Nestlé SA
Transcript of Nestlé SA
Nestlé SA
The Nescafé Plan in China
The Team
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G205069 G205080 G205055
Abdulmajeed Alzunaidi
Hatim Alsaif
Abdulaziz Aleshaiwy
Ibrahim Alfaqih
G205105
AGENDA SLIDE
INTRODUCTION
Introducing Nestle and the story of Nescafe1
INTRODUCING COFFEE
Summary of Coffee value chain and the Economy of Coffee2
CREATING SHARED VALUE INITIATIVE
A look at Nestle’s Strategy, CSV Initiative and the Nescafe plan4
THE NESCAFE PLAN IN CHINA
Closely examining Nestle’s three options and the best option to
move forward
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Sustainability
NGOs and the support for coffee farmers3
1867 82
Fortune Global 500
11.4$B
Rev.
Established
352K
# of Employees
247$B
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Stock Price
InstantHistory
• In 1929, Louis Dapples, the Nestlé Chairman, was presented with an interesting task by his former employer.
• The bank owned warehouses full of Brazilian coffee beans, which were sitting unsold.
• They wondered if Nestlé could turn the beans into a “soluble coffee cube” to be sold directly to consumers.
• In fact, when it seemed impossible to retain the coffee aroma and the project was cancelled.
• Max persevered and continued to experiment on his own.
• His dedication paid off. In April of 1937, a stunned Nestlé Executive Board was invited to a tasting.
• From the first mouthful, their response was overwhelmingly positive.
• The scale-up began immediately and in 1938, Nescafé was officially born.
• By 1940, only two years later, Nescafé was already available in 30 countries.
• These days it is enjoyed by millions of people around the world.
Switze rland
Nescafé
starts
operations
1938
Thai land
Experimental
farm
2005
P hi l ippines
First
Agricultural
Serv ices
launched
1960
R&D Center
2009
France
R&D Center
opened
1986
Côte d’Ivoire Côte d’Ivoire
Agricultural
Serv ices
Launch
Nescafé Plan
Me x ico
2010
Me x ico
Agricultural
Serv ices
1987
Vie tnam /
Brazi l
Agricultural
Serv ices
2011
Ecuador
Experimental
farm
1988
Côte d'Ivoire
Experimental
farm
2013
Thai land
Agricultural
Serv ices
1991
Nicaragua
Agricultural
Serv ices
2014
China
Agricultural
Serv ices
1992 1994
Global
Grown
Respectfully
Consumer
Campaign
2018
India
Agricultural
Serv ices
Indone sia
Agricultural
Serv ices
1996
Switze rland
First Nescafé
Plan Report
2021
1938
A young food chemist
work ing at Ne stlé cal led Max
Morge nthaler found a way to
cre ate water-soluble coffee.
1953
Nescafé be cam e the f i rst coffee brand to
cl im b Mount Everest as part of Edm und
Hi l lary’ s e xpedition.
Apollo 11
Nescafé was launche d into
space along with astronauts
Ne i l Armstrong, Buzz Aldrin
and Michae l Coll ins to help
k e e p them sharp on their
1969 m oon landing.
#1Nescafé is the world’s
preferred coffee brand
180Countries distribute
and sell Nescafé
1 in 7Cups of coffee consumed
around the world is
Nescafé
Backward IntegrationWorking with Coffee Farmers
Paying Higher for Certified beans
To advance Nescafe plan in China; Nestle had 3 Choices
Introducing Coffee
Summary of Coffee value chain and the Economy of Coffee
Intro to Coffee / Supply Chain
Growers + Buyers + Processors + Government Agencies + Exporters + Dealers
Roasters
Distributers
Retail
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14
15
16
Key Sources of Coffee 2012-13
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Brazil35%
Vietnam19%
Others19%
Central America & Mexico
11%
Colombia7%
Indonesia6%
India
3%
Percentage of World Production
Global Market Shares in Coffee 2009-2012
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22%
23
%
22%
22%
0.00
%
0% 0%
11%
0.00
%
0% 0%
6%
0.40
%
1% 2% 3%3% 3% 3% 3%
7% 7% 7%
7%
68%
67%
67%
49%
2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2
G LOBAL M ARKET
Nestle Mondelez International DE Master Blenders
Green Mountain Coffee Roasters Tchibo GMBH Private Labels
Other
Retail Sales of Coffee in China (2019-2012)
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8 9 11 13
4 6 6 7
726
820
981
1120
2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2
IN US$ M ILLIONS
Coffe Beans Fresh Ground Coffee Instant Coffee
Retail Sales of Coffee in China (2019-2012)
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321
28
6
321
36
2
143
127
143
161
3670
7
3349
2 3670
7 4005
3
2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2
IN TONS
Coffe Beans Fresh Ground Coffee Instant Coffee
Sustainability
NGOs and the support for coffee farmers
The Common Code for the Coffee Community (4C)
01 Economic Sustainability 02 Social Sustainability 03 Environmental Sustainability
0
0.5
1
1.5
2
2.5
3
3.5
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$ /
lb.
Coffee Prices Lower Price Line Fair-Trade
Coffee Prices and the Fair-Trade Pricing*
23*Based on Current Fair-Trade Premium of 0.2 and floor price of 1.35$ / lb.
Creating Shared Value Initiative and Nescafe
Plan
A look at Nestle’s Strategy, CSV Initiative and the Nescafe plan
• Evolve with consumer needs
• Good nutrition
• Healthier, balanced lives and a healthier planet
• Evolution, innovation, acquisition or partnerships.
Nestlé’s Strategy
Enhance the health and wellness of people and pets.
• Needs of the modern consumer
• Premium food innovations to market
• Plant-based foods
• Increase access to nutrition for everyone, everywhere.
Nestlé’s Strategy
We play to win in all our categories while pursuing higher growth in coffee, pet care, infant nutrition, water and nutritional health.
Value Creation Model
Creating Shared Value in Nestlé
• Long term
• Shareholders and for society
• Positive differenceto society
• Nestlé’songoing success.
St at us of our commitments
New In progress
Roll out our Nestlé
needs YOUth init iative across all our operations
Enhance gender
balance in our work f orce
and em power wom en across t he entire value
chain
Adv ocat ef or healthy
workplaces and healt hier employ ees
Assess and address
hum an right s im pacts across our business
activ ities
Im prov eworkers’
liv elihoods and prot ect children in our agricult ural
supply chain
Enhance a cult ure of
int egrit y across the organization
Prov ide ef fective
griev ance m echanisms t o
em ploy ees and stakeholders
Launch more f oods
and bev erages that are nut rit ious, especially for
m ot hers- to-be, new
m ot hers, and inf ants and children
Furt her decrease
sugars, sodium and
saturated f at
Increase v egetables, f iber- rich grains, pulses,
nut s and seeds in our f oods
and bev erages
Sim plif y our ingredient list s and
rem ov e artif icial colors
Address under-
nut rition t hrough m icronut rient f ortif ication
Im prov ef arm
econom ics am ong the f arm ers who supply us
Im prov ef ood
av ailabilit y and dietary
div ersit y among the f arm ers who supply us
Implement
responsib le sourcing in
our supply chain and prom ot e animal welf are
Continuously im prove
our green cof f ee supply
chain
Roll out t he Nestlé Cocoa Plan with cocoa
f armers
W ork t o achieve
wat er ef f iciency and sust ainabilit y across our
operations
Adv ocat ef or
ef f ective water policies and st ewardship
Engage wit h
suppliers, especially
t hose in agricult ure
Raise awareness on wat er conservation and
im prov e access to water
and sanit at ion across our v alue chain
Prov ide clim ate change
leadership
Promote t ransparencyand proact iv e, long- term
engagement in clim ate
polic y
Build and share
nut rition knowledge f rom t he f irst 1000 days through
t o healt hy aging
Build b iom edical
science leading t o health-promoting product s,
personalized nutr it ion
and dig it al solutions
Im prov ethe
env ironmental per f ormanceof our
packaging
Reduce f ood loss
and wast e
Prov ide meaningf ul and accurat e env ironmental
inf orm ation and dialogue
Preserv e natural
capital
Enhancing rural
development and
livelihoods
Respect ing and
promoting
human rights
Promoting decent
employment
and diversity
Caring for water Acting on
climate change
Safeguarding the
environment
Building, sharing and
applying nutrition
knowledge
For our communities
Helping develop thriving, resilient communities
For the planet
Steward ing resources and the environm ent
For individualsand families
Enabling healthier and happier lives
I nspiring people to
lead healthier lives
Offering tastier and
healthier choices
Apply and explain
nut rition inf orm at ion on pack s, at point-of-sale and
online
Of f er guidance on
por t ions f orour produc ts
Lev erage our marketing ef f ort sto
prom ot ehealthy cooking,
eat ing and lif estyles
Em power parents, caregiv ers and teachers t o
f oster healthy behaviors in
children
Support breast f eedingand prot ect it by continuing
t o im plem ent an industry-
leading policy t o market b reast-m ilk substitu tes
responsibly
Inspire people to
choose wat er to lead healt hier liv es
Par t ner f or
prom ot ing healt hy
f ood env ironment s
Achiev ed
Our 2030 ambition is to help 50 million children lead
healthier lives
Our 2030 ambition is to improve 30 million livelihoods in
communities directly connected to our business activities
Our 2030 ambition is to strive for zero environmental
impact in our operations
Responsiblecoffee sourcing
Our com mitment
Continuously improve our green
coffee supply chain
Our objectives
By 2020: 70% of the total Nescafé cof fee supply to
be responsibly sourced
In progress
By 2020: Nescafé to improve the quality, quantity
and sustainability of its cof f ee supply chain by
distributing 220 million cof f ee plantlets
In progress
By 2020: Nescafé to improve cof f ee f arm
economics in at least f our cof f ee-sourcing
countries
In progress
By 2020: Nescafé to monitor and improve labor
rights in at least tw o cof fee-sourcing countries
In progress
By 2020: Source tow ard 100% of the coffee for
Nespresso’s permanent range through its AAA
Sustainable Quality Program on cof f ee sourcing
In progress
Coffee tree
renovation programs
Training on best
agricultural practices
F inancial l i teracy andrec ord ke eping
Training women a ndy o ung farme rs
Farmer o rganization p r ogr ams
I n terc ropping programs
S a nitation and food c r ops programs
Water, ecosystem
and soi l management
programs
Increased coffee
productivity
Improved coffee quality
Optimized costs
of production
Tree stocks rejuvenated
Farmers adopting
best practices
Farmers as agripreneurs
Improved living conditions
Better management
and controls
Women and youth
empowerment
Betterorganizational capacity
Farm productiondiversified
Improved health conditions
Water resources conserved
Soil fertility improved
Biodiversity promoted
Improved coffee
economics on farm
Resilient coffee
farming
families and
communities
Sustainably
managed coffee
landscapes
What we want to achieve How we want to ge t there What we do to ge t there
The Nescafe Plan
The Nescafe Plan Monitoring and Evaluation
ECONOMiCSMeasuring farmer
earnings and earning
power from coffee
and other crops
KPIs
✔ Net farm income
✔ Coffee revenue
✔ Productivity
✔ Cost of production
✔ Farm diversification
✔ Adoption of best
agricultural practices
SOCIALMeasuring our impact
on farm families
and workers
KPIs
✔ Bookkeeping records
✔ Financial literacy
✔ Gender and youth
participation
✔ Safe working
conditions
ENVIRONMENTMeasuring water, soil and
biodiversity
KPIs
✔ Watershed conservation
✔ Household wastewater treatment
✔ Shade coverage
✔ Soil conservation
✔ Mill water conservation
✔ Mill water treatment
✔ Irrigation water
conservation
GENERALKPIs (qualitative)
✔ Satisfaction with
Nescafé Plan program
✔ Farmers’ views on
future outlook
Monitoring & Evaluation
key performance indicators
Key performance indicators are
designed to measure progress
towards our goals and alignment
with common sustainability frameworks
in the coffee sectorand the Sustainable Development Goals.
13countries wi th annual
Rainforest Alli ance
im pact asse ssm ents
The Nescafe Plan in China
Closely examining Nestle’s three options and the best option to move forward
• Nestle Extended the Nescafe plan to China in 2011.
• Nestle started working with Coffee farmers to ensure they receive
✓ Steady Income
✓ Training and Technical Services for cultivating coffee
• Set a Purchasing Station to source beans directly form farmers (9,500 Tons in the first half of 2013).
• Invested in Research to
• Improve farmers yields.
• 10 years research to determining the exact variety that should be grown in the region
• Investing $16M toward building coffee-farming institute
Nescafe Plan in China
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Backward Integration
Backward integration into coffee farming in
China (Similar to tea farming)
Strengthening Local Efforts
Strengthen its commitment to sustainable coffee
in China by working with coffee farmers at the
grassroots level to improve their productivity
Higher Prices to Farmers
Paying Higher prices to purchase coffee beans
that had been grown according to some form of
certification relate to sustainability
To advance Nescafe plan; Nestle had 3 Choices
BackwardIntegration
Strengthen Local Efforts
The three options as in the case
Higher prices increase
attractiveness to farmers.
Which Certificate to benefit the
farmers most?
Which certification would improve
beans quality received by Nestle?
Long term problems might occur
with overproduction
Better livelihood would remain
unchanged
Working Closely with individuals
Consumers prefer Fair-Trade
Certification coffee
Supply Seedlings and Technical
assistance
Diversify farmer’s sources of
income
Difficulty to change farmers
mindset
Greater control over sustainable
farming development
Secures reliable supply of high-
quality coffee beans
Removing Intermediaries
Not Common, usually coffee farms
make forward integration
Higher Prices to Farmers
STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
• Large distribution
system
• Research and
development capability
• Global recognized brand
• Efficient R&D system
• Criticism over high-
water usage, selling
contaminated food
• Expand production
capacity in key markets
• Increase control over
coffee beans quality
• Cost cutting by reducing
markup
• Government unstable
regulations
• Huge investment
• Property limited
ownership for 99 year
SWOT Analysis
Recommendations
How Nestle can move forward in their mission in Sustainability
Moving forward in China – A combination of Solutions
STRENGTHEN LOCAL EFFORTS
WORK WITH NGOS TO CERTIFY FARMERS
PAY HIGHER PRICES TO FARMERS
Moving forward in China – A combination of Solutions
STRENGTHEN LOCAL EFFORTS
WORK WITH NGOS TO CERTIFY FARMERS
PAY HIGHER PRICES TO FARMERS
✓Working Closely with individuals, build their capabilities.
✓Allows Nestle to identify the gaps in the farms.
✓Also, the right certification program for farmers.
STRENGTHEN LOCAL EFFORTS
Moving forward in China – A combination of Solutions
STRENGTHEN LOCAL EFFORTS
WORK WITH NGOS TO CERTIFY FARMERS
PAY HIGHER PRICES TO FARMERS
✓Nestle should align their CSV with 4C.
✓ Partnership with NGOs to certify farmers.
WORK WITH NGOS TO CERTIFY FARMERS
Moving forward in China – A combination of Solutions
STRENGTHEN LOCAL EFFORTS
WORK WITH NGOS TO CERTIFY FARMERS
PAY HIGHER PRICES TO FARMERS
✓Nestle can guarantee the quality of the beans.
✓Nestle can pay higher prices with a piece of mind.
PAY HIGHER PRICES TO FARMERS
Thank You
References
• Supply Chain infographic: https://www.visualcapitalist.com/from-bean-to-brew-the-coffee-supply-chain/
• The Economic of Coffee: https://www.visualcapitalist.com/the-economics-of-coffee-in-one-chart/
• CSV Initiative: https://www.nestle.com/csv
• Nescafe Grown Respectfully Report: https://www.nescafe.com/gb/cup-of-respect/grown-respectfully
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