about 16% of sales. Nestle Nescafe dominates the premium instant coffee segment. Nestls other coffee brand Sunrise has also been relaunched under the NESCAFE franchise 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, Customers 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. Nestls Bourn vita & HLL with Boost are the major players in the market along with Milo. Bourn vita 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 2004.

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.

39

Beverages solutions featuring well known consumer brands such as Nescafe, Nestea and Nesquik as well as host professional brands including Minors, 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 SocieTe Genele Des Minerals 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. Its 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, 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'
40

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' Waters, a token of Nestle' decisive commitment to the bottled water market, which now represents 9% of its sales. Today, Nestle' Waters 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. 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.

3.4 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.

41

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 consumers 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 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 companys offer & to advocate the cause of its production in the minds of its audience. Thus informing, reminding & advocating about the companys 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.

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

42

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 Nestls 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 Nestls 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.

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.
43

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 their 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 & 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 MNCs but still it is a respected firm in our eyes. Nestles under its promotional campaign that is designed by Ogilvy & Mather the adv shows the power of positioning with emotional benefits and it really works for Nestles & leaves it with dramatic increase in sales.

PLACE:
Physical distribution is also called as market logistics. It involves: Planning Implementing Controlling the physical flow of the materials and final goods from point of origin to point of use to meet customers requirements at a profit. Over the last several years, NIL has introduced a number of new products. These include: Kit-ka, Polo, Milo, Cerelac, Maggie, Dosa Mixes, Bar-one etc. The success of these products is in part based in Nestls nation wide distribution system and its strong relation with channel members, which allow it to quickly place new products in the market. Channels of distribution tend to be traditional for a number of product categories. For i.e. in the beverages and food industry, manufacturers normally sell through wholesalers, who deal with retailers. But the distribution strategy of Nestle' is not a traditional one. The products manufactured in various production units are
44

passed on to C&F agents. Practically each C&F agent covers just one state. The products are then sent to various distributions, the company itself has defined the particular area to be covered by each distributor. Salesman from the distributors office then approaches various retailers of their area & book the order. The products are delivered to on the next day as against the orders. For instance MILO is manufactured at Karnataka. C&F agents located at various places collect the product from production unit. In Delhi C7F is in Mandali Village, Trans Yamuna. The agent in turn send the products to distributor and then to retailers. The distribution channel includes 6, 00,000 outlets in 3000 towns throughout the country, serviced by 39,000 distributors. Practically every shop dealing in consumer goods is an outlet for Nestle'. This is formulating its marketing strategies.

45

TABLE 3.1 DISTRIBUTION NETWORK OF NIL

MANUFACTURER

C & F AGENTS (1%-3-% Margin)

SUPER STOCKIST (3%-6%)

STOCKIST (3%-5%)

DISTRIBUTOR (4%-7%)

ORGANISED RETAILER (6%-18%)

46

TABLE 3.2 NESTLES MOST LIKED PRODUCTS PRODUCTS CHOCOLATE COFFEE MILKMADE MAGGIE MINERAL WATER INFANT FOODS SOUPS SAUCES PERCENTAGE 10% 28% 5% 40% 2% 5% 4% 6%

40% 35% 30% 25% 20% 15% 10% 5% 0%

PERCENTAGE
CHOCOLATE MAGGIE SOUPS COFFEE MINERAL WATER SAUCES MILKMADE INFANT FOODS

Fig 3.2
47

10% people like chocolates as Nestls best product. Among chocolates the Kit-Kat & Munch are the most liked ones. Munch is the largest selling chocolates in Indian chocolate market followed by Nestls Dairy milk. Coffee is considered as the best product of Nestle' by 28% of respondents. They like the taste & aroma as it best quality. Milkmaid is liked by 5% of people & this crowd involves women & surprisingly children. Maggie noodle is the most loved product by 40% respondents especially mothers & children as they consider it as the all time dish (Fast to cook, good to eat). Infant products are liked by 9% of respondents, most of them were mothers but, it is very interesting to quote that some mothers them & their elder children liked the taste of Cerelac & it increased the purchasing frequency of the product.

Fig. 3.3 REASONS TO LIKE NESTLES PRODUCTS

REASONS TO LIKE NESTLE' PRODUCTS

ADVERTIS EMENT COLOR PRICE PACKAGIN G TASTE

48

TABLE 3.3 FEATURES COLOR TASTE PACKAGING PRICE ADVERTISEMENT PERCENTAGE 2% 64% 4% 20% 10%

Most of the respondent (64%) liked the products because of the great taste of products like Maggie, Munch , Kit-Kat, Coffee, Frappe, Slim Milk & sauces. 2% of the respondents say that they like the color of the product most as it shows the freshness of the product. 20% people are satisfied with the price.

TABLE 3.4 BRAND LOYALTY FOR NESTLES

LOYALTY STATUS HARD CORE LOYALTY SHIFTING LOYALS CONTRIBUTORS 53% 19%

SWITCHERS

28%

49

BRAND LOYALTY FOR NESTLE

HARD CORE SHIFTING LOYALTY LOYALS SWITCHERS

28% 19% 53% CONTRIBUTORS

Fig 3.4

50

3.4 BRAND LOYALTY FOR NESTLE

Brand loyalty is very high for Nestle' as 53% of respondents denied to switch over to other product, when any gift or scheme is offered by the competitors. Products that have highly loyal customers are Maggie noodles, coffee, munch & everyday. People also like & are loyal for sauces and it is showing an increasing trend (Heinz recently started the Diwali offer to give 500 gm only for Rs. 39. people responded that the offer wasnt so interesting to switch from Maggie & also it was a short-term offer. 19% respondents said that they will some time switch over if they find a really attractive offer. They also said that Nestle' is the company that uses least of the marketing gimmicks to promote its products & people believe in quality of Nestle'. 20% people said that they switch in most of the cases.

TABLE 3.5 SHOULD NESTLE IMPROVE SOME OF ITS PRODUCTS

PRODUCTS CHOCOLATES SOUPS COFFEE MAGGIE

OPINION 63% 21% 15% 1%

51

PRODUCTS THAT NEED IMPROVEMENT

70% 60% 50% 40% 30% 20% 10% 0%

OPINION

O C O LA TE

O U P

C O

Fig 3.5 63% of respondents want the company to work on the taste of Milky bar and Classic. 21% people want the soups to be offered in more flavors, at present there are 12 flavors. They also want to make the soups creamier. 16% people say that Nescafe is the most powerful brand of Nestle', but they say that prices are too high to afford, although Nescafe red mix is a big relief but it is not so creamy.

TABLE 3.6 QUALITY WISE POSITIONING

Quality wise Nestle' and Amul are the most admired companies. They blamed Nestles because of the recent issue of worms in the Nestles chocolate. They say that Nestls quality is trusted. COMPANY NESTLE BRITANNIA CADBURAYS AMUL OPINION 37% 21% 12% 30%

C H

G G IE

FF E

52

QUALITY WISE COMPARISON OPINION

AM UL

NESTLE

CADBURA YS

BRITANNIA

Fig 3.6 TABLE 3.7 AVAILABILITY WISE COMPARISON

Nestle' produces the products that are part of most of the peoples daily life. So availability of fresh Nestle' product is smooth. COMPANY NESTLE AMUL BRITANIA NESTLES OPINION 26% 11% 28% 35%

53

AVAILABILITY WISE COMPARISON

40% 35% 30% 25% 20% 15% 10% 5% 0% NESTLE AMUL BRITANIA CADBURYS OPINION

Fig.3.7 The pricing policies of Nestle' regarding products like Coffee, Dahi & Milk needs revision.

TABLE 3.8 PRICE WISE COMPARISON

COMPANY NESTLE AMUL BRITANIA NESTLES OPINION 23% 38% 21% 18%

54

PRICE WISE COMPARISON

40% 35% 30% 25% 20% 15% 10% 5% 0%

OPINION

U L

IA

TL E

AN

N E

R IT

Fig.3.8

3.5 MARKET SEGMENTATION AND TARGET MARKET SELECTION

Market segmentation and target market selection have an intimate relationship with market strategy formulation. The company may focus on the following factors while laying down the target market.

1.

GEOGRAPHIC SEGMENTATION
Geographically the country can be broadly divided into 3 sub segments -Rural,

Suburban and Urban. In the first phase (after the test launch), Urban parts of the country should be targeted. The chosen segment is targeted because Lack of infrastructure, like refrigeration-not to venture rural markets. The consumption pattern & behavior in Rural India does not fit with the product attributes and perceived benefits.

C A

D B

R Y

55

The limitation of disposable income is another factor that hampers entry in rural areas.

Semi-Urban may be considered in the second phase. An year after the launch. Within Urban India, the cities with 1 million + population i.e. top 23 metros

will be targeted. A soft launch of the brand should be undertaken before taking the brand to these areas. This (test launch) will be undertaken in Bombay, since it (Bombay) is a high consumption city for chocolates. (Source: Nestle (I) Ltd in fact Nestls sales peaked out in Bombay, during its initial launch).

2.

DEMOGRAPHIC SEGMENTATION

The demographic variables have been separately addressed to arrive at the target audience.

Age:
12 years + segment of the population is recommended to be targeted. Small kids may not be targeted, because of the nature of the perceived product benefit by consumers in that age group, who are inclined towards sweeter and creamier snacks. Further, it may not be easy to get youngsters off their tuck money. Also, children today already have an array of cheap domestic and international confectionery (in the form of chewing-gums, lollipops, rolls, lozenges and toffees).

Income:
The income segmentation may be all households with an annual income exceeding Rs. one lakh. Targeted audience may be all households that can afford a television or have access to satellite television.

3.

PSYCHOGRAPHIC SEGMENTATION

Social Class: In terms of psychographic the social class targeted is the educated upwardly mobile urban middle and upper class. Personality Traits: This segment essentially consists of emulators i.e. upwardly mobile, pioneers, freaky, fun loving type of people. These are the people who like to enjoy life and believe in traveling and adventure.
56

Life Style: In terms of lifestyle, it may be aimed at those who favor buying convenience products. They are also willing to experiment with alternate products in place of conventional food items, as the universe of chocolate consumption is changing from occasion led to more casual consumption. 4. BEHAVIORAL SEGMENTATION The moulded segment of the market is perceived to be the growth engine of the market. Hence, this segment is quite lucrative for a new brand launch. Also, chocolate purchases have moved from being occasion-led to a casual snack. Hence, anytime anyplace snack aspect needs to be established. This segment comprises of people who like to have chances and want to try new things. 5. LEARNING-INVOLVEMENT The purchase of a chocolate is of a low-involvement category. It is an impulse purchase and decision to buy is not pre-planned. 6. USAGE RATE The market may be further segmented on usage rather than attitude-Anytime Anyplace Snack. This is a group of consumers that find traditional snacks too heavy. Even though a range of chocolates may be offered, a core brand (concentrated strategy mentioned later) may be launched in the count line segment. Since this segment is tipped to be the growth engine of the industry (according to industry sources Mr. Sanjay Verkey, Nestls India and Mr. Bohidar) and this segment has a substantial share of the market (33%).

7. TARGET AUDIENCE
Following from the above, it is recommended to target consumers who found traditional snacks too heavy. Usage rather attitude is being used to segment. This ithe segment that tended to pick up biscuits instead-something they could munch while continuing with their schedule. There are 181 million urban individuals in India Our target segment is people living in the top 23 metros (1 million +population), which implies 63 million people. Further, SEC A-B in these 23 metros with Cable & Satellite at home are targeted
57

(94.4 % of SEC A-B have a cable & satellite connection) [All these are NRS -VI & IRS 99 figures].

ADVERTISING & SALES PROMOTION

When a marketer or a firm has developed a product to satisfy market demand after thoroughly analyzing the market , there is a need for establishing contact with the target market to eventually sell the product . Moreover, this has to be a mass contact which means that the marketer is interested in reaching a large number of people so that his product may receive optimum exposure . Naturally , the communication best and way to reach advertising is this one mass of the market means is through of such mass mass

communication along with such other means as publicity, sales promotion and public relations .Advertising as a means of mass communication has , therefore, made mass selling possible . It is perhaps the best known mass communication channel. Marketers and firms engaged in selling their products and services throughout the country and or in other nations are fully aware of the necessity and importance of advertising . As a means of forceful communication , advertising promotes the sale of goods , services , images and ideas through information and persuasion . Advertising is not a panacea that can restore a poor product or rejuvenate a decline market . It only helps in selling through the art and business of persuasive communication . The American Marketing Association, Chicago, defines advertising as ANY PAID FORM OF NON PERSONAL PRESENTATION OF IDEAS GOODS AND SERVICES BY AN IDENTIFIED SPONSOR . Advertising aims at drawing attention to a product. It seeks to create an awareness about the existence of advertised product . It passes on information about the product in such a way that interest is created in the mind of the prospective consumer about the product .

58

3.6 DIRECT COMPETITION

NESTLE, NESTLE & AMUL
At present there are three major players Nestle, Nestles and Amul in the Indian Chocolate market. Campco initially tried to break into market but failed. Brief profile of the same has been entailed below:

NESTLES INDIA LTD.

Nestls India Ltd, has been in India since 1948. Its brands: Dairy Milk, 5 Star, Gems and Chocolate clairs are the households names in India today. In all the segments i.e. moulded chocolates, count chocolates and panned chocolates, it is undoubtedly the market leader. Nestls has its manufacturing units at Thane (Mumbai), Malanpur, Indori(near Pune), Mithuri and Kolhapur. It has a strong distribution network with about 500 distributors in North India and more than 3 lac retail outlets being serviced all over India. In 1997, Nestle planned to pump in Rs.80-crore to up production capacity at a couple of Nestls factories. This cash is exactly double of whats been invested in 1996. The Company launched Perk, a wafer enrobed chocolate in 1995. This was reactionary to the launch of Kit Kat and has been able to counter competition.

NESTLES DAIRY MILK (CDM) - THE FLAGSHIP BRAND

CDM, the oldest of Nestls brands was launched in 1956. In the early 90s, a rise in the prices of cocoa, increase in the excise duty and a fall in the demand inspired the idea of repositioning. Two years in the process after relaunch Nestls Dairy Milks market share stood at 25 percent with sales rising by an average 40 percent per annum. Besides CDM Nestls has a number of endorser brands such as FruitnNut, Nut Milk etc. Even though contribution of these brands to the companys bottom-line is very small, they are required in order to make a complete portfolio of offering.

59

The Company developed a concentration strategy on CDM, Five Star, Nestle Gems, Nestls clairs, Perk and the latest of its offering Picnic (which has drawn a good response in the market). The Company has also identified sugar confectionery, as a growth sector. Its first offering Googly.

NESTLE INDIA LTD.

Nestle India Ltd. has been in India for more than 35 years now. The worlds largest marketer of chocolates (became world number one when it acquired Rowntree Macintosh of the UK) - Nestle, made its foray in the Indian chocolate Industry in November 1990. It launched three products - the milk chocolate, the bitter chocolate and Crackle (a crunchy chocolate) - in the slabs category and Bar One in count lines. Nestls been quick to react, and launched a whole host of products in succession: All Silk milk chocolate, Creamy Bar, and a new version of 5 Star. Nestle, in the beginning did not have its own manufacturing facility. It had an alliance with Campco to manufacture chocolates. Later, in 1995 a state-of-art manufacturing plant was set up at Ponda, Goa at a cost of Rs. 50 crores. This unit took care of the entire Kit Kat production. However, the production tie-up with Campco still continued.

LAUNCH OF KIT KAT

Kit Kat, one of worlds most popular chocolate, was launched in India in 1995. Within months of its launch, it fulfilled every target Nestle had set. Its launch was accompanied by the launch of Nestls Perk in order to counter Kit Kat and safeguard the flagship brand CDM. Kit Kat has been able to define a new segment in the industry in the form of the wafer enrobed any time snack. Kit Kat outsells Perk in the outlets where both are available. In the crucial markets of Bombay and Delhi both are running neck-and-neck. It has even said to have threatened the mother brand, Nestle Dairy Milk.

TABLE 3.9 NESTLS NEW LAUNCHES

60

BRAND

LAUNCH

Allen Splash(Sugar Candies) After Eight Mints Lion Wafer Bars

Select Cities Delhi & Mumbai Delhi & Mumbai

FUTURE OUTLOOK
Focus will be on chocolates and confectionery followed by culinary products which include the Maggi range and coffee.

AMUL

Gujarat Cooperative Milk Marketing Federation (GCMMF) launched the Amul Chocolate way back in 1974. With its milk chocolates, Badam Bar, Crunch and Fruit n Nut has a market share of about 5 %. Due to lack of focus and with multinationals spending huge amounts on advertisements its market share has been falling. GCMMF is involved in a large number of products, of which chocolates constitutes just 1-2 %. The company is not concentrating much on its chocolate business. As of now, Amul chocolates are not on companys focus. Interestingly, Kaira District Cooperative Milk Producers Ltd.(KDCMPL) - the manufacturer of Amul chocolate - is selling whatever it produces. Limited capacity is also a reason for the share it has. However, Amuls memorable advertising campaign positioning it as a A Gift for Someone You Love, saw the sales graph rising. Amuls sales grew by 39% then. Ever since, Amul has maintained a low profile.

OTHER DOMESTIC PLAYERS

61

The only other organized player in the market is Campco, which has an insignificant share of the market. It is supplying its production to Nestle. Apart from this Campco did come up with its new brands like Treat. But crunch of resources grossly effected the pace of the company and is hardly to be heard of today.

IMPORTED BRANDS
Considering the high growth potential, various multinationals wanted to set up facilities in India (Mars being one of them). However, shortage of cocoa, seasonality in demand, and the absence of a proper cold chain deterred them from investing in India. The government also moved the import of chocolates from special item list to open general license category. The duty structure was also reduced. This resulted in making import of foreign brands easier and price competitive. Due the above, Mars Inc.-the US giant, who had decided to set up facilities in 1995(the site for which was also selected), decided to postpone its investment plans. An alternate strategy was formulated to import Mars chocolate brands into India through Sarura Business (I) Ltd. Sarura, which came into existence about an year ago, imports Mars brands and sells through its own distribution network. Highlights of the strategy being followed are mentioned below: Imports Mars brands every 40 days, after careful demand analysis. Takes 20 to 22

days to reach India.

DUTY STRUCTURE

Customs Duty Counter-veiling Duty( a form of excise) Special Duty(Surcharge)

40 % 2% 3%

62

The import duty on finished product is expected to come down to 20-25 percent in a phased manner.

OTHER FOREIGN BRANDS

Nestle has also recently launched its foreign brands by importing them into India. These include Lion and After Eights.

FUTURE OF THE IMPORTED BRANDS

The future of this segment is highly dependent on extraneous factors like, government policies regarding import of chocolates and the duties structure therein. Any movement can make these players price competitive. In December 1997, a no. of products reaching expiry are said to have been dumped into India due to favorable import policy (this is when foreign brand imports like Saruras products came into the market)

63

CHAPTER 4 RESEARCH METHODOLOGY

64

4.1 RESEARCH METHODOLOGY

As mentioned earlier, the objective of the study is to formulate a Marketing Strategy for any new entrant in the Indian Chocolate Industry. While recommending the said strategy detailed information from both primary and secondary sources was collected and analyzed. This included:

PRIMARY SOURCES
Four level primary information collections were undertaken. These were: 1. In order to get relevant information regarding competition, executives of the following chocolate players in the market were interviewed: To analyze buying behavior and in order to gain an insight into the buyer need-satisfaction level, a questionnaire was formulated. These included pan shops, grocery shops, bakeries, departmental stores, etc.

SECONDARY SOURCES:
A number of secondary sources of information were used. These were: Confederation of Indian Industries reports, PHDCCI & FICCI library. Internet websites Of Nestls, Nestle and indiainfoline.com, askjeeves.com Executive use of a secondary in the form of the magazines/journals/newspapers clippings, such as Business world, Business Today, Business India, A & M, Economic Times, etc.,

Tools analysis
Observation and descriptive survey methods was used to collect the data about the features, expectations, satisfaction, problems etc. the customers.

Size of sample
The present study was conducted on a sample size of 80.

65

TABLE 4.1 THE METHODOLOGY ADOPTED WAS AS FOLLOWS:

INDUSTRY SCENARIO SKETCH (UTILIZING SECONDARY INFORMATION)

EXTENSIVE INTERVIEWS HELD WITH PRIMARY/SECONDARY SOURCES

(COMPANIES/CHOCOLATE MANUFACTURERS ASSOCIATION)

INTERVIEW WITH EX-DISTRIBUTOR OF NESTLE INDIA LTD

EXTENSIVE RETAILER INTERVIEWS IN NARAINA INDL. AREA

FORMULATION AND ADMINISTRATION OF A QUESTIONNAIRE

FORMULATION OF THE RECOMMENDED STRATEGY ON THE BASIS OF THE ABOVE MENTIONED PRIMARY AND SECONDARY INFORMATION

66

4.2

Limitations :
In attempt to make this project authentic and reliable, every possible aspect of the topic was kept in mind. Nevertheless, despite of fact constraints were at job during the formulation of this project. The main limitations are as follows:

Due to limitation of time only few people were selected for the study. So the sample of consumers was not enough to generalize the findings of the study.

The main source of data for the study was primary data with the help of self-administered questionnaires. Hence, the chances of unbiased information are less.

People were hesitant to disclose the true facts. Continuous and reliable information was not available. The time span of the survey was short and hence only major aspects were considered.

67

CHAPTER 5 SUMMARY OF FINDINGS

68

5.1 SWOT ANALYSIS

The SWOT Analysis shows the relationship between critical variables of the company. The SWOT matrix has a wider scope. The SWOT 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.

STRENGTHS

High brand equity consumer & dealer regarding Nestle' as company delivery quality product.

Company processes an extensive powerful distribution network. Company processes a dedicated & experienced sales staff. Strong base in monitoring & controlling market.
69

Distributions are highly dedicated towards performance & experience. 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.

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.

NIL - State of the Art Technology and production systems ensuring high technological/high value and optimum cost advantage to its product portfolio.

Idealization of products to suit local tastes are critical for success and NIL is converting its international products into Indian tastes products.

Nestle has altogether 570000 outlets in more than 3000 towns. This is one of the major strengths of the company.

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.

WEAKNESSES
Company takes time in handling return claims on authorized whole seller. Warehousing norms are not followed which account for increased breakage. Restricted website minimizes marketing opportunities. Yearly initiatives are not so motivating. A high percentage of turnover and profits coming from a few products categories like Coffee/Maggi.

70

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.

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.

NIL factories are not to meet the demands of products with the supply. 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 dyeing. There was an embarrassing starter like Nestea an iced tea, Nesfit - a glucose rich energy drink, Bonus, Milo is not given much of promotion.

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.

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.

OPPORTUNITIES
Great quality. Mass market is growing with established performances. Growing middle class is increasing opportunities. Great taste. Low differentiation in market brands. Credit facility given to dealers.
71

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.

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.

Food industry is the second highest growing industry in India and offers a lot of opportunities for NIL in India.

THREATS
Tough competition especially in premium segment. Characteristics of premium segment that it is never brand loyal. Tough competition (indirect) with barista, caf coffee day. Mere availability of best sellers from the parents 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. 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. 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 midterm. Because of the present Swadeshi prime and changing public opinion towards MNCs will affect NIL's future.

72

10

20

30

40

50

60

70

80

90

0
Picnic Fruit n' Nut CD M Foreign brands Kit Kat Perk Am ul 5 Star Bar One Break Crunch Cadbury' s Nest le

AWARENESS - PURCHASE PREFERENCE

5.2 ANALYSIS AND INTERPRETATION OF DATA

73

PURCHASE PREFERENCE: WHAT INFLUENCED YOU TO BUY THE

SELECTED BRAND

80 70 60 50 40 30 20 10

CDM

Picnic

Perk

Fruit n' Nut

Crunch

KitKat

Foreign Brands

90 80 70 60 50 40 30 20 10 0 Advertising Word of Mouth Attractive Packaging Dealer Shop Display Family, friends, relatives

Cadbury's

Bar One

Nestle

5 Star

Amul

74

PURCHASE BEHAVIOUR:
REASONS FOR PURCHASE:-

70

60

50

40

30

20

10

0 Occasion led As a gift Casual Purchase Energy Snack

CHOCOLATES
1. A gift to a love one 2. As a gift it is for impulse driven

No 10%

Yes 90%

75

3.

MOST

OF

MY

CHOCOLATE

PURCHASES

ARE

PREPLANNED

Yes 10%

No 90%

4. OFTEN PICK UP CHOCOLATES WHILE I MAKE OTHER PURCHASES ----REINFORCING IMPULSE PURCHASE

No 24%

Yes 76%

76

700

600

500

400

300

200

100

0 Taste Quality Price Flavour Packaging Add-ons Brand Image

PRODUCT RELATED

90 80 70 60 50 40 30 20 10

Fruit n' Nut

CDM

Cadbury's

Bar One

Foreign brands

Crunch

Nestle

Picnic

KitKat

Perk

5 Star

Amul

Break

77

PRICE RELATED
SUITABLE PRICE FOR A40gms.CHOCOLATE PRICE PERCEPTION.

Below Rs. 10/14%

Between Rs. 14/-& Rs. 20/29%

Between Rs. 10/& Rs. 14/52%

Greater than Rs. 20/5%

THE PRICE OF MOST PREFERRED BRAND IS

High Expensive 19% Cheap 5%

Reasonably OK 76%

78

PRICE SENSITIVITY (ELASTICITY).

IF PRICE OF YOUR FAVORITE BRAND IS REDUCED, YOU WILL BUY MORE OF IT

NO 48%

YES 52%

PRICE SENSITIVITY.
IF THE FAVORITE BRAND IS FEW RS. EXPENSIVE WOULD YOU TO GO FOR IT

YES NO

79

ADVERTISING/PROMOTION RELATED
ADVERTISEMENT RECALL TEST (UNAIDED)

80 70 60

50 40 30 20 10 0 Perk KitKat CDM Picnic Amul 5 Star

MOST LIKE ADS (UNAIDED)

250

200

150

100

50

0 Perk KitKat CDM Picnic Amul 5 Star

80

WHETHER, SALES PROMOTION WOULD AFFECT YOUR PURCHASE DECISION

NO 57%

YES 43%

BRAND LOYALTY IF A PARTICULAR BRAND IS NOT AVAILABLE, YOU WILL:

GO TO ANOTHER DROP THE ANOTHER BRAND IDEA RETAILER

29%

19%

Series1

52%

81

IF YOU WANT TO BUY A WAFER CHOCOLATE, SAY KITKAT AND IF IT IS NOT AVAILABLE, YOU WOULD SETTLE FOR A

BAR/MOULDED CHOCOLATE SAY 5 STAR OR CDM

NO 33% YES 67%

CHOCOLATE BRANDS IN INDIA

ARE YOU HAPPY WITH THE KIND OF CHOCOLATE BRAND AVAILABLE

NO 24%

YES 76%

82

PLACE RELATED----OUTLET PREFERENCE

600

500

400

300

200

100

0 Pan shop Sweet Shops Gift shops Stationary shops Ice-cream parlours Fast Food joints M ilk booths Restaurants Exclusive chocolate parlours Road-side Kiosks

DEMOGRAPHIC PROFILE OF THE RESPONDENTS

AGE
Between 25 yrs & 35 yrs 19% Between 35 yrs & 45 yrs 19%

Between 18 yrs & 25 yrs 33%

Between 2 yrs & 17 yrs 29%

83

SEX

FEMALE MALE

MARITAL STATUS

MARRIED 33% UNMARRIE D 67%

84

OCCUPATION AND MONTHLY INCOME

Less than Rs. 5000/10%

Between Rs. 5000/& Rs. 8000/14%

More than 12000/52%

Between Rs. 8000/& Rs. 12000/24%

85

CHAPTER 6 CONCLUSION AND SUGGESTIONS

ss

86

6.1 FINDINGS & RECOMMENDATIONS

FINDINGS

In the age group of 16-20 and 21-30, the average monthly spend is not influenced by the place of residence/ social class but rather on, where a person studies/works i.e. by the social] circle of his friends and colleagues.

The consumers by and large are satisfied with the present choices available in chocolates i.e. there are no complaints of consumers as regards to existing varieties of chocolates.

However there are many new wants and demands of consumers in terms of new flavors and ingredients of chocolates which the present brands of chocolates have not introduced into the Indian markets.

There is a substantially low margin of difference in terms of people who are sensitive to price of chocolates and hence it cannot be proved conclusively that introducing a chocolate at a lesser price than the prevailing price will lead to capturing of market share.

Consumers attach more value to the brand of the chocolates as well as the packaging i.e. the quality of the chocolates. 79% of chocolate sales happen through kirana shops i.e. mom and pop shops which says that chocolate is a commodity which has to be available to the consumer when and where he wants it. The sales of chocolates largely depend on its availability to the consumer at his convenience. The chocolate confectionery market elicits conscious and unconscious feelings of passion, loyalty and enthusiasm. Almost 80% of chocolate purchases are made on impulse. Buyers generally decide quickly which confectionery product to buy with almost half of purchase decisions made within 10 seconds of arriving at the confectionery fixture in the store. Brands play an important role in the chocolate confectionery industry. A brand is a name, mark, or feature, which distinguishes

87

one product from another. A good brand effectively guarantees that it will deliver all of the qualities that the consumer associates with it.

For many people, chocolate is Nestle, and no other brand will do. This consumer loyalty is critical because of the value of the chocolate confectionery market and because, in all markets, a small number of consumers account for a large proportion of sales. Loyal customers are the most valuable customers to have because they will buy your product over and over again. Research data shows that the Nestle brand equity is highly differentiated from other brands with consumers. Brand equity is the value consumer loyalty brings to a brand, and reflects the likelihood that a consumer will repeat purchase. This is a major source of competitive advantage. The Nestle umbrella brand has endured in a highly competitive market, and has established the link, in the mind of the consumer, that Nestle equals chocolate. The Nestle brand is associated with best tasting chocolate. Marketing managers at Nestle are working to ensure this association is continually developed through their 'Choose Nestle' marketing strategy. Key concepts of quality, taste and emotion underpin the Nestle brand. These core values help to differentiate Nestle from other brands and ensure its competitive advantage. The Nestle brand has proven itself to be a leader in a highly volatile and competitive market because it has successfully established, nurtured and developed its umbrella brand and growing portfolio of products. Perhaps very few product categories in India have seen as much excitement generation, widening of appeal and repositioning as chocolates. Nestle India's" has been successful in revamping its brand portfolio and its repositioning efforts. It has reinvented and revamped its brand portfolio, strengthened its distribution network and relied heavily on promotions and advertising - while launching and relaunching brands. Nestls strategy to attract consumers is somewhat unique in a sense, instead of focusing on the product; it seeks to tap into emotions normally associated with chocolates. They have also adapted their strategies to the unique demands of the
88

Indian retail sector. The strategy has clearly proved successful, as they have been able to build and maintain a leadership position in the market with many loyal customers. Nestle introduced a new global marketing strategy called 'Choose Nestle'. This strategy came about as a result of extensive research into consumer behaviors and perception. It is a campaign that perfectly illustrates how a brand can evolve and how different messages can be communicated without losing the core strength and brand values that are already established New product development has played a key role in developing markets as brands strive to offer something to a consumer that is truly different The Nestle product range addresses the needs of each and every consumer, from childhood to maturity, from impulse purchase to family treats. For example an analysis of the 'gift' sector highlights the importance of developing innovative products to address specific markets. Nestle designs products to coincide with Diwali, rakshabandhan, , Mother's and Father's Day. The chocolate confectionery market is full of brands that need to fight for our attention. The role of advertising is to keep a brand in the mind of the consumer. We are constantly presented with countless brand images and messages on a daily basis. During the lifetime of a brand, companies will develop marketing strategies that communicate brand identity and core values to gain our attention. In order to keep its product competitive and contemporary, these messages need to change over time. Nestle provides one of the most successful examples of how an advertising message can be modified from one campaign to the next to attribute new values to a brand giving consumers more reasons to buy Nestles. Nestle employs all types of advertising from the internet to posters, from TV, radio and cinema to print media. This same creative message is then communicated through point of sale, merchandising, package design and public relations. Besides advertising and sales promotion, brand perception by consumers gets affected by several other factors like packaging, distribution efficiency, after-sale service (where applicable), speed
89

of response to customer complaints. Shopping experience and delivery of the value proposition are also among the contributing factors. Nestle India has also worked & is still working on these factors to successfully position its brand as the topmost brand of chocolate. Nestle India expects strong growth in India in future. The company plans to increase the franchise of its existing brands and continue to explore new product opportunities including adjacent market opportunities. Nestle India is also looking for more opportunities in the SAARC region.

RECOMMENDATION
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. It should work more on concept of CRM (Making new customers & retaining old ones. Cash discounts must be given. More competitive pricing to be done in the premium segment. Increase their sales force to make more frequent visits to the sales person. Should also look for rural markets. Quick handling of problems of stockiest & dealers. Online ordering facility & electronic payment through website can save a lot of time. 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. Company should concentrate on all round cost saving & productivity gain, to neutralize the adverse impact of increased excise of confectionary. The market strategy of the firm is a complete and unbeatable plan or an instrument designed especially for attaining the marketing objective of company. formulation of the marketing strategy consists of two steps:90

The

1. Segmentation & target market selection. 2. Assembling the marketing mix.

6.2 CONCLUSION

In line with the Company's objective to provide superior value in every product category and market sector, efforts were focused to provide quality products to customers at attractive price points. While the Company continued to generally maintain price points across all the product categories, the pricing of some products were also reduced to meet consumer expectations. Nestls domestic sales registered a 18.5% volume growth during the first 9 months of 2006. Exports registered a 31% yoy volume growth. In value terms, domestic sales grew by 15.8% yoy to Rs12.1bn, while Exports grew by 26.4% yoy to Rs2.4bn Advertising plays an important role in creating brand awareness, brand recall and brand recognition which are important in helping a customer make purchase decision of that brand. 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, Bar One, 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.

91

BIBLIOGRAPHY

92

Books
Kotler Philip (2004); Marketing Management; Pearson Education Pvt. Ltd. Ramaswamy V.S. and Namakumari S. (2002); Marketing Management Planning Implementation and Control; McMillan India Pvt. Ltd. Al Ries (1996), FOCUS, Harper Collins Publishers Ltd. David A. Aaker (1991), Managing Brand Equity, the Free Press. David A. Aaker (1996), Building Strong Brands, the Free Press. Jean-Noel Kapferer (1994), Strategic Brand management, Macmillan

Publishing Co.

Internet Sites
www.Nestle.Com www.Google.Com www.Yahoosearch.Com

Magazines
Business Today Business World Business Standard

93

ANNEXURE

94

QUESTIONNAIRE
1. Do you consume chocolates? YES / NO

2.

If yes, what all brands do you normally buy?

3.

How often do you buy chocolates? (No.) chocolates per day / week / month (please tick)

4.

What brands of chocolates are you aware of?

5.

Please rank the following attributes in a chocolate on a scale of 1-7 according to their importance to you? (1-most important, 7-least important) Taste Quality Packaging Price Flavor Add-ons (Wafers, nuts, etc.) Brand Image

6.

I often pick up a chocolate while I make other purchases. YES / NO

7.

What influenced you to buy the above stated brand(s)? Advertising Word of mouth
95

 Attractive Packaging Dealer Shop Display Family/Friend/Relatives Any Other (Pls. Specify) 8. How do you rate the idea of chocolates being made available at the following outlets.(Please rate on a scale of 1-5, where 1 is most preferred and 5 is least preferred). Pan Shops Sweet Shops Gift Shops Stationary Shops Ice-cream Parlors Fast Food Joints Milk Booths Restaurants Exclusive Chocolate Parlors Road-side Kiosks

9.

If a particular brand is not available with the retailer, you will Drop the idea of buying a chocolate Go to another retail outlet Try another (competitors) brand

96