CHAPTER-1: INTRODUCTION
INTRODUCTION
Nestle India Ltd. is a part of the Nestle SA group which is one of the largest manufacturing
companies in the world. Henri Nestle founded the company (with its headquarters in Vevey,
Switzerland) in 1867. Nestle has two major divisions - Le Societe des Produits which looks
after the production and marketing and Nestec Ltd. which provides the technical assistance to
the group companies. Since its inception in 1867, 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 130 years the company has ranked 26th among
the world‟s largest corporations and boasts of a turnover of $ 48932.5 million and employee
strength of 221,144 people spread over 75 countries worldwide (Annexure A).
Nestle has long been viewed as one of the most multinational of the multinationals. This is
because today only 2% of its turnover comes from Switzerland. Out of the remaining 98%,
Europe contributes 43.5%, North and South America contribute 36.5% and Africa and the Asia
Pacific Regions contribute 18%.
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RESEARCH OBJECTIVE:
• To study the market share of NESTLE.
• To study and analyze the customer perception and preference about NESTLE.
• To study the distribution process of Nestle
SCOPE OF THE STUDY
The study covers the branding strategies used by Nestle India. The study assists in identifying
how branding helps any company to get an edge over competition and also help in a long run.
Which eventually helps in growing consumer loyalty due to brand awareness, brand recall due to
effective positioning and so on.
LIMITATION
Nestle is a huge brand therefore all aspect cannot be covered in a short span of time.
Nestle is a huge brand with multiple brand extensions and therefore it uses various branding
strategies. So it is impossible to identify any single strategy used.
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RESEARCH DESIGN
The research design will be combination of exploratory & descriptive research. The research is
used to measure the importance given to FMCG sector exercising digital platform.
DATA COLLECTION:
Sources of Data:
The data has been collected from both primary as well as secondary source.
Secondary Data
It is defined as the data collected earlier for a purpose other than one currently being pursued.
As a research I have scanned lot of source to get an access to secondary data which have formed
a reference base to compare the research findings. Secondary data in this study has provided an
insight and forms an outline for the objective established.
The various source of secondary data used for this study are:
▪ Internet
▪ Blogs
▪ Journals
▪ Books
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Company Profile
Although Nestle 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 Moga in 1962. The first product to be
manufactured was Milkmaid. In the last 35 years the company has shown rapid progress and
has increased its product range to 80 products as of October 1997. Nestle India Ltd. now
ranks 22nd amongst India‟s most valuable companies (Annexure B) . Its gross revenue has
increased from Rs 1000.1 crores to Rs. 1213.8 crores in 1993. This remarkable growth
has been
achieved through - Rapidly 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.
• Strengthening 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.
The company‟s exports also resulted in a very successful year in this area as exports
grew by 27% to Rs. 250.8 crores in 2003. The main contributors to this increase were the
export of tea and coffee to USA, Japan, Russia, Hungary and Taiwan. Nestle India Ltd. wants to
further increase its operations in India and has started construction of its sixth Factory at
Bicholim, Goa for the manufacture of culinary products (a key thrust area) for this purpose.
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KEY OBJECTIVES OF NESTLE
Production
To optimise production costs while enhancing product quality so as to make Nestle products
even more competitive in the market place.
Sales and marketing
• To reach a sales turnover of 3000 crores by the year 2003
• To double the turnover every three years
People
• To help employees to retain a long term perspective and 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 Nestle.
Finance
To maintain profit levels above the average for the food industry in India.
The Business Excellence and Common Application (BECA) initiative essentially translates the
spirit of the Journey towards excellence into an organised, systematic and measurable approach.
The aim is to aid the achievements of the company‟s key objectives of rapid growth by ensuring
that all operations incorporate the spirit of meaningful planning, effective cost control and
efficient implementation. BECA is about “ planned improvement in everything we do ”
Factories
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Nestle has 6 factories in India. These are
1. Moga (punjab) : The Nestle factory in Moga has the pride of being the first and most
comprehensive factory of Nestle India. Set up in 1962, it represents the core competence of
Nestle India in the manufacture of milk products (Everyday, Milkmaid), beverages, culinary
products (Maggi sauces, noodles, soups etc.), weaning cereals (Cerelac) and infant milk
formulae.
2. Choladi ( Tamil Nadu): The factory in Choladi started production in 1967. Situated
about 60 miles from Calicut, the factory today has 81 employees and produces 1.5% of the total
turnover of Nestle India. It is a 100 percent export oriented unit which processes freshly picked
tea leaves into soluble instant tea.
3. Nanjagud (Karnataka): Production in this factory began in 1989 with the
manufacture of Nestle instant coffee and Sunrise. Today in addition to instant coffee the factory
also manufactures health beverages. The plant to manufacture MILO was also commissioned at
this factory. This factory employs 145 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.
4. Samalakha (Haryana): This factory was set up in 1993. Located 70 kilometres from
Delhi , it manufactures weaning cereals , culinary products
,health beverages and milk products. Recently the expansion of manufacturing capacity for
Milkmaid Dessert Mixes was undertaken at this factory as this new and unique product category
is viewed to have great potential in the future.
5. Ponda (Goa): This Kit-Kat factory was set up in Goa in 1995 at a cost of Rs. 50
crores. It represented a major step by Nestle towards becoming the Number 1 Chocolates and
Confectionery Company in India.
6. Bicholim (Goa)
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.
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As a part of Nestles efforts towards continuous improvement and excellence in
Manufacturing operation, a Moga Improvement team (MIT) was put in place at the Moga
factory.
The team comprised of international experts from Nestle Technical Services (NESTEC) and the
local staff. In 1996, it embarked on a program with the single minded objective of optimizing
production costs while enhancing the product quality so as to make Nestle products even more
competitive in the market place. Drawing upon Nestle‟s global experience and manufacturing
expertise in 75 countries the team identified the following areas for detailed study -
• Process improvement to ensure the optimal usage of resources
• Improvement of operational efficiency
• Cost optimization
A series of small but critically important initiatives ranging from redesigning laboratories to
palletisation of raw materials and packaging material utilization, manufacturing and filling loses
and labour man hours resulting in substantial savings and improved productivity and machine
utilization. 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 realized .
This project was highly successful and the company is now implementing its key
learning‟s of MIT in its other factories.
In a country as vast and diverse as India, supply chain management is absolutely critical to
rapid growth. Through BECA, Nestle has concentrated heavily on streamlining and improving
their supply chain management in order to make it more dependable, more cost effective and
most importantly, more responsive to market needs.
For better supply chain integration the planning of key operations - purchase, production,
distribution and sales are synchronized to ensure that everybody works towards a common
business plan. Monthly objectives are broken down into weekly and (wherever necessary) into
daily plans and monitored regularly to ensure smooth implementation and quick corrective
action when needed . Major benefits accrued thus far include reduction in working capital
through lower inventories of finished goods and materials, better stock availability and reduction
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in obsolescence of materials.
In addition to traditional performance indicators, quantifiable performance measures have been
identified and implemented in all 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.
By 1989 the company had achieved a sales figure of approximately Rs. 258 crores. 1989 was
the year of launches. Seven new product lines were launched in this
year. This was also the year in which the Nanjagud factory was set up. By the year 1992, this
sales figure was touching Rs 500 crores. In the 1995 the pace of launches quickened and since
the construction of the factory at Samalakha, 20 new products have been introduced. By 2003,
Nestle had about 76 different products in its portfolio with various new products in the
pipeline as well. The sales figure now touched Rs. 1214 crores. Thus sales grew by 450% over
a period of one and a half decades.
Marketing Strategy
Nestle has adopted a four pronged growth strategy: -
1. Gunning the market with new products and brand extensions.
2. Expansion of the distribution network to small towns for extensive availability.
3. Reduce prices and introduce smaller packages for products to make them more affordable (a tool
to enter price sensitive markets).
4. Focus on employ training and develop a positive attitude through enhanced manpower
development.
By year 2003 it expects chocolate & confectionery to account for one in every third rupee in
sale.
In the late 1996 fear of breading complacency by not having a continuous improvement,
gave birth to an international sales & marketing improvement
teams (SMIT).
SMIT maps the latest in helping towards the target of year. 2003. The SMIT exercise is a major
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global initiative of Nestle to enhance sales & marketing productivity. Linked with the already
existing BECA project, which in turn emphasises on excellence by improving the distribution set
up , this gave rise to the following growth objectives for the year 2003 Ensure direct coverage of
all urban towns in India.
• Expand distribution to reach 1 million retail outlets on a regular basis.
• Work in partnership with the distributor for the achievement of these objectives.
• Provide sustainable solution to optimize our secondary sales from distributor to retailer.
NEW PRODUCT LAUNCHES
To put all the product launches into perspective, Nestle now has 80 products including various
flavors and variants this awesome list of 80 products for most companies is an overfull palate.
Nestle India Ltd. Still have a variety of new products in the pipelines. It believes in slowly
colonizing as much territory as fast as it can, adapting to native conditions and then work at
“holding off the advancing herds”. Nestle products can be broadly classified into 5 main ranges
• Milk Products
• Chocolate and Confectionery
• Beverages
• Culinary
• Food service
Milk Products
This category which comprises of condensed milk, baby milk foods , milk powders
, acidified infant food , and other milk products, showed a slump in 1996 as sale of milk
products fell from Rs 31.4 crores in 1995 to Rs 31.2 crores in the said year.
Consumer offtake remained depressed throughout this year as a consequence of high price
increases necessitated by substantial increases(+50%) in the cost of basic raw materials( fresh
milk ) , over the past two years .
However Nestle retained its leadership in the infant food market with Cerelac, Lactogen and
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Nestum and even introduced a new flavour of Cerelac - Cerelac Rice in 1996.
CHOCOLATES AND CONFECTIONERY
Nestle pursues the objective of accounting for one in every three rupees in its sales figures
through chocolates and confectionery. This has thus been one of the thrust areas in Nestle. Nestle
this year widened its range of flavours in POLO, backed by its tremendous success in the Indian
Market by adding POLO Spearmint to its Portfolio. This new flavour has also received an
encouraging response in the market according to market analysts.
Milkybar 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 majority of Indian tastes still do not accept this
flavour.
This year however, was a year of tremendous success for Kit Kat .This internationally renowned
brand gained a large increase in the Market share in the past year and Nestle officials are
hopeful that this will further increase in the
coming years. However this Brand along with it success has brought with it its share of
Controversy as the Union of India has launched a Litigation against the Kit Kat family pack.
In 1997 Nestle added to its range of confectionery by introducing SPLASH, “A soft hearted,
hard boiled sweet ” this is being promoted as a sweet unique to India and is positioned to a target
audience in the age group of 4 to 12 years and “anyone with a soft heart” is a potential customer.
Priced at Rs. 1 for a 7.5 gram candy splash has been introduced selectively in the
South and has been speculated to repeat Polo‟s performance. Nestle‟s officials claim that this
candy has the potential to grab a quarter of the 700 crores confectionery market.
The most recent of Nestle affairs with the confectionery market has been the introduction of
Mithai Magic which is “a little Mithai , a little magic “ .This new product was launched in
September 1997 ,in time for the Diwali 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
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BEVERAGES
This year has been very successful in the beverages market for Nestle .The sales of beverages
has increased from Rs 323.3 crores in 2002 to Rs 398.8 crores in 2003.
Nestles Flagship Nescafe which was pegged at Rupees 1040 per Kilogram before the launch of
Tata Cafe, met with stiff competition from Tata Cafe priced at Rupees 550 per Kg once it was
introduced . Tata cafe claimed to have garnered a market share of 17% by December 1996. This
forced Nestle to cut prices of Nescafe to Rupees 840 per Kg. However Nescafe still retains 83%
market share in the Rs 177 Crores market for pure instant coffee. Nestle Sunrise also showed an
increase in sales and captured 20 % of the Rs 253 crores market in Mixed instant coffee. This
year Nestle also launched MILO, an internationally renowned chocolate energy drink, and the
response for this has been encouraging.
Nestle has also introduced Tasters Choice tea bag pitched against Taj mahal tea bags.
CULINARY 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 Housewife. Encouraged by this success Nestle launched Maggi Macoroni
Snack in three flavors - Chicken , Masala and Tomato. Nestle officials‟ say that this would
consolidate Maggis position as the number 1 culinary brand in India. The product focuses on
convenience and innovation as its Unique Selling Proposition. 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 7.5 lakh outlets that Maggi noodles sells in .
In the spirit of catering to Indian tastes Maggi introduced maggi pickles in five variants
benchmarked to give the “ghar ka swad”. Maggi Dosa Mix was also introduced to offer superior
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quality and added convenience. Apart from this Milkmaid Kalakand Mix, a traditional north
Indian sweet of premium quality was added to the milkmaid dessert mixes. Maggi soup also
launched three new variants. Maggi Rassam in particular was noticeable as yet another attempt
to make traditional Indian cooking a little bit easier.
FOOD SERVICE
Food service items basically deal with the out of home segments, which would include vending
machines. Nestle‟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 .
Nestle wants to sell 500 million cups of tea and coffee through its vending machines in the year
2003. It currently has 3500 vending machines at assorted locations (both public and private). In
1995 Nestle food service did well to vend 40 million cups of Nescafe and Tasters Choice tea. Its
2003 sales were placed at 59 million cups of Nescafe and 36 million cups of tea, this figure was
however way below the expected sales for the year.
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
250 million consumers -an unbelievable potential for any FMCG . The potential being spread
across more than 4000 towns have to be very effectively and efficiently tapped. Nestle till now
was retailing in a limited number of towns with only 200 towns accounting for 70 % of their
business. For Nestle to be a leader in the food industry, expanding the distribution network
for more retail outlets was a must.
To meet this challenge, Nestle is working towards an objective of increasing the retail base to
1,000,000 outlets by the year 2003. This network is feasible as Nestle has a triangular
distribution structure thus the span of control is still retained. The Distribution Network is
explained in figure 2.
In order to achieve these distribution objectives Nestle has formulated an international sales and
marketing improvement team (SMIT). SMIT focuses on a single objective -provide sustainable
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solutions to optimize 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.
Advertising Strategy
Nestle, a cash rich company has plenty of marketing prowess. This can be credited to a strong
and sound advertising strategy.
Nestle in the year 2002 had an advertisement spending of Rs 43.3 crores (net) . Tracing Nestles
advertising responses the ad campaign by HTA of „Hot and Sweet‟ was a runway success this
ad was actually meant to fend off a challenge from H.J Heinz.
The Maggi ranges of sauces were introduced in 1985 but sales didn‟t catch up until 1990 but till
2003 it got considerable market share. At this point the popular and memorable campaign of
Javed Jaffrey and Pankaj Kapoor was launched by Producer Pralad Kakkar . This commercial
was an instant success. The volume of sales kept rising from an initial growth of 13% to 20% in
the next year.
Today the sales figure for Maggi Sauces is growing at a steady 6% per year.
Another noteworthy campaign was that of POLO (the mint with a hole), devised by Mudra
advertising agency. This campaign was awarded 11 industry ad awards.
In 2002 the advertisement budget has been approximately Rs 56 crores where again innovation
was the main focus. The new nation-wide product launch of Maggi Macaroni Snack and Mithai
Magic have been designed by Mudra . The Macaroni ad with its use of “English “ and a catchy
beat (which is the latest trend amongst the Indian Advertisers) appeals well to the target audience
and the Mithai Magic commercial does keep the secret of the contents in the box , intact.
“Training is an integral and indispensable part of Nestle . I regard the importance
of training a highly as research and development .
- Mr. Helmut Maucher Chairman and CEO Nestle S A Group
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Recruitment Policy
Recruitment of fresh management trainees and sales officers is done every April- May. 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 12-18 months. Although Nestle does
not offer some of the highest pay packets in the industry, it is considered a growth oriented
company.
Training and Development: Continuous development of skills and attitudes of employees is
critical to the achievement of excellence. At Nestle therefore training and development of human
resources is viewed as a long term investment.
“If you are planning for one year , Plant wheat; If you are planning for ten years, plant a tree; If
you are planning for life, train people.”
- Old Chinese proverb
This proverb goes with the organizations most enduring beliefs worldwide -
• That long term planning is the key to Nestles global success
• That Nestle‟s most valuable assets are its people
• Nestle‟s policy is to rely on a more decentralized form of management by building in the
habit to “Think Nestle”.
At Nestle India training and development is an integral part of the business plan and strategy
in line with the objectives for the year 2003 and aims to -
• Help employees to retain long term perspective and integrate them fully with
the company‟s business goals
• View the growth of both the personnel and the company as a continuous process .
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• Concentrate on attitudinal changes by developing leadership skills, an appreciation of
interdependence between units and the enhancement of a sense of belonging to Nestle .
In 2003 Nestle India benefited greatly from the training program offered at the Rive Reine
International Training Center at Vevey, Switzerland. This training program helped facilitate the
transfer of common Knowledge (technical, marketing, and finance) across the Nestle Group and
ensure interdisciplinary approach to learning and uniform progress with a tailor-made approach
for all.
Company Training needs -
• analysis of training needs of Managers
• self development programs for staff at HO
• programs for company orientation and information sharing
• programs aimed at computer training and computerization
• Establishment of contact with leading management institutes with a view to use the same for
meeting local training requirements
3.1 Nestlé’s Corporate Culture
As we had discussed before, Nestle is one of the most multinational of multinationals and is
spread over 75 countries worldwide. This implies that it has employees from diverse cultural
backgrounds. Nestle respects the distinctive culture, mentality and traditions of every employee
in every country. What Nestle aims at is to incorporate its own culture into its employees without
stifling the individual employee‟s culture and identity. When we went to Nestle we could feel
the existence of a distinctive work culture amongst the management - the staff seemed highly
motivated & cheerful and everybody had pin up boards in front of their tables with reminders ,
motivational messages and even time logs (the Nestle people seemed as if they availed of the
benefits of time management) .
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Nestle has a diverse product range and so it also has diversified risks Thus Management on
Information systems plays a vital role in Nestle to provide information to the Sales and
Marketing as well a the finance department .The Electronic Data Processing Department looks
after Management Information Systems . Apart from this, Nestle has a vast distribution network.
In order to support the BECA 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.
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