NESTLE COMPANY

1.0 NESTLE ORGANIZATION

1.1 INTRODUCTION
Nestl began in Switzerland in the mid 1860s when founder Henri Nestl created one of the first baby
formulas. Henri realized the need for a healthy and economical product to serve as an alternative for
mothers who could not breastfeed their babies. Mothers who were unable to breastfeed often lost their
infants to malnutrition. Henris product was a carefully formulated mixture of cows milk, flour and sugar.
Nestls first product was called Farine Lacte (cornflour gruel in French) Henri Nestl. The product was
first used on a premature baby who could not tolerate his mothers milk or other alternative products of
that time. Doctors gave up on treating the infant. Miraculously the baby tolerated Henris new formula and
it provided the nourishment that saved his life. Within a few years the first Nestl product was marketed in
Europe.
In 1874 the Nestl Company was purchased by Jules Monnerat. Nestl developed its own condensed
milk to contend with its competitor, the Anglo-Swiss Condensed Milk Company. The Anglo-Swiss
Condensed Milk Company made products like cheese and instant formulas. The two companies merged
in 1905, the year after Nestl added chocolate to its line of foods. The newly formed Nestl and AngloSwiss Milk Company had factories in the United States, Britain, Spain and Germany. Soon the company
was full-scale manufacturing in Australia with warehouses in Singapore, Hong Kong and Bombay. Most
production still took place in Europe.
The start of World War I made it difficult for Nestl to buy raw ingredients and distribute products. Fresh
milk was scarce in Europe, and factories had to sell milk for the public need instead of using it as an
ingredient in foods. Nestl purchased several factories in the U.S. to keep up with the increasing demand
for condensed milk and dairy products via government contracts. The companys production doubled by
the end of the war. When fresh milk became available again after the war, Nestl suffered and slipped into
debt. The price of ingredients was increasing, the economy has slowed and exchange rates deteriorated
because of the war.
An expert banker helped Nestl find ways to reduce its debt. By the 1920s Nestl was creating new
chocolate and powdered beverage products. Adding to the product line once again, Nestl developed
Nescaf in the 1930s and Nestea followed. Nescaf, a soluble powder, revolutionized coffee drinking and
became an instant hit.
With the onset of the Second World War, profits plummeted. Switzerland was neutral in the war and
became increasingly isolated in Europe. Many of Nestls executive officers were transferred to offices in
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the U.S. Because of distribution problems in Europe and Asia, Nestl opened factories in developing
countries in Latin America. Production increased dramatically after America entered the war. Nescaf
became a main beverage for the American servicemen in Europe and Asia. Total sales increased by $125
million from 1938 to 1945.
Nestl continued to prosper, merging with Alimentana S.A., a company that manufactured soups and
seasonings, in 1947. In the coming years, Nestl acquired Crosse & Blackwell, Findus frozen foods,
Libbys fruit juices, and Stouffers frozen foods. Nescaf instant coffee sales quadrupled from 1960 to
1974, and the new technology of freeze-drying allowed the company to create a new kind of instant
coffee, which they named Tasters Choice.
By the 1980s Nestl had a new Chief Executive Officer. The company focused on improving its financial
situation and continuing to expand. In the one of the largest takeovers at that time, Nestl bought
Carnation for $3 billion and parted with any unprofitable businesses.In the 1990s Nestl acquired San
Pellegrino, and Spillers Petfoods of the UK. With the acquisition of Ralston Purina in 2002, the Nestlowned pet care businesses joined to form the industry leader Nestl Purina PetCare. The leading in the
food industry, Nestl brings in $81 billion in overall sales and has 470 factories around the world. Nestl
will continue to grow, introduce new products and renovate existing ones. The companys mission is to
focus on long-term potential over short-term performance.

NESTLE PRODUCTS IN ALL OVER THE WORLD

WATER

CEREALS

COFFEE

Nestl Selda (Portugal)

Cookie Crisp

Buondi(Portugal)

Nestl Vera (Italy)

Golden Grahams

sunrise(India)

Neuselters (Germany)

Crunch (Cereal)

Nescafe

Nestle(Pakistan)

Chocapic

Shrameet

ICE CREAM
Camy, Dibs, Ahusglass(Sweden), Frigor(Argentina), Kimo(Egypt), Oreo(Canada), Peters(Australia).
OTHERS DRINKS
Nestlea, Enviga, Milo,Carnation, Caro, Vascolet(Uruguay), Nesfruta( Philippines), Nescau(Brazil).
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1.2 MISSION AND VISION

MISSION
Nestls mission, in the words of our founder Henri Nestl, is to: ...positively influence
the social environment in which we operate as responsible corporate citizens, with due
regard for those environmental standards and societal aspirations which improve quality
of life. -- Henri Nestl, 1857.
VISION
To be a leading, competitive, Nutrition, Health and Wellness Company delivering
improved shareholder value by being a preferred corporate citizen, preferred employer,
preferred supplier selling preferred products.
OBJECTIVES
Nestle objective is :
To be the worlds largest and best brand food manaufactured.
Not only make well selling product but be the best in te food market.
Eight of the thirty selling products out include nestle logo.

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1.3 Globalization
Nestl Ltd. is a Multinational Corporation, A company that operates globallythrough
branches with their headquarters in one country (Stimpson& Singh,2007, p.65). This
is made possible through Globalization and Trade Liberalizationwhich encourages
companies to expand globally with fewer restrictions. InternalFactors that have led
to Nestls global growth are;

Nestl continues to maintain its commitment to follow and respect all applicable
local laws in each of its markets.

Nestl has positioned itself as a company promoting health and dietary preferenc
e to its consumers.

Nestl acquires dependable worldwide brands to build up its product range.The

Multinational Corporation chosen to be assessed is Nestl Trinidad andTobago
Ltd.

Nestle is one of the world largest global food companies, it has over 500 factories
in 76 countries and sells its products.

Investment in dairy and food sector are main contributors of nestles global
competitive strategy.

Nestle earn bulk of thire revenue from foreign countries.. about 80% of their
revenue from foreign countries

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1.4 Internationalization Process

Neslte starts its operation in 1866. The company first product was breast feeding
products. At that time this product was first introduce by Nestle and they become
popular gradually in Europe.
After that Nsetle merge with another compnay. The compnay formed by the 1905
merger called NESTLE AND ANGLO SWISS MILK COMPANY.
By early 1900s the company was operating factories in the United States,
Britain, Germany and Spain. 1904 Nestle added chocolate to its range of food products
after reaching an agreement with the SWISS General chocolate company.
Condensed milk exports increase rapidly as the company replace sales agents with
local subsidiary cojpanies. In 1907 the company began full scale manufacturing in
Australia, its secondlargest exort market. Warehous were built in Singapore, HongKong
and Bombay to supply the rapidly growing Asian market. Most production facilities
remained in Europe. However and the onset of world war brought severe disruption.
Acquiring raw material and distributing products became increasingly difficult. Fresh
milk shortage through outeurope forced factories to sell almost all their suplies tomeet
the need of local towns.
The war created new demands far diary products largelyinform of government contract.
To keep up Nestle purchadse several existing factories in the United States. By wars
end the company had 40 factories and its world productiion had more than double since
1914. Now Nestle have 500 factories in all over the world. Nestle sell their products in
130 countries and their number of employees are about 250,000.

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1.5 Foreign Direct Investment

increase sales & Profits and Enter Rapidly Growing Market
One opportunity that Nestle has is that health-based products are becoming more
popular in the world, including in the United States. Consumers are becoming more
health conscious, and realize that living longer isnt only by luck and genetics.
LC1 has not been introduced in the United States yet. Nestle also has an opportunity of
being even a larger market leader in Germany with LC-1. Within two years of launching
the product in Germany, they had captured 60% of the market. This was due to the fact
that they differentiated the product, and Germans simply preferred the taste. Another
opportunity of LC1 is that, because they are a market leader, they can introduce more
health-based products in Germany.
A threat to Nestle is the fact that some markets they are entering are already mature.
Danone had an established leadership position in the yogurt market in France. Since
Danone was the first to arrive in the market, they have always been the market leader
there. Also consumers in France liked the taste of LC-1, but researchers believe they
did not repurchase the yogurt because they preferred the taste of Danone products
better. Another threat to Nestle is that there is intense competition in the United States
yogurt market. General Mills Yoplait division is the leader in the yogurt market in the
United States. Yoplait has been the leader for years and is constantly innovating new
health products.
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Reduce cost
Nestles LC1 division has many strengths. Their first is that they have a great CEO,
Peter Brabeck. Brabeck emphasizes internal growth, meaning he wants to achieve
higher volumes by renovating existing products, and innovating new products. His
explanation of renovation is that to just keep pace in the industry, you need to change
at least as fast as consumer expectations.(Hitt, 2005) And his explanation of innovation
is to maintain a leadership position, you also need to leapfrog, to move faster and go
beyond what consumers will tell you. Brabeck has led Nestle into a position to better
achieve the internal growth targets with his. Another strength that Nestle has is that they
are low cost operators. This allows them to not only beat the competition by producing
low cost products, but by also edging ahead with low operating costs.
Gain Foothold in EconomicsBlocks
When operating in a developed market, Nestl strives to grow and gain economies of
scale through foreign direct investment in big companies. Recently, Nestl licensed the
LC1 brand to Mller (a large German dairy producer) in Germany and Austria. In the
developing markets, Nestl grows by manipulating ingredients or processing technology
for local conditions, and employ the appropriate brand. For example, in many European
countries most chilled dairy products contain sometimes two to three times the fat
content of American Nestl products and are released under the Sveltesse brand name.

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Another strategy that has been successful for Nestl involves striking strategic
partnerships with other large companies. In the early 1990s, Nestl entered into an
alliance with Coca Cola in ready-to-drink teas and coffees in order to benefit from Coca
Colas worldwide bottling system and expertise in prepared beverages.
Protect Foreign Market and Local Market
European and American food markets are seen by Nestl to be flat and fiercely
competitive. Therefore, Nestl is setting is sights on new markets and new business for
growth.

1.6 STRATEGIES
When operating in a developed market, Nestle strives to grow and gain economies of
scale through FDI in big companies.
In the developing markets, Nestle grows by manipulating ingredients or processing
technology for local condition and employ the appropriate brand.
Another stratgy that has been succesful for Nestle involves striking strategies
partnerships with other large companies. In the early 1990s. Nestle company entered
into an alliance with Coca cola in ready to drink tees andcoffee in order to benefit from
Coca colas worldwide bottling system and expertise in prepared beverages.
In Asia, Nestles strategy has been to acquire local companies in order to form a group
of autonomous regional managers who know more about the culture of the local
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markets than American or Europeans.

Nestle strong cash flow and comfortable debt equity ratio leave it with ample muscle for
takeovers.
Competitive Strategy
Nestle discribe itself as a food nutrition, health and wellness company. Recently they
created Netle Nutrition a global businessorganization design to strenthen the focus on
their core nutrition business. They believe strenthening the eir leadership in this market
is the key element of their corporate strategy. This market is characterized as one in
which the consumers primary motivation for a purchase is the claims made by the
product based on nutritional content.
In order to reinforce their competitive advantage in this area, Nestle created Nestle
Nutrition as an autonomous global business unit within the organization and change it
with the operational and profit and loss responsibility for the claim based business of
infant Nutrition, healthcare nutrition and performance nutrition. This unit aims to deliver
superior business performance by offering consumers trusted, science based nutrition
products and services.
The corporate wellness unit was designed to integrate nutritional value added in their
food and beverage businesses. This unit will drive the nutrition, health and wellness
organization across all their food and beverage businesses. It encompasses a majaor
communication effort both internally and externally.
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1.7 SWOT ANALYSIS

STRENGTH

BRAND IMAGE
Marketing strategies established by the company are innovative.
Customers.
Financial, marketing and sales strategies are formulated by gauging the periodic

research carried out to judge market trends.

It is a large scale organization, with abundant funds and has the capability of acquiring
weaker firms by throwing them out of competition. An example for this strength of the

company:
Multinational.
Growing Sales and profits.
Major shareholder in the food industry of Pakistan.
Aggressive Marketing.
Efficient Distribution networks through out the country.
Quality Products.
Environment Friendly.
Skilled labour.
Educated staff.
Large number of offerings.
Pre purchase virtual displays.
Good background of the company.

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Easy to approach outlets.

Solid Financial position
Strong supply chain network
Focus on research and development Estimations of UHT Milk Production

WEAKNESES
The target market of Nestle MilkPak is upper middle and high class because lower
middle and poor class cannot afford to buy UHT milk due to its premium price.

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It is a main weakness of MilkPak that there are different companies of milk but the name

of nestle MilkPak is always stand in the last because of low advertising and marketing.
Limited presence in organic foods market
Didn't promote fully their new product LC1

OPPORTUNITIES
There are substantial growth opportunities considering the average yield of Pakistani
animals at only 1,100 liters/annum as compared to 6,000 liters/annum for animals in
Europe and USA. There are nearly 20 million milk producing animals in the country,
mostly in Punjab (80%).
The overall milk market in Pakistan is 20 billion liters, out of which processed milk
contributes only 3 million liters. Nestl MilkPak along with other processed milk
businesses.
Integration of new acquisitions in growth markets (i.e., RKF in Russia,
Henniez)
Transition to a "nutrition and well-being" company
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Fair Trade argeements for cocoa and other products produced in third world
countries.
Provide allergen free food items, such as gluten free peanut free.
Open Nestle cafes in major cities to feature Netle products.

Threats

Private label growth

Increased competition in bottled water from niche brands
Any contamination of the food supply especially e-coli.
Their tool house brand cookie dough was recalled in March 2009 because of
e-coli. Out brieaks were linked to 28 states and the product

had to be

recalled globally. Nestle has yet find out how this happened? And still
investigating

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They have major competitors like Hersheys, Cadbury- schweppes, Lint,

Ghiradelli, Quaker, Kraft food etc.

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1.8 Company Joint Venture

The Laboratoires Inneov is a joint venture in nutritional cosmetics between Nestl and
L'Oral, while Galderma is a joint venture in dermatology with L'Oral. Other joint
ventures include:

Cereal Partners Worldwide with General Mills

Beverage Partners Worldwide with The Coca-Cola Company

Lactalis Nestl Produits Frais with Lactalis (40%/60%)[23]

Nestl Colgate-Palmolive with Colgate-Palmolive (50%/50%)[24]

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Nestl Indofood Citarasa Indonesia with Indofood (50%/50%)[25]

Dairy Partners Americas (DPA) with Fonterra (50%/50%)[26]

Nestl Snow with Snow Brand Milk Products (50%/50%)[27]

Nestl Modelo with Grupo Modelo

Company Financial Data

Nestl is the biggest food company in the world, with a market capitalisation of roughly
191 billion Swiss francs, which is more than 200 billion U.S. dollars. [3]
In 2011, consolidated sales were CHF 107.6 billion and net profit was CHF
10.43 billion. Research and development investment was CHF 2.02 billion.[29]

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Sales by activity breakdown

27% from drinks
26% from dairy and food products
18% from ready-prepared dishes and ready-cooked dishes
12% from chocolate
11% from pet products
6% from pharmaceutical products
2% from baby milks
Sales by geographic area breakdown
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32% from Europe

31% from Americas (26% from US)
16% from Asia
21% from rest of the world

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1.9 Culture of Nestle Company

The Nestl Management and Leadership Principles are based on the many experiences that have
led to the companys success throughout its long history. They relate mainly to the human
aspects of our management and our employees, and stress the multi-cultural nature of the
Company. Nestl embraces cultural and social diversity and does not discriminate on the basis of
origin, nationality, religion, race, gender or age. Nor does Nestl have any political involvement.
Nestl operates in many countries and in many cultures throughout the world. This rich diversity
is an invaluable source for our leadership, and also for broadening our employees experiences.

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A key theme of the Management and Leadership Principles is that we put our priority on people
rather than systems. This results in a structure that is as flat as possible, rather than hierarchical,
and gives individuals plenty of opportunities to advance their careers. Together with our
Corporate Business Principles, the Management and Leadership Principles form the foundation
of our approach to doing business. Its an approach that has been recognised by top Harvard
academics as having generated real benefits both for Nestl and for society over many decades.
Harvard Business School Professors Michael Porter and Mark Kramer have stated that this puts
Nestl in the front rank of companies who create real shared value for themselves and society at
every step of their business process or value chain. Porter and Kramer argue that our approach
has already stood the test of time; and will continue to do so precisely because there are winners
on all sides.

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