Project On Nestle
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Transcript of Project On Nestle
AAPROJECT REPORTPROJECT REPORT
ONONNESTLENESTLE
FOR THE PARTIAL FULLFILLMENT OF BACHELOR OF BUISNESSADMINISTRATION
GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY
SUBMITTED BY: VIPUL
BBA (GEN)
SUBMITTED TO: Mr. AMIT GUPTA
COURSE CORDINATOR OF BBA (GEN)
MAHARAJA AGRASEN INSTITUTE OF MANAGEMENT STUDIESAFFILATED TO GURU GOBIND SINGH INDRPRASTHA
UNIVERSITY
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ACKNOWLEDGEMENT
I here with take the opportunity to express my profound sense of gratitude and reverence to all those who have helped and encouraged me towards the successful completion of the project .It’s been a great experience working on NESTLE .It give me complete insight about how an organization not only survives in cutthroat completion but also maintain a killer instinct in the competitive world.
I would like to thank my project guider Mr. AMIT GUPTA for his immense guidance .A valuable help and provided me the opportunity to complete the project under his guidance
I would like to thanks all the faculty members of MAHARAJA AGRASEN INSTITUTE OF MANAGEMENT STUDIES for guiding me and supporting me in the completion of this project from time to time
Last but not least my greatest gratitude to the almighty and my parents, without their support this dream would have remained dream
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CERTIFICATECERTIFICATE
This is to certify that VIPUL study in our institute MAHARAJA AGRASEN
INSTITUTE OF MANAGEMENT STUDIES was allotted the project on
“NESTLE” by Guru Gobind Singh Inderprastha University has successfully
completed it under the guidance of Mr. AMIT GUPTA
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DECLARATIONDECLARATION
I here by declare that the project work entitled “ NESTLE” is an
authentic work carried out by me under the guidance of MR.
AMIT GUPTA (project coordinator) for a practical fulfillment of
the degree of BBA(GEN) and this has not been submitted
anywhere else for the award of any degree
Name of the student
VIPUL
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INDEX
CHAPTER 1 OJECTIVE RESEARCH METHODOGY
CHAPTER 2 INTRODUCTION COMPANY PROFILE
CHAPTER 3 ANALYSIS OF DATA PRODUCTS
CHAPTER 4 CONCLUSION LIMITATIONS
BIBLOGRAPHYANNEXURE
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EXECUTIVE SUMMARY
The current millennium has unfolded new business rules most the significant of them being that company has to constantly look into minds of the customer. Customer loyalty plays a significant role and today securing that loyalty requires quality right price and of course last but not the least i.e. creating awareness about their service. As a trainee, I was given knowledge about the way and style of their working, their routine and their environment. It was a great experience in getting under such a reputed company, which has in it the ability to retain customer.
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OBJECTIVE
To identify the services and products offered by NESTLE.
To study and analyze the customer perception and preference about NESTLE.
Finally to draw the various conclusion and recommendation on the on the basis of study conducted.
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RESEARCH METHODOLOGY
Managers need information in order to introduce products and
services that create value in the mind of the customer. But the
perception of value is a subjective one, and what customer’s value
this year may be quite different from what they value next year. As
such, the attributes that create value cannot simply be deduced
from common knowledge. Rather, data (information) must be
collected and analyzed. The goal of Marketing Research
(analysis) is to provide the facts and direction that managers need
to make their more important marketing decisions.
The analysis involves the following steps:
Define the problem.
Determine research design.
Identify data types and sources.
Determine sample plan and size.
Collect the data.
Analyze and interpret the data.
Prepare the research report.
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For the purpose of study, data from the in-house survey
conducted by the marketing department (secondary data) has
been used and also for coming out with the recommendation. It
was also felt that mere secondary data would not provide in-depth
information for the analysis, hence it was decided that interactive
discussions with the managers and the head of every department
would help in an in-depth and true understanding of challenges
faced by the department.
The methodology adopted was to gather relevant information from
the appropriate department, correlate the information obtained and
to present the information in a logical and systematic manner.
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INTRODUCTION
Nestle India Ltd. is a part of the Nestle SA group which is one of the largest manufacturing
companies in the world. Henri Nestle founded the company (with its headquarters in Vevey,
Switzerland) in 1867. Nestle has two major divisions - Le Societe des Produits which
looks after the production and marketing and Nestec Ltd. which provides the technical
assistance to the group companies. Since its inception in 1867, the company has diversified
it product range from the infant weaning formula (which was its first product) to beverages,
confectionery, ice creams and pet foods among others. In a span of 130 years the company
has ranked 26th among the world’s largest corporations and boasts of a turnover of $
48932.5 million and employee strength of 221,144 people spread over 75 countries
worldwide (Annexure A).
Nestle has long been viewed as one of the most multinational
of the multinationals. This is because today only 2% of its
turnover comes from Switzerland. Out of the remaining 98%,
Europe contributes 43.5%, North and South America
contribute 36.5% and Africa and the Asia Pacific Regions
contribute 18%.
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Company Profile
Although Nestle has been associated with India since the
beginning of the century through the importing and trading of infant
food and condensed milk, manufacturing in India only began with the
setting up of the factory in Moga in 1962. The first product to be
manufactured was Milkmaid. In the last 35 years the company has
shown rapid progress and has increased its product range to 80
products as of October 1997. Nestle India Ltd. now ranks 22nd
amongst India’s most valuable companies (Annexure B) . Its gross
revenue has increased from Rs 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 co-packers.
Taking measures to ensure availability and improved quality of key
raw materials - fresh milk in particular.
Strengthening of the sales and distribution network (particularly in
smaller towns)
Ambitious and cohesive manpower training and development
programs for the personnel of the company across all disciplines.
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The company’s exports also resulted in a very successful year in
this area as exports grew by 27% to Rs. 250.8 crores in 2003. The
main contributors to this increase were the export of tea and coffee to
USA, Japan, Russia, Hungary and Taiwan.
Nestle India Ltd. wants to further increase its operations in India
and has started construction of its sixth Factory at Bicholim, Goa for the
manufacture of culinary products (a key thrust area) for this purpose.
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The Spirit of Nestle
“Organisational excellence is never achieved through a one time
effort; 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 products, our shareholders with rapid growth & 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 optimise production costs while enhancing product quality so as
to make Nestle products even more competitive in the market place.
Sales and marketing
To reach a sales turnover of 3000 crores by the year 2003
To double the turnover every three years
People
To help employees to retain a long term perspective and integrate
them fully with the company’s business goals
To retain a broad perspective while addressing individual needs
To view growth as a continuous process
To concentrate on attitudinal changes by developing leadership
skills, an appreciation of interdependence between units and the
enhancement of a sense of belonging to Nestle.
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Finance
To maintain profit levels above the average for the food industry in
India.
The Business Excellence and Common Application (BECA) initiative
essentially translates the spirit of the Journey towards excellence into
an organised, systematic and measurable approach. The aim is to aid
the achievements of the company’s key objectives of rapid growth by
ensuring that all operations incorporate the spirit of meaningful
planning, effective cost control and efficient implementation. BECA is
about “ planned improvement in everything we do ”
Factories
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.
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2. Choladi ( Tamil Nadu): The factory in Choladi started production
in 1967. Situated about 60 miles from Calicut, the factory today has 81
employees and produces 1.5% of the total turnover of Nestle India. It is
a 100 percent export oriented unit which processes freshly picked tea
leaves into soluble instant tea.
3. Nanjagud (Karnataka): Production in this factory began in 1989
with the manufacture of Nestle instant coffee and Sunrise. Today in
addition to instant coffee the factory also manufactures health
beverages. The plant to manufacture MILO was also commissioned at
this factory. This factory employs 145 people and is cited as a model in
terms of environment protection for its installations to purify waste
water as well as for its provisions for recycling coffee wastes.
4.Samalakha (Haryana): This factory was set up in 1993. Located 70
kilometres from Delhi , it manufactures weaning cereals , culinary
products ,health beverages and milk products. Recently the expansion
of manufacturing capacity for Milkmaid Dessert Mixes was undertaken
at this factory as this new and unique product category is viewed to
have great potential in the future.
5.Ponda (Goa): This Kit-Kat factory was set up in Goa in 1995 at a
cost of Rs. 50 crores. It represented a major step by Nestle towards
becoming the Number 1 Chocolates and Confectionery Company in
India.
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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.
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 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
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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
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 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.
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 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
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figure was touching Rs 500 crores. In the 1995 the pace of launches
quickened and since the construction of the factory at Samalakha, 20
new products have been introduced. By 2003, Nestle had about 76
different products in its portfolio with various new products in the
pipeline as well. The sales figure now touched Rs. 1214 crores. Thus
sales grew by 450% over a period of one and a half decades.
Marketing Strategy
Nestle has adopted a four pronged growth strategy: -
1. Gunning the market with new products and brand extensions.
2. Expansion of the distribution network to small towns for extensive
availability.
3. Reduce prices and introduce smaller packages for products to
make them more affordable (a tool to enter price sensitive markets).
4. Focus on employ training and develop a positive attitude through
enhanced manpower development.
5. By year 2003 it expects chocolate & confectionery to account for
one in every third rupee in sale.
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In the late 1996 fear of breading complacency by not having a
continuous improvement, gave birth to an international sales &
marketing improvement teams (SMIT).
SMIT maps the latest in helping towards the target of year.
2003. The SMIT exercise is a major global initiative of Nestle to
enhance sales & marketing productivity. Linked with the already
existing BECA project, which in turn emphasises on excellence by
improving the distribution set up , this gave rise to the following growth
objectives for the year 2003
Ensure direct coverage of all urban towns in India.
Expand distribution to reach 1 million retail outlets on a regular
basis.
Work in partnership with the distributor for the achievement of these
objectives.
Provide sustainable solution to optimize our secondary sales from
distributor to retailer.
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NEW PRODUCT LAUNCHES
To put all the product launches into perspective, Nestle now has
80 products including various flavours and variants this awesome list of
80 products for most companies is an overfull palate. Nestle India Ltd.
Still have a variety of new products in the pipelines. It believes in slowly
colonizing as much territory as fast as it can, adapting to native
conditions and then work at “holding off the advancing herds”. Nestle
products can be broadly classified into 5 main ranges -
Milk Products
Chocolate and Confectionery
Beverages
Culinary
Food service
Milk Products
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This category which comprises of condensed milk, baby milk
foods , milk powders , acidified infant food , and other milk products,
showed a slump in 1996 as sale of milk products fell from Rs 31.4
crores in 1995 to Rs 31.2 crores in the said year. Consumer offtake
remained depressed throughout this year as a consequence of high
price increases necessitated by substantial increases(+50%) in the cost
of basic raw materials( fresh milk ) , over the past two years .
However Nestle retained its leadership in the infant food market
with Cerelac, Lactogen and Nestum and even introduced a new flavour
of Cerelac - Cerelac Rice in 1996.
Chocolates and Confectionery
Nestle pursues the objective of accounting for one in every three
rupees in its sales figures through chocolates and confectionery. This
has thus been one of the thrust areas in Nestle. Nestle this year
widened its range of flavours in POLO, backed by its tremendous
success in the Indian Market by adding POLO Spearmint to its
Portfolio. This new flavour has also received an encouraging
response in the market according to market analysts.
Milkybar also retained its position as the number one white
chocolate brand in India, however it did not record a significant
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increase in sales as a majority of Indian tastes still do not accept this
flavour.
This year however, was a year of tremendous success for Kit
Kat .This internationally renowned brand gained a large increase in the
Market share in the past year and Nestle officials are hopeful that this
will further increase in the coming years. However this Brand along with
it success has brought with it its share of Controversy as the Union of
India has launched a Litigation against the Kit Kat family pack.
In 1997 Nestle added to its range of confectionery by introducing
SPLASH, “A soft hearted, hard boiled sweet ” this is being promoted as
a sweet unique to India and is positioned to a target audience in the
age group of 4 to 12 years and “anyone with a soft heart” is a potential
customer. Priced at Rs. 1 for a 7.5 gram candy splash has been
introduced selectively in the South and has been speculated to repeat
Polo’s performance. Nestle’s officials claim that this candy has the
potential to grab a quarter of the 700 crores confectionery market.
The most recent of Nestle affairs with the confectionery market
has been the introduction of Mithai Magic which is “a little Mithai , a
little magic “ .This new product was launched in September 1997 ,in
time for the Diwali purchases of sweets . This brand has been
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positioned somewhere between chocolates and traditional sweets and
the company is employing a push strategy to promote this brand.
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Beverages
This year has been very successful in the beverages market for
Nestle .The sales of beverages has increased from Rs 323.3 crores in
2002 to Rs 398.8 crores in 2003.
Nestles Flagship Nescafe which was pegged at Rupees 1040
per Kilogram before the launch of Tata Cafe, met with stiff competition
from Tata Cafe priced at Rupees 550 per Kg once it was introduced .
Tata cafe claimed to have garnered a market share of 17% by
December 1996. This forced Nestle to cut prices of Nescafe to Rupees
840 per Kg. However Nescafe still retains 83% market share in the Rs
177 Crores market for pure instant coffee.
Nestle Sunrise also showed an increase in sales and captured
20 % of the Rs 253 crores market in Mixed instant coffee.
This year Nestle also launched MILO, an internationally renowned
chocolate energy drink, and the response for this has been
encouraging.
Nestle has also introduced Tasters Choice tea bag pitched against Taj
mahal tea bags.
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Culinary Products
The market in culinary products had witnessed a high growth
consequent to aggressive pricing decisions on existing products and
the introduction of a variety of new products to match the needs of the
Indian Housewife. Encouraged by this success Nestle launched Maggi
Macoroni Snack in three flavors - Chicken , Masala and Tomato. Nestle
officials’ say that this would consolidate Maggis position as the number
1 culinary brand in India. The product focuses on convenience and
innovation as its Unique Selling Proposition. This snack has opened a
new segment for the maggi brands. The brand is positioned as youthful
and is represented by the twists and curls of the macaroni snack. It is
speculated to be introduced in a phase manner nation-wide to be
placed in the 7.5 lakh outlets that Maggi noodles sells in .
In the spirit of catering to Indian tastes Maggi introduced maggi
pickles in five variants benchmarked to give the “ghar ka swad”. Maggi
Dosa Mix was also introduced to offer superior 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.
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Food Service
Food service items basically deal with the out of home
segments, which would include vending machines. Nestle’s food
service business is poised for rapid expansion to meet the growing
need for such a reliable, time saving and cost effective service in this
modern age .
Nestle wants to sell 500 million cups of tea and coffee through
its vending machines in the year 2003. It currently has 3500 vending
machines at assorted locations (both public and private). In 1995
Nestle food service did well to vend 40 million cups of Nescafe and
Tasters Choice tea. Its 2003 sales were placed at 59 million cups of
Nescafe and 36 million cups of tea, this figure was however way below
the expected sales for the year.
Distribution strategy
It is an indisputable fact that fundamentally all consumers
marketing must first assure availability of the product to the consumer.
In India, the urban population alone is of a whooping 250 million
consumers -an unbelievable potential for any FMCG . The potential
being spread across more than 4000 towns have to be very effectively
and efficiently tapped. Nestle till now was retailing in a limited number
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of towns with only 200 towns accounting for 70 % of their business. For
Nestle to be a leader in the food industry, expanding the distribution
network for more retail outlets was a must.
To meet this challenge, Nestle is working towards an objective
of increasing the retail base to 1,000,000 outlets by the year 2003. This
network is feasible as Nestle has a triangular distribution structure thus
the span of control is still retained. The Distribution Network is
explained in figure 2.
In order to achieve these distribution objectives Nestle has
formulated an international sales and marketing improvement team
(SMIT). SMIT focuses on a single objective -provide sustainable
solutions to optimize the distributor and retailer sales through a step by
step approach starting with analysis of market followed by identification
of the probable retail outlets and finally selection of the same .The
team also focuses on proper implementation of resources and timely
follow ups for effective solutions.
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Advertising Strategy
Nestle, a cash rich company has plenty of marketing prowess.
This can be credited to a strong and sound advertising strategy.
Nestle in the year 2002 had an advertisement spending of Rs
43.3 crores (net) . Tracing Nestles advertising responses the ad
campaign by HTA of ‘Hot and Sweet’ was a runway success this ad
was actually meant to fend off a challenge from H.J Heinz. The Maggi
ranges of sauces were introduced in 1985 but sales didn’t catch up
until 1990 but till 2003 it got considerable market share. At this point
the popular and memorable campaign of Javed Jaffrey and Pankaj
Kapoor was launched by Producer Pralad Kakkar . This commercial
was an instant success. The volume of sales kept rising from an initial
growth of 13% to 20% in the next year. Today the sales figure for
Maggi Sauces is growing at a steady 6% per year.
Another noteworthy campaign was that of POLO (the mint with a
hole), devised by Mudra advertising agency. This campaign was
awarded 11 industry ad awards.
In 2002 the advertisement budget has been approximately Rs
56 crores where again innovation was the main focus. The new nation-
wide product launch of Maggi Macaroni Snack and Mithai Magic have
been designed by Mudra . The Macaroni ad with its use of “English “
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and a catchy beat (which is the latest trend amongst the Indian
Advertisers) appeals well to the target audience and the Mithai Magic
commercial does keep the secret of the contents in the box , intact.
“Training is an integral and indispensable part of Nestle . I regard the
importance of training a highly as research and development .It is a
major investment in the Future of the company and imperative because
it is an investment in people ”
- Mr. Helmut Maucher
Chairman and CEO Nestle S A
Group
Nestle India Ltd. has an employee base of 3040 people and
aims to be in the top quartile of the FMCG companies .For this
purpose it follows a very stern and rigorous recruitment policy .
Recruitment Policy
Recruitment of fresh management trainees and sales officers is
done every April-May. These graduates are generally selected from the
best institutes in the country through a series of interviews. They are
then put through a probation period of 12-18 months. Although Nestle
does not offer some of the highest pay packets in the industry, it is
considered a growth oriented company.
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Training and Development
Continuous development of skills and attitudes of employees is
critical to the achievement of excellence. At Nestle therefore training
and development of human resources is viewed as a long term
investment .
“ If you are planning for one year , Plant wheat;
If you are planning for ten years, plant a tree;
If you are planning for life, train people.”
- Old Chinese proverb
This proverb goes with the organizations most enduring beliefs
worldwide -
That long term planning is the key to Nestles global success
That Nestle’s most valuable assets are its people
Nestle’s policy is to rely on a more decentralized form of
management by building in the habit to “ Think Nestle”.
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At Nestle India training and development is an integral part of
the business plan and strategy in line with the objectives for the year
2003 and aims to -
Help employees to retain long term perspective and integrate them
fully with the company’s business goals
View the growth of both the personnel and the company as a
continuous process .
Concentrate on attitudinal changes by developing leadership skills,
an appreciation of interdependence between units and the
enhancement of a sense of belonging to Nestle .
In 2003 Nestle India benefited greatly from the training program
offered at the Rive Reine International Training Center at Vevey,
Switzerland. This training program helped facilitate the transfer of
common Knowledge (technical, marketing, and finance) across the
Nestle Group and ensure interdisciplinary approach to learning and
uniform progress with a tailor-made approach for all.
Company Training needs -
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analysis of training needs of Managers
self development programs for staff at HO
programs for company orientation and information sharing
programs aimed at computer training and computerization
Establishment of contact with leading management institutes with a
view to use the same for meeting local training requirements
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 and
traditions of every employee in every country. What Nestle aims at is to
incorporate its own culture into its employees without stifling the
individual employee’s culture and identity. When we went to Nestle we
could feel the existence of a distinctive work culture amongst the
management - the staff seemed highly motivated & cheerful and
everybody had pin up boards in front of their tables with reminders ,
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motivational messages and even time logs (the Nestle people seemed
as if they availed of the benefits of time management) .
Apart from this, Nestle has a vast distribution network. In order
to support the BECA process, an integrated computer system has been
put in place across the company to link all functional areas and
locations. This common linked system will improve information
availability, aid quick decision-making and improve supply chain
integration.
Nestle has a diverse product range and so it also has diversified risks
Thus Management on Information systems plays a vital role in Nestle
to provide information to the Sales and Marketing as well a the
finance department .The Electronic Data Processing Department
looks after Management Information Systems .
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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).
Nestle has long been viewed as one of the most
multinational of the multinationals. This is because
36
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.
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.
37
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.
38
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 products, our
shareholders with rapid growth and fair returns and our
employees with a challenging and satisfying work
environment."
39
To translate this spirit into a planned and measurable
process, Nestle has set up key objectives across all
divisions.
40
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.
To retain a broad perspective while addressing
individual needs
41
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.
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.
42
SALES ANALYSIS
By Geographic Area
In Million of CHF 2006
(%)
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
43
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
44
Breakdown of 2006 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.
Company Profile
45
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
Suisses. S. A.
1947 Merger with Alimentana S.A. (Maggi)
46
1971 Merger with Ursina-Franck (Switzerland)
1985 Acquisition of Carnation (USA)
1990 Acquisition of Buitoni-Perugina (Italy)
1992 Acquisition of Rowntree (GB)
1994 Acquisition of Perrier (France)
1998 Acquisition of Spillers (GB)
2002 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).
2006 Acquisition of PowerBar.
Factories
Nestle has 6 factories in India. These are
1. Moga (punjab)
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The Nestle factory in Moga has the pride of being the
first and most comprehensive factory of Nestle India. Set
up in 1962, it represents the core competence of Nestle
India in the manufacture of milk products (Everyday,
Milkmaid), beverages, culinary products (Maggi sauces,
noodles, soups etc.), weaning cereals (Cerelac) and
infant milk formulae.
2. Choladi ( Tamil Nadu)
The factory in Choladi started production in 1967.
Situated about 60 miles from Calicut, the factory today
has 81 employees and produces 1.5% of the total
turnover of Nestle India. It is a 100 percent export
oriented unit which processes freshly picked tea leaves
into soluble instant tea.
3. Nanjagud (Karnataka)
Production in this factory began in 1989 with the
manufacture of Nestle instant coffee and Sunrise. Today
in addition to instant coffee the factory also
manufactures health beverages. The plant to
48
manufacture MILO was also commissioned at this
factory. This factory employs 145 people and is cited as
a model in terms of environment protection for its
installations to purify waste water as well as for its
provisions for recycling coffee wastes.
4.Samalakha (Haryana)
This factory was set up in 1993. Located 70 kilometres
from Delhi , it manufactures weaning cereals , culinary
products ,health beverages and milk products. Recently
the expansion of manufacturing capacity for Milkmaid
Dessert Mixes was undertaken at this factory as this new
and unique product category is viewed to have great
potential in the future.
5.Ponda (Goa)
This Kit-Kat factory was set up in Goa in 1995 at a cost
of Rs. 50 crores. It represented a major step by Nestle
towards becoming the Number 1 Chocolates and
Confectionery Company in India.
49
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.
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 -
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Process improvement to ensure the optimal usage of
resources
Improvement of operational efficiency
Cost optimization
A series of small but critically important initiatives
ranging from redesigning laboratories to palletisation of
raw materials and packaging material utilization,
manufacturing and filling loses and labour man hours
resulting in substantial savings and improved
productivity and machine utilization. In addition, several
non tangible benefits in the form of systems for
sustainable improvement in areas like factory
maintenance planning tools , down time recording
systems and performance measurement tools were also
realized .
This project was highly successful and the company is
now implementing its key learning’s of MIT in its other
factories.
51
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 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
52
planning, production output, quality assurance, material
ordering transportation and warehouse management.
These measures are monitored regularly to gauge the
extent of improvement and identify root problems for
taking corrective actions.
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
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
53
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.
54
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
55
Nesquik, Nescau, Nestea, Milo, Carnation, Libby's Caro.
56
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)
Maggi, Crosse and Blackwell, Libby's, Thomy, Builtoni,
Contadina
57
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, Smarties,
Baci, After Eight, Baby Ruth, Butterfinger, Lion, Nuts,
Rolo, Aero, Polo, etc.
58
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
59
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
Food Service.
60
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.
61
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 the past year and
Nestle officials are hopeful that this will further increase
in the coming years. However this brand along with its
62
success has brought with it its share of Controversy as
the Union of India has launched a Litigation against the
Kit Kat family pack.
In 1997 Nestle added to its range of confectionery by
introducing SPLASH, "A soft hearted, hard boiled sweet"
this is being promoted as a sweet unique to India and is
positioned to a target audience in the age group of 4 to
12 years and "anyone with a soft heart" is a potential
customer. Priced at Rs. 1 for a 7.5-gram candy Splash
has been introduced selectively in the South and has
been speculated to repeat Polo's performance. Nestle's
officials claim that this candy has the potential to grab a
quarter of the 700 crores confectionery market.
The most recent of Nestle affairs with the confectionery
market has been the introduction of Mithai Magic, which
is "a little Mithai, a little magic." This new product was
launched in September 1997, in time for the Diwali
purchases of sweets. This brand has been positioned
somewhere between chocolates and traditional sweets
and the company is employing a push strategy to
promote this brand.
63
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 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.
64
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
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
65
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 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
66
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 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.
67
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.
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ANNEXURE
Financial Results and Operation
2006(Rs. in millions) 1996(Rs. in millions)
Gross Revenue 12144 10011
Gross Profit (BIT) 1343 1183
Interest 506 315
Depreciation 227 165
Provision for Tax 68 171
Profit after taxation 542 532
Extraordinary tax
Payment
14 116
Profit after taxation and
extraordinary item
528 416
Profit brought forward 215 145
70
Reserves written back 49 130
Balance available for
appropriation
792 691
Interim dividends paid 353 321
Final Dividend proposed - 97
Transfer to debenture
redemption reserve
42 2
transfer to general
reserve
54 56
Surplus carried in Profit
and loss Account
343 215
Gross Revenue increased by 21% during the year, and crossed
the 1200 crores mark . Domestic sales grew by 19% and exports
(including sales to Nepal ) grew by 27 %. Net profit after tax grew by
27% - From Rs 41.6 crores to Rs 52.8 crores.
71
Throughout 2003, there was a marked lack of buoyancy in the
domestics market caused primarily by increased inflation and the
financial liquidity squeeze which affected all segments of the industry
and trade .
Interest costs rose substantially on account of higher funding
needs to service recently commissioned projects as well as to meet
increased exports for which materials often had to be purchased in
advance .
Considering the recessionary market conditions, Nestles overall
sales and progression during 2003 can be considered satisfactory.
72
Financial Information
In millions of CHF 2006
Sales 81 422
EBITDA (a) 12 516
as % of sales 15.4%
EBITA (b) 9600
as % of sales 11.8%
Trading Profit 9 186
as % of sales 11.3%
Net Profit 5 763
as % of sales 7.1%
Capital expenditure 3305
73
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
74