ON ON NESTLE NESTLE FOR THE PARTIAL FULLFILLMENT OF BACHELOR OF BUISNESS ADMINISTRATION GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY SUBMITTED BY: VIPUL BBA (GEN) SUBMITTED TO: Mr. AMIT GUPTA COURSE CORDINATOR OF BBA (GEN) MAHARAJA AGRASEN INSTITUTE OF MANAGEMENT STUDIES AFFILATED TO GURU GOBIND SINGH INDRPRASTHA UNIVERSITY 1 ACKNOWLEDGEMENT I here with take the opportunity to express my profound sense of gratitude and reverence to all those who have helped and encouraged me towards the successful completion of the project .Its been a great experience working on NE!"E .It give me complete insight about how an organi#ation not only survives in cutthroat completion but also maintain a killer instinct in the competitive world. I would like to thank my project guider $r. AMIT GUPTA for his immense guidance .% valuable help and provided me the opportunity to complete the project under his guidance I would like to thanks all the faculty members of MAHARAJA AGRASEN INSTITUTE OF MANAGEMENT STUDIES for guiding me and supporting me in the completion of this project from time to time "ast but not least my greatest gratitude to the almighty and my parents& without their support this dream would have remained dream CERTIFICATE CERTIFICATE ' !his is to certify that (I)*" study in our institute MAHARAJA AGRASEN INSTITUTE OF MANAGEMENT STUDIES was allotted the project on NESTLE+ by ,uru ,obind ingh Inderprastha *niversity has successfully completed it under the guidance of $r. %$I! ,*)!% DECLARATION DECLARATION I here by declare that the project work entitled NESTLE is an authentic work carried out by me under the guidance of $-. . %$I! ,*)!% /project coordinator0 for a practical fulfillment of the degree of 11%/,EN0 and this has not been submitted anywhere else for the award of any degree Name of the student (I)*" 2 INDEX CHAPTER OJECTIVE RESEARCH METHODOGY CHAPTER ! INTRODUCTION COMPANY PROFILE CHAPTER " ANALYSIS OF DATA PRODUCTS CHAPTER # CONCLUSION LIMITATIONS BIBLOGRAPHY ANNEXURE 3 EXECUTIVE SUMMARY The current millennium has unfolded new business rules most the significant of them being that company has to constantly look into minds of the customer. Customer loyalty plays a significant role and today securing that loyalty requires quality right price and of course last but not the least i.e. creating awareness about their service. As a trainee, I was given knowledge about the way and style of their working, their routine and their environment. It was a great experience in getting under such a reputed company, which has in it the ability to retain customer. 4 OBJECTIVE !o identify the services and products offered by NE!"E. !o study and analy#e the customer perception and preference about NE!"E. 5inally to draw the various conclusion and recommendation on the on the basis of study conducted. 6 RESEARCH METHODOLOGY anagers need information in order to introduce products and services that create value in the mind of the customer. !ut the perception of value is a sub"ective one, and what customer#s value this year may be quite different from what they value next year. As such, the attributes that create value cannot simply be deduced from common knowledge. $ather, data %information& must be collected and analy'ed. The goal of arketing $esearch %analysis& is to provide the facts and direction that managers need to make their more important marketing decisions. The analysis involves the following steps( )efine the problem. )etermine research design. Identify data types and sources. )etermine sample plan and si'e. Collect the data. Analy'e and interpret the data. *repare the research report. 7 +or the purpose of study, data from the in,house survey conducted by the marketing department %secondary data& has been used and also for coming out with the recommendation. It was also felt that mere secondary data would not provide in,depth information for the analysis, hence it was decided that interactive discussions with the managers and the head of every department would help in an in,depth and true understanding of challenges faced by the department. The methodology adopted was to gather relevant information from the appropriate department, correlate the information obtained and to present the information in a logical and systematic manner. 8 INTRODUCTION -estle India .td. is a part of the -estle /A group which is one of the largest manufacturing companies in the world. 0enri -estle founded the company %with its headquarters in 1evey, /wit'erland& in 2345. -estle has two ma"or divisions , Le Societe des Produits which looks after the production and marketing and Nestec Ltd. which provides the technical assistance to the group companies. /ince its inception in 2345, the company has diversified it product range from the infant weaning formula %which was its first product& to beverages, confectionery, ice creams and pet foods among others. In a span of 267 years the company has ranked 84th among the world#s largest corporations and boasts of a turnover of 9 :3;68.< million and employee strength of 882,2:: people spread over 5< countries worldwide %Annexure A&. -estle has long been viewed as one of the most multinational of the multinationals. This is because today only 8= of its turnover comes from /wit'erland. >ut of the remaining ;3=, ?urope contributes :6.<=, -orth and /outh America contribute 64.<= and Africa and the Asia *acific $egions contribute 23=. 19 Comp!" Pro#i$e Although -estle has been associated with India since the beginning of the century through the importing and trading of infant food and condensed milk, manufacturing in India only began with the setting up of the factory in oga in 2;48. The first product to be manufactured was Mi$%mid. In the last 6< years the company has shown rapid progress and has increased its product range to 37 products as of >ctober 2;;5. -estle India .td. now ranks 88nd amongst India#s most valuable companies %Annexure !& . Its gross revenue has increased from $s 2772.2 crores to $s. 2826.3 crores in 2;;4. This remarkable growth has been achieved through , $apidly creating greater manufacturing capacity, both at factories as well as with co,packers. Taking measures to ensure availability and improved quality of key raw materials , fresh milk in particular. /trengthening of the sales and distribution network %particularly in smaller towns& Ambitious and cohesive manpower training and development programs for the personnel of the company across all disciplines. 11 The company#s exports also resulted in a very successful year in this area as exports grew by 85= to $s. 8<7.3 crores in 8776. The main contributors to this increase were the export of tea and coffee to @/A, Aapan, $ussia, 0ungary and Taiwan. -estle India .td. wants to further increase its operations in India and has started construction of its sixth +actory at !icholim, Boa for the manufacture of culinary products %a key thrust area& for this purpose. 1' T&e Spirit o# Nest$e Organisational excellence is never achieved through a one time effort; It is always a process of continuous improvement across a number of areas of operation. A key factor for -estle#s success has been its quest for continuous improvement through ushering in greater productivity and more efficiency in everyday operations. )espite the infrastructure impediments in India, -estle has set itself high standards of business performance. This is reflected through the essence of the company , its mission statement. Nest$e's missio! CTo be in every way the leading company in the Indian food industry and a good corporate citi'en by providing our consumers with superior quality products, our shareholders with rapid growth D fair returns and our employees with a challenging and satisfying work environment.E To translate this spirit into a planned and measurable process, -estle has set up key ob"ectives across all divisions. 1. Key Objectives Productio! To optimise production costs while enhancing product quality so as to make -estle products even more competitive in the market place. S$es !d mr%eti!( To reach a sales turnover of 6777 crores by the year 8776 To double the turnover every three years Peop$e To help employees to retain a long term perspective and integrate them fully with the company#s business goals To retain a broad perspective while addressing individual needs To view growth as a continuous process To concentrate on attitudinal changes by developing leadership skills, an appreciation of interdependence between units and the enhancement of a sense of belonging to -estle. 12 )i!!ce To maintain profit levels above the average for the food industry in India. The !usiness ?xcellence and Common Application %!?CA& initiative essentially translates the spirit of the Aourney towards excellence into an organised, systematic and measurable approach. The aim is to aid the achievements of the company#s key ob"ectives of rapid growth by ensuring that all operations incorporate the spirit of meaningful planning, effective cost control and efficient implementation. !?CA is about * p$!!ed impro+eme!t i! e+er"t&i!( ,e do - Factories -estle has 4 factories in India. These are ./ Mo( 0pu!123 4 The -estle factory in oga has the pride of being the first and most comprehensive factory of -estle India. /et up in 2;48, it represents the core competence of -estle India in the manufacture of milk products %?veryday, ilkmaid&, beverages, culinary products %aggi sauces, noodles, soups etc.&, weaning cereals %Cerelac& and infant milk formulae. 5/ C&o$di 0 Tmi$ Ndu34 The factory in Choladi started production in 2;45. /ituated about 47 miles from Calicut, the factory today has 32 13 employees and produces 2.<= of the total turnover of -estle India. It is a 277 percent export oriented unit which processes freshly picked tea leaves into soluble instant tea. 6/ N!1(ud 07r!t%34 *roduction in this factory began in 2;3; with the manufacture of -estle instant coffee and /unrise. Today in addition to instant coffee the factory also manufactures health beverages. The plant to manufacture I.> was also commissioned at this factory. This factory employs 2:< people and is cited as a model in terms of environment protection for its installations to purify waste water as well as for its provisions for recycling coffee wastes. 8/Sm$%& 0Hr"!34 This factory was set up in 2;;6. .ocated 57 kilometres from )elhi , it manufactures weaning cereals , culinary products ,health beverages and milk products. $ecently the expansion of manufacturing capacity for ilkmaid )essert ixes was undertaken at this factory as this new and unique product category is viewed to have great potential in the future. 9/Po!d 0Go34 This Fit,Fat factory was set up in Boa in 2;;< at a cost of $s. <7 crores. It represented a ma"or step by -estle towards becoming the -umber 2 Chocolates and Confectionery Company in India. :/;ic&o$im 0Go3 14 The construction work at this new factory is progressing with speed. This factory will soon commence the manufacture of culinary products, which is a key thrust area for the company and will include latest technological improvements relating to this category of products. As a part of -estles efforts towards continuous improvement and excellence in anufacturing operation, a oga Improvement team %IT& was put in place at the oga factory. The team comprised of international experts from -estle Technical /ervices %-?/T?C& and the local staff. In 2;;4, it embarked on a program with the single minded ob"ective of optimi'ing production costs while enhancing the product quality so as to make -estle products even more competitive in the market place. )rawing upon -estle#s global experience and manufacturing expertise in 5< countries the team identified the following areas for detailed study , *rocess improvement to ensure the optimal usage of resources Improvement of operational efficiency Cost optimi'ation A series of small but critically important initiatives ranging from redesigning laboratories to palletisation of raw materials and packaging material utili'ation, manufacturing and filling loses and labour man hours resulting in substantial savings and improved productivity and 16 machine utili'ation. In addition, several non tangible benefits in the form of systems for sustainable improvement in areas like factory maintenance planning tools , down time recording systems and performance measurement tools were also reali'ed . This pro"ect was highly successful and the company is now implementing its key learning#s of IT in its other factories. In a country as vast and diverse as India, supp$" c&i! m!(eme!t is absolutely critical to rapid growth. Through !?CA, -estle has concentrated heavily on streamlining and improving their supply chain management in order to make it more dependable, more cost effective and most importantly, more responsive to market needs. +or better supply chain integration the planning of key operations , purchase, production, distribution and sales are synchronised to ensure that everybody works towards a common business plan. onthly ob"ectives are broken down into weekly and %wherever necessary& into daily plans and monitored regularly to ensure smooth implementation and quick corrective action when needed . a"or benefits accrued thus far include reduction in working capital through lower inventories of finished goods and materials, better stock availability and reduction in obsolescence of materials. In addition to traditional performance indicators, quantifiable performance measures have been identified and implemented in all 17 functional areas such as sales planning, production output, quality assurance, material ordering transportation and warehouse management. These measures are monitored regularly to gauge the extent of improvement and identify root problems for taking corrective actions. Teams have been put in place at all factories and sales offices to ensure the implementation is continuous and self,sustaining. Areas of improvement are regularly identified and time bound action plans established. +or this purpose, standard tools such a Total Guality anagement%TG&, Fai'en, </ and /mall Broup improvement activity %/BIA& are being extensively used. The efficacy of this hierarchical structure is seen in -estle#s performance over past few years of various products. !y 2;3; the company had achieved a sales figure of approximately $s. 8<3 crores. 2;3; was the year of launches. /even new product lines were launched in this year. This was also the year in which the -an"agud factory was set up. !y the year 2;;8, this sales figure was touching $s <77 crores. In the 2;;< the pace of launches quickened and since the construction of the factory at /amalakha, 87 new products have been introduced. !y 8776, -estle had about 54 different products in its portfolio with various new products in the pipeline as well. The sales figure now touched $s. 282: crores. Thus sales grew by :<7= over a period of one and a half decades. 18 Mr%eti!( Strte(" -estle has adopted a four pronged growth strategy( , 2. Bunning the market with new products and brand extensions. 8. ?xpansion of the distribution network to small towns for extensive availability. 6. $educe prices and introduce smaller packages for products to make them more affordable %a tool to enter price sensitive markets&. :. +ocus on employ training and develop a positive attitude through enhanced manpower development. <. !y year 8776 it expects chocolate D confectionery to account for one in every third rupee in sale. In the late 2;;4 fear of breading complacency by not having a continuous improvement, gave birth to an international sales D marketing improvement teams %/IT&. /IT maps the latest in helping towards the target of year. 8776. The /IT exercise is a ma"or global initiative of -estle to enhance sales D marketing productivity. .inked with the already existing !?CA pro"ect, which in turn emphasises on excellence by improving the '9 distribution set up , this gave rise to the following growth ob"ectives for the year 8776 ?nsure direct coverage of all urban towns in India. ?xpand distribution to reach 2 million retail outlets on a regular basis. Hork in partnership with the distributor for the achievement of these ob"ectives. *rovide sustainable solution to optimi'e our secondary sales from distributor to retailer. '1 NE< PRODUCT LAUNCHES To put all the product launches into perspective, -estle now has 37 products including various flavours and variants this awesome list of 37 products for most companies is an overfull palate. -estle India .td. /till have a variety of new products in the pipelines. It believes in slowly coloni'ing as much territory as fast as it can, adapting to native conditions and then work at Cholding off the advancing herdsE. -estle products can be broadly classified into < main ranges , ilk *roducts Chocolate and Confectionery !everages Culinary +ood service Mi$% Products '' This category which comprises of condensed milk, baby milk foods , milk powders , acidified infant food , and other milk products, showed a slump in 2;;4 as sale of milk products fell from $s 62.: crores in 2;;< to $s 62.8 crores in the said year. Consumer offtake remained depressed throughout this year as a consequence of high price increases necessitated by substantial increases%I<7=& in the cost of basic raw materials% fresh milk & , over the past two years . 0owever -estle retained its leadership in the infant food market with Cerelac, .actogen and -estum and even introduced a new flavour of Cerelac , Cerelac $ice in 2;;4. C&oco$tes !d Co!#ectio!er" -estle pursues the ob"ective of accounting for one in every three rupees in its sales figures through chocolates and confectionery. This has thus been one of the thrust areas in -estle. -estle this year widened its range of flavours in *>.>, backed by its tremendous success in the Indian arket by adding *>.> /pearmint to its *ortfolio. This new flavour has also received an encouraging response in the market according to market analysts. ilkybar also retained its position as the number one white chocolate brand in India, however it did not record a significant increase in sales as a ma"ority of Indian tastes still do not accept this flavour. '. This year however, was a year of tremendous success for Fit Fat .This internationally renowned brand gained a large increase in the arket share in the past year and -estle officials are hopeful that this will further increase in the coming years. 0owever this !rand along with it success has brought with it its share of Controversy as the @nion of India has launched a .itigation against the Fit Fat family pack. In 2;;5 -estle added to its range of confectionery by introducing /*.A/0, CA soft hearted, hard boiled sweet E this is being promoted as a sweet unique to India and is positioned to a target audience in the age group of : to 28 years and Canyone with a soft heartE is a potential customer. *riced at $s. 2 for a 5.< gram candy splash has been introduced selectively in the /outh and has been speculated to repeat *olo#s performance. -estle#s officials claim that this candy has the potential to grab a quarter of the 577 crores confectionery market. The most recent of -estle affairs with the confectionery market has been the introduction of ithai agic which is Ca little ithai , a little magic C .This new product was launched in /eptember 2;;5 ,in time for the )iwali purchases of sweets . This brand has been positioned somewhere between chocolates and traditional sweets and the company is employing a push strategy to promote this brand. '2 ;e+er(es This year has been very successful in the beverages market for -estle .The sales of beverages has increased from $s 686.6 crores in 8778 to $s 6;3.3 crores in 8776. -estles +lagship -escafe which was pegged at $upees 27:7 per Filogram before the launch of Tata Cafe, met with stiff competition from Tata Cafe priced at $upees <<7 per Fg once it was introduced . Tata cafe claimed to have garnered a market share of 25= by )ecember 2;;4. This forced -estle to cut prices of -escafe to $upees 3:7 per Fg. 0owever -escafe still retains 36= market share in the $s 255 Crores market for pure instant coffee. -estle /unrise also showed an increase in sales and captured 87 = of the $s 8<6 crores market in ixed instant coffee. This year -estle also launched I.>, an internationally renowned chocolate energy drink, and the response for this has been encouraging. -estle has also introduced Tasters Choice tea bag pitched against Ta" mahal tea bags. '3 Cu$i!r" Products The market in culinary products had witnessed a high growth consequent to aggressive pricing decisions on existing products and the introduction of a variety of new products to match the needs of the Indian 0ousewife. ?ncouraged by this success -estle launched aggi acoroni /nack in three flavors , Chicken , asala and Tomato. -estle officials# say that this would consolidate aggis position as the number 2 culinary brand in India. The product focuses on convenience and innovation as its @nique /elling *roposition. This snack has opened a new segment for the maggi brands. The brand is positioned as youthful and is represented by the twists and curls of the macaroni snack. It is speculated to be introduced in a phase manner nation,wide to be placed in the 5.< lakh outlets that aggi noodles sells in . In the spirit of catering to Indian tastes aggi introduced maggi pickles in five variants benchmarked to give the Cghar ka swadE. aggi )osa ix was also introduced to offer superior quality and added convenience. Apart from this ilkmaid Falakand ix, a traditional north Indian sweet of premium quality was added to the milkmaid dessert mixes. aggi soup also launched three new variants. aggi $assam in particular was noticeable as yet another attempt to make traditional Indian cooking a little bit easier. '4 )ood Ser+ice +ood service items basically deal with the out of home segments, which would include vending machines. -estle#s food service business is poised for rapid expansion to meet the growing need for such a reliable, time saving and cost effective service in this modern age . -estle wants to sell <77 million cups of tea and coffee through its vending machines in the year 8776. It currently has 6<77 vending machines at assorted locations %both public and private&. In 2;;< -estle food service did well to vend :7 million cups of -escafe and Tasters Choice tea. Its 8776 sales were placed at <; million cups of -escafe and 64 million cups of tea, this figure was however way below the expected sales for the year. Distri2utio! strte(" It is an indisputable fact that fundamentally all consumers marketing must first assure availability of the product to the consumer. In India, the urban population alone is of a whooping 8<7 million consumers ,an unbelievable potential for any +CB . The potential being spread across more than :777 towns have to be very effectively and efficiently tapped. -estle till now was retailing in a limited number of towns with only 877 towns accounting for 57 = of their business. +or '6 -estle to be a leader in the food industry, expanding the distribution network for more retail outlets was a must. To meet this challenge, -estle is working towards an ob"ective of increasing the retail base to 2,777,777 outlets by the year 8776. This network is feasible as -estle has a triangular distribution structure thus the span of control is still retained. The )istribution -etwork is explained in figure 8. In order to achieve these distribution ob"ectives -estle has formulated an international sales and marketing improvement team %/IT&. /IT focuses on a single ob"ective ,provide sustainable solutions to optimi'e the distributor and retailer sales through a step by step approach starting with analysis of market followed by identification of the probable retail outlets and finally selection of the same .The team also focuses on proper implementation of resources and timely follow ups for effective solutions. Ad+ertisi!( Strte(" '7 -estle, a cash rich company has plenty of marketing prowess. This can be credited to a strong and sound advertising strategy. -estle in the year 8778 had an advertisement spending of $s :6.6 crores %net& . Tracing -estles advertising responses the ad campaign by 0TA of J0ot and /weet# was a runway success this ad was actually meant to fend off a challenge from 0.A 0ein'. The aggi ranges of sauces were introduced in 2;3< but sales didn#t catch up until 2;;7 but till 8776 it got considerable market share. At this point the popular and memorable campaign of Aaved Aaffrey and *anka" Fapoor was launched by *roducer *ralad Fakkar . This commercial was an instant success. The volume of sales kept rising from an initial growth of 26= to 87= in the next year. Today the sales figure for aggi /auces is growing at a steady 4= per year. Another noteworthy campaign was that of *>.> %the mint with a hole&, devised by udra advertising agency. This campaign was awarded 22 industry ad awards. In 8778 the advertisement budget has been approximately $s <4 crores where again innovation was the main focus. The new nation, wide product launch of aggi acaroni /nack and ithai agic have been designed by udra . The acaroni ad with its use of C?nglish C and a catchy beat %which is the latest trend amongst the Indian Advertisers& appeals well to the target audience and the ithai agic commercial does keep the secret of the contents in the box , intact. '8 Training is an integral and indispensable part of Nestle . I regard the importance of training a highly as research and development .It is a maor investment in the !uture of the company and imperative because it is an investment in people " #r. $elmut #aucher %hairman and %&O Nestle ' ( )roup -estle India .td. has an employee base of 67:7 people and aims to be in the top quartile of the +CB companies .+or this purpose it follows a very stern and rigorous recruitment policy . Recruitme!t Po$ic" $ecruitment of fresh management trainees and sales officers is done every April,ay. These graduates are generally selected from the best institutes in the country through a series of interviews. They are then put through a probation period of 28,23 months. Although -estle does not offer some of the highest pay packets in the industry, it is considered a growth oriented company. Tri!i!( !d De+e$opme!t Continuous development of skills and attitudes of employees is critical to the achievement of excellence. At -estle therefore training .9 and development of human resources is viewed as a long term investment . * I# "ou re p$!!i!( #or o!e "er = P$!t ,&et> I# "ou re p$!!i!( #or te! "ers= p$!t tree> I# "ou re p$!!i!( #or $i#e= tri! peop$e/- ? O$d C&i!ese pro+er2 This proverb goes with the organi'ations most enduring beliefs worldwide , That long term planning is the key to -estles global success That -estle#s most valuable assets are its people -estle#s policy is to rely on a more decentrali'ed form of management by building in the habit to C Think -estleE. At -estle India training and development is an integral part of the business plan and strategy in line with the ob"ectives for the year 8776 and aims to , .1 0elp employees to retain long term perspective and integrate them fully with the company#s business goals 1iew the growth of both the personnel and the company as a continuous process . Concentrate on attitudinal changes by developing leadership skills, an appreciation of interdependence between units and the enhancement of a sense of belonging to -estle . In 8776 -estle India benefited greatly from the training program offered at the $ive $eine International Training Center at 1evey, /wit'erland. This training program helped facilitate the transfer of common Fnowledge %technical, marketing, and finance& across the -estle Broup and ensure interdisciplinary approach to learning and uniform progress with a tailor,made approach for all. Company Training needs , analysis of training needs of anagers self development programs for staff at 0> programs for company orientation and information sharing .' programs aimed at computer training and computeri'ation ?stablishment of contact with leading management institutes with a view to use the same for meeting local training requirements Nest$e's Corporte Cu$ture As we had discussed before, -estle is one of the most multinational of multinationals and is spread over 5< countries worldwide. This implies that it has employees from diverse cultural backgrounds. -estle respects the distinctive culture, mentality and traditions of every employee in every country. Hhat -estle aims at is to incorporate its own culture into its employees without stifling the individual employee#s culture and identity. Hhen we went to -estle we could feel the existence of a distinctive work culture amongst the management , the staff seemed highly motivated D cheerful and everybody had pin up boards in front of their tables with reminders , motivational messages and even time logs %the -estle people seemed as if they availed of the benefits of time management& . .. Apart from this, -estle has a vast distribution network. In order to support the !?CA process, an integrated computer system has been put in place across the company to link all functional areas and locations. This common linked system will improve information availability, aid quick decision,making and improve supply chain integration. -estle has a diverse product range and so it also has diversified risks Thus anagement on Information systems plays a vital role in -estle to provide information to the /ales and arketing as well a the finance department .The ?lectronic )ata *rocessing )epartment looks after anagement Information /ystems . .2 Nestle India Ltd., is a part of the Nestle SA group, which is one of the largest manufacturing companies in the world. The company (with its headquarters in Veey, Swit!erland" was founded #y $enri Nestle in %&'(. Nestle has two ma)or diisions*Le Societe des Produits which loo+s after the production and mar+eting and Nesstec Ltd. which proides the technical assistance to the group companies. Since its inception in %&'(, the company has diersified it product range from the infant weaning formula (which was its first product" to #eerages, confectionery, ice creams and pet foods among others. In a span of %,- years the company has ran+ed .' th among the world/s largest corporations and #oasts of a turnoer of 01&2,..3 million and an employee strength of ..%,%11 people spread oer (3 countries worldwide (Anne4ure A". Nestle has long #een iewed as one of the most multinational of the multinationals. This is #ecause .3 today only .5 of its turnoer comes from Swit!erland. 6ut of the remaining 2&5, 7urope contri#utes 1,.35, North and South America contri#ute ,'.35 and %&5 is contri#uted #y Africa and Asia 8acific 9egions. OVERVIEW Although Nestle has #een associated with India since the #eginning of the century through the importing and trading of infant food and condensed mil+, manufacturing in India only #egan with the setting up of the factory in :oga in %2'.. The first product to #e manufactured was :il+maid. In the last ,3 years the company has shown rapid progress and has increased its product range to &- products as of 6cto#er %22(. Nestle India Ltd. now ran+ .. nd amongst India/s most alua#le companies (Anne4ure ;". Its gross reenue has increased from 9s. %--%.% crores to 9s. %.%,.& crores in %22'. This remar+a#le growth has #een achieed through< 9apidly creating greater manufacturing capacity, #oth at factories as well as with copac+ers. .4 Ta+ing measures to ensure aaila#ility and improed quality of +ey raw materials*fresh mil+ in particular. Strengthening of the sales and distri#ution networ+ (particularly in smaller towns". Am#itious and cohesie manpower training and deelopment programs for the personnel of the company across all disciplines. The company/s e4ports also resulted in a ery successful year in this area as e4ports grew #y .(5 to 9s. .3-.& crores in %22'. The main contri#utors to this increase were the e4port of tea and coffee to =SA, >apan, 9ussia, $ungary and Taiwan. Nestle India Ltd. wants to further increase its operations in India and has started construction of its si4th ?actory at ;icholim, @oa for the manufacture of culinary products (a +ey thrust area" for this purpose. .6 The spirit of Nestle "Organizational excellence is never achieved through a one time efforts; It is always a process of continuous improvement across a number of areas of operation." A +ey factor for Nestle/s success has #een its quest for continuous improement through ushering in greater productiity and more efficiency in eeryday operations Aespite the infrastructure impediments in India, Nestle has set itself high standards of #usiness performance. This is reflected through the essence of the company*its mission statement. Nestle's mission BTo #e in eery way the leading company in the Indian food industry and a good corporate citi!en #y proiding our consumers with superior quality products, our shareholders with rapid growth and fair returns and our employees with a challenging and satisfying wor+ enironment.B .7 To translate this spirit into a planned and measura#le process, Nestle has set up +ey o#)ecties across all diisions. .8 KEY OBJECTIVES Production To optimi!e production costs while enhancing product quality so as to ma+e Nestle products een more competitie in the mar+et place. Sales and ar!etin" To reach a sales turnoer of ,--- crores #y the year .---. To dou#le the turnoer eery years. Peo#le To help employees to retain a long*term perspectie and integrate them fully with the company/s #usiness goals. To retain a #road perspectie while addressing indiidual needs 29 To iew growth as a continuous process. To concentrate on attitudinal changes #y deeloping leadership s+ills, an appreciation of interdependence #etween units and the enhancement of a sense of #elonging to Nestle. $inance To maintain profit leels a#oe the aerage for the food industry in India. Cey ?act This section offers a quic+ and simple oeriew of N7STL7, ma+ing it an e4cellent place to #egin learning more a#out the DorldEs Largest ?ood Fompany. $ere introduction is gien with some +ey facts and figures, including %&&' $inancial In(ormation) Com#an* Pro(ile) +istorical ,e-elo#ment and ain Brand. 21 S.LES .N.LYSIS By Geographic Area In illion o( C+$ %&&/ 012 7urope .3G(-' ,'.( North and South America ..G.'. ,%.& Africa, Asia and 6ceania %,G12, %2., 6ther Actiities &G3,( %... '2G22& By Main roduct !roup In illion o( C+$ %&&'012 2' Europe 6:/@A Nort& !d Sout& Americ 6./BA A#ric= Asi !d Oce!i .C/6A Ot&er Acti+ities .5/5A ;eerages %2G%1. .(.1 :il+ 8roducts, Nutrition and Ice Fream ,,1 .(.' 8repared Aishes and Foo+ing Aids %(G''- .3.. Fhocolate and Fonfectionery %-G'', %3.. 8harmaceuticals ,G%222 1.' 2. ;e+er(es 5@/8A Mi$% Products= Nutritio! !d Ice Crem 5@/:A Prepred Dis&es !d Coo%i!( Aids 59/5A C&oco$te !d Co#ectio!r" .9/5A P&rmceutic $s 8/:A Brea!do3n o( %&&/ Tradin" E4#enses 0in 12 Percenta"e 9aw :aterials .'.. 8ac+aging &.& Salaries and Delfare 74penses %'.' Aepreciation 1.% 6ther Trading 74penses ,1.3 Total Trading 74penses 2-.. Trading 8rofit 2.& @o to $inancial 5uide for additional facts and figures. Com#an* Pro(ile Fhairman of the ;oard< $elmut 6. :aucher 22 R, Mteri$s .6/BA Pc%(i!( 8/:A S$ries !d <e$#re EDpe!ses B/@A Ot&er Trdi!( EDpe!ses .B/.A Tot$ Trdi!( EDpe!ses 8@/8A Trdi!( Pro#it 9/5A Deprecitio! 5/5A Fhief 74ecutie 6fficer< 8eter ;ra#ec+*Letmathe DorldEs leading food company Swit!erlandEs largest industrial company Dorldwide operations 123 factories @roupEs total wor+ force< ..3, &-& people. +istorical ,e-elo#ment %&'' FompanyEs foundation %2-3 :erger #etween Nestle and Anglo*Swiss Fondensed :il+ Fompany %2.2 :erger with 8eter*Failler*Cohler Fhocolates Suisses. S. A. %21( :erger with Alimentana S.A. (:aggi" %2(% :erger with =rsina*?ranc+ (Swit!erland" %2&3 Acquisition of Farnation (=SA" 23 %22- Acquisition of ;uitoni*8erugina (Italy" %22. Acquisition of 9owntree (@;" %221 Acquisition of 8errier (?rance" %22& Acquisition of Spillers (@;" .--. Aiestiture of ?indus #rand and parts of NestlH/s fro!en food #usiness in 7urope. Aiestiture of $ills ;ros, :>; and Fhase I San#orn roast and ground coffee #rands (=SA". .--' Acquisition of 8ower;ar. Factories Nestle has ' factories in India. These are '6 o"a 0#un7a82 The Nestle factory in :oga has the pride of #eing the first and most comprehensie factory of Nestle India. Set up in %2'., it represents the core competence of Nestle India in the manufacture of mil+ products (7eryday, :il+maid", #eerages, culinary products 24 (:aggi sauces, noodles, soups etc.", weaning cereals (Ferelac" and infant mil+ formulae. %6 C9oladi 0 Tamil Nadu2 The factory in Fholadi started production in %2'(. Situated a#out '- miles from Falicut, the factory today has &% employees and produces %.35 of the total turnoer of Nestle India. It is a %-- percent e4port oriented unit which processes freshly pic+ed tea leaes into solu#le instant tea. :6 Nan7a"ud 0Karnata!a2 8roduction in this factory #egan in %2&2 with the manufacture of Nestle instant coffee and Sunrise. Today in addition to instant coffee the factory also manufactures health #eerages. The plant to manufacture :IL6 was also commissioned at this factory. This factory employs %13 people and is cited as a model in terms of enironment protection for its 26 installations to purify waste water as well as for its proisions for recycling coffee wastes. ;6Samala!9a 0+ar*ana2 This factory was set up in %22,. Located (- +ilometres from Aelhi , it manufactures weaning cereals , culinary products ,health #eerages and mil+ products. 9ecently the e4pansion of manufacturing capacity for :il+maid Aessert :i4es was underta+en at this factory as this new and unique product category is iewed to hae great potential in the future. <6Ponda 05oa2 This Cit*Cat factory was set up in @oa in %223 at a cost of 9s. 3- crores. It represented a ma)or step #y Nestle towards #ecoming the Num#er % Fhocolates and Fonfectionery Fompany in India. /6Bic9olim 05oa 2 27 The construction wor+ at this new factory is progressing with speed. This factory will soon commence the manufacture of culinary products, which is a +ey thrust area for the company and will include latest technological improements relating to this category of products. As a part of Nestles efforts towards continuous improement and e4cellence in :anufacturing operation, a :oga Improement team (:IT" was put in place at the :oga factory. The team comprised of international e4perts from Nestle Technical Serices (N7ST7F" and the local staff. In %22', it em#ar+ed on a program with the single minded o#)ectie of optimi!ing production costs while enhancing the product quality so as to ma+e Nestle products een more competitie in the mar+et place. Arawing upon NestleEs glo#al e4perience and manufacturing e4pertise in (3 countries the team identified the following areas for detailed study * 8rocess improement to ensure the optimal usage of resources 28 Improement of operational efficiency Fost optimi!ation A series of small #ut critically important initiaties ranging from redesigning la#oratories to palletisation of raw materials and pac+aging material utili!ation, manufacturing and filling loses and la#our man hours resulting in su#stantial saings and improed productiity and machine utili!ation. In addition, seeral non tangi#le #enefits in the form of systems for sustaina#le improement in areas li+e factory maintenance planning tools , down time recording systems and performance measurement tools were also reali!ed . This pro)ect was highly successful and the company is now implementing its +ey learningEs of :IT in its other factories. In a country as ast and dierse as India, su##l* c9ain mana"ement is a#solutely critical to rapid growth. 39 Through ;7FA, Nestle has concentrated heaily on streamlining and improing their supply chain management in order to ma+e it more dependa#le, more cost effectie and most importantly, more responsie to mar+et needs. ?or #etter supply chain integration the planning of +ey operations * purchase, production, distri#ution and sales are synchronised to ensure that eery#ody wor+s towards a common #usiness plan. :onthly o#)ecties are #ro+en down into wee+ly and (whereer necessary" into daily plans and monitored regularly to ensure smooth implementation and quic+ correctie action when needed . :a)or #enefits accrued thus far include reduction in wor+ing capital through lower inentories of finished goods and materials, #etter stoc+ aaila#ility and reduction in o#solescence of materials. In addition to traditional performance indicators, quantifia#le performance measures hae #een identified and implemented in all functional areas such as sales planning, production output, quality assurance, material 31 ordering transportation and warehouse management. These measures are monitored regularly to gauge the e4tent of improement and identify root pro#lems for ta+ing correctie actions. Teams hae #een put in place at all factories and sales offices to ensure the implementation is continuous and self*sustaining. Areas of improement are regularly identified and time#ound action plans esta#lished. ?or this purpose, standard tools such a Total Juality :anagement(TJ:", Cai!en, 3S and Small @roup improement actiity (S@IA" are #eing e4tensiely used. The efficacy of this hierarchical structure is seen in NestleEs performance oer past few years of arious products. ;y %2&2 the company had achieed a sales figure of appro4imately 9s. .3& crores. %2&2 was the year of launches. Seen new product lines were launched in this year. This was also the year in which the Nan)agud factory was set up. ;y the year %22., this sales figure 3' was touching 9s 3-- crores. In the %22-Es the pace of launches quic+ened and since the construction of the factory at Samala+ha, .- new products hae #een introduced. ;y %22', Nestle had a#out (' different products in its portfolio with arious new products in the pipeline as well. The sales figure now touched 9s. %.%1 crores. Thus sales grew #y 13-5 oer a period of one and a half decades. 3.
TO,.Y NESTLE IS PRESENT IN ,I$$ERENT .RKETS WIT+ T+E $OLLOWIN5 .IN BR.N,S Solu8le co((ee Nescafe, Taster/s Fhoice, 9icore, 9icoffy. Roast and 5round Co((ee $ills ;ros., :>;, ;on+a, Koegas, Loumidis ineral Water 8errier, Fontre4, Vittel, Valert, Jue!ac, Arrowhead, 8oland Spring, ;u4ton, Vera, ;laue Juellen, Falistoga, Santa :aria, San 8ellegrino. Ot9er 8e-era"es 32 Nesqui+, Nescau, Nestea, :ilo, Farnation, Li##y/s Faro. 33 ,air* Product Nido, Nespray, Farnation, :il+maidG La Lechera, @loria, Neslac, ;arenmar+e. Brea!(ast Cereals Nestle Co((ee Creamers Foffee*mate In(ant $oods and ,ietetic Products Nestle, Nan, Lactogen, Ferelac, Nestum, @uigo! Culinar* Products 0Bouillons) sou#s) seasonin"s) #re#ared dis9es) canned (ood) #asta) sauces2 :aggi, Frosse and ;lac+well, Li##y/s, Thomy, ;uiltoni, Fontadina 34 $ro=en $oods ?indus, Stouffer/s ;uitoni, :aggi Ice Cream Nestle, ?risco, Aairy ?arm, :agnolia, :otta, Famy , ect. Re(ri"erated Products 0*o"urts) desserts) #asta sauces2 Nestle, Locatelli, Vismara, ;uitoni, Fontadina C9ocolate and Con(ectioner* Nestle, Frunch, Failler, ?rigor, Fho+ito, Sarotti, @ala+G:il+y#ar, Les, Cit Cat, Juality Street, Smarties, ;aci, After 7ight, ;a#y 9uth, ;utterfinger, Lion, Nuts, 9olo, Aero, 8olo, etc. 36 $ood Ser-ices and Pro(essional Products Fhef, Aaigel, Santa 9ica Pet Care ?ris+ies, ?ancy ?east, Aplo, :ighty Aog, @ourmet. S#eciali=ed #roducts (or t9e (ood industr* ?ood Ingredients Specialties (?IS" O#9t9almolo"ical #roducts Alcon Cosmetics L/6real 37 NEW PRO,>CT L.>NC+ES To put all the product launches into perspectie, Nestle now has &- products including arious flaors and ariants this awesome list of &- products for most companies is an oerfull palate. Nestle India Ltd. still has a ariety of new products in the pipelines. It #eliees in slowly coloni!ing as much territory as fast as it can, adapting to natie conditions and then wor+ at /$olding off the adancing herds/. Nestle products can #e #roadly classified into 3 main ranges< :il+ 8roduct Fhocolate and Fonfectionery ;eerages Fulinary ?ood Serice. 38 :il+ 8roducts This category which comprises of condensed mil+, #a#y mil+ foods, mil+ powders, acidified infant food, and other mil+ products, showed a slump in %22' as sales of mil+ products fell from 9s. ,%.1 crores in %223 to 9s. ,%.. crores in the said year. Fonsumer off ta+e remained depressed throughout this year as a consequence of high price increases necessitated #y su#stantial increases (M 3-5" in the cost of #asic raw materials (fresh mil+", oer the past two year. $oweer Nestle retained its leadership in the infant food mar+et with Ferelac Lactogen and Nestum and een introduced a new flaor of Ferelac*Ferelac 9ice in %22'. 49 C9ocolates and Con(ectioner* Nestle pursues the o#)ectie of accounting for one in eery three rupees in its sales figures through chocolates and confectionery. This has thus #een one of the thrust areas in Nestle. Nestle this year widened its range of flaors in 86L6, #ac+ed #y its tremendous success in the Indian :ar+et #y adding 86L6 Spearmint to its 8ortfolio. This new flaor has also receied an encouraging response in the mar+et according to mar+et analysts. :il+y#ar also retained its position as the num#er one white chocolate #rand in India, howeer it did not record a significant increase in sales, as a ma)ority of Indian tastes still do not accept this flaor. This year howeer, was a year of tremendous success for Cit Cat. This internationally renowned #rand gained a large increase in the :ar+et share in the past year and Nestle officials are hopeful that this will further increase in the coming years. $oweer this #rand along with its 41 success has #rought with it its share of Fontroersy as the =nion of India has launched a Litigation against the Cit Cat family pac+. In %22( Nestle added to its range of confectionery #y introducing S8LAS$, BA soft hearted, hard #oiled sweetB this is #eing promoted as a sweet unique to India and is positioned to a target audience in the age group of 1 to %. years and Banyone with a soft heartB is a potential customer. 8riced at 9s. % for a (.3*gram candy Splash has #een introduced selectiely in the South and has #een speculated to repeat 8olo/s performance. Nestle/s officials claim that this candy has the potential to gra# a quarter of the (-- crores confectionery mar+et. The most recent of Nestle affairs with the confectionery mar+et has #een the introduction of :ithai :agic, which is Ba little :ithai, a little magic.B This new product was launched in Septem#er %22(, in time for the Aiwali purchases of sweets. This #rand has #een positioned somewhere #etween chocolates and traditional sweets 4' and the company is employing a push strategy to promote this #rand. The latest launch of Nestle in the Fhocolate and confectionery diision is C9ar"e. Be-era"es This year has #een ery successful in the #eerages mar+et for Nestle. The sales of #eerage hae increased from 9s. ,.,., crores in %223 to 9s. ,2&.& crores in %22'. Nestles ?lagship Nescafe, which was pegged at 9upees %-1- per +ilogram #efore the launch of Tata Fafe, met with stiff competition from Tata Fafe priced at 9upees 33- per Cg., once it was introduced. Tata cafe claimed to hae garnered a mar+et share of %(5 #y Aecem#er %22'. This forced Nestle to cut prices of Nescafe to 9upees &1- per Cg. $oweer Nescafe still retains &,5 mar+et share in the 9s. %(( Frores mar+et for pure instant coffee. 4. Nestle Sunrise also showed an increase in sales and captured .-5 of the 9s. .3, crores mar+et in :i4ed instant coffee. This year Nestle also launched :IL6, an internationally renowned chocolate energy drin+, and the response for this has #een encouraging. Nestle has introduced Tasters Fhoice tea #ag pitched against Ta) :ahal Tea #ags. Culinar* Products The mar+et in culinary products had witnessed a high growth consequent to aggressie pricing decisions on e4isting products and the introduction of a ariety of new products to match the needs of the Indian $ousewife. 7ncouraged #y this success Nestle launched :aggi :acoroni Snac+ in three flaors*Fhic+en, :asala and Tomato. Nestle officialEs say that this would consolidate :aggis position as the num#er % culinary #rand in India. The product focuses on conenience and 42 innoation as its =nique Selling 8roposition. This snac+ has opened a new segment for the maggi #rands. The #rand is positioned as Louthful and is represented #y the twists and curls of the macaronic snac+. It is speculated to #e introduced in a phase manner nationwide to #e place in the (.3*la+h outlets that :aggi noodles sells in. In the spirit of catering to Indian tastes :aggi introduced maggi pic+les in fie ariants #enchmar+ed to gie the Bghar +a swadB. :aggi Aosa :i4 was also introduced to offer superior quality and added conenience. Apart from this :il+maid Cala+and :i4, a traditional north Indian sweet of premium quality was added to the mil+maid dessert mi4es. :aggi soup also launched three new ariants. :aggi 9assam in particular was noticea#le as yet another attempt to ma+e traditional Indian coo+ing a little #it easier. 43 $ood Ser-ices ?ood serice items #asically deal with the out of home segments, which would include ending machines. Nestle/s food serice #usiness is poised for rapid e4pansion to meet the growing need for such a relia#le, time saing and cost effectie serice in this modern age. Nestle wants to sell 3-- million cups of tea and coffee through its ending machines in the year .---. It currently has ,3-- ending machines at assorted locations (#oth pu#lic and priate". In %223 Nestle food serice did well to end 1- million cups of Nescafe and Tasters Fhoice tea. Its %22' sales were placed at 32 million cups of Nescafe and ,' million cups of teaN this figure was howeer way #elow the e4pected sales for the year. 44 In "##$ and "##" nestle has come with a number of new products li%e it has come with many of the diary products li%e mil%. &he mil% is avaliable in the mar%et in the full cream ' toned and double toned mil%. &he nestle has also come with the dahi' butter which is available in the mar%et but at very few shops . ()*&+) has also come with the products which will target the children li%e FRUITIPS,MILKYBAR CHOO,!STL! CHI!S! MAGGI OO"L!S# 46 ;I;LI6@9A8$L www.nestle.com www.google.com -?H/*A*?$ ABKI-?/ 47 %NNE:*-E )i!!ci$ Resu$ts !d Opertio! 8774%$s. in millions& 2;;4%$s. in millions& Bross $evenue 282:: 27722 Bross *rofit %!IT& 26:6 2236 Interest <74 62< )epreciation 885 24< *rovision for Tax 43 252 *rofit after taxation <:8 <68 ?xtraordinary tax *ayment 2: 224 *rofit after taxation and extraordinary item <83 :24 *rofit brought forward 82< 2:< $eserves written back :; 267 !alance available for appropriation 5;8 4;2 48 Interim dividends paid 6<6 682 +inal )ividend proposed , ;5 Transfer to debenture redemption reserve :8 8 transfer to general reserve <: <4 /urplus carried in *rofit and loss Account 6:6 82< Bross $evenue increased by 82= during the year, and crossed the 2877 crores mark . )omestic sales grew by 2;= and exports %including sales to -epal & grew by 85 =. -et profit after tax grew by 85= , +rom $s :2.4 crores to $s <8.3 crores. Throughout 8776, there was a marked lack of buoyancy in the domestics market caused primarily by increased inflation and the financial liquidity squee'e which affected all segments of the industry and trade . Interest costs rose substantially on account of higher funding needs to service recently commissioned pro"ects as well as to meet increased exports for which materials often had to be purchased in advance . 69 Considering the recessionary market conditions, -estles overall sales and progression during 8776 can be considered satisfactory. $inancial In(ormation In millions o( C+$ %&&/ Sales &% 1.. 7;ITAA (a" %. 3%' as 5 of sales %3.15 7;ITA (#" 2'-- as 5 of sales %%.&5 61 Trading 8rofit 2 %&' as 5 of sales %%.,5 Net 8rofit 3 (', as 5 of sales (.%5 Fapital e4penditure ,,-3 7quity .2 2-1 Total Assets '3 3.1 9esearch and deelopment costs % -,& :ar+et Fapitali!ation, end Aecem#er %1' &'1 (a" :ainly 8harmaceutical products and Dater, managed on a worldwide #asis. (#" :ainly corporate e4penses, research and deelopment costs, amortisation of goodwill 6'