Nestle Purina Power Point(withVideo)
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Transcript of Nestle Purina Power Point(withVideo)
Jason Atherton
David Friedman
Viktoryia Stackle
Xinwei Xin
Headquartered in St. Louis, MO
Founded in 1894 as Purina Mills
Merged with Nestle in 2001
Leader in pet food sales in the U.S.
Operates in over 100 countries
Parent company Subsidiary Global Retail Sales
Mars Inc. Mars Petcare 14.7
Nestle SA Nestle Purina Petcare 14.1
Colgate-Palmolive Co. Hill’s Pet Nutrition 3.4
Procter& Gamble Co. P&G Pet Care 3.3
Del Monte Food Co. N/A 2
Others 22
The size of industry 59.5
Global Pet Food Industry Size for 2010 ( USD in billions)
45.12
51.5
53
59.5
40
45
50
55
60
65
2007 2008 2009 2010
U.S
. Do
llars
in
Bil
lio
ns
($)
Time Span
Global Dog and Cat Food Sales
IndustryTotal
25%
24%
6%5%
3%
37%
Global Market Share 2010
Mars. Inc
Nestle Purina
Colgate-Palmolive
Procter & Gamble
Del Monte
Others
Differentiation via Quality
Dog food and treats
Cat food and treats
High-tech headquarters in St. Louis, MO
Virtual reality technology
Efficient Assortment Solution
Top notch tracking system
69% female
25% 45-54 years-old
92% Caucasian
66% have no kids
28% income of $100-150K
53% with some college education
Distributes to: 65% of Purina products sold in the Americas
28% in Europe
7% in Asia, Oceania and Africa
Headquarters in St. Louis, MO
Over 20 factories in U.S.
4 in Canada
6 in Latin America
9,850 employees
On-site quality assurance labs and staff
Tracking system
Ingredient screening
Eco-friendly materials
Wide variety of emerging global markets
Sales are not fazed by the economy
Low production costs
Community support
Intense competition
High regulations on food quality
Leadership position based on “trust” and “quality”
Extensive products/brands portfolio
Efficient production and shipping methods
Best work-life balance
17 consecutive years of revenue growth
High reputation in the community
At Nestle Purina PetCare, we offer top of the line dog food, cat food and pet care products for those
who seek the best for their pets. We deliver to grocery and pet stores across the Americas,
Europe and the Asia-Pacific region. With continuous growth, we strive to become the
leader in the global market.
Customers
Associates
Stockholders
Suppliers
Communities
Company Profit
Margin
ROA Inventory
Turnover
Quick
Ratio
Debt to
Assets
Nestle Purina 28.05% 27.57% 13.8% 1.03% 43.93%
P & G 16.13% 10% 12.4% 0.51% 52.07%
Colgate-
Palmolive
14.15% 19.72% 12.7% 0.67% 74.79%
Del Monte 6.53% 5.70% 5.1% 0.73% 57.39%
Strengths Weaknesses
• Top-notch ingredient screening for best quality
• Lean and efficient production process
• State-of-the-art technology• High brand awareness• Globally known parent
company• High employee morale• Unmatched r & d capabilities
• Factories concentrated only in the Americas
• Too much focus on developed markets
• Several pet food recalls• Limited distribution channels
Opportunities Threats
• Increasing pet ownership in emerging markets
• Increasing number of empty nesters
• Global awareness of pet health and wellness
• Rising disposable income globally
• Growing amount of skilled young professionals around the world
• Product safety and quality concerns
• Rising price of commodities• Growing number of foreign and
domestic competitors• Emergence of cheaper private
label products• Cultural barriers in foreign
countries
New entrants-Moderate to high threat
Suppliers-Low to moderate bargaining power
Buyers-Moderate bargaining power
Substitutes-Low
Rivalry-Very high
Performance:
No manufacturing facilities to support Europe, Asia, Oceania and Africa more cost effectively
Opportunity:
Fast growth of emerging markets and changing sociocultural views
Threat:
Increasing number of private label companies with lower prices and newer niche-oriented
products
Consumer confidence is increasing
Unemployment rates are decreasing
Emerging markets will continue to grow
Lifestyles, attitudes and perceptions around the world will continue to change
Government will continue forcing regulations
Technology around the world will continue booming
Open a manufacturing facility in Latvia to increase profitability 8% by 2017
Increase sales by 4.5% by expanding into Latvia, Romania, South Korea and Thailand by 2015
Expand manufacturing plants to developing countries to cut costs and increase profitability
Expand international sales by entering new emerging and developed markets to increase global market share and narrow the gap with Mars, Inc.
Open a manufacturing facility in Latvia to increase profitability by 8% by the end of 2017
R & D
Basic research on building and location costs
$500,000
Building and equipping the factory
$60M
Conducted by Nestle Purina
Human Resources
Recruiting and training$250,000
Wages$2.15M (annually)
Benefits$537,500 (annually)
Information Systems
Use of existing systems with minor adaptations
$100,000
Finance
60% debt financing
20% equity
20% cash reserves
Marketing
None required
Market Research
Research on size of the market and costs
$500,000
Action Plan 1
Pro Income Statement Before Strategy (in millions)
2012 2013 2014 2015 2016 2017
1.0% 1.0% 1.0% 1.0% 1.0%
Sales $14,100.00 $14,241.00 $14,383.41 $14,527.24 $14,672.52 $14,819.24
Cost of good sold $5,295.24 $5,348.19 $5,401.67 $5,455.69 $5,510.25 $5,570.91
Gross profit $8,804.76 $8,892.81 $8,981.74 $9,071.55 $9,162.27 $9,248.33
General and Administrative expense
$3,245.28 $3,277.73 $3,310.51 $3,343.62 $3,377.05 $3,410.82
EBIT $5,559.48 $5,615.07 $5,671.23 $5,727.94 $5,785.22 $5,837.51
Interest income $13.80 $13.94 $14.08 $14.22 $14.36 $14.50
Interest expense $64.32 $64.96 $65.61 $66.27 $66.93 $67.60
EBT $5,508.96 $5,564.05 $5,619.69 $5,675.89 $5,732.65 $5,784.41
Tax(25%) $1,377.24 $1,391.01 $1,404.92 $1,418.97 $1,433.16 $1,446.10
EAT(net profit) $4,131.72 $4,173.04 $4,214.77 $4,256.92 $4,299.48 $4,338.31
Pro Income Statement After Strategy (in millions)
2012 2013 2014 2015 2016 2017-1% 0 2% 5% 8%
Sales $14,100.00 $14,241.00 $14,383.41 $14,527.24 $14,672.52 $14,819.24 Cost of good sold $5,295.24 $5,380.29 $5,508.97 $5,509.26 $5,455.29 $5,402.45 Gross profit $8,804.76 $8,860.71 $8,874.44 $9,017.98 $9,217.23 $9,416.79 General and Administrative expense
$3,245.28 $3,277.73 $3,310.51 $3,343.62 $3,377.05 $3,410.82
R&D $0.00 $60.50 $0.50 $0.50 $0.50 $0.50 HR $0.00 $0.0000 $2.9375 $2.6875 $2.6875 $2.6875 Info System $0.00 $0.10 $0.00 $0.00 $0.00 $0.00 Market Research $0.00 $0.50 $0.00 $0.00 $0.00 $0.00
EBIT $5,559.48 $5,521.88 $5,560.49 $5,671.18 $5,836.99 $6,002.78 Interest income $13.80 $13.94 $14.08 $14.22 $14.36 $14.50 Interest expense $64.32 $64.96 $65.61 $66.27 $66.93 $67.60 EBT $5,508.96 $5,470.85 $5,508.96 $5,619.13 $5,784.42 $5,949.68 Tax(25%) $1,377.24 $1,367.71 $1,377.24 $1,404.78 $1,446.10 $1,487.42 EAT(net profit) $4,131.72 $4,103.14 $4,131.72 $4,214.35 $4,338.31 $4,462.26
PROS CONS
Significant decrease in costs
Easier access to developing markets
Increased production capacity
Local technology and know-how
Lower profitability for the first couple years
Potential increase of contaminants
Safety concerns
Cost Of Reversibility
Irreversible costs$950,000
Cost of building the facilityEstimated $20M
Severance package cost$180,000(One month avg. salary)
2013 2014 2015 2016 2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
R & D
Market
Research
ISYS
Plant
Construction
Equipment
Recruiting
/Training
Increase sales by 4.5% by expanding into Latvia, Romania, South Korea and Thailand by the end of
2015
R & D
None required
Finance
60% debt
20% equity
20% cash reserve
Human Resources
Recruiting and training 35 agents
$200,000
Wages$485,000(annually)
Benefits$121,250(annually)
Info Systems
Use of existing
Market Research
Research on:
Market size
Segments
Purchasing power
Pet acceptance
$1M
Pro Income statement before strategy(in millions)
2012 2013 2014 2015
0.5% 0.5% 0.5%
Sales $14,100.00 $14,170.50 $14,241.35 $14,312.56
Cost of good sold $5,295.24 $5,321.72 $5,348.32 $5,375.07
Gross profit $8,804.76 $8,848.78 $8,893.03 $8,937.49
General and Administrative expense
$3,245.28 $3,261.51 $3,277.81 $3,294.20
EBIT $5,559.48 $5,587.28 $5,615.21 $5,643.29
Interest income $13.80 $13.87 $13.94 $14.01
Interest expense $64.32 $64.64 $64.96 $65.29
EBT $5,508.96 $5,536.50 $5,564.19 $5,592.01
Tax(25%) $1,377.24 $1,384.13 $1,391.05 $1,398.00
EAT(net profit) $4,131.72 $4,152.38 $4,173.14 $4,194.01
Pro Income statement after strategy(in millions)
2012 2013 2014 20151.5% 3.0% 4.5%
Sales $14,100.00 $14,311.50 $14,523.00 $14,734.50
Cost of good sold $5,295.24 $5,321.72 $5,348.32 $5,375.07
Gross profit $8,804.76 $8,989.78 $9,174.68 $9,359.43
General and Administrative expense
$3,245.28 $3,261.51 $3,277.81 $3,294.20
HR $0 $0.503125 $0.60625 $0.85
Market Research $0 $1 $0 $0
Marketing $0 $90.0048 $90.0048 $90.0048
EBIT $5,559.48 $5,726.77 $5,896.26 $6,064.38
Interest income $13.80 $13.87 $13.94 $14.01
Interest expense $64.32 $64.64 $64.96 $65.29
EBT $5,508.96 $5,676.00 $5,845.23 $6,013.10
Tax(25%) $1,377.24 $1,419.00 $1,461.31 $1,503.27
EAT(net profit) $4,131.72 $4,257.00 $4,383.92 $4,509.82
Marketing in Europe
Target consumer: 30+
Latviansonline.com
Hockey games in Latvia
Soccer games in Romania
Subway stations
TV
$50,480,000
Marketing in Asia
Target consumer: 30+
Soccer games in South Korea
Muay Thai fights in Thailand
Bus and subway stations
TV
$40M
PROS CONS
Narrow the gap with Mars
Improve global brand recognition
Local agents know-how
Local brand loyalty
Cross cultural risk
Political and economical threat
Possible competitors’ cost advantage in price
Cost of Reversibility
Irreversible costs$1.2M
Marketing cost$90,004,800
Severance package cost$17,835
2013 2014 2015
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Market
Research
Recruiting
and Training
Marketing
TV Ads
Subway
Banners
Sporting
Events
Online
Pursue action plan 1 to establish a production facility for future execution of action plan 2
Implementation of plan 1 allows for higher long term profits
52-week high: $57.25
52-week low: $43.50
Present price: $56
Market cap: 184.8B
Buy now
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