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Marketing & Advertising Strategy of Nestle India Limited
Transcript of Marketing & Advertising Strategy of Nestle India Limited
NESTLE INDIA LTD.
Project Report Project Report
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PIONEER INSTITUTE OF PROFESSNAL STUDIESPIONEER INSTITUTE OF PROFESSNAL STUDIESMADHYA PRADESHMADHYA PRADESH
NESTLE INDIA LTD.
NESTLE INDIA LTD.
NESTLE INDIA LTD.
TABLE OF CONTENTS
SYNOPSIS 1
INTRODUCTION 5
METHODOLOGY 103
FINDINGS 106
LIMITATION 143
CONCLUSION 153
APPENDICS 173
BIBLIOGRAPHY 177
NESTLE INDIA LTD.
ACKNOWLEDGEMENT
This project is dedicated to the institute of
marketing and Technolgoy the outset I express my
deep sense of gratitude to mr. , for providing me
an opportunity to understand and thus gave chance
to design the project. I would like to thank Mr.
Ravinder choudhary , assistant director and all
faculty members for guiding me while making this
project .
I also thank all those who helped me and all
respondents (retailers) for giving their precious time
and support.
Manik Duggal01-AII-227
NESTLE INDIA LTD.
UNDERTAKING
This is certify that this project report made by
MANIK DUGGAL (01-AII-227), a student of Institute
of Marketing and Technology, is original and
authentic and has been made as part of MBA
curriculum. There is no manipulation of the data. All
the facts and figures are true.
MANIK DUGGAL (01-AII-277)
NESTLE INDIA LTD.
ATTESTATION
I certify that Manik Duggal S/o Mr. Vijay Kumar
Duggal, a bonafide student of Institute of Marketing
and Technology (01-AII-277) has done this project
specializing in the fields marketing and advertising,
on the company "NESTLE INDIA LTD.." On his own.
The facts and figures provided in this report are
original and true.
NESTLE INDIA LTD.
SYNOPSIS
his report presents on in-depth analysis of
marketing and Advertising and public Relations of
Nestle India Ltd.-one of the well known and esteemed
organisations in the FMCG Sector in the country. Nestle
India
T
Ltd. is a company which is multinational company and
has its operations in many countries in the world. Carlos
Donati is the CEO & Managing Director of the N.I.L who
is from suitzerland. It is one of the big Companies in the
FMCG Sector. The Nestle India Ltd. deals in chocolates,
Milk products, Maggi, Soup, Sauce, Cofee, Tea, Milkmaid
and Mineral water etc. the Nestle I. Ltd. is working in
India for the last 40 years. Nestle I. Ltd has 51% holding
in Nestle. The Company has 6 factories and 6 sales
Branches. The company is emphasizing on building new
products to its customers & satisfying them.
NESTLE INDIA LTD.
The reports begin with Introduction, which deals with
the objective of the product, Introduction to marketing
and Advertising and Public Relations.
The Introduction to marketing comprises of the
definition of marketing, Marketing before and now, the
marketing system, the emergence of marketing as a
discipline, marketing management and marketing
Philosphies. It points out that the rules of the Past are no
longer applicable in marketing through the strategic
Paradigm of marketing and the Views of Philip Kotler.
The Introduction to Advertising and PR comprises of the
definition of advertising, the Need of Advertising, its
Benefits, its role, its limitation, the future of advertising
in India. It also deals with the definition of Public
Relations, the Need for PK, its limits, its scope & its
future in India.
The company profile in which Nestle India Limited
operates also form Part of the Introduction.
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This section of the Report, provides an insight into the
Nestle India Limited, its statistical profile, its salient
features, its products, Target Customer and its market
size and growth.
This Sector of the report also discusses also deals with
the competitors of the N.T.L in the FMCG sector in India.
This is followed by the History of N.T.L., Board of
Directors, its Subdivision, network, its foreign
collabrations, and the social welfare activities
undertaken by it.
This is followed by the profile of the Carlos Donati, its
areas of operations, finanancial performance and future
plans.
The Introduction is followed by a detailed description of
the methodology used to conduct the research and
getting the information required for the project in which
the primary and secondary of data have been specified.
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The methodology is followed by findings which entails
an in depth analysis of marketing and Advertising and
public Relations of N.I.L. This section also discusses the
4p’s of marketing, Marketing Strategy of N.I.L., Market
Segmentation. This section also includes the Advertising
strategy of N.I.L., and different advertisements that has
helped company in its growth.
The is followed by the limitations, condusions and
Recommendations respectively.
Bibliography and Appendics form the last two section of
the report.
NESTLE INDIA LTD.
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 Vevey, Switzerland) was founded by
Henri Nestle in 1867. Nestle has two major
divisions-Le Societe des Produits which looks
after the production and marketing and Nesstec 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 an employee strength of 221,144 people
spread over 75 countries worldwide (Annexure A).
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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 18% is contributed by Africa
and Asia Pacific Regions.
NESTLE INDIA LTD.
OVERVIEW
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
rank 22nd amongst India's most valuable companies
(Annexure B). Its gross revenue has increased from
Rs. 1001.1 crores to Rs. 1213.8 crores in 1996. This
remarkable growth has been achieved through:
Rapidly creating greater manufacturing capacity,
both at factories as well as with copackers.
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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 1996. 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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INTRODUCTION TO MARKETING
1. Much of marketing concerned with the problem
of profitably disposing off that is produced.
2. Marketing is a Phenomen brought about by the
pressure of mass production and increased
spending Power.
3. Marketing is the performance of business
activities that direct the flow of goods and
services from the producer to the consumer.
Marketing was quite simple subject in
1967,Consumer marketing largely operated on mass
marketing principles, and business marketing
primarily concerned itself with how to build the best
sales force. All the time marketers has faced a
number of tough decisions. The marketers had to
determine product features and quality,
establishing accompanying sources, set the price,
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determine the distribution channels, decide how
much to spend on marketing, & decide how to
divide these resources among advertising, sales
force & other promotional tools.
Today, the time has changed from the previous
years. Today, the market place is enormously more
complex. Domestic markets, at on time safe from
foreign invaders, are now the happy hunting
grounds of giant global coorporations as well as
global Niche specialists. New products are launched
at an astonishing placed & are available worldwide
in a short time. Communications media are
proliferating. New Distribution Channels and formats
keep apparition. Competitors are every there &
hungry.
The whole marketing system moves like this. In this
diagram I will trying to show how marketing system
moves between the seller & buyer. In this Diagram
there are buyers and sellers who transact over a
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particular product or particular class. These buyers
and sellers are connected by four flows. The seller
send goods & services and communication to the
marketing, in return they receive money and
Infrastructure.
Evolution of marketing as a business discipline
The evolution of marketing as a business discipline
provides an insight into it emergence as one of the
most important functions of management in any
business. The evolution of marketing as a business
discipline comprises of following stages :-
a. The stage of barter
b. The stage of money economy
c.The stage of industrial evolution
d.The stage of competition
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e.The emergence of marketing
Marketing Management
We will discuss the what exactly the marketing is in
the language of “Philip Kotler”.
“Marketing is a Social and Managerial process by
which individuals & groups obtain what they need &
want through creating, offering and exchanging
products of value with others”.
According to Philip Kotler, “A human activity
directed at satisfying needs & wants through
exchange process”.
Basically there are different concepts of marketing
which are very important for marketing. These
concepts are need, wants and Demand. The starting
point in the discipline of marketing is to identify the
needs of consumer. Every person has some need.
These needs are not created by marketers or
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society, they exist in the very texture of human
biology and human conditions. Wants are the
desires for specific satisfaction of these deeper
needs people needs are few but there wants are
many.
Demands are wants for specific products that are
backed up by the ability & willingness to buy them.
In marketing we pass through three stages.
1. Entrepreneurial marketing
The entrepreneurial marketing is first stage of
marketing started by the entrepreneur who
start his business by Direct selling of goods &
Public relations. He starts his business from the
first stage of business & starts his business
individually. In this stage the company did not
advertise because he cannot afford to spend
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money on advertising because he is in the
first stage of marketing.
2. Formulated marketing
When a company achieves success in business,
the company is in a stage of formulated
marketing i.e. the second stage of marketing.
In this stage the company can afford
advertising Budget because the company has
achieved success. Now the company is
adopting some of the tools used in
professionally run marketing companies.
3. Entrepreneurial Marketing
This is the third stage of marketing when
companies have to maintain success
throughout there life of business. This is the
last stage of marketing where company has a
success or it can fail. The companies main aim
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in this stage is that there brand & product
managers need to get out of the office & start
living with their Customers & Visualize new
ways to add value to their customer lives.
MARKETING PHILOSPHIES
We Will be discussing about the five important
marketing concepts used in marketing:
1. PRODUCTION CONCEPT
The production concept is one of the oldest concept
guiding sellers. It holds that consumers will favour
those products that are widen available & low in
cost. Managers of production oriented organisations
concentrate on achieving high production efficiency
and wide distribution coverage.
2. The product concept
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This hold that consumers will favour those products
that offer the most quality or performance.
Managers in these product oriented organisations
focus their energy on making good products &
improving there over time.
3. The selling concept
The selling concepts holds that consumers if left
alone will ordinarily not buy enough of the origin’s
products. The organisation must therefore
undertake an aggressive selling & promotion effort.
4. The marketing concept
The marketing concept holds that the key to
achieving organisational goals consists in
determining the needs & wants of Target markets &
delivering the desired satisfaction more efficiently
and effectively then the competitors.
5. The societal marketing concept
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The societal marketing Concept holds that the
organisation task is to determine the needs, wants
& interest of target markets & to deliver the
satisfactions more effectively & efficiently then the
competitors in a way that preseures or enchances
the consumers & society’s well being.
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INTRODUCTION TO ADVERTISINGINTRODUCTION TO ADVERTISING
“Doing business without advertising is like
working at a girl in the dark; you know what
you are doing but no body else does.”
Advertising is Multi-dimensional. It is a form of mass
Communication, a powerful marketing tool, a
component of the economic system, a means of
financing the mass media a Social institution, an
ART FORM, AN INSTRUMENT OF Business
management, a field of employment & a profession.
Advertising today is very necessary. Today we are
exposed to large number of commercial messages
that at any time in the past. Newspapers &
magazines are full of advertisements, today, from
not only the quantity increased even the quality of
advertising has improved considerably.
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The means of advertising such as the radio,
television, the cinema & BillBoards etc., have also
amply contributed to the growth of this industry.
Advertising which has become a marketing force
helping mass selling & distribution.
Now, I will be discussing the definition of
advertising the simplest definition of advertising is
the “Public announcement”.
According to American Management Association,
“Advertising as any paid form of non personal
presentation of ideas Goods & Services by an
identified Sponsor”.
Advertising as a tool of Communication
Advertising is as old as man. There is Semblance of
advertising in the many activities of a human being
especially those activities, which influence other
either favourably or otherwise. A baby crying for its
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feed want to communicate to persuade, to influence
& to lead to some action. All this has been a part of
human life almost from the time it took shape.
Advertising is the most visible marketing tool, which
seeks to transmit an effective message from the
marketer to a group of individuals. Though
marketers use advertising, basically it is a
communication process.
Benefits of advertising
1. Advertising establishes a link between the
manufacturer and the consumer. It is a form of
mass communication. Through advertising, the
advertiser reaches a Vast Number of
Consumers and makes his Product known to
them.
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2. Advertising keeps the consumers well-informed
about the products & Services-styles, features,
sizes, colours, specifications, price etc.
3. Advertising expands markets, builds up
volume, gives a market share & profitability,
and reduces prices.
4. Advertising guides the consumers in his
product choice. It gives the information about
the product, the benefits it offers.
5. Advertising contributes to consumer welfare. It
helps consumers in a variety of ways. It tells
what to buy, how to buy & why to buy.
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INTRODUCTION TO PUBLIC RELATIONINTRODUCTION TO PUBLIC RELATION
The ultimate aim of Public Relation is to develop a
favourable image in the eyes of public. It refers to a
company’s communication & relationships with
various sections of the public-customers, suppliers,
share-holders, employees, governments, media,
society at large.
According to the Institute of Public Relation, London
defines Public Relation as” the deliberate, Planned
& sustained effort to establish & maintain
understanding between an organisation & its public.
Public Relation is low cost compared to advertising
for the publicity obtained, say in the press, through
public relations is not directly paid for. Indirectly,
the expenses involves keeping in close close touch
with people in the media through press conferences,
press visits & press releases.
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There are four element to the mechanics of Public
Relation:
1. The message to be transmitted.
2. An independent third party endorser to
transmit the message.
3. A target audience that it is hoped will be
motivated to buy whatever is being sold, and
4. A medium through which message is
transmitted.
NESTLE INDIA LTD.
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 key factor for Nestle's success has been its quest
for continuous improvement through ushering in
greater productivity and more efficiency in
everyday operations Despite the infrastructure
impediments in India, Nestle has set itself high
standards of business performance. This is reflected
through the essence of the company-its mission
statement.
Nestle's mission
"To be in every way the leading company in the
Indian food industry and a good corporate citizen by
providing our consumers with superior quality
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products, our shareholders with rapid growth and
fair returns and our employees with a challenging
and satisfying work environment."
To translate this spirit into a planned and
measurable process, Nestle has set up key
objectives across all divisions.
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KEY OBJECTIVES
Production
To optimize 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 2000.
To double the turnover every years.
People
To help employees to retain a long-term
perspective and integrate them fully with the
company's business goals.
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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.
NESTLE INDIA LTD.
KEY FACT
This section offers a quick and simple overview of
NESTLE, making it an excellent place to begin
learning more about the World’s Largest Food
Company. Here introduction is given with some key
facts and figures, including 2001 Financial
Information, Company Profile, Historical
Development and Main Brand.
Financial Information
In millions of CHF 2001
Sales 81 422
EBITDA (a) 12 516
as % of sales 15.4%
EBITA (b) 9600
as % of sales 11.8%
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Trading Profit 9 186
as % of sales 11.3%
Net Profit 5 763
as % of sales 7.1%
Capital expenditure 3305
Equity 29 904
Total Assets 65 524
Research and development costs 1 038
Market Capitalization, end December 146 864
(a) Mainly Pharmaceutical products and Water,
managed on a worldwide basis.
(b) Mainly corporate expenses, research and
development costs, amortisation of goodwill
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SALES ANALYSIS
By Geographic Area
In Million of CHF 2001
(%)
Europe 25/706 36.7
North and South America 22/262 31.8
Africa, Asia and Oceania 13/493 19.3
Other Activities 8/537 12.2
69/998
By Main Product Group
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In Million of CHF 2001(%
)
Beverages 19/142 27.4
Milk Products, Nutrition and
Ice Cream
334 27.6
Prepared Dishes and Cooking
Aids
17/660 25.2
Chocolate and Confectionery 10/663 15.2
Pharmaceuticals 3/1999 4.6
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Breakdown of 2001 Trading Expenses (in %)
Percentage
Raw Materials 26.2
Packaging 8.8
Salaries and Welfare Expenses 16.6
Depreciation 4.1
Other Trading Expenses 34.5
Total Trading Expenses 90.2
Trading Profit 9.8
Go to Financial Guide for additional facts and
figures.
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Company Profile
Chairman of the Board: Helmut O. Maucher
Chief Executive Officer: Peter Brabeck-Letmathe
World’s leading food company
Switzerland’s largest industrial company
Worldwide operations
495 factories
Group’s total work force: 225, 808 people.
Historical Development
1866 Company’s foundation
1905 Merger between Nestle and Anglo-Swiss
Condensed Milk Company
1929 Merger with Peter-Cailler-Kohler Chocolates
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Suisses. S. A.
1947 Merger with Alimentana S.A. (Maggi)
1971 Merger with Ursina-Franck (Switzerland)
1985 Acquisition of Carnation (USA)
1988 Acquisition of Buitoni-Perugina (Italy)
1988 Acquisition of Rowntree (GB)
1992 Acquisition of Perrier (France)
1998 Acquisition of Spillers (GB)
1999 Divestiture of Findus brand and parts of
Nestlé's frozen food business in Europe.
Divestiture of Hills Bros, MJB and Chase &
Sanborn roast and ground coffee brands
(USA).
2000 Acquisition of PowerBar.
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Factories
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
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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
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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
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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
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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 synchronised 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 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
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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 timebound
action plans established. For this purpose, standard
tools such a Total Quality Management(TQM),
Kaizen, 5S and Small Group improvement activity
(SGIA) are being extensively used.
The efficacy of this hierarchical structure is seen in
Nestle’s performance over past few years of various
products.
By 1989 the company had achieved a sales figure of
approximately Rs. 258 crores. 1989 was the year of
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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
1990’s the pace of launches quickened and since
the construction of the factory at Samalakha, 20
new products have been introduced. By 1996,
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.
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Nestle’s Product Range is detailed below -
Product Year of inception
Milkmaid 1962
Nescafe 1964
Lactogen 1968
Ricori 1972
Cerelac 1974
Maggi Cubes 1974
Nestum 1978
Nespray 1982
Lactogen 1 1982
Sunrise 1983
Maggi Noodles 1983
Maggi Sauces 1985
Everyday 1986
Cerelac (wheat-apple, orange) 1987
Maggi Sauces(Chilli Garlic Masala Chilli)
1987
Everyday Ghee 1989
Maggi soups( tomato,chicken) 1989
Taster choice(leaf tea) 1989
Sunrise extra(originally Ricory) 1989
Nestogen 2 1989
Sunrise Premium 1989
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Cerelac(Wheat-vegetable) 1989
Chocolates(Nestle Milky bar, crunch)
1990
Nestle eclairs 1991
Bar- one 1991
Maggi Soups( mixed vegetables, chicken noodles)
1991
Nestogen 1 1991
Everyday gold
(originally nespray)
1992
Maggi Super seasoning (originally Maggi cubes)
1993
Nestle Bonus 1993
POLO 1993
Nestle Bar one (roasted peanuts)
1993
Tasters choice (dust tea) 1993
Contadina Snack Dressing 1993
Cerelac (wheat-soya) 1994
Milkmaid Dessert Mixes (custard powder, gulab jamun , Kesar Kulfi, Shahi Rabri)
1994
Maggi Tonite’s special (Gravy sauces)
1994
Nescafe Premix 1994
Everyday premix 1994
Nestle Bonus(chocolate) 1995
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Kit -Kat 1995
Toffo 1995
POLO (Paan) 1995
Nestle MILO 1996
Milkmaid Dessert mixes (Kalakand)
1996
Maggi Pickles( lime ,mango , mixed , mango punjabi, lime sweet.
1996
Maggi Dosa Mixes (masala, plain, sambhar)
1996
Maggi Soups (Chicken Sweet Corn, Hot and Sour, Rasam)
1996
POLO (Spearmint) 1996
Cerelac - Rice 1996
Taster’s Choice - Tea Bags 1996
Tea mate - Dairy Whitener 1996
Splash - Candy 1996
Maggi Macaroni 1996
Mithaimagic 1996
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TODAY NESTLE IS PRESENT IN DIFFERENT
MARKETS WITH THE FOLLOWING MAIN BRANDS
Soluble coffee
Nescafe, Taster's Choice, Ricore, Ricoffy.
Roast and Ground Coffee
Hills Bros., MJB, Bonka, Zoegas, Loumidis
Mineral Water
Perrier, Contrex, Vittel, Valvert, Quezac, Arrowhead,
Poland Spring, Buxton, Vera, Blaue Quellen,
Calistoga, Santa Maria, San Pellegrino.
Other beverages
Nesquik, Nescau, Nestea, Milo, Carnation, Libby's
Caro.
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Dairy Product
Nido, Nespray, Carnation, Milkmaid/ La
Lechera, Gloria, Neslac, Barenmarke.
Breakfast Cereals
Nestle
Coffee Creamers
Coffee-mate
Infant Foods and Dietetic Products
Nestle, Nan, Lactogen, Cerelac, Nestum, Guigoz
Culinary Products (Bouillons, soups,
seasonings, prepared dishes, canned food,
pasta, sauces)
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Maggi, Crosse and Blackwell, Libby's, Thomy,
Builtoni, Contadina
Frozen Foods
Findus, Stouffer's Buitoni, Maggi
Ice Cream
Nestle, Frisco, Dairy Farm, Magnolia, Motta, Camy ,
ect.
Refrigerated Products (yogurts, desserts,
pasta sauces)
Nestle, Locatelli, Vismara, Buitoni, Contadina
Chocolate and Confectionery
Nestle, Crunch, Cailler, Frigor, Chokito, Sarotti,
Galak/Milkybar, Yes, Kit Kat, Quality Street,
NESTLE INDIA LTD.
Smarties, Baci, After Eight, Baby Ruth, Butterfinger,
Lion, Nuts, Rolo, Aero, Polo, etc.
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Food Services and Professional Products
Chef, Davigel, Santa Rica
Pet Care
Friskies, Fancy Feast, Aplo, Mighty Dog, Gourmet.
Specialized products for the food industry
Food Ingredients Specialties (FIS)
Ophthalmological products
Alcon
Cosmetics
L'Oreal
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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 has 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 Product
Chocolate and Confectionery
Beverages
Culinary
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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
sales of milk products fell from Rs. 31.4 crores in
1995 to Rs. 31.2 crores in the said year. Consumer
off take 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 year.
However Nestle retained its leadership in the infant
food market with Cerelac Lactogen and Nestum and
even introduced a new flavor of Cerelac-Cerelac
Rice in 1996.
NESTLE INDIA LTD.
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 flavors in POLO, backed by its
tremendous success in the Indian Market by adding
POLO Spearmint to its Portfolio. This new flavor 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
flavor.
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
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the past year and Nestle officials are hopeful that
this will further increase in the coming years.
However this brand along with its 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
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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.
The latest launch of Nestle in the Chocolate and
confectionery division is Charge.
Beverages
This year has been very successful in the beverages
market for Nestle. The sales of beverage have
increased from Rs. 323.3 crores in 1995 to Rs.
398.8 crores in 1996.
Nestles Flagship Nescafe, which was pegged at
Rupees 1040 per kilogram before the launch of Tata
Cafe, met with stiff competition from Tata Cafe
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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 introduced Tasters Choice tea bag
pitched against Taj Mahal Tea bags.
Culinary Products
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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
official’s 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 macaronic snack. It is
speculated to be introduced in a phase manner
nationwide to be place 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
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Dosa Mix was also introduced to offer superior
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 Services
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
2000. It currently has 3500 vending machines at
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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 1996 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.
In 2001 and 2002 nestle has come with a number of
new products like it has come with many of the
diary products like milk. The milk is avaliable in the
market in the full cream , toned and double toned
milk. The nestle has also come with the dahi, butter
which is available in the market but at very few
shops .
NESTLE has also come with the products which will
target the children like FRUITIPS,MILKYBAR
CHOO,NESTLE CHINESE MAGGI NOODLES.
NESTLE INDIA LTD.
NESTLÉ CORPORATE BUSINESS
PRINCIPLES
Nestlé is committed to the following business
principles in all countries, taking into account local
legislation, cultural and religious practice:
Nestlé's business objective and that of
management and employees at all levels, is to
manufacture and market the company's
products in such a way as to create value that
can be sustained over the long term for
consumers, shareholders, employees, business
partners and the large number of national
economies in which Nestlé operates.
Nestlé does not favour short-term profit and at
the expense of successful long term business
development, but recognises the need to
generate profit each year in order to maintain
NESTLE INDIA LTD.
the support of the financial markets, and to
finance investments.
Nestlé believes that, as a general rule,
legislation is the most effective safeguard of
ethical conduct, although in certain areas,
additional guidance to management and
employees in the form of voluntary business
principles, is beneficial in order to ensure that
the highest standards are met throughout the
organisation.
Nestlé is conscious of the fact that the success
of a corporation is a reflection of the
professionalism, conduct and ethical values of
its management and employees, therefore
recruitment of the right people, and ongoing
training and development are crucial.
Nestlé recognises that consumers have a
legitimate interest in the company behind the
NESTLE INDIA LTD.
Nestlé brands, and the way in which the Nestlé
Company operates.
Legislation and International
Recommendations
Nestlé:
complies with the laws applicable in the
countries in which it operates.
ensures that the highest standards of ethical
conduct are met throughout the organisation,
by complying in a responsible way with the
Business Principles, which guide company
activities and relationships world-wide in each
sector of business interest.
is aware that increasing globalisation is leading
to the development of more and more
international recommendations. Although, as a
general rule, these recommendations are
NESTLE INDIA LTD.
addressed to governments, they inevitably
impact on business practices; Nestlé has taken
such recommendations as the ILO Basic Rights,
and the International Code of Marketing of
Breast-milk Substitutes (WHO) into account in
its policies.
generally endorses commitments and
recommendations for voluntary self regulation
issued by competent sectoral organisations,
provided they have been developed in full
consultation with the parties concerned; these
include the ICC Business Charter for
Sustainable Development, and the OECD
Guidelines for Multinational Enterprises.
Consumers
Nestlé aims to create value for consumers that
can be sustained over the long term by offering
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a wide variety of high quality, safe food
products, at affordable prices.
Nestlé believes that advertising and other
communications play an important role in
encouraging consumers to exercise their right
to informed choice. In order to fulfil this role in
a responsible way, the Company makes a
determined effort to ensure that Nestlé
advertising:
does not mislead as to the benefits derived
from use of the product
does not use gratuitous violence, sex or
profanity
does not depict discriminating or offensive
attitudes to religious, political, ethnic, cultural
or social groups
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avoids demonstrations that encourage
dangerous, or inappropriate use of the product
does not portray competitors' products
inaccurately, nor denigrate competitors'
products
avoids the exploitation of media events which
could be in bad taste or conflict with the
corporate image.
In addition to the above principles, Nestlé does not
sponsor TV and radio programmes or magazines
whose strategy of attracting viewers or readers lies
clearly in the use of gratuitous violence, sex or
offensive attitudes to either majority or minority
groups.
NESTLE INDIA LTD.
Children as Consumers
Nestlé has developed the following principles for
advertising to children:
communications (including advertising, events,
sponsorships) to children should should not be
disguised as programming or editorial;
advertising to children should not attempt to
undermine the authority, responsibility or
judgement of parents or care providers;
advertising to children should not portray
children in unsafe situations nor encourage
them to accept invitations from people they do
not know;
food and beverage communication should not
demonstrate either unsafe or irresponsible
consumption.
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Human Resources and the Workplace
Nestlé regards its management and employees as
its most valuable assets. Involvement at all levels
starts with open communication, whether on
specific aspects of the business, or about the
activities of the Company in general. Suggestions
for changes and proposals for improvements of
Nestlé's practices are encouraged.
The Company's business practices are designed to:
promote a sense of identification among all
employees all over the world, and apply a
number of common rules while at the same
time adapting the expression of these rules to
local customs and traditions;
encourage training, and the improvement of
professional skills;
NESTLE INDIA LTD.
offer opportunities for promotion based upon
merit, irrespective of race, religion, sex or
nationality. Professional skills, experience, and
the capacity and willingness to apply Nestlé
management principles are the criteria for
promotion.
offer competitive salaries and social benefits.
Working hours, wages and overtime pay
comply with applicable local laws and are in
line with conditions offered by similar
companies.
limit factory overtime to a reasonable level;
create a safe working environment for each
employee;
respect the right of employees to join legally
recognised labor unions;
NESTLE INDIA LTD.
treat every employee with respect and dignity,
and not tolerate any form of physical or sexual
harassment or abuse; preclude the use of
forced labor or involuntary prison labor.
NESTLE INDIA LTD.
CEO'S VISION
According to Mr. Carlo Mavia Donati Opportunities
(CEO) "New opportunities have opened up with the
emergence of a new middle class. Today the Indian
youth is much more open to international trends the
media and communication revolution has also
exposed the Indian people to new life styles. And in
the process, this has created new opportunities for
our products" and Donati is pretty clear-he will
ensure that Nestle grabs these opportunities.
THE NESTLÉ POLICY ON THE ENVIRONMENT
CEO's Statement
Over the past several decades, significant progress
has been achieved towards protecting the world's
environment. This objective remains a fundamental
duty and a collective responsibility that must be
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shared between the public, governments and the
private sector.
As the World Food Company, Nestlé is dedicated to
providing consumers with the best food throughout
life. Our Company's primary function is the
transformation of perishable raw materials into
finished products that meet consumers'
expectations for safety, quality, convenience, and
value. From our earliest days, we have recognized
the need to protect the environment in our business
activities. Exercising this commitment, which is part
of our broader commitment towards the good of the
community, remains central to our business today
and tomorrow.
The Nestlé Policy on the Environment was published
in 1991 to define our world-wide strategy on
environmental issues and to state our long-standing
commitment to environmentally sound business
practices. It is communicated internally within the
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Nestlé Group and externally to all interested parties
and institutions. Following its publication, the Nestlé
Environmental Management System (NEMS) was
established to consolidate all environmental
measures taken by the Nestlé Group. The NEMS is
being implemented across our entire business.
Today, preserving natural resources and minimizing
waste has become a part of day-to-day business for
our employees and is an integral part of our
strategy to achieve global competitiveness. The
1999 update of the Nestlé Policy on the
Environment reiterates our strong environmental
commitment and reflects our priorities as we move
into the new millennium. It also recognises
developments in the international environmental
arena.
The application of the Nestlé Policy on the
Environment at every level of our operation forms
an essential part of the Nestlé Corporate Business
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Principles and enables us to contribute to
sustainable development — meeting the needs of
the present, without compromising the ability of
future generations to meet their own needs
Compliance
Nestlé is committed to the application of these
principles in all countries, and wherever they are
not in conflict with relevant local legislation where it
operates.
Nestlé compliance with its Corporate Business
Principles is regularly monitored by its internal
auditors on the basis of clear auditing instructions,
which are certified by the external auditing firm
KPMG.
Findings and recommendations are reported to the
Nestlé S.A. Board of Directors.
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Nestlé's Environment Progress Report 2001, many
years of real work experience
Nestlé is committed to environmentally sound
business practices
Environmental Update
Message from the CEO
Nestlé was founded in 1867 by pharmacist Henri
Nestlé on the shores of Lake Geneva in Vevey,
Switzerland. One hundred and thirty-four years
later, our headquarters are still in Vevey,
surrounded by the Swiss Alps in one of the world’s
best-preserved environmental settings.
As they have grown from humble beginnings into
the world’s largest food company, we have
attempted to take the fundamental cultural values
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of environmental preservation and cleanliness into
every country where we operate.
They spend a great deal of time travelling to these
countries and have personally visited many of the
479 Nestlé factories currently in operation. One of
the reasons for doing so is to see for myself that
our facilities reflect the environmental values basic
to our Company. Nestlé announces publication of
the Environment - Progress Report 2000.
The Nestlé Environment Progress Report 2000 has
been published and can be ordered from the Nestlé
Environmental Affairs Department. The
Environment Progress Report 2000 - Highlights was
distributed together with the Nestlé Management
Report 2000.
Moreover, the company follows environmental
performance, including the results of our
environmental performance indicators. The
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Environmental Officer reports directly to General
Management to ensure there is on-going awareness
regarding environ mental affairs. Also, the Nestlé
Environmental Advisory Group (made up of
corporate experts from many functions) meets
regularly to review current environmental issues
and to anticipate potential concerns. This allows us
to maximise control over our activities and
contribute to sustainable development in the
countries where we operate.
The Nestlé Environment – Progress Report 2000
describes the results of continuous improvement in
our environmental practices. The progress in a
number of key areas, including a significant decline
in the amounts of water and energy used to bring
each kilo of Nestlé products into your home, and a
similar reduction in factors which potentially affect
global warming. However, however they were
never completely satisfied with their current
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performance, and are committed to further
environmental improvements.
The try to remain sensitive to the environmental
concerns of our consumers and the public as a
whole. As a charter member of the World Business
Council for Sustainable Development, They attempt
to keep their policies at the forefront of industrial
companies. For this reason, they have pledged
their adherence to The Business Charter for
Sustainable Development of the International
Chamber of Commerce, and we are committed to
being a leader in environmental performance.
This leadership is only possible through the
collective commitment of the tens of thousands of
individual Nestlé employees who, on a daily basis,
work to make this a better planet on which to live.
This Report is dedicated to them.
NESTLE INDIA LTD.
Peter Brabeck-Letmathe
Chief Executive Officer
Nestlé Corporate Business Principles
Nestlé is committed to the following business
principles in all countries, taking into account local
legislation, cultural and religious practice:
Nestlé's business objective and that of
management and employees at all levels, is to
manufacture and market the company's
products in such a way as to create value that
can be sustained over the long term for
consumers, shareholders, employees, business
NESTLE INDIA LTD.
partners and the large number of national
economies in which Nestlé operates.
Nestlé does not favour short-term profit and at
the expense of successful long term business
development, but recognises the need to
generate profit each year in order to maintain
the support of the financial markets, and to
finance investments.
Nestlé believes that, as a general rule,
legislation is the most effective safeguard of
ethical conduct, although in certain areas,
additional guidance to management and
employees in the form of voluntary business
principles, is beneficial in order to ensure that
the highest standards are met throughout the
organisation.
Nestlé is conscious of the fact that the success
of a corporation is a reflection of the
NESTLE INDIA LTD.
professionalism, conduct and ethical values of
its management and employees, therefore
recruitment of the right people, and ongoing
training and development are crucial.
Nestlé recognises that consumers have a
legitimate interest in the company behind the
Nestlé brands, and the way in which the Nestlé
Company operates.
NESTLE INDIA LTD.
Vevey, October 23, 2001
Nestlé To Invest CHF 100 Million in New Swiss
Airline
Vevey, October 23, 2001 – Nestlé S.A. will take a
participation of up to CHF 100 million in the new
Swiss airline, fully expecting this investment to
yield a return to its shareholders after the initial
launch phase. The project appears to be based on a
reasoned, viable business plan, with a fair chance of
attaining its objectives. Nestlé will assume no
responsibility of any kind at management or board
level of the airline. Nestlé sees its limited
investment in the new venture in the following
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context: · as all internationally active corporations
based in Switzerland, Nestlé needs frequent
intercontinental airline connections. · Nestlé is often
identified by authorities and consumers as a Swiss
corporation whose products stand for quality and
reliability. The company cannot be indifferent to the
quality of the image of Switzerland abroad, which
would have substantially suffered from the inability
to find a constructive solution. · Nestlé is an
international company with a substantial Swiss
shareholding and it is based in Switzerland. As such,
it does not operate in a vacuum and is well aware of
the social, political and economic environment in
which it functions. Participating in an effort that
encompasses all the major players in the Swiss
economy, is consistent with the position it occupies
in its country of origin as well as with its attitude of
responsible corporate citizenship. During the earlier
attempts to solve the difficulties resulting from the
impending failure of Swissair, Nestlé has
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consistently signaled that, in view of its
responsibility vis-à-vis its own shareholders, it
would not commit shareholders' funds on a
gratuitous base, simply to "rescue" Swissair. Over
the past weeks, however, the Swiss government as
well as representatives of the Swiss economy,
discussed the creation of a new Swiss airline that
would ensure that Switzerland remains well served
with intercontinental flights and that the existing
infrastructures would continue to function. Nestlé's
small minority stake in the new venture corresponds
to about three percent of the Nestlé Group's yearly
investment volume in fixed assets.
NESTLE'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
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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 and cheerful and
everybody had pin up boards in front of their tables
with reminders, motivational messages and even
timelogs (the Nestle people seemed as if they
availed of the benefits of time management).
Nestle has a diverse product range and so it also
has diversified risks. Thus Management on
Information System plays a vital role in Nestle to provide information to the
Sales and marketing as well a finance department. The Electronic Data Processing Department
looks after Management Information Systems. The Hierarchy of this department is given below;
Controller Head of E.D.P. Controller
Apart from this, Nestle has a vast distribution
network. In order to support the BECA process,
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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.
NESTLE INDIA LTD.
GLOBAL OPERATION : COUNTRY WISE
Company Description : Nestle India
Nestle India. The principal activity of the company is
the manufacture of soluble beverage powder, milk
products, surplus fat and other food products.
Products of the company include soluble coffees,
coffee blends, tea, preparation of milk, cream and
cereals and milk concentrated/condensed. The
manufacturing plants are located at Moga,
Samalkha, Nanjangud, Choladi, Ponda and Bicholim.
The company exports it's products to Russia, Nepal
and Bhutan. Soluble beverage powder accounted for
29% of 2000 revenues; milk products, 26%; surplus
fat, 3% and other foods, 42%.
Competitor Analysis
Nestle India operates within the Dry, condensed,
evaporated products sector. This analysis compares
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Nestle India with three other dairy companies in
Asia: Alaska Milk Corporation of Philippines (2000
sales of 3.79 billion Philippine Pesos [US$73.12
million] ), Smithkline Beecham Consumer
Healthcare (8.58 billion Indian Rupees [US$178.71
million] of which 95% was Malted Milkfood/Food),
and Pure Foods Corporation which is based in
Philippines (12.65 billion Philippine Pesos
[US$243.90 million] ).
Officers
Executive Chairman & Managing Director
Carlo M.V. Donati
Executive Director Finance
Jean Marc Waelti
Secretary
B. Murli
NESTLE INDIA LTD.
USA MARKET
Nestlé USA is named America's Most Admired Food
Company for the fourth consecutive year.
As many of its rivals seek growth through
consolidation, Nestlé instead looks within for ways
to boost sales...In the process, it has posted sales
growth of more than 4%, higher than the industry
average of 2.5%.
Together, Nestlé's disparate Internet ventures
present a mountain of opportunity...U.S. CEO
Weller's Net-savvy unit is leading the global
company in its e-enterprise
Their vision as part of the world's leading food
company is to provide families with the best food
and beverages throughout their lives. Our success is
based on the quality of our products and on
relationships we continually build with our
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customers, our employees, our communities and our
suppliers - who continually look to our company to
be the very best. Our commitment to achieving this
vision is a source of Nestlé pride.
For well over a century, Nestlé has been making the
very best food and beverage products for families
around the world. We believe that food should
provide for the spirit as well as the body, and strive
to ensure that every product we prepare also
enriches the experience of life itself. We believe it is
our unique understanding of the integral role of
food in good living that's helped us to become a
part of the world's largest food company.
Corporate Governance Principles
Since its foundation in 1866, Nestlé has
built consumers' trust through the quality of its
products;
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respected the social, political and cultural
tradition of all countries in which it operates;
taken a long-term approach to strategic
decision-making, which recognises the
interests of our shareholders, consumers,
employees, business partners as well as those
of all the national economies in which we
operate.
Nestlé's commitment to good Corporate Governance
goes back to its very early days. Today, as both
legislation and international recommendations
indicate growing public interest in the issue, we
take the opportunity to publish the Nestlé
"Corporate Governance Principles" that reflect and
highlight our ongoing commitment.
NESTLE INDIA LTD.
Legislation and International
Recommendations
Nestlé complies with the laws applicable in the
countries in which it operates;
ensures that the highest standards of conduct
are met throughout the organisation by
complying in a responsible way with the Nestlé
Corporate Business Principles, which guide
company activities and relationships world-
wide in each sector of business interest;
is aware that increasing globalisation is leading
to the development of more and more
international recommendations. Although, as a
general rule, these recommendations are
addressed to governments, they inevitably
have an impact on business practices. Nestlé
NESTLE INDIA LTD.
takes such recommendations into account in its
policies;
generally endorses commitments and
recommendations for voluntary self-regulation
issued by competent sectoral organisations,
provided they have been developed in full
consultation with the parties concerned; these
include the ICC Business Charter for
Sustainable Development (1991), the OECD
Guidelines for Multinational Enterprises (1976),
and the OECD Principles of Corporate
Governance (1999).
The Principles
They cover four areas:
I. The rights and responsibilities of shareholders
II. The equitable treatment of shareholders
NESTLE INDIA LTD.
III. The duties and responsibilities of the Board of
Directors
IV. Disclosure and transparency and are based on
Swiss legislation, since Nestlé S.A. has its
registered offices in Switzerland (Cham and
Vevey), as well as on Nestlé S.A.'s Articles of
Association.
The rights and responsibilities of shareholders
The shareholders' rights are protected by law, by
the Articles of Association, and by the Corporate
Governance Principles, which are also intended to
ensure the sustainable development of Nestlé S.A.
Nestlé S.A.'s basic shareholders' rights and
responsibilities include the right to:
secure methods of ownership registration;
NESTLE INDIA LTD.
obtain relevant information on Nestlé S.A. on a
regular and timely basis;
participate in and vote at General Meetings of
the Shareholders in person or in absentia (by
proxy), subject the Nestlé S.A.'s Articles of
Association;
approve the annual report and the annual
financial statements of Nestlé S.A.;
approve the consolidated financial statements
of the Group;
grant the discharge to the Board of Directors
(hereafter referred to as the "Board") and to
the Management;
decide on the appropriation of profits resulting
from the balance sheet of Nestlé S.A., in
particular determine the amount of the
dividend;
NESTLE INDIA LTD.
elect and remove the members of the Board
and the Auditors of the annual financial
statements, and of the consolidated financial
statements;
adopt and amend the Articles of Association;
take all decisions, which by law or under its
Articles of Association, are within the
jurisdiction of the General Meeting;
participate in the decisions in extraordinary
meetings;
be informed sufficiently ahead of time of the
date, location and agenda of General Meetings;
place items on the agenda and ask questions at
General Meetings in accordance with the
Articles of Association, and - for the questions -
subject to reasonable limitations inasmuch as
the topics are related to the business activities.
NESTLE INDIA LTD.
Any Nestlé S.A. shareholder has the right to
request effective redress of violation of his/her
rights in accordance with the Swiss law.
NESTLE INDIA LTD.
The duties and responsibilities of the Board
The Board ensures the strategic guidance of Nestlé
S.A. and the effective monitoring of its
management.
The Board is accountable to the shareholders. In
order to fulfil their duties and their responsibilities,
Board members receive and can request accurate,
relevant and timely information.
Board members act on a fully informed basis, in
good faith, with due diligence and care, and in the
best interest of Nestlé S.A.
Disclosure and transparency
Nestlé S.A. aims to ensure that shareholders
have access to relevant, up-to-date and
consistent information. This information should
allow shareholders as well as prospective
NESTLE INDIA LTD.
investors to make an informed judgement
about Nestlé S.A. shares.
Nestlé S.A. will pursue a policy of disclosure
and transparency. This policy will be modified
only when it is necessary to protect the
company's competitive, commercial or legal
position.
Nestlé S.A. complies with all legal and
regulatory requirements applicable where its
shares are listed. Nestlé S.A. will monitor all
changes and take part whenever possible in
the discussion preceding such changes in
legislation and listing regulations.
Nestlé S.A. is aware of its obligation to make
information that is relevant to the market
publicly available in simultaneous fashion. To
this effect, "quiet periods", during which no
NESTLE INDIA LTD.
relevant financial information will be provided
to third parties, have been introduced.
Independent auditors elected by the
shareholders conduct the annual audit in order
to provide an external and objective assurance
on the way in which financial statements have
been prepared and presented.
NESTLE INDIA LTD.
DISTRIBUTION NETWORK
THE DISTRIBUTION CHAIN NOW
FMCG Manufacture
Clearing and forwarding agents (1-3% margins)
Super stockists (3-6% margins)
Stockists (3-5%)
Distributor (4-7%)
Organized retailer (6-15%)
WHAT RETAIL CHAINS WANT
FMCG manufacturer
Organized retailer (current 6-15% margin + 11-21%
savings from disintermediation)
NESTLE INDIA LTD.
The retail demands
What FMCG
companies give
What retail
chains wants
6% to 15% Margins At least 20%
7-10 days Credit days 15-30 days
12 days Minimum stock
levels
7 days
20% to 25% Stock outs Less than 5%
NESTLE INDIA LTD.
NESTLE INDIA LTD.
Methodology
The nature of the project work has been exploratory
as no hypothesis, is taken to be tested. Though the
conclusions drawn could be taken as the hypothesis
and further tested by the research work undertaken
in the relevant field. The reason for choosing the
exploratory research design is the fact the project
report has been primarily based upon the secondary
sources of data and whose authenticity could be
assured of.
The reluctance of the company's personnel in
parting with much of information led the project
report to be based substantially on the secondary
source of data. The sources of data used in data
collection are the following:
NESTLE INDIA LTD.
Primary sources
In order to gather information about the various
products, I personally visited a number of retail
markets and collected data pertaining to the prices
of the products offered. The market visits were
useful in knowing the comparative prices and
quality of the offered brands vis-à-vis the
competitive brands. Detail regarding the packaging
of the products were collected were collected and I
also inquired about the various sales promotion
schemes followed by the three companies.
By interviewing these retailers valuable information
was collected. I inquired from them about their
marketing advertising and distribution strategies.
NESTLE INDIA LTD.
Secondary sources
Information was collected from secondary sources
such as public libraries, newspapers, business
magazines.
Beside these the use of Internet was also made in
collecting relevant information. The data collected
from the above mentioned sources has been
adequately structured and used at appropriate
places in the report. This particular way of data
collection was used because of its low cost (except
data collected through surfing the internet) and less
time consumption.
The information gathered included:
Their annual reports (Procter & Gamble and
Johnson and Johnson).
Pamphlets.
Posters.
Press clippings.
News releases.
Newsletters.
Pictures.
NESTLE INDIA LTD.
Mc Curtty has popularized a four factor
classification of these loots called the 4 p. These
are:
Once should note that the 4P’s represent the seller’s view of the
marketing tools available for influencing buyers. From a buyers
point of view, each marketing tool is designed to deliver a
custom benefit. The 4 P’s correspond to the customer’s 4 C’s as:
MARKETING MIX
PRODUCTProduct variety quality
design features brand
name packaging sizes
TARGET MARKET
PLACEChannels coverage
Assortments Locations
Inventory transport
PRICEList price discounts
allowances payment
period credit terms
PROMOTIONSales promotion
advertising sales force
PR direct marketing
NESTLE INDIA LTD.
4Ps 4Cs
Product Customer needs and
wants
Price Cost to the customers
Place Convenience
Promotion Communication
Product
In the product the companies started a spate of
freebies with their products e.g. Godrej offered a
cordless Rx 1234 off with its refrigerators. Peter
England gave Rs 100 off on for its sheets. One must
try to create new segments for people who want to
go to a higher segment but are not in a position to
do so.Nestle introduces milk and dahi for higher
segment people. Many companies are bringing in
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cheaper ranges to the existing ranges so that once
the people have tried & tested their products they
can be made to upgrade to their premium ranges.
One must also target the others customers because
this is not exactly the right time to expand the
market but to make the existing customers buy
again. For grabbing others share one must try to
attack on the rivals achelles heal with high dose of
speed & surprise, catching him unawares e.g. LML
followed the same strategy in UP, MP & Rajasthan
where its competitors position was relatively weak.
Nestle again repositioned the chocolate bar one.
Nestle has been coming with the different
productsand trying to target the different segments.
Nestle is also trying to give the customer more
choice, so that they can choose the product which
they like. The company is also trying to bring a
variety of products in every segment.
NESTLE INDIA LTD.
The companies should also try to offer emotional
value to the customer a Pt. New customers can't be
attracted with the same benefits as in good tones.
For, the resistance to experiment, whether with a
new product or a brand is much higher unless that
is, the benefit can mow down the barrier. According
to Puris Lintas Mehra consumers look for safe
choices during a recession. This is not the time for
new brands to come in, unless their attributes are
very strong.
Price:
Is an important tool to break down barrier to a
product or brand acceptance. According to
Siddhartha 'Shunv' Sen,59, the CEO of Suadra
Advisory Services "Statinzg the price upfront can
lower the consumer's expectation from a brand".
But one can't be convinced of the value connotation
of year brand, the customer will still use the
expensive, but more trusted product although in
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smaller quantities or a fewer occasions than before
to project her budget So what next ? The price
warriors must make their offer either qualitatively
different or quantitatively superior to the
competition. And then slip in the lower price to seal
the deal. This double differentiation will double your
impression in the customer's mind.
In consumer durables the demand for these goods
falls rapidly in a recession the consumer postponing
his buy as long as he can. The marketers in this
time must lure the customers with much more than
then their lower prices but by schemes such as
exchange offers.
Nestlae has been always pricing the products as
premium price. The strategy of the nestle is to set
the priceas premium. The price is always set as that
price that can be afforded by the customers .the
company should set the price for those also who
have low spending budgets, they can not only
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service the old customers but also bring in new for
whom earlier price was the main barrier.
Price One can reach for the consumers purse on the
basis of price but to stay there on the basis of price
is pretty cough.az Because every one tries to
imitate the low prices if the players are new. To
ensure price as a sustained competitive advantage,
the differentiation should be continuos. Imitation
should be warded off, consumers kept interested &
build image around price rather than as a discount
player.
Promotion:-
In recession the marketers must find innovative
ways to promote its product because the promotion
must and from the clutter. The marketer has to
make the consumer try his product & in order to
make them try marketer's uses giving samples of
his product. If the product is worthy or the customer
NESTLE INDIA LTD.
finds the product satisfactorily then the product
gets listed on his list & it can be considered in the
next purchase. The marketer has also the use
different media to catch the attention of the buyers
apart from T.V. & the print media. He has to use
new methods of promotions in order to get the
consumers attention.
Nestle has also implemented many promotion
schemes . the company has also promoted there
products like giving free samples of the new
products. or giving the new product free wiyh old
popular and famous product.
Place:-
In recession times when the demand in urban
markets is not growing at a fast rate the marketer
must find new markets where he can sell his
products. For today's Urban-centric marketer, one
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way to beat the recession is to tune into rural
markets.
Many companies have resorted to direct selling .
This is because companies can save on costs of
distribution channel. The company chose direct
marketing or what is presently called as mutti-level-
marketing where customer doubles as distributors.
The advantage the distributors in addition to being
a seller also doubles as a customer & his giving
away of experiences is genuine.
So one can finally say
PRODUC
T
PRICE PROMOTIO
N
PLACE PAYMENT PACKING
Consumer
Non-
durables
Create new
segments
within
earlier
segments
Use
sampling
and multiple
media
Go rural;
use
shops-in
– shops
Designs
small units
oat lower
prices
Consumer
Durables
Offer no-
frills
Use
exchange
Use
announceme
Use dired
selling
Offer
financing
Bundle
products
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options offers nt
advertising
and
installment
s
into single
units
MARKETING
Sales and Marketing are amongst the main
strengths of Nestle
It is the hierarchy, which has strengthened the
foundation of Nestle’s marketing force, is as in fig 1:
Managing director
Vice President (Marketing)
The efficacy of this hierarchical structure is seen in
Nestle's performance over past few years of various
products.
NESTLE INDIA LTD.
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
1990's the pace of launches quickened and since
the construction of the factory at Samalakha, 20
new products have been introduced. By 1996,
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.
NESTLE INDIA LTD.
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.
5. By year 2000 it expects chocolate and
confectionery to account for one in every third
rupee in sale.
NESTLE INDIA LTD.
In the late 1996 fear of breading complacency by
not having a continuous improvement, gave birth to
an international sales and marketing improvement
teams (SMIT).
SMIT maps the latest in helping towards the target
of year 2000. The SMIT exercise is a major global
initiative of Nestle to enhance sales and marketing
productivity. Linked with the already existing BECA
project, which in turn emphasizes on excellence by
improving the distribution set up, this gave rise to
the following growth objectives for the year 2000:
Ensure direct coverage of all urban towns in
India.
Expand distribution to reach I million retail outlet
on a regular basis.
Work in partnership with the distributor for the
achievement of these objectives.
NESTLE INDIA LTD.
Provide sustainable solution to optimize our
secondary sales from distributor to retailer.
PRODUCTION
As a part of Nestles efforts towards continuous
improvement and excellence in Manufacturing
operation, a Maga Improvement Team (MIT) was put
in place at the Maga factory. The team comprised of
international experts from Nestle Technical Service
(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
NESTLE INDIA LTD.
Improvement of operational efficiency
Cost optimization.
As 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 labor 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.
NESTLE INDIA LTD.
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 every
body works towards a common business plan.
Monthly objectives are broken down into weekly and
9wherever 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 in obsolescence of
materials.
NESTLE INDIA LTD.
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 measure 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. For this purpose,
standard tools such a Total Quality Management
(TQM), Kaizen, 5S and Small Group improvement
activity (SGIA) are being extensively used.
NESTLE INDIA LTD.
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 1995 had an advertisement
spending of Rs. 43.3 crores (net). Tracing Nestle
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 range of sauces were introduced
in 1985 but sales didn't catch up until 1990. 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.
NESTLE INDIA LTD.
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 1996 the advertisement budget has been
approximately Rs. 56 crores where again innovation
was the main focus. The new nationwide product
launch of Maggi Macaroni Snack and Mithai Magic
have been designed by Mudra. The macaroni ad
with its use of "Hinglish" 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.
NESTLE INDIA LTD.
WORKING OF THE EXCLUSIVE
DISTRIBUTION SYSTEM
What is an exclusive distribution system?
Exclusive distribution runs on a line similar to the
Trade Distribution System. It is when the goods
reach the cash distributors' godown that the
difference first shows up.
When a company is into a number of different
category products, with a wide range in each of the
categories, it becomes increasingly difficult for it’s
to pay attention to each and every product of each
and every category. In order to maintain its stress
on each category and monitor them in a more
organized manner it is necessary to create an
exclusive distribution for each of these categories
i.e., each category has a distribution network
exclusive to itself. There are separate units/vans,
NESTLE INDIA LTD.
with separate categories of products of the same
brand, plying to the same dealers. The dealer thus
can concentrate better on the variety of products in
each category. Similar categories can be clubbed
together e.g., chocolate and confectionery.
The exclusive distribution system developed by
Nestle has the following salient features:
The Chocolate and Confectionery division was
separated from the Instant drink and Culinary
divisions to start the Exclusive distribution for
the former, sometime during the end of the year
1997.
Four metros and around 37 semi metro towns
have been covered under the exclusive
distribution. Seventeen Cash Distributors were
appointed in Delhi itself to carry out this new
system.
NESTLE INDIA LTD.
The chocolate and confectionery are transferred
from the factories, where they are manufactured
to the Mother godown after they are quality
approved. From the Mother godown the products
are transferred to the respective cash
Distributors godown.
According to the company norms a cash
distributor holds the stock of two week and
therefore the stocks are replenished every
fortnight.
Sales Analysis
During the year ended December of 2000, sales at
Nestle India were 15.82 billion Indian Rupees
(US$329.38 million). This is an increase of 8.0%
versus 1999, when the company's sales were 14.65
billion Indian Rupees. Sales of Surplus Fat saw an
increase that was more than double the company's
growth rate: sales were up 1,174.6% in 2000, from
NESTLE INDIA LTD.
546.01 million Indian Rupees to 6.96 billion Indian
Rupees. Not all segments of Nestle India
experienced an increase in sales in 2000: sales of
Milk Products fell 86.3% to 569.45 million Indian
Rupees.
Recent Sales at Nestle India
9.5 11.5 13.7 15.3 14.6 15.8
1995 1996 1997 1998 1999 2000
(Figures in Billions of Indian Rupees)
NESTLE INDIA LTD.
Nestle India has changed its product mix within the
past five years. In 2000, the largest segment was
Surplus Fat, while in 1996, the largest segment was
Other Foods. During the past four years, sales of
Surplus Fat increased 1,374.2% (from 472.07 million
Indian Rupees to 6.96 billion Indian Rupees), while
during the same period, sales of Other Foods
experienced an increase of only 22.8% (from 3.99
billion Indian Rupees to 4.90 billion Indian Rupees).
Although sales at this company increased, they
increased at a slower rate than the three
comparable companies in 2000. The sales increase
of 8.0% was less than those at Alaska Milk
Corporation (up 14.7%), Smithkline Beecham
NESTLE INDIA LTD.
Consumer Healthcare (41.2%), and Pure Foods
Corporation (18.9%).
The company currently employs 2,963. With sales of
15.82 billion Indian Rupees (US$329.38 million) ,
this equates to sales of US$111,164 per employee.
Sales Comparisons (Fiscal Year ending 2000)
CompanySales(US$mlns)
SalesGrowth
Sales/Emp (US$)
Largest Region
Nestle India 329.379 8.0% 111,164India (100.0%)
Alaska Milk Corporation 73.122 14.7% 93,268 N/A
Smithkline Beecham Consumer Healthcare
178.707 41.2% N/A (100.0%)
Pure Foods Corporation 243.899 18.9% 64,729 N/A
NESTLE INDIA LTD.
Recent Stock Performance
For the 52 weeks ending 10/19/01, the stock of this
company was down 0.3% to 505.95 Indian
Rupees. During the past 13 weeks, the stock has
fallen 4.5%.
During the 12 months ending 12/31/00, earnings per
share totalled 12.30 Indian Rupees per share. Thus,
the Price / Earnings ratio is 41.13. Earnings per
NESTLE INDIA LTD.
share rose 20.4% in 2000 from 1999. Note that the
earnings number includes a $.35 pre-tax charge and
$.11 pre-tax credit in 2000.
This company is currently trading at 3.08 times
sales. This is at a higher ratio than all three
comparable companies, which are trading between
0.51 and 2.15 times sales. Nestle India is trading at
18.91 times book value. The company's price to
book ratio is significantly higher than that of all
three comparable companies, which are trading
between 0.81 and 4.94 times book value.
Summary of company valuations
CompanyDate P/E
Price/Book
Price/Sales
52 WkPr Chg
Nestle India 10/19/01 41.1 18.91 3.08 -0.30%
Alaska Milk Corporation 10/19/01 7.2 0.81 0.51 10.53%
Smithkline Beecham Consumer Healthcare
10/19/01 N/A 4.94 2.15 N/A
Pure Foods Corporation 10/9/01 7.9 1.83 0.60 35.00%
NESTLE INDIA LTD.
The market capitalization of this company is 48.78
billion Indian Rupees (US$1.02 billion) . The
capitalization of the floating stock (i.e., that which
is not closely held) is 34.89 billion Indian Rupees
(US$726.33 million) .
Dividend Analysis
During the 12 months ending 12/31/00, Nestle India
paid dividends totalling 14.00 Indian Rupees per
share. Since the stock is currently trading at 505.95
Indian Rupees, this implies a dividend yield of 2.8%.
Nestle India has increased its dividend during each
of the past 5 fiscal years (in 1995, the dividends
were 3.33 Indian Rupees per share).
During the same 12 month period ended 12/31/00,
the Company reported earnings of 12.30 Indian
Rupees per share. Thus, the company is paying out
dividends that are higher than the earnings.
NESTLE INDIA LTD.
Profitability Analysis
On the 15.82 billion Indian Rupees in sales reported
by the company in 2000, the cost of goods sold
totalled 12.61 billion Indian Rupees, or 79.7% of
sales (i.e., the gross profit was 20.3% of sales). This
gross profit margin is better than the company
achieved in 1999, when cost of goods sold totalled
81.2% of sales. In 2000, the gross margin was the
highest of the previous five years (and in 1996 was
as low as 13.9%).
Nestle India's 2000 gross profit margin of 20.3%
was lower than all three comparable companies
(which had gross profits in 2000 between 25.5% and
57.1% of sales).
The company's earnings before interest, taxes,
depreciation and amorization (EBITDA) were 2.47
billion Indian Rupees, or 15.6% of sales. This EBITDA
to sales ratio is roughly on par with what the
NESTLE INDIA LTD.
company achieved in 1999, when the EBITDA ratio
was 15.7% of sales. The three comparable
companies had EBITDA margins that were all fairly
close (between 13.2% and 17.0%) to that achieved
by Nestle India.
In 2000, earnings before extraordinary items at
Nestle India were 1.19 billion Indian Rupees, or
7.5% of sales. This profit margin is an improvement
over the level the company achieved in 1999, when
the profit margin was 6.7% of sales. Earnings before
extraordinary items have grown for each of the past
5 years (and since 1996, earnings before
extraordinary items have grown a total of 119%).
The company's return on equity in 2000 was 41.1%.
This was significantly better than the already high
35.7% return the company achieved in 1999.
(Extraordinary items have been excluded).
NESTLE INDIA LTD.
Profitability Comparison
Company YearGrossProfit
Margin
EBITDAMargin
Earnsbef.
extra
Nestle India 2000 20.3% 15.6% 7.5%
Nestle India 1999 18.8% 15.7% 6.7%
Alaska Milk Corporation
2000 31.4% 13.2% 10.2%
Smithkline Beecham Consumer Healthcare
2000 57.1% 17.0% 13.1%
Pure Foods Corporation
2000 25.5% 14.3% 7.0%
Inventory Analysis
As of December 2000, the value of the company's
inventory totalled 2.06 billion Indian Rupees. Since
the cost of goods sold was 12.61 billion Indian
Rupees for the year, the company had 60 days of
inventory on hand (another way to look at this is to
say that the company turned over its inventory 6.1
NESTLE INDIA LTD.
times per year). This is an increase in days in
inventory from December 1999, when the company
had 1.62 billion Indian Rupees, which was only 50
days of sales in inventory.
The 60 days in inventory is lower than the three
comparable companies, which had inventories
between 91 and 106 days at the end of 2000.
Financial Position
At the end of 2000, Nestle India had negative
working capital, as current liabilities were 3.73
billion Indian Rupees while total current assets were
only 3.35 billion Indian Rupees. The fact that the
company has negative working capital could
indicate that the company will have problems in
expanding. However, negative working capital in
and of itself is not necessarily bad, and could
indicate that the company is very efficient at
NESTLE INDIA LTD.
turning over inventory, or that the company has
large financial subsidiaries.
As of December 2000, the company's long term
debt was 790.06 million Indian Rupees and total
liabilities (i.e., all monies owed) were 4.94 billion
Indian Rupees. The long term debt to equity ratio of
the company is 0.31.
As of December 2000, the accounts receivable for
the company were 1.17 billion Indian Rupees, which
is equivalent to 27 days of sales. This is an
improvement over the end of 1999, when Nestle
India had 36 days of sales in accounts receivable.
The 27 days of accounts receivable at Nestle India
are lower than all three comparable companies:
Alaska Milk Corporation had 72 days, Smithkline
Beecham Consumer Healthcare had 46 days, while
Pure Foods Corporation had 62 days outstanding at
the end of the fiscal year 2000.
NESTLE INDIA LTD.
Financial Positions
Company YearLT Debt/Equity
DaysAR
DaysInv.
Nestle India 2000 0.31 27 60
Alaska Milk Corporation
2000 0.01 72 106
Smithkline Beecham Consumer Healthcare
2000 0.15 46 91
Pure Foods Corporation
2000 0.07 62 104
NESTLE INDIA LTD.
SWOT ANALYSIS
Strength
The basic Aim of Nestle is to become the leading
company in the Indian food industry. It was linked to
India from the starting of the century (1900).
Through exports, manufacturing in India only began
in 1962. In very short span it had established itself
as a major player in Indian food industry.
The remarkable growth has been achieved through.
a. Rapidly creating greater has manufacturing
capacity.
b. Taking steps to ensure availability of good quality
of products.
c. Strengthening of distribution and sales network
particularly in rural areas.
NESTLE INDIA LTD.
d. Sales and marketing are among the major
strength of the Nestle.
Weakness
a. Nestle aims only of capturing young market,
which is quiet clear from the advertisements in
India.
Opportunities
Threats
a. Cadbury In creasing popularity of Cadbury's
products in markets is a major threat to Nestle.
b. Introduction of foreign food product in India is
another threat to Nestle.
NESTLE INDIA LTD.
RESULTS OF MARKET SURVEY
PEOPLE LISTINGS
NESTLE INDIA LTD.
NESTLE INDIA LTD.
RECOMMENDATIONS AND
SUGGESTIONS
Recommendation and suggestions forms the most
critical part of the report. These are based on hard
nose feedback collected from the retailers and
distributors and my personal experiences in the
market.
1. It has been found for increasing the sales
Displays and Consumer offers have to be
given simultaneously this helps in two ways,
attracts the customer attention through product
display and prompts him to buy, the offer on the
product further strengthens this feeling to indulge
in buying. But both the tools should be used with
adequate planning and precision and only then
would they reap benefits. We can provide the
trade loads as the Displays. As has been found
retailers are more satisfied with the displays. It
NESTLE INDIA LTD.
would also improve the image of the company as
the one that cares for its channel members. But
whole process should be cautiously handled with
prompt payments. Delay in payments would lead
to bad reputation in the market.
2. Inspite of the best of the marketing
communication strategies adopted by us we are
not doing well. Possible reason could be lack of
motivation at the lowest possible but the most
important level that is the sales officer and the
RS salesman. We should organize a contest for
weeks or month time between the entire RS
salesman and the sales officers separately.
Whoever makes the maximum sales during the
week/month would be entitled for a vacation or
cash incentives by the company. He would have
to generate a list of retailers/wholesalers where
he has made the sales. This would act as a tool to
keep a check on the stock being dumped in the
wholesale market.
NESTLE INDIA LTD.
3. It has been found that the sales officers often fail
to carry the catalogs and samples with them. We
can design a sales promotion kit, which would
act as a handy tool for them in the market. It
would consist of advertisement proofs, product
samples, illustrations of POP displays, description
of special deal or contest featured in the
promotion. I feel that all the sales process revolve
around the following basic seven steps:
Get set to sell.
Spark the interest.
Dramatize the need.
Prepare the proposal
Capitalize on objections.
Cut the order
Follow through
4. Our department could print a dealers manual
which would elaborate on the above points.
NESTLE INDIA LTD.
For EG: Capitalize on objections would list all the
possible objections that that prospect may voice
and each of the corresponding well thought of
answer. These small efforts on our part would
help us overcome barriers and clear out the most
taken for granted things. This would also come in
handy for the managers when they feel like
building pressure on the channel members.
5. It has been my experience that there is an flaw in
the working of the sales officers. They are often
unclear about the targets and the schemes. They
have to be briefed more frequently and trained
accordingly. They should be provided a company
T-shirt that would distinguish them from other
salesman.
6. There is a dire need of the Institutional selling
unit which all major companies have. NESTLE in
Delhi has a lot of distributors specifically for this
purpose. They cater to demand from super
NESTLE INDIA LTD.
bazaars, kendriya bhandars, railway canteens and
other cooperative stores.
7. The display windows provided by us are not a
least bit attractive to draw attention of any
customer standing in the shop. We should have
really skilled team of workers (or single person)
doing up the windows. This would also act as a
safeguard for proper utilization of display budget.
If we are spending on displays then we must
capitalize on these things, which is not happening
now. Hence professional merchandisers should
be appointed.
8. Distributors image in a area plays a major role
in boosting sales. Company should take strict
action against those distributors with tarnished
image as they spoil the companies’ reputation
also. If the need be they should replace the
distributor. The company should in regular
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interval take feedback from the retailers as
regards to the distributor.
9. There should be adequate supply of the POP
material. The sales officers and merchandizers
should properly put them on the outlets visited
during the day.
10. As found in the study that the displays are a
major motivating factor, the display claims should
be promptly cleared on time. This maintains the
companies’ image across the retail outlets and
keeps the retailers satisfied. It was a general
feeling across the Delhi metro.
11. At present the company does not have any
“Target based incentives” to the retailers. We
give trade loads at the time of purchase by the
retailer and then forget him for 15 days. It should
be other way round. On selling certain units the
retailers should be offered incentives in form of
NESTLE INDIA LTD.
gifts like Cameras, Walkman, Mobile phones etc.
This would motivate him to push the companies’
product as compared to the competitors. It would
also ensure actual consumption of the product
and control dumping at the retailers outlet.
12. The company can prepare Cardboard stands
on which the nivea products could be placed.
These stands should be placed at the front of
retailer’s desk. Recently FA has prepared such
stands. This ensures high visibility of the product
category and prompts the customer to take
impulse decisions. They are cost effective too.
13. HOME TO HOME SELLING
The success mantra of HLL is that it applies all
possible channels of selling emphasizing on
direct selling whereby company employed
people interact with the customer personally.
They sell the product and offer discount coupons
NESTLE INDIA LTD.
on next purchases. Our company must explore
this channel that ensures sales and builds
repeat purchases. Discount coupons should
be distributed across the household in Delhi
Metro. This would build awareness about
thechocolates products and would overcome its
major weakness of lack of awareness on part of
customer about the range of products. The retail
outlets in the areas where coupon are distributed
must be flooded with our range of products so
that there is no shortage of supply.
14. As revealed by the survey Spot Promotions
are a cheap and effective way of sales promotion.
For this purpose the company should make one
time investment in preparing maggi stalls,
chocolates stalls,new range of products
stalls (we know your skin better) and placing
them at prominent places at regular intervals. To
begin with 2 mobile stalls could be prepared
and the concept be tested across the Delhi metro.
NESTLE INDIA LTD.
Each stall would cost approx Rs 1200. The stall
would sell our range of items at Discounted
price (Minus the retailers and distributors
margin as the products would be directly sourced
from the C&F agents). Nestle representative
wearing nestle T-shirts and Blue colored caps
would counsel the public.
It would serve twin objective of increasing the
awareness of the product as well as boosting the
sales. The sales officers should be asked to
identify crowded market places in their areas
where such efforts could be made. Specially, On
festival occasions when the expenditure by public
increases we could cash on the opportunity.
15. The wholesalers are found to undercut
whatever extra margin he gets in form of
Schemes etc, So for proper channel balance we
need to keep strict control over our sales to the
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wholesalers. This would also help the distributors
to maintain their ROI. .
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LIMITATIONS
Sample size: The sample size chosen was 250 for
the whole Delhi metro where there are so many
people. This could have affected the results, which
may not hold true in all parts.
Concerned persons were not available despite
appointments at some times. It was difficult to tap
the distributors and the ASM of nestle.
The marketing and the advertising managers were
not ready to give any infomationabout the
company . They were not willing to tell about any
strategy of marketingand advertising . so very less
information can be gas\thered about the strategy
of marketing.
The distributors were reluctant to share
information regarding the trade insights.
NESTLE INDIA LTD.
CONCLUSIONS
Sales growth in 2001 led by a robust 20% growth in
volumes
Nestle’s domestic sales registered a 18.5% volume growth during the first 9 months of 2001.
Exports registered a 31% yoy volume growth. In value terms, domestic sales grew by 15.8% yoy to
Rs12.1bn, while Exports grew by 26.4% yoy to Rs2.4bn.
Jan-Sep Jan-Sep % yoy
Volume Growth (tons) 2001 2000
Domestic 105718 89176 18.5
Exports 13402 10216 31.2
Total 119120 99392 19.8
Value Growth (Rs mn)Domestic
12107 10454 15.8
Exports 2424 1918 26.4
Total 14531 12372 17.5
NESTLE INDIA LTD.
Beverages leading volume growth, value growth
being led by culinary segment
Beverage sales have grown at a fast pace of 42% in
the first 9 months of 2001 driven by rising exports
and revised pricing strategy in domestic market.
Growth in value terms is however lower due to a
sharp 15% decline in realizations. Culinary product
sales grew by 20% in volumes and 22% in value.
Volume growth in chocolate & confectionery
segment was 12%, which was higher then market
leader and average industry growth, signifying that
the company has been able to improve market
share in the category.
NESTLE INDIA LTD.
Turnover Contribution by
Turnover
contribution
Growth
Volum
e
Value Volume Value Realization
Milk & Nutrition
Products
47 43 15 13 -1.4
Beverages 18 29 42 21 -15.1
Culinary Products 24 14 20 22 1.9
Chocolates &
Confectionery
11 14 12 20 6.8
Milk products, which account for a significant 43%
of Nestle’s revenues have grown at steady 15% in
volume terms. Turnover contribution of beverages is
29%, while culinary products and chocolate &
NESTLE INDIA LTD.
confectionery each contribute 14% to Nestle
Rs14.5bn turnover in the first 9 months of 2001..
Profit Margin
Operating margins have improved from 18.1% to 18.5% in 2001 driven by lower material cost.
Raw material cost declined from 44.4% of sales in F12/00 to 43.1% of sales in F12/01.
Operating Margins 2001 2000
EBITDA 18.5 18.1
Adjusted EBITDA 18.5 17.7
Improved working capital and asset
management
The company has been able to improve working capital management. Operating cash flow has
registered a CAGR of 15% in the last 4 years. Fixed asset turnover has also gradually improved
over the last 3 years. Net indebtedness (total financial liabilities net of liquid assets) has declined
from a high 2.5x in 1998 to 0.3z currently.
1998 1999 2000 2001-Sep
Operating Cash Flow 1743 2391 2420 1966
NESTLE INDIA LTD.
Rotation of Operating Net Working Capital
7.1 9.6 14.7 18.1
Rotation of Fixed Assets 4.0 3.9 4.2 4.7
Net Indebtedness 2.5 1.0 0.9 0.3
1. Operations:
Domestic Sales grew by 7% in value and 15% in
volume terms, during the year. Export Sales grew
by 16% in value and 32% in volume. Profit After Tax
grew by 20% from Rs985mn to Rs1186mn.
During the year, the Company retired certain fixed
assets from active use at various locations and the
impairment loss on such fixed assets has been
charged to the Profit and Loss Account.
Out of business prudence, the Company
supplemented the Contingency Provision with
further amount in 2000 of Rs295mn (net) to provide
for various contingencies resulting from matters
NESTLE INDIA LTD.
mainly relating to issues under litigation, dispute
and management discretion.
The current year has commenced as per plan in the
domestic market and your Directors are hopeful of
continued good results. However, with the current
level of inflation and economic indicators pointing
towards a sluggish market, it would be difficult for
the Company to maintain the level of earnings
unless the Company takes price increase on finished
products which would depend on market conditions
and competitor activities.
NESTLE INDIA LTD.
2. Exports:
Export Sales for the year at Rs2655mn have grown
by 32% in volume terms, over the last year. This
has been mainly due to the higher exports of
NESCAFE to Russia, buoyant sales of Instant Tea
and good performance of the culinary products.
However, depressed green coffee prices in domestic
and international markets kept the export
realisations low. Measures taken for tapping new
market and product opportunities have also
contributed to this growth. The export
competitiveness of value added instant coffee
manufactured in India continues to be adversely
affected by the purchase tax levied on green coffee.
Efforts continue to tap new market and product
opportunities.
3. Dividends:
NESTLE INDIA LTD.
Interim dividend of Rs. 8.00 per equity share,
including Rs4.50 per equity share out of
undistributed profits of the previous financial years,
was paid during 2000.
4. Business Development:
In line with the Company's objective to provide
superior value in every product category and
market sector, efforts were focussed to provide
quality products to customers at attractive price
points. While the Company continued to generally
maintain price points across all the product
categories, the pricing of some products were also
reduced to meet consumer expectations.
MAGGI Noodles re launched in 1999 in response to
popular consumer taste preference, continued to
boost sales during 2000 in the culinary segment.
New flavour profiles were introduced in the bouillon
business.
NESTLE INDIA LTD.
The market continued to react positively to the
initiatives taken in the recent past to grow the
consumption of instant coffee in the domestic
market. The new NESCAFE pricing and bringing the
popular SUNRISE brand under NESCAFE umbrella to
benefit from its association continued to strengthen
the category. NESCAFE Frappe a blend of coffee,
mocha and vanilla, which makes a delicious frothy
cold coffee was launched in select metropolitan
cities in the third quarter. This was another
strategic launch and seeks to address consumer
with preference for cold drinks. NESCAFE Frappe has
received encouraging response.
In the area of Chocolate and Confectionery NESTLE
MUNCH Crisp wafer biscuit with chocolayer, which
was launched in select markets in1999, was rolled
out nationally during 2000 and had good growth.
Continuing with the efforts to meet consumer
expectation on price points, the pricing of KITKAT
was also reduced during the later half of the year.
NESTLE INDIA LTD.
Moulded Chocolates and Eclairs also showed
satisfactory growths. This has also helped in
improving the infrastructure and distribution reach
of the Company in the Chocolate and Confectionery
segment.
In the milk and cereal categories, EVERYDAY Dairy
Whitener and cereals had satisfactory growth.
NESTLE Growing up Milk, a new product offering
superior nutrition, launched in 1999 was rolled out
nationally during the year.
The Company has also entered the Chilled Dairy
business with the recent launch of NESTLE Dahi in
select cities of the North. The initial response has
been very encouraging and the Company is working
on plans to further leverage the international
expertise of Nestle Group, Switzerland in the area of
Chilled Dairy.
NESTLE INDIA LTD.
The performance of other products were generally
in line with expectations. A few products whose
performance was not considered satisfactory are
under constant review for corrective action.
The directors were pleased to report the
implementation of the two new projects undertaken
by the Company during 2000 packaged milk and
packaged drinking water. Both the projects seek to
leverage the worldwide experience and knowledge
of Nestle Group, Switzerland who are the leaders in
these product categories.
In line with its objective of long term growth and
entry in significant value added food segments, the
Company forayed into the Ultra Heat Treated (UHT)
liquid milk business in April 2000 by launch in
Mumbai. Packaged UHT milk seeks to address
growing consumer concerns on adulteration and
product safety and brings with it reliability,
complete hygiene and safety. It offers convenience
NESTLE INDIA LTD.
to the consumer, in terms of a shelf life without any
deterioration in the product quality and easy usage
without refrigeration or boiling. UHT Milk has
received encouraging response and has been rolled
out in select cities of the West, South and North.
The project for bottled water was implemented at
the Samalkha factory and water launched in
February, 2001 under the brand NESTLE PURE LIFE
and is available in select cities. NESTLE PURE LIFE
contains a balance of essential minerals and a light
pleasant taste and is manufactured under stringent
quality control. The packaging has been specially
designed to maximise safety for the consumer and
protect from possible tampering.
The new categories like bottled water and liquid
milk are lower margin categories and will require
considerable investments. The Company sees them
as strategic and as requiring support on a sustained
basis.
NESTLE INDIA LTD.
The two new Sales Branches at Bangalore and
Chandigarh set up in 1999 to further strengthen the
flexibility of the Sales organisation and for speedier
response to the market conditions, have started
showing positive results during the year. With a
view to expand distribution and increase
penetration in smaller towns, a concerted drive was
undertaken to make products affordable and
accessible to consumers. Initiatives taken include
more penetrative pricing and smaller packs
covering brands such as EVERYDAY Dairy Whitener,
MAGGI Noodles, MILO Chocolate Energy Drink and
NESCAFE Instant Coffee. The response has been
encouraging.
The Alternative Trade Channel unit created in 1999
undertook initiatives to tap the opportunities for out
of home consumption, particularly for instant coffee
and chocolate and confectionery and to extend
availability of product to nontraditional outlets. The
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outcome of these initiatives has been encouraging
and is being consolidated.
Availability of NESCAFE has been enhanced through
an expansion of the vending machine network and
new consumption opportunities for Chocolates and
Confectionery were identified and developed in
areas like railway platforms, college canteens and
major events.
On the manpower development front, programmes
during the year continued to be focussed on the
operational front more particularly sales and
production.
To support the growth plans and distribution
strategy, and simultaneously improve the
operational efficiency, the thrust on strengthening
supply chain continued to receive attention during
the year. In addition to consolidating the
NESTLE INDIA LTD.
improvements made over the last two years,
significant progress was recorded in following areas:
a) Reduction in finished goods inventory pipeline to
improve freshness of stocks and reduce working
capital.
b) Control of distribution costs through innovative
measures, despite steep increases in cost of fuel.
c) Sustained improvement in customer service level
to improve product availability across all
geographies and channels.
d) Reduction in obsolescence of materials.
5. Technology from Nestle:
The Company benefits from its access to proprietary
technology, technical and non technical expertise
and the fruits of the extensive centralised Research
and Development. The diversified knowledge and
NESTLE INDIA LTD.
expertise have contributed significantly to the
operations of your Company over the years. Some
of the key areas, which have benefited are:
a) Manufacture of products of truly international
quality. Product quality, which encompasses taste,
appearance, convenience and overall value for
money, is a critical factor in consumer choice and in
a competitive market like India could determine the
very survival of the products. The high quality of
products of your Company is borne out by the
position and image the products enjoy in the market
and your Company continuing to be a leading
exporter of value added Instant Coffee in the
country.
b) Benchmarking of products against competition to
achieve an advantage in product quality, for
increasing competitiveness.
NESTLE INDIA LTD.
c) Access to latest technological developments,
such as Spearpoint Technology for Cocoa based
products implemented during 2000 which would
improve product quality and competitiveness and
the MUCH technology for instant coffee manufacture
implemented during 1999, which would enhance the
productivity by increased extraction of coffee solids
from coffee beans.
d) Implementation of project for bottled drinking
water.
e) Product innovation and renovation some
illustrations are MUNCH Crisp wafer biscuit with
chocolayer; Nestle Dahi; Nestle Milk (UHT); Junior
Foods; NESCAFE Frappe; KITKAT Milky; newand
improved flavours profiles of bouillons; and relaunch
of MAGGI Noodles.
f) Enhancement of skill and competence of
Company personnel due to the training received.
NESTLE INDIA LTD.
g) Implementation of environmentally sound
business practices.
h) Technical expertise in various forms including
Information Technology, which has enabled the
business of your Company to grow and sustain.
i) Providing assistance by way of improved technical
and quality standards to local manufacturers, who
have contract manufacturing arrangements with
your Company.
6. Information Technology:
The Company continued to make significant
investments in the Information Services of
Technology area to cope with the growing
information needs necessary to manage operations
more effectively in a complex supply chain
environment.
NESTLE INDIA LTD.
7. Community Health:
Recognising its responsibility to the community in
which it operates, the Company over the years has
been taking initiatives in the area of community
health at locations around its factories. Some of the
initiates taken in the recent past are:
a) Provide Government and village schools with
facilities for toilets and hygiene drinking water
including deep bore wells, where necessary.
b) Support to health officials in Pulse Polio
programmes.
c) Sponsorship of treatment of TB patients at clinic
run by NGO.
d) Healthcare Programmes with focus being on well
being of employees and their families covering
NESTLE INDIA LTD.
vaccination, awareness programmes and health
check up.
The company performance is much better in
comparison to its competitors.
NESTLE INDIA LTD.
Questionnaire
Tel.: Name :Personal: Age :
Class :School/ college :
Tel.:
1. How many Nestle Products Have your consumed
so far?
2. How do you like those products?
Good Bad
3. Which of these Nestle products do you like?
a) Chocolates b) Maggi
c) Milk product d) Mineral water
e) Coffee f) Infant products
g) Milkmaid h) Soups
NESTLE INDIA LTD.
4. Why do you like the nestle products? It is due to
its.
Colour Taste Packing /Pack Size
Advertisement
5. Which brand of Particular product do you like?
Specify the name_____________ Product _______
Brand
6. Do you like the advertisement of Nestle?
Yes No
7. Which advertisement do you like and why?
________________________________________________
________________________________________________
8. Do you think some brand ambassador Should
come in the advertisement of Nestle?
Yes No
9. Whom do you think should endorse the brand
Nestle?
NESTLE INDIA LTD.
1. ____________________________________________
2. ____________________________________________
10. What strikes to your mind, when you think
"Good Food Good Life"
________________________________________________
11. Will you switch over to some other brand, if
there is a gift/offer with the other brand
Yes No
12. Have you tried the new range of Products from
Nestle? If yes specify the name.
Yes No
13. How do you like the new range of products from
other competitors products which are same?
________________________________________________
14. Do you think Nestle should come with some new
products? If yes specify some name
NESTLE INDIA LTD.
________________________________________________
15. Are you satisfied from quality of Nestle
products?
Yes No
16. Where you rank Nestle from others?
Very Good Good Satisfactory
Bad
NESTLE INDIA LTD.
BIBLIOGRAPHY
MARKETING MANAGEMENT: PHILIP KOTTLER
BUSINESS INDIA BUSINESS TIMES
BUSINESS TODAY
Business world
NEWSPAPERS & JOURNALS (TIMES OF INDIA,
ECONOMICS TIMES)
IIM LIBRARY (DELHI)