PrefaceBusiness is a never ending race and in the fast running world of business, there is a variety of products, shops, showrooms, setups and etc. One important branch of business is “marketing” which works as a catalyst and its good use can ensure healthy perpetuation of business. With the aim of studying the marketing mix of any multi-national company, we have compiled this report and the organization that is chosen for our research report is ‘NESTLÉ’.

Data and observation analysis, recommendations for managing conflicts is also discussed. The methods used for collecting data for this report are surveys, questionnaires, personal observations, personal interviews, newspapers, internet etc.

Great effort and care has been taken in the compilation of this report. With the limited resources at our disposal, we’ve tried our best to ensure a healthy reading experience.

Enjoy!

AcknowledgementWith the special blessing of ALLAH ALMIGHTY, this report was finally composed on 18th January 2015, as per instructed by Mrs Sajida Nisar (Instructor of “Introduction to Marketing” at IBA Punjab University, Lahore).

Special thanks to Mr. Musa-bin-Nasr (Brand Manager of Nestlé) and Mr. Abdul Jabbar (Marketing Manager of Nestlé) for their co-operation towards the compilation of this report. Not to forget the efforts of entire team to piece up all the bits and chunks of information and compile it into a meaningful report.

All rights reserved. This report is made solely for educational purposes and it does not mean to tamper with the copyrights of any author, organization or any relevant reference thereof in that might have been consulted, nor is it made for public distribution. Copying of this report is NOT permissible without the authors’ consent.

AUTHORS

Nestlé’s History

1866-1905: The key factor which drove the early history of the enterprise that would become The Nestlé Company was Henri Nestlé's search for a healthy, economical alternative to breastfeeding for mothers who could not feed their infants at the breast.

In the mid-1860s Nestlé, a trained pharmacist began experimenting with various combinations of cow's milk, wheat flour and sugar in an attempt to develop an alternative source of infant nutrition for mothers who were unable to breast feed. His ultimate goal was to help combat the problem of infant mortality due to malnutrition. He called the new product Farine Lactée Henri Nestlé. Nestlé's first customer was a premature infant who could tolerate neither his mother's milk nor any of the conventional substitutes, and had been given up for lost by local physicians. People quickly recognized the value of the new product, after Nestlé's new formula saved the child's life and within a few years, Farine Lactée Nestlé was being marketed in much of Europe. Henri Nestlé also showed early understanding of the power of branding. He had adopted his own coat of arms as a trademark; in Swiss German, Nestlé means 'little nest'. One of his agents suggested that the nest could be exchanged for the white cross of the Swiss flag. His response was firm: "I regret that I cannot allow you to change my nest for a Swiss cross .... I cannot have a different trademark in every country; anyone can make use of a cross, but no-one else may use my coat of arms." Meanwhile, the Anglo-Swiss Condensed Milk Company, founded in 1866 by Americans Charles and George Page, broadened its product line in the mid-1870s to include cheese and infant formulas. The Nestlé Company, which had been purchased from Henri Nestlé by Jules Monnerat in 1875, responded by launching a condensed milk product of its own. The two companies remained fierce competitors until their merger in 1905. Some other important firsts occurred during those years. In 1875 Vevey resident Daniel Peter figured out how to combine milk and cocoa powder to create milk chocolate. Peter, a friend and neighbour of Henri Nestlé, started a company that quickly became the world's leading maker of chocolate and later merged with Nestlé. In 1882 Swiss miller Julius Maggi created a food product utilizing legumes that was quick to prepare and easy to digest. His instant pea and bean soups helped launch Maggi & Company. By the turn of the century, his company was producing not only powdered soups, but bouillon cubes, and sauces and flavourings.

1905-1918: The Company formed by the 1905 merger was called the Nestlé and Anglo-Swiss Milk Company.

By the early 1900s, the Company was operating factories in the United States, Britain, Germany and Spain. In 1904, Nestlé added chocolate to its range of food products after reaching an agreement with the Swiss General Chocolate Company. Condensed-milk exports increased rapidly as the Company replaced sales agents with local subsidiary companies. In 1907, the Company began full-scale manufacturing in Australia, its second-largest export market. Warehouses were built in Pakistan, Hong Kong, and Bombay to supply the rapidly growing Asian markets. Most production facilities remained in Europe, however, and the onset of World War I brought severe disruptions. Acquiring raw materials and distributing products became increasingly difficult. Fresh-milk shortages throughout Europe forced factories to sell almost all their supplies to meet the needs of local towns. Nevertheless, the war created tremendous new demand for dairy products, largely in the form of government contracts. To keep up, Nestlé purchased several existing factories in the United States. By war's end, the Company had 40 factories, and its world production had more than doubled since 1914.

1918-1938: The end of World War I brought with it a crisis for Nestlé.

Government contracts dried up following the cessation of hostilities, and civilian consumers who had grown accustomed to condensed and powdered milk during the war switched back to fresh milk when it became available again. In 1921, the Company recorded its first loss. Rising prices for raw materials, the worldwide post-war economic slowdown, and deteriorating exchange rates deepened the gloom. Nestlé's management responded quickly, bringing in Swiss banking expert Louis Dapples to reorganize the Company. He streamlined operations to bring production in line with sales and reduced the Company's outstanding debt. The 1920s also saw Nestlé's first expansion beyond its traditional product line. The manufacture of chocolate became the Company's second most important activity. New products appeared steadily: malted milk, a

powdered beverage called Milo, a powdered buttermilk for infants, and, in 1938, Nescafé. The Brazilian Coffee Institute first approached Louis Dapples in 1930, seeking new products to reduce Brazil's large coffee surplus. Eight years of research produced a soluble powder that revolutionized coffee-drinking habits worldwide. Nescafé became an instant success and was followed in the early 1940s by Nestea.

1938-1944: The effects of the onset of World War II were felt immediately by Nestlé.

Profits dropped from $20 million in 1938 to $6 million in 1939. Neutral Switzerland became increasingly isolated in a Europe at war, and the Company transferred many of its executives to offices in Stamford, Connecticut.The first truly global conflict ended forever the traditional Company structure. To overcome distribution problems in Europe and Asia, factories were established in developing countries, particularly in Latin America. Ironically, World War II helped speed the introduction of the Company's newest product, Nescafé. After the United States entered the war, Nescafé became a staple beverage of American servicemen serving in Europe and Asia. Annual production levels reached one million cases by 1943. As in World War I, production and sales rose in the wartime economy: Nestlé's total sales jumped from $100 million in 1938 to $225 million in 1945. As the end of the war approached, Nestlé executives found themselves unexpectedly heading up a worldwide coffee concern, as well a company built upon Nestlé's more traditional businesses.

1944-1975: The close of World War II marked the beginning of the most dynamic phase of Nestlé's history.

Throughout this period, Nestlé's growth was based on its policy of diversifying within the food sector to meet the needs of consumers. Dozens of new products were added as growth within the Company accelerated and outside companies were acquired. In 1947, Nestlé merged with Alimentana S.A., the manufacturer of Maggi seasonings and soups, becoming Nestlé Alimentana Company. The acquisition of Crosse & Blackwell, the British manufacturer of preserves and canned foods, followed in 1950, as did the purchase of Findus frozen foods (1963), Libby's fruit juices (1971) and Stouffer's frozen foods (1973). Meanwhile, Nescafé continued its astonishing rise. From 1950 to 1959, sales of instant coffee nearly tripled, and from 1960 to 1974, they quadrupled. The Company's total sales doubled twice in the 15 years after World War II. The development of freeze-drying led to the introduction, of Taster's Choice instant coffee, in 1966. Finally, Nestlé management reached the decision to diversify for the first time outside the food industry. In 1974, the Company became a major shareholder in L'Oréal, one of the world's leading makers of cosmetics.

1975-1981: After the agreement with L'Oréal in 1974, Nestlé's overall position changed rapidly.

For the first time since the 1920s, the Company's economic situation deteriorated as the price of oil rose and growth in the industrialized countries slowed. In addition, foreign exchange rates deteriorated with the French franc, dollar, pound sterling, and mark all losing value relative to the Swiss franc. Finally, between 1975 and 1977, the price of coffee beans quadrupled, and the price of cocoa tripled. As in 1921, the Company was forced to respond quickly to a radically changed marketplace. Nestlé's rapid growth in the developing world partially offset a slowdown in the Company's traditional markets, but it also carried with it the risks associated with unstable political and economic conditions. To maintain a balance, Nestlé made its second venture outside the food industry by acquiring Alcon Laboratories, Inc., a U.S. manufacturer of pharmaceutical and ophthalmic products. Taking such a step in a time of increased competition and shrinking profit margins required boldness and vision. Even more than the L'Oréal move, Alcon represented a leap into unknown waters for Nestlé. But, as Group Chairman Pierre Liotard-Vogt noted, "Today we find ourselves with a very wide range of activities, all of which have one thing in common: they all contribute to satisfying the requirements of the human body in various ways."

1981-1996: Under a new Chief Executive Officer, Helmut Maucher, Nestlé approached the 1980s with a renewed flexibility and determination to evolve.

The Company's strategy for this period was twofold: improve its financial situation through internal adjustments and divestments, and continue its policy of strategic acquisitions. Thus, between 1980 and 1984, the Company divested a number of non-strategic or unprofitable businesses. At the same time, Nestlé managed to put an end to a serious controversy over its marketing of infant formula in the Third World. This debate had led to a boycott of Nestlé products by certain lay and religious organizations. This issue is still alive in some quarters, but there is no longer any significant boycott activity. In 1984, Nestlé's improved bottom line allowed the Company to launch a new round of acquisitions, including a public offer of $3 billion for the American food giant Carnation. At the time, the takeover, sealed in 1985, was one of the largest in the history of the food industry.

1996-2002: The first half of the 1990s proved to be a favourable time for Nestlé: trade barriers crumbled and world economic markets developed into a series of more or less integrated trading areas.

The opening of Central and Eastern Europe, as well as China, and a general trend towards liberalization of direct foreign investment was good news for a company with interests as far-flung and diverse as Nestlé. While progress since then has not been as encouraging, the overall trends remain positive. Consolidation since 1996 has been demonstrated by the acquisition outright of the Italian mineral water concern San Pellegrino (1997), the acquisition of Spillers Petfoods of the UK (1998), and also with the decision to divest the Findus brand in order to concentrate on high added-value frozen food products (1999). Since then, Ralston Purina was acquired (2002) and the petcare business is now joint world leader and known as Nestlé Purina PetCare. In the same year, the former Perrier Vittel water business was re-named Nestlé Waters, recognising the fact that the dynamic bottled water business accounts for a growing share of

Group sales. Nestlé opened the 20th century by merging with the Anglo-Swiss Condensed Milk Company to broaden its product range and widen its geographical scope. In the new millennium, Nestlé is the undisputed leader in the food industry, with more than 470 factories around the world and sales of more than CHF 81 billion. In July 2000, Nestlé launched a Group-wide initiative called GLOBE (Global Business Excellence), aimed at harmonizing and simplifying business process architecture; enabling Nestlé to realize the advantages of a global leader while minimising the drawbacks of size. There have also been two major acquisitions in North America, both in 2002: in July, Nestlé announced that the U.S. ice cream business was to be merged into Dreyer's, and in August, a USD 2.6bn acquisition was announced of Chef America, Inc. , a leading U.S.-based hand-held frozen food product business. The Company's strategy will continue to be guided by several fundamental principles. Nestlé's existing products will grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Long-term potential will never be sacrificed for short-term performance. The Company's priority will be to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives.

2003: We acquired Mövenpick Ice Cream, enhancing our position as a market leader in the super premium category.

2005: Our Chairman Peter Brabeck-Letmathe recognised that the eating habits of the world’s population were changing and we began our own transformation.

We began to move away from being a processor of agricultural commodities towards becoming a producer of food with added benefits and ultimately a provider of a wide range of products and services in the areas of nutrition, health and wellness.

2006: We acquired Jenny Craig and Uncle Toby's.

With the help of Harvard’s Michael Porter and Mark Kramer, we articulated for the first time the concept of Creating Shared Value. Creating Shared Value expresses our conviction that we can only be successful over the long term if we create value, not just for our shareholders, but also for society.

2007: We acquired Novartis Medical Nutrition, Gerber and Henniez.

2009: We held the first Creating Shared Value Forum in New York, with leading experts in the areas of nutrition, water and rural development coming together to discuss serious global challenges facing us in these three areas and the role of business in helping to solve them. The Creating Shared Value Forum has been held on an annual basis since then.

History of Logo

The Nestlé logo is undoubtedly one of the most memorable and well-recognized food logos ever created. Despite being changed several times, the logo still retains a sense of authority and modernity with an up-to-date feel.

Shape of the Nestlé Logo:

The earliest Nestlé logo was introduced by Henri Nestlé in 1868, based on the meaning of his name in German, i.e. little nest, as an artistic conceptualization of his family emblem. Henri secured a 15-year Frenchpatent for this design the same year. Following his retirement, the logo was registered in Vevey in 1875 by the new owners of the Nestlé S.A. company.

Later in 1938, the “Nestlé” name was introduced to the traditional nest design, giving rise to the “combined mark”. However, in 1966, the design was simplified once again, with a few minor graphic tweaks to the nest as well as the typeface.

In 1988, the worm in the beak of the mother bird was taken out while an extra fledgling was also added. Such changes were intended to put an emphasis on the activities of the company, which was broadening its horizons to include diversified products, while reflecting the modern family with two children.

NESTLÉ – An IntroductionNestlé was founded in 1866 by Henri Nestlé with headquarters in Vevey, Switzerland. It has its offices in 140 countries, its factories in 89 countries and has employed around 250,000 people. It is one of the world's biggest food and Beverage Companies. The Company's priority is to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives. The goals of Nestlé are nutrition, health and wellness. Being a brand of high reputation, customers expect Nestlé to maintain higher standards when it comes to quality assurance. With the passage of time, Nestlé has become a benchmark for other companies.

Nestlé in Pakistan is operating since 1988 under a joint venture with Milk Pak ltd and took over management in 1992. Nestlé Pakistan is proud of its commitment to excellence in product safety and quality and to providing value and aims to be the leading Nutrition, Health and Wellness Company. As a socially responsible corporate, we always focus on environment friendly operations, ethical business practices and our responsibility towards the communities.

Mission Statement

Nestlé’s mission, in the words of our founder Henri Nestlé, is to: “...positively influence the social environment in which we operate as responsible corporate citizens, with due regard for those environmental standards and societal aspirations which improve quality of life.” -- Henri Nestlé, 1857. 

Vision and Values

To be a leading, competitive, Nutrition, Health and Wellness Company delivering improved shareholder value by being a preferred corporate citizen, preferred employer, preferred supplier selling preferred products.

Nestlé Pakistan subscribes fully to this vision of being the number one Nutrition, Health, and Wellness Company in Pakistan. In particular, we envision to;

• Lead a dynamic, passionate and professional workforce – proud of our heritage and positive about the future.

• Meet the nutrition needs of consumers of all ages – from infancy to old age, from nutrition to pleasure, through an innovative portfolio of branded food and beverage products of the highest quality.

• Deliver shareholder value through profitable long-term growth, while continuing to play a significant and responsible role in the social, economic, and environmental sectors of Pakistan.

NESTLÉ TODAY

Nestlé is now the world's largest food company. It is present on all five continents, has an annual turnover of 74.7 billion Swiss francs, runs 509 factories in 83 countries and employs about 231,000 people the world over.

The Company owes its current status to the pioneering spirit inherited from its founders which continues to inspire it, to its concern with quality and to its constant search for new ways of satisfying man's nutritional needs.

Wherever possible, it sets up factories locally, employs personnel from the country concerned and relies on indigenous raw materials. Its agricultural services provide assistance to improve the quality and yield of the raw materials it uses. Much attention is devoted to professional training and to the integration of the Company in its economic and social environment.

Major Competitors

Ferrero Nespresso PepsiCo ITC Limited Keurig Nigeria Breweries Starbucks Maggi products Unilever Amul BakerHostetler Engro Foods Walmart Heinz IBFAN Euro Africa Emeven Global Glencore

BCG Growth MatrixThe BCG-matrixis a chart that was created by Bruce D. Henderson for the Boston Consulting Group in 1970 to help corporations to analyze their business units, that is, their product lines. This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis. Its pattern is given below:

As in the case of Nestlé, the BCG growth matrix can be drawn as:

Product Life CycleOur goal is that Nestlé products will not only be tastier and healthier, but also better for the environment along their value chain. It’s a challenge we approach by identifying areas for improvement at every stage from farm to consumer and beyond.

We are determined to live up to the expectations our employees and external stakeholders have about our environmental responsibility and practices. To build trust, we integrate environmental sustainability into our communications. We educate all employees to live by the Nestlé business principle on environmental sustainability. And we engage with stakeholders, develop key partnerships and nurture constructive relations with organisations that are critical to our environmental performance.

Our progress

We reissued The Nestlé Policy on Environmental Sustainability (pdf, 3Mb) and engaged the business in developing our 2016 strategic master plan for environmental sustainability.

We were externally recognised for our efforts in the Dow Jones Sustainability Index Series 2013 (best performer in our sector group), in the CDP Climate Disclosure Leadership Index and the Climate Performance Leadership Index 2013 (best performer in all sectors combined).

In 2013, 12% of Nestlé factories achieved zero waste for disposal - ahead of the targeted 10% by 2015.

The Nestlé Policy on Environmental Sustainability

In 2013, we reissued The Nestlé Policy on Environmental Sustainability, first launched in 1991, to better reflect our evolving ambition, and the contribution of environmental sustainability to Creating Shared Value.

We have reissued it with a commitment by the CEO to environmentally sustainable business practices. Paul Bulcke states in this commitment: “Our goal is that our products will not only be tastier and healthier but also better for the environment along their value chain.”

The reissued policy includes the steps we will take to meet this commitment, through a product life-cycle approach that involves our partners, from farms to consumers and beyond.

As well as additional information on governance and Nestlé Continuous Excellence, it identifies six new focus areas:

Water preservation Natural resources efficiency Biodiversity conservation Air emissions reduction Climate change adaptation, and Zero waste

The Nestlé Policy on Environmental Sustainability is complemented with more detailed commitments on a number of key issues:

The Nestlé Commitment on Climate Change The Nestlé Commitment on Biofuels The Nestlé Commitment on Water Stewardship The Nestlé Commitment on Natural Capital The Nestlé Commitment on Deforestation and Forest Stewardship

Nestlé Environmental Management System

The Nestlé Policy on Environmental Sustainability is implemented through the Nestlé Environmental Management System. Management is accountable for its implementation within their area of responsibility. The system is designed to improve environmental performance, to help ensure compliance with all relevant requirements and enable our factories to achieve ISO 14001:2004 certification.

To ensure consistent and coherent implementation worldwide, Nestlé submits all its manufacturing sites to ISO 14001 certification by independent accredited bodies and is expanding this programme to all its units.

By the end of 2013, we had achieved ISO 14001:2004 certification at 601 of our sites.

Product life-cycle approach

Life-cycle assessment (LCA) is an internationally recognised method for assessing the environmental impacts of a product throughout its life cycle. Understanding these impacts is key to improving the environmental performance of our products.

We seek to improve the environmental performance of our products by optimising their environmental impact from the earliest stages of their design. This means thinking about everything from agricultural production to what happens at the end of a product’s life.

To help, we have been pioneering new, more user-friendly methods and tools to help designers use LCA methods and identify opportunities for more sustainable design. We have also identified the environmental hotspots to be addressed as a priority.

Nestlé – Four “Ps”The Marketing mix of Nestlé discusses the 4P’s of one of the strong FMCG companies of the world. The Nestlé marketing mix shows Nestlé has a strong product line which boosts its marketing mix. Below are the products, price, placement and promotions of Nestlé.

ProductsVariety:

There are 4 different strategic business units within Nestlé which are used to manage various food products.

Beverages – One of the most known coffee brands Nescafe, belongs to the house of Nestlé and is one of the cash cows for Nestlé. However, it is not the biggest cash cow. Nestlé has a worldwide distribution and has many different variants. Looking at India, Nestlé has also launched Nestea.

Milk and Milk products – Nestlé everyday, Nestlé slim and Nestlé Milk maid are some of the milk and milk based products from the house of Nestlé.

Prepared dishes and cooking aides – Nestlé has a third category of products which comes into prepared dishes and cooking aides. The major cash cow of Nestlé lies in this segment, which is Maggi Noodles. Probably one of the most widely sold ready to cook noodle brands is Maggi. Maggi has a fantastic taste and quality. Thus, it was not a surprise, that Nestlé expanded the Maggi brand to create an umbrella of different products like Maggi pasta, Maggi sauce, Maggi cubes etc. The maggi range contributes vastly to the bottom line of Nestlé.

Chocolates – Nestlé has some popular chocolate products, most popular being Nestlé Kitkat, Munch, Milky bar, Eclairs and Polo. The newly introduced Alpino is targeting the gifting segment in response to various chocolates like Dairy milk and Bournville by Cadbury. The

chocolates segment of Nestlé is a star, where the competition is high and the expense is high but at the same time the market size is huge as well.

Quality:

The Nestlé Quality Policy, which applies across the complete Nestlé Group and which is complemented by unit-specific Quality Policies, is achieved through the implementation of the Nestlé Quality Management System (NQMS). All functions across the value chain are responsible for achieving Quality objectives and continuously improving Quality performance. The Quality Function acts as the guardian and the challenger of the NQMS. Management by process is an essential principle of NQMS. It provides the framework for attaining and maintaining compliance, measuring performance and continuing to achieve consumer and customer delight. We ensure full alignment of NQMS to ISO Quality standards. NQMS is implemented across our organization and verified by independent third party certification bodies. We expect that our external business partners (vendors, contract manufacturers, licensees, joint ventures, and customers) demonstrate their alignment with our requirements to achieve food safety and compliance. We foster a quality culture by developing quality awareness through the organization and encouraging a management attitude that anticipates potential Quality issues. We empower all Nestlé personnel with the necessary competences and tools in order to consistently fulfill policies, principles and standards. We continuously improve by challenging ourselves. We involve all employees across the whole Value Chain to achieve and maintain consumer trust. We enhance the effectiveness of NQMS through the use of the management tools and methods provided by Nestlé Continuous Excellence (NCE) and GLOBE data management solutions.

The NQMS is composed of three main elements:

The Quality Standards capture the knowledge and expertise of Nestlé professionals to ensure a consistent application of what we know. Quality standards incorporating centrally established generic and product-specific requirements are managed through locally defined operating quality manuals. Country specific standards, based upon local regulatory requirements, are incorporated at the local level.

A Continual Improvement Management Cycle to ensure an effective and efficient management of Quality processes, to measure performance, and drive the enhancement of our Quality culture.

A Process-Based Management System compassing the whole value chain in which all functions are responsible to define and manage the processes they own which can impact on product safety, compliance and consumer delight. Support Functions provide assistance,

expertise and tools in order to meet the NQMS requirements and to achieve the quality objectives.

Packaging:

In 2013, 66 594 tonnes of packaging material were saved, which is equivalent to CHF 158.5 million (2012: 47 125 tonnes). We also evaluated 5200 projects and more than 15 500 scenarios (2012: 4000 projects and 13 000 scenarios). The packaging of our products is crucial to prevent food waste, guarantee our high quality standards and inform our consumers. We challenge ourselves to achieve both performance and functionality during the design process, whilst optimising the weight and volume. Today, materials from renewable resources are sold at a premium and they often have limited availability, with fierce competition for supplies. In addition, their environmental performance is not always better. Recycled materials do not always have an environmental benefit over virgin material: for example, in some instances we would need a heavier grammage of recycled materials to guarantee our standards.

Services & Brand name:

The appreciable factor in Nestlé is that quality maintenance of products is upto mark and there are hardly any complaints about Nestlés products in the market. This is a major achievement for a company which relies majorly on food products.

PriceThe price is dependent on the market of each individual products. For example, Nescafe and Maggi being the clear leaders are priced with higher margins for the company as compared to competition. This is because the product quality is good enough and a bit of skimming price will not cause the customer to switch brands.

The strength of pricing for Nestlé comes from its packaging or consumption based pricing. For Nescafe as well as Maggi, Nestlé offers a lot of sizes and package options. In supermarkets, you can even find a 16 packet maggi whereas in small retail shops, you can find Rs 20 maggi.

Thus, with the variety available, customer can make his own choice based on his consumption. In other products like Kitkat and Munch, due to tough competition from other companies, Nestlé

offers competitive pricing. You will find that Nestlé will be similar priced to many of Cadbury’s Products in the chocolate segment.

Industry overview and performance in FY09:

Nestle Pakistan is a member of the growing Fast Moving Consumer Goods Market in Pakistan and it has several competitors in all its product markets. Nestle Pakistan faces the biggest competition from Unilever Pakistan, which is involved in many of the same products as Nestle Pakistan and in many more.

The industry overall performed fairly well during FY10. Profit margin for the industry was 7.67%, while Gross Profit Margin was even higher, standing almost 30%.

The Quick Ratio showed an improvement as compared to FY09 standing at 0.34 and Current Ratio at 0.83, which is almost the same as in FY09.

Asset Management ratios showed decrease in the Operating Cycle of the industry, which declined from 53 days in FY09 to 45 days in FY10. This indicates increase of liquidity in the market with the companies being able to convert the sales into cash in a comparatively lesser time. This is also supported by the decrease in Inventory Turnover from 49 days in FY09 to 42 days in FY10.

Debt Management is again quite similar because all the multinationals operating in Pakistan and controlling the major chunks of the market are fairly established and have the same capital structure with very few differences. The major change was in Times interest earned from 11times in FY09 to 23times in FY10. This shows an increase in the industry’s profits.

Market ratios indicate that investor confidence in the companies is high with continuously rising share prices. Furthermore, companies on average in the industry have shown consistent growth in EPS, Dividend Payout and Book Value.

Financial performance (FY04-10):

Net sales for Nestle Pakistan continued the rising trend since 2004 by increasing 25% (YoY) in FY10 from Rs 41.155 billion to Rs 51.5 billion. Increase in sales was contributed by milk and nutrition 25% (YoY) from Rs 35.559 billion to Rs 44.44 billion and beverages by 27% (YoY) from Rs 5.225 billion to Rs 6.641 billion. The sales of other operations also witnessed an increase of 9.26% as the sales went up from Rs 0.37 billion to Rs 0.405 billion in FY10 unlike in FY09 when it declined significantly by falling 10.48% (YoY) in FY09 from Rs 0.414 billion to Rs 0.370 billion.

Export sales also went up by 24.5% to Rs 4.0 billion (2009: 3.3 billion).

Increase in sales can be partly attributed to diversification of the portfolio, with introduction of several new brands such as Nesquik Milk Enhancer, Nestle Creations, Cerelac Fruit Cereals, Maggi Umda Maza, MAGGI Noodles (Bar-B-Q, Masala & Karara), NESTLÉ Peach Nectar, LACTOGEN low lactose, NIDO 1+, NIDO 3+ and NESTLÉ Pure Life-5 liters. and improvement of NAN and partly to pricing movements with respect to food inflation in the country

Another reason for the increase in sales was that Nestle tried to penetrate the rural market through their PPPs (popularly positioned products). They started Motor bike operations in places where it was difficult for vans to reach.

CGS witnessed an increase of 28.55% (YoY) in FY09 from Rs 29.256 billion to Rs 37.608 billion, which was largely caused by supply constraints and inflation in key commodities in the country. The main contributors to this rise were costs of raw materials mostly fresh milk and sugar, salaries and repairs costs, royalty and technical assistance fee also increased by more than 26%. The fuel and power also increased by more than 50% due to the ever-increasing costs of fuel and electricity. The expense on information technology also increased by more than 40%.

Profitability:

Gross Profit for Nestle Pakistan rose 16.64% (YoY) in FY10 from Rs 11.898 billion to Rs 13.9 billion owing to the significant increase of almost 25% in net sales. Net operating expenses came from Rs 7.270 billion to Rs 7.89 billion increasing the EBIT to Rs 6.2 billion from Rs 4.628 billion, an increase of 34.16% YoY. This significant rise can be contributed to tightly-controlled operations of the company and a rise in other operating income generated by Nestle Pakistan.

Nestle Pakistan’s PAT in FY10 was Rs 4.11 billion as compared to FY09 when it was Rs 3.005 billion, an increase of almost 37% (YoY) as a result of the higher EBIT.

An assessment of Nestle Pakistan’s profitability, as demonstrated by the diagram below, shows an upward trend in all profitability ratios:

The profit margin rose from 7.30% in FY09 to almost 8% in FY10. This was higher than the industry average of 7.67%. The gross profit margin decreased from 28.91% in FY09 to 27% in FY10 but again this was less than the industry’s GPM, which stood at 30%. An overview of the Return on Assets (ROA) and Return on Equity (ROE) forged a similar upward trend thereby sustaining the profitability of Nestle Pakistan. ROA increased to 17% in FY10 from 16.17% in FY09 attributed to a 37% increase in PAT accompanied by 23.5% rise in total assets between FY09 and FY10. The industry average ROA stood at 21%. ROE statistics indicate an increase from 67.88% in FY09 to 73.68 in FY10 as the total equity increased by 26.1% in FY10. ROE for the industry was 82.65%. Overall, Nestle Pakistan’s profitability ratios, gross profit and net profit margin remained almost equal to the industry average whereas the ROA and ROE remained below the industry average showing high competition from the competitors.

Liquidity:

Quick Ratio for Nestle Pakistan from 0.26 in FY09 to 0.28 in FY10. This is because although current assets of the company showed an increase in FY10 (22.02% YoY), the increase was mostly attributed to stores and spares and stock in trade, which reduced liquidity of the current assets. The trade debts of the company decreased significantly by 48%. Furthermore, current liabilities rose from Rs 8.083 billion in FY09 to Rs 9.806 billion (YoY increase of 21.32%). The current ratio remained the same 0.85 in FY10 as in FY09 as the increase in current assets was more than offset by the increase in current liabilities.

Asset management:

The inventory turnover decreased from 42 days in FY09 to 39 days in FY10, which means it took Nestle Pakistan an average of 39 days to convert its inventories into cash ie 2 less days than in the previous year. However, this was below the industry average of 43 days. Day Sales Outstanding more than halved from 2.11 days in FY09 to 0.88 days in FY10, indicating a tighter collection policy from the debtors. This was also lower than the industry average of 2.44 days.

Moving further, the Total Asset Turnover for Nestle Pakistan rose from 2.21 in FY09 to 2.24 in FY10 indicating slightly higher profitability of the asset base employed by Nestle Pakistan. Total Asset Turnover for the industry was 2.62, which is slightly better. Assets of the company Sales to Equity Ratio decreased from 9.30 in FY09 to 9.22 in FY10.

Debt management:

The debt to asset ratio stood at 0.76 in FY10 showing little change since FY07. The debt to equity ratio declined from 3.20 in FY09 to 3.11 in FY10 implying a slight shift from debt financing for assets of the company supported by increased interest rates in the economy and instability of the equity market. On the other hand, the long-term debt to equity ratio also fell slightly from 1.37 in FY’09 to 1.36 in FY10, indicating company’s preference for equity over long-term borrowing. The company preferred short-term running finance as it witnessed a significant increase of 267%. The Times Interest Earned (TIE) ratio increased from 10.47 in FY09 to 12.10 owing to the high EBIT in FY10.

Market ratios:

Market ratios for Nestle Pakistan indicate a 37% increase in Earnings per Share from Rs 66.27 in FY09 to Rs 90.69. The industry’s EPS was much higher, standing at an average of Rs 168.35.

Dividend per Share also increased by 50% rising from Rs 20 in FY09 to Rs 30 in FY10. The reason for this is the high increase in profits of the company. The Book Value per Share for Nestle Pakistan registered an increase from its value of Rs 97.62 in FY09 to Rs 123.09 in FY10.

This rise can largely be accounted for by the 23.5% increase in total assets without any change in the number of issued ordinary shares, which stood at 45,349,600 shares at the end of 2010.

The price of Nestle Pakistan’s shares on 31st December 2010 rose from Rs 1246 to Rs 2375, which is a significant increase of 90.61%.

Future outlook:

Nestle Pakistan has maintained a firm position in the Pakistani foods market with the leading position in several categories and is expected to continue its strong operations on the basis of its current and past performance.

Nestle Pakistan’s future operations seem promising with several projects and investments already in line. The company plans to approximately Rs 8 billion in 2011 for milk collection field development, upgrading of existing production facilities and increase in production capacity. The company also plans to continue with its Corporate Social Responsibility efforts in the coming year.

Nestle Pakistan has also decided to contribute significantly to the Port Grand Project being initiated in Karachi with a Coffee Shop and Beverages Bar offering at the complex.

PlaceDistribution Channel:

Nestlé follows the FMCG strategy of distribution which involves breaking the bulk. The typical distribution strategy of Nestlé is as follows.

Manufacturing >> C & F agent >> Distributors >> Retailers >> Consumer

Manufacturing >> Bulk buyers >> Consumer

These are the two different forms of distribution which Nestlé has. It is typical of any FMCG company. However, the Nestlé channel is known to be strong with a good marketing and sales network for channel distribution.

Coverage:

Nestlé has one of the most advanced distribution systems in the world. In Pakistan, if you go to any general store no matter how remotely it is located, more likely you would find a Nestlé product there. This is because Nestlé utilizes its expertise in ensuring reliable distribution channels that transport its products far and wide throughout the country.

Inventory:

Each item of a product comes with a unique ID that serves as the serial number of that product and amazingly Nestlé has the complete tracking of each item of its each brand/product. Almost 100% of Nestlé products are sold in markets and retail outlets. There are hardly any secondary methodologies of selling opted by Nestlé within the premises of Pakistan.

Logistics:

Nestlé's logistics operation is one of the most fast-moving environments in the UK. You'll be finding creative solutions to operational delivery issues whilst at the same time shaping the future of Logistics so it can go on being recognised as one of the leading edge suppliers to its customers. You will need to anticipate the demands of our customers and respond to their needs and whilst achieving exceptionally high levels of service at a competitive cost.

On top of it, Nestlé regularly introduces trade discounts and various tactics to keep the channel motivated. The major challenge is in the distribution of Maggi which is the most in-demand product along with Nescafe. Due to these two products, Nestlé is able to drive other products in the market as well. Thus, on purchase of one weak product, the distributor might get a discount on the stronger product or vice versa.

The challenge for Nestlé is in the chocolate segment where it faces stiff competition from Cadbury and hence selling the chocolates becomes difficult. Kitkat might have its own brand positioning, but it is not better than Dairy milk. Thus, converting retailers to sell Nestlé instead of Cadbury is the toughest task for Nestlé. This is converted mainly through promotions.

PromotionOne of the most widely known tunes is the Nescafe tune. It was one of the best advertising campaigns and was launched at least 2 decades back. However, that campaign brought Nescafe strongly in the market.

On the other hand, Nestlé’s brand was pushed by the excellent product quality of Maggi and the witty and innovative campaigns of Maggi. Where Nescafe focuses on value and the good things in life, Maggi focuses on moments you had with your Maggi. The recent campaign was completely focused on your maggi story, where people had to come out with various innovative ways that they had their maggi.

Promotions for other products too are done smartly. Kitkat focuses on “Take a break” and has done some good marketing for the same. Kitkats website too is very innoative and shows nothing but asks the visitor to take a break and have a Kitkat. The major push expected of a FMCG company is in sales promotions at the ground level. This is where Nestlé really rocks. Nestlé focuses on its strength which is Maggi, Nescafe and Kitkat which are the most promoted brands in the market on ground level.

Besides this, Nestlé regularly uses TVC’s and ATL marketing. It is also present online through some smart creative. Overall, Nestlé is a brand which has strong products as well as strong marketing, and hence the brand has a very high brand recall value.

We hope that Nestlé keeps bringing in good products and keeps maintaining the quality of the products it already has.

Modes of advertising

Below the line includes following mediums of advertisement that are normally deployed by Nestlé:

• Direct mail to users

• Outdoor advertising

• Through Transit

Direct Mail/SMS to Users: It is any form of advertising present directly to the new comers, this can be through the mail, fax, online computer services, sales personnel’s, retailers or other means rather than through traditional mass media. Nestlé distributes brochures of their product to their users through internet to make them inform of new research and innovations and products. This helps Nestlé in adding more customers.

Outdoor Advertisement: Nestlé expenses a big share of their advertisement budget on the outdoor advertisement in Pakistan, which includes:

• Painted Billboards at different places

• MMT in various locations

• Vinyl Sheets located in public places

According to the NESTLÉ they perform heavy outdoor advertisement to aware people about the presence of their product due to it is a product for which consumer never pre-determined plan to purchase it so to encourage them for the purchase of Nestlé Milk Products they have to place billboards. Beside this they rotate the posters of their billboards after some months the reason for this is that users not interest in those themes when they see it for a longer time so when they exchange them and place the new different one that create the interest among the people.

Transit Advertising: Transit advertising is a type of public places out of private media that adding bus and taxicab advertising as well as posters on transit places, Bus terminals, and display at airports. Nestlé performs transit advertising in the following methods:

• Inside cards in public transports

• Outside posters on Vehicles

• Terminal posters at various locations

• Taxi / bus walls.

Segmentation, Targeting and Positioning Of NestléNestlé has been promising in providing quality products to people. Nestlé Utilized the most new and up-to-date advance technology and its accounted science-based experienced in the manufacture of food products. Nestlé takes its broad responsible partner as a corporate citizen member by availability in community and social projects that contribute to the speedy development of the country.

Nestlé brands are household names in Pakistan and very well-known company. These include MILO, NESCAFÉ, MAGGI, NESTLÉ NESVITA OMEGA PLUS ACTICOL, KIT KAT, PURINA, FRISKIES and many of other market competitors’ in their product categories.

Marketing Strategies:

The Strategic plan provides the company’s overall mission and objective and new hpopes to achieve company’s views. Through market segmentation, targeting and positioning the company takes decisions which customers it will provide and how. The company also makes designs a marketing mix made up of factors under its control product, price, place, promotion.

Basic Strategy of Nestlé in Pakistan:

Nestlé’s required strategy is to cover only the developed area of Pakistan.

That’s why they are doing their activities in main and metropolitan cities of Pakistan. They want to put babies and children healthy and ensure their sufficient nutrition. That’s why a large range of their products are baby milk food products. They also target new age generation to build a strong relationship by providing various eatable products. Nestlé ensures there is no compromise on quality, no matter how much the cost is. Nestlé wants to charge customers toward their products.

Market Segmentation:

The marketing concept asks for understanding customers’ requirements and satisfying their requirements and needs better than the others do. But many customers have different requirements and it hardly chance to satisfy all customers by treating them same just like. Market segmentation is the searching of part of the market that are not similar from other. Segmentation provides the firm to good satisfy the needs of its major customers.

1. Clearer understanding of the requirements and needs of selected customer groups.2. More effective positioning in this place.3. Greater precision in selecting promotional Transportation vehicles and techniques.

Bases for Segmentation:

Users markets can be divided on the basis of these customer characteristics.

1. Geographically

2. Demographically

3. Psychographically

4. Behaviorally

1. Geographically: Nature: Nestlé Pakistan segmented its market for Nescafe Ice depends on the geographic weather: warm hot and cold.

Nescafe Ice: A coffee which may be consume with ice. During warm season consumers making this coffee with normal, chilled or cold water mixing ice cube to bring freshness in their body.

2. Demographically: Nestlé segmented market area for its main products based on the genration. For the products Cerelac, Lectogen, Koko Krunch, Nido, Nestlé divided the market area segment for new born baby and children of different ages.

Nido: It is nutritious milk specially makes for children 2 years onwards. It includes 25 minerals and vitamin D which helps child’s growth.

Cerelac: Nestlé also provide cerelac for new aged baby. It contains milk and rice mixture for less than one year’s baby. It fulfills baby’s proper nutrition in foods.

Nesquick, Koko Krunch: Nesquick and Koko krunch contain child’s required growth. It’s very sweet and delicious and also includes vitamin protein, mineral.

Lactogen: Nestlé Pakistan brings full cream milk powder in the country. It gives baby required nutrition. Lactogen one is for children whose age is not more than 6months and lectogen 3 is for babies whose age is below 1 year.

3. Psychographally: Life style and personality: Nestlé Pakistan provides KIT KAT these people who really want to taste and enjoy chocolate. Nestlé Nescafe 3 in 1 is for specially those users and customers who are really engaged in activity and do not have more time. They can use by taking Nescafe 3 in 1. All the things are mixed sugar, milk and coffee.

4. Behaviorally: Based on benefits Nestlé Pakistan segmented their market in an efficient way. So they make available Cerelac for those customers who want more profit from the product. Cerelac includes a high nutrition for baby’s whose age is less than 1 year. Two very important things rice and milk remain added in cerelac. On the other part, cerelac includes vitamin, more mineral and all major useful nutritious elements for babies.

Target MarketingMarket segmentation reveals the firm’s market opportunities. Then the firmsort market targeting by evaluating the many types market segments and deciding which and in which quantity segments it will target.

Nestlé examined the different type of market segments on the basis of segment size and growth, segments, structural attractiveness, and Nestlé objectives and resources and decided to introduced their operation whole of Pakistan country. Nestlé distributes their target market because of having unique requirements and wants. Nestlé Pakistan selected their target market into two market coverage policy:

Differentiation

Market Differentiation:

Nestlé also choose the differentiated marketing. He provides different product for many segments based on different ages, occupation, season and climate of Pakistan.

Nescafe 3 in 1: Coffee for customers who are busy in life.Koko Krunch, Nesquick: Chocolate milk who want to get taste of real chocolate.Nescafe Ice: Cold coffee for the customer in hot and warm weather.

Product Differentiation: Nestlé brings a many of product for target customers. They make available 25 types of minerals in Nido for children.It also arranged Cereals’ and Lactogen 1 &3 for newly born baby exclusively. Now the doctors says these products for child’s to their parents for great & maximum nutrition Nescafe is a product which contains 4 types of categories. They offer Nescafe ice for hot and warm weather, They provide Maggi including Maggi instant; Maggi 2 minutes which Includes and contain various minerals, vitamins and nutrition’s.

Channel Differentiation: Nestlé reaches out their products to the customers through their experienced market salesman and transportation so that their products are much easy to their customers.

Image differentiation: Nestlé’s logo is totally different from others competitors that are greatly choices by its users. For that way customer easily choose them in the market which is another effective benefits for Nestlé products.

People differentiation: The Company has a large number of manpower’s that are highly educated and trained. In Pakistan, 400 employees are employed in market Company chairman; they are running this business successfully for a long time.

Service differentiation: Another advantage for this company is better service for its respective users from its competitors. They provide 24x7 hot line service. High quality checking is providing for its customers. Its marketing dept. and public relation dept. are working for finding out customer’s new needs and response toward their Nestlé products.

SWOT AnalysisStrengths:

Unmatched product and brand portfolio: The business offers one of the widest portfolio of food and brewery products in its sector. It also operates 29 brands that earn more than $1 billion in annual revenues. With more than 8,000 products it is hard for any other corporate to compete against Nestlé.

R&D capabilities: Nestlé invested more than $2 billion in R&D in 2011. It’s introducing new and redesigned products every year, strengthening firm’s competitive advantage.

Distribution channels and geographic presence: Nestlé runs in more than 100 countries and has extensive distribution channel all over the world, which supports its operations globally.

Competency in mergers and acquisitions: Over the years Nestlé has been forming successful partnerships and acquiring other companies in order to grow and maintain its leadership in the market.

Brand reputation valued at $7 billion: Nestlé is known almost everywhere and has a reputable brand for its products that are used by millions every day.

Weaknesses:

Inability to provide consistent quality in food products: Nestlé has been recalling many products from trade due to food contamination or poor quality supplies. This does not only hurt firm’s sales but its image as well as the business is unable to control quality of the products.

Expensive products: Due to the advanced technologies and a long list of formalities, Nestle has to bear a lot of cost (upto 40% more than its local competitors).

Weak implementation of CSR: The company has announced and is involved in many programs that aim to make company more eco-friendly and improving the working conditions of its suppliers. Still, Nestlé receives a lot criticism over the effectiveness of its programs.

Opportunities:

Increasing demand for healthier food products: The trend of buying and consuming only healthy food products is a major shift in consumer tastes and opens up an immense market for companies. Currently, Nestlé tries to introduce more healthy food products in response to the trend.

Acquiring startups specializing in producing well-being products: Many new startups are forming and introducing new products for well-being or revolutionizing the ways those products

are made. Startups are cheap and can easily be acquired. Nestlé is focusing on providing more well-being products and this is a great opportunity to expand its portfolio.

Establishing new joint ventures: Nestlé is already involved in many successful partnerships with major world companies like The Coca-Cola Company and Colgate-Palmolive.

Threats:

Food contamination: Although it is Nestlé’s responsibility to run thorough quality checks of its products, the company had been reportedly providing contaminated food or other products to the market. Such actions hurt company’s reputation and result in losses.

Trend towards healthy eating: Nestlé is a major supplier of chocolate and chocolate drinks that have high level of calories and due to changing customer habits, will experience decline in demand.

Growth of private labels: The growing number of supermarkets and other retailers are introducing their own label products that cost less and can easily compete with Nestlé’s product portfolio.

Rising raw food prices: With an overall growth of world economy and population, the demand for raw food will rise. The result of that will be higher material costs and squeezed margin for Nestlé.

PEST AnalysisThe main theme of PEST analysis is to measure market potential and situation, by indicating growth or decline. PEST analysis can be used for marketing and business development assessment and decision-making, and the PEST analysis encourages proactive thinking, rather than relying on habitual or instinctive reactions.

Political analysis:

Nestlé has to operate within the framework of laws set by Parliament, and that’s why it depends on political considerations. For instance, Nestlé’s baby milk can be affected by political change in several different ways i.e. political change can influence public priorities and funding arrangements. Government plays vital role by imposing the law and regulation on the companies. Government set standard laws for companies that has to meet otherwise they have to pay fines. Nestlé is trying to meet all the standard laws which are set by the government. For example Health and Safety Act, Disability Act but unfortunately Nestlé break the law. Government laws and regulation in accounting standards, taxation requirements, including tax rate changes, new tax laws and revised tax law interpretations are highly influenced on Nestlé business. Nestlé is also very keen about stability of government stability in countries where they

are trying to get in (especially in underdeveloped countries where political stability is at risk).They are also subject to state, local, foreign environmental laws and regulations.

Economical Environment:

Nestlé needs to have enough information about the country inflation rate, economic growth rate, and national per person capital income, in which they are willing to start their business. Economic condition varies from country to country. Before starting the baby milk has focus on the above factors. These are the factors that Nestlé has to consider before setting corporate objectives. Global economic turmoil has major influence on Nestlé business because customers are spending less and they have to adopt different strategies in order to run business smoothly.

Social analysis:

Social or cultural environment had great impact on Nestlé. The main focus of social/ cultural includes the Social change involves changing attitudes and lifestyles. The social and cultural environment is constantly changing. Different countries had different culture (language, religious beliefs, food, family, clothing and their lifestyle). Nestlé has to developed strategies which are according to belief and culture in multicultural country like UK. Every country has different consumer taste and lifestyle and Nestlé has to develop effective strategies in order to meet different lifestyle consumer behavior. Company is totally dependent on the consumer lifestyle and their attitude. Product or services cannot be successful until company has enough information about the consumer lifestyle. Nestlé has to take social and cultural factors under consideration in order to achieve their strategic objectives.

Technological:

Technological change has the most rapid, persistent and profound effect. It creates opportunities for new products and product improvements and of course new marketing techniques- the Internet, ecommerce. Technology creates opportunities for new product or product improvements and new techniques of marketing such as internet and e-commerce. Technology has great influence on business operations and overall decisions. Nestlé uses technology by taking orders via telephone and online by internet. Moreover, Nestlé uses technology in various business activities such as record of their customers and employees.

General Recommendations by the PublicWe conducted a survey to ask various students (aged 18-24) to give their suggestions for further improvement of Nestlé’s products. The most repeating responses were:

Keep the taste nice. Increase advertising & show your competitive edge. Increase loyalty of customer with brand through attractive packages. Keep the price low, because the day when price will competitor will be very near to your

price your sales will be boost up. Increase its distribution network. Try to get more & more party orders. Increase incentives & promotional activities. More focus on c & d class shops by revisiting shop wise data. Training courses/workshops for team. Conduct training sessions of salesmen

at least once a month at regional level. Hiring of quality sales people. Re-define roles & responsibilities of

every individual in order to bring ownership and sense of responsibility

Weekly meeting with distributors and sales team in order to review weekly target closing

ConclusionThe advent of consumer food products has brought an immense change in the field in the consumer’s food habit. Nestlé has done well to adding its customer’s loyalty operating as a market competitor’s in its industry. Nestlé is one of the largest food processing companies. Their products and quality mainly includes on their experience and efficiency. Nestlé provides quality that leads to good business growth and good development. It has segmented the market based on certain clustered preferences deploying multi-stage segmentation approach to meet individual requirements of the customers. Offering brand new products would also close its old products gaps to a great extend promise satisfaction and loyalty.