nestle - marketing strategies of nestle foods india ltd. chocolate segment as compared with its

7/23/2019 Nestle - Marketing Strategies of Nestle Foods India Ltd. Chocolate Segment as Compared With Its

1/91

A

PROJECT REPORT

ON

MARKETING STRATEGIES OF NESTLE FOODS INDIA LTD.(CHOCOLATE SEGMENT) AS COMPARED WITH ITS KEY COMPETITORS

REPORT SUBMITTED FOR THE REQUIREMENTS OF THE DEGREEOF BBA (3RD YEAR)

(Affiliated to GJU, Hissar, Haryana)

SUBMITTED TO SUBMITTED BY

Mrs. Monica Diwedi

(Marketing Department)

Times Business School,

Kailash Colony, New Delhi

MALSAWMDAWNGLIANA

Enrolment number- 09511244014

BBA (3rd Year)

Session- (2009-2012)

DIRECTORATE OF DISTANCE EDUCATIONGURU JAMBESHWAR UNIVERSITY OF SCIENCE

&TECHNOLOGYHISAR - 125001

i


2/91

DECLARATION

I, MALSAWMDAWNGLIANA, a student of BBA (3rd Year) of Times

Business School, Kailash Colony, New Delhi, hereby declare that the

project report entitled Marketing Strategies of Nestle Foods India Ltd.

(Chocolate Segment) as compared with its key competitors is my

original work and the same has not been submitted for the award of any

other diploma or degree.

MALSAWMDAWNGLIANA

Enrolment number- 09511244014

BBA (3rd Year)

ii


3/91

ACKNOWLEDGEMENT

I express my sincere gratitude to Nestle and its entire staffs for giving me

this wonderful opportunity to work and get to know and giving an

overview and informations throughout this research report has been

successfully completed.

I am thankful to Mrs. Monica Diwedi, TBS, New Delhi for his valuable

guidance and support at all time.

Finally, I have a lot of thanks to all persons that who gave me all the

necessary informations directly or indirectly throughout this research

report has been successfully completed.

MALSAWMDAWNGLIANAEnrolment number- 09511244014

BBA (3rd Year)

iii


4/91

TABLE OF CONTENTSTABLE OF CONTENTS

1. INTRODUCTION

2. LITERATURE PROBLEM FORMULATION COMPANY

Company profile

Industrial Scenario

Major Products

Marketing Strategies

Distribution network

Brand Loyalty

Market Segmentation and Target Market

3. OBJECTIVES & RESEARCH METHODOLOGY

Objectives

Methodology

4. ANALYSIS & INTERPRETATION OF DATA

SWOT Analysis

5. FINDINGS/RECCOMENDATION/CONCLUSION

Conclusion

Findings & Recommendations

6. BIBLOGRAPHY

7. APPENDIX

iv


5/91

INTRODUCTION

1


6/91

FMCG companies have now realized that India lives in its rural villages. So much so that

rural marketing has become the latest marketing mantra of most FMCG majors. The lure

of an untapped market has driven the marketers to chalk out bold new strategies for

targeting the rural consumer in a big way.

India is on the move and so are the markets in India. Apart from economic changes,

India is also facing social changes like changes in life style, hobbies etc. New

fashions, Adventures holidays, etc. are in today.

Further, food habits of Indians are changing rapidly. Chocolates which were

believed to be kids preference are now being consumed by kids, teenagers, and adults.

Chocolate market in India (Currently 28 000 tones) is growing at a fast rate annually.

To take advantage of the growing market, international confectionery

companies are getting ready to woo the proverbial Indian Sweet tooth. An influx of

worlds leading Chocolate players is expected.

Nestle also piled primarily on the urban consumers. After understanding the

great potentiality rural India possesses, Nestle is also experimenting in big way to bringthe much needed volumes and help itself to bank upon the volume driven growth, in

this severe competitive FMCG sector where the dispersion or market penetration plays

a big role. So Nestle is eying on the market penetration and it is being targeted by

devising different marketing strategies.

The rational behind Nestle going for the market penetration is to acquire new

consumer base by making the products available to the every interior of the country and

increase its sales, to sustain growth. The company is having a marketing strategy todrive penetration through wholesale marketing. But is it a right marketing

strategy? Or will it prove to be an expensive mistake? If they want to increase their

penetration then how and where they should go for? These are the issues Nestle is

facing today.

2


7/91

This project is a market research and it touches every aspect of the current

wholesale marketing and predicament associated with it. It also juxtaposition that how

penetration, can be possible through wholesale marketing, what is the cost of doing itand maintaining it. This project gives an insight into the every feasible aspect that is

associated in Driving penetration through wholesale marketing, for Nestle.

In the above context, the prime objective of this report is to prepare a marketing

plan for any brand that is planning to enter the India Chocolate Market. Therefore, this

report is generic (broad-based) to the extent that it does not focus on any single brand.

However, this may prove to be a relevant marketing guide for any brand launch in

India.

The FMCGsector has been the cornerstone of the Indian economy. Though, the

sector has been in existence for quite a long time, it began to take shape only during the

last fifty-odd years. To date, the Indian FMCG industry continues to suffer from a

definitional dilemma. In fact, the industry is yet to crystallize in terms of definition and

market size, among others. The sector touches every aspect of human life, from looks

to hygiene to palate. Perhaps, defining an industry whose scope is so vast is not easy.

After witnessing booming sales and flooding markets with innumerable

products, FMCG companies have had to abruptly apply the brakes and look for various

ways to save costs. The MORE THAN RS. 43,000 crore (listed companies) FMCG

industry in India, which has been on a roll for many years, faces tough times ahead,

although many segments still shows good growth.

3


8/91

4


9/91

LITERATUREPROBLEM

FORMULATION

COMPANY Company profile

Industrial Scenario

Major Products

Marketing Strategies

Distribution network

Brand Loyalty

Market Segmentation and Target Market

5


10/91

REVIEW OF LITERATURE

India is on the move and so are the markets in India. Apart from economic

changes, India is also facing social changes like changes in life style, hobbies etc. New

fashions, Adventures holidays, etc. are in today. Further, food habits of Indians are

changing rapidly. Chocolates which were believed to be kids preference are now being

consumed by kids, teenagers, and adults. Chocolate market in India (Currently 20 000

tones) is growing at a fast rate annually. To take advantage of the growing market,

international confectionery companies are getting ready to woo the proverbial Indian

Sweet tooth. An influx of worlds leading Chocolate players is expected. Further, since

Confederation of Indian Industry (CII) is a representative body of the Indian Industry, it

receives its inquiries for pertinent marketing information from various domestic and

international players, who want to invest in India. In the above context, the prime

objective of this report is to prepare a marketing plan for any brand that is planning to

enter the India Chocolate Market. Therefore, this report is generic (broad-based) to the

extent that it does not focus on any single brand. However, this may prove to be a

relevant marketing guide for any brand launch in India.

Improved penetration of brands is an important consideration in the Companys

vision of sustained growth. Expansion of distribution and reach was a focus area. Some

of the initiatives that are expected to contribute significantly include introduction of

single serve convenience packs at affordable price point, such as NESCAFE Redimix

and MAGGI Hot Cup Soup Powder. The initiative to automate distributor operation has

continued and is expected to be complete during 2003. This will help NIL achieve

greater speed and transparency in the flow of information, ensure better levels of

customer contact and enable faster response to consumer needs.

The Company continued to strengthen initiatives to facilitate availability of

products for out of-home consumption. These initiatives were supported by a number

of new product launches. The development of NESTEA Instant Tea premix for hot

vending offers consistency and convenience as compared to tea bag preparation;

NESCAFE Frappe premix fort cold vending has been introduced in Quick ServeRestaurants; Low Sugar NESCAFE premix has been developed for health conscious

6


11/91

consumers; MAGGI Hot Cup Soup dispensed through vending machines is an

innovative and pioneering concept in the market. Large number of Nestle Consumption

Zones including Cafe NESCAFE, Coffee Corners and multibrands stalls were set upand innovative vending machines were introduced for Iced Tea. Sustained focus on

continuously improving the value to the consumer, helped to introduce vending

machines with eight beverage options to offer consumers a range of specialty beverage

at the same location.

On the manpower development front, programmed during the year continued to be

focused on the operational front more particularly sales and production.

To support the growth plans and distribution strategy, and simultaneouslyimprove the operational efficiency, the on strengthening chain continued to receive

attention during the year.

Marketing is based on the principle of satisfying consumers needs.

The overall trust of consumers in Nestle brands and products comes from a qualityimage that has been continuously strengthened foe over 130 years. Nestles strives to

increase this trust through its commitment to environmentally sound business practices.

For this reason nestle: Opposes the shortly-term opportunistic green marketing

that can mislead the consumer; Bases environmental claims in advertising promotional

material labeling and corporate communication on solid scientific evidence and

selects materials and printing methods for merchandising materials such as consumer

offers, in-store promotions is play materials, leaflets and printed materials in light ofenvironmental considerations.

SUPPLIERS

PROCURMENT SUPPLYPLAN

SALES &MARKETING

MANUFACTURER DISTRIBUTOR CUSTOMER CONSUMER

7


12/91

Marketing strategy is the complete and unbeatable plan designed specially for

attaining the marketing objective of the firm.

The marketing objectives indicate what the firm wants to achieve; the marketingstrategy that decides the success at the business unit level which in turn decides the

total corporations success. The link between marketing strategy and overall success is

indeed direct and vital. And in this linkage lies the significance of marketing strategy.

Nestle India ltd. has an aggressive marketing strategy which is very well

understood when one goes through the in-depth study of the 4-Ps of the marketing and

price strategies with respect to its products. One comes to the conclusion that NIL has a

well defined roadmap to success i.e. to reach its ultimate objective of realizingcustomer satisfaction through value for price products.

Alreck and Settle (1999) in the paper has mentioned six strategies for building

relationship(between a specific brand and a particular customer group - to create a

strong bond between brand and buyer)which are linking the brand to a particular need;

associating it with a pleasant mood; appealing to subconscious motives; conditioning

buyers to prefer the brand through reward; penetrating perceptual and cognitive barriers

to create preference; and providing attractive models for buyers to emulate. The paperstates that the choice of an individual strategy or combination depends mainly on the

nature of the branded product or service and the success of the strategy depends heavily

on the marketer's understanding of the preference building and bonding process.

The article provides results like the six consumer preference-building methods

mentioned require particular kind of product, pricing, promotion and distribution. It

further states that Successful advertising needs clear consistent strategies and also lists

some of the crucial elements without which advertising will not work. The paper helpsus in analyzing the factors which influence the selection of a strategy for building

consumer brand preference.

COMPANY PROFILE

8


13/91

NESTLE FOODS INDIA LTD.

Nestle Foods India is a Transnational company (TNC) with its worldwide

operations in over 70 countries. The founder of Nestle was Henry Nestle who from a

modest beginning founded the company in 1866 at Switzerland for manufacturing milk

powders for babies. At that time Switzerland faced one of the highest infant mortality

rates and the milk formula saved the lives of many infants whose mothers were unable

to breast feed successfully.

Nestle has been a partner in India's growth for the past nine decades and has

built a very special relationship of trust and commitment with the people of India. The

culture of innovation and renovation within the company and access to the Nestle

Group's proprietary technology/ Brands, expertise and the extensive centralized

Research and Development facilities helps the company to create value that can be

sustained over the long term. Nestle India manufactures products of truly international

quality under internationally famous Brand names such as Nescafe, Cerelac, Maggi,

Milky Bar, Milo, BarOne, Nestea and Kit Kat and in the recent years the company has

also introduced products of daily consumption and use such as Nestle Milk, Nestle

Dahi, Nestle Butter, Nestle Fruit 'n milk ready to drink beverage and Nestle Pure Life

bottled drinking water.

Nestle is often quoted by most as "multinational of multinationals." There is a

good reason, as less than 2% of the turnover comes from the domestic market in

Switzerland and rest from its other operations worldwide.

At present Nestle in the world's largest food company with its internationalheadquarters at Vevey, Switzerland. With almost 500 factories world wide it employs

many people directly or indirectly.

Nestle is under first 50 companies of Fortunes five hundred list. It is present

over all five continents of the globe in over 80 countries. It is having 200 operating

companies, one basic research center and 17 technological development centers and

around 2,76,000 employees.

BOARD OF DIRECTORS

9


14/91

NESTLE INDIA Ltd.

Name Designation

Antonio Helio WaszykChairman and Managing director

Pradip BaijiaNon Executive Director

Ravinder Narain Non Executive Director

Rakesh MohanNon Executive Director

Christian SchmidDirector (Technical)

Name Designation

Shobinder Duggal Director

Michael W O Garrett Non Executive Director

Richard Sykes Alternate Director

Swati A Piramal Non Executive Director

10
http://connect.in.com/antonio-helio-waszyk/profile.htmlhttp://connect.in.com/ravinder-narain/profile-501281.htmlhttp://connect.in.com/rakesh-mohan/profile.htmlhttp://connect.in.com/christian-schmid/profile.htmlhttp://connect.in.com/shobinder-duggal/profile-503160.htmlhttp://connect.in.com/michael-w-o-garrett/profile-497575.htmlhttp://connect.in.com/richard-sykes/profile.htmlhttp://connect.in.com/swati-a-piramal/profile.htmlhttp://connect.in.com/antonio-helio-waszyk/profile.htmlhttp://connect.in.com/ravinder-narain/profile-501281.htmlhttp://connect.in.com/rakesh-mohan/profile.htmlhttp://connect.in.com/christian-schmid/profile.htmlhttp://connect.in.com/shobinder-duggal/profile-503160.htmlhttp://connect.in.com/michael-w-o-garrett/profile-497575.htmlhttp://connect.in.com/richard-sykes/profile.htmlhttp://connect.in.com/swati-a-piramal/profile.html


15/91

Nestls Philosophy

When Henri Nestle introduced the first commercial infant formula in 1867, he

also created a symbol of the Bird's nest, graphic translation of his name, which

personifies the company's business. The symbol, which is universally understood,

evokes security, motherhood and affection, nature and nourishment, family and

tradition. Today it is the central element of Nestls corporate identity and closely

parallels the company's corporate values ad culture.

Mission Statement

At Nestl, our research makes it possible for everyone to enjoy better food for

a better life.

Good Food is the primary source of Good Health throughout life. We strive to

bring consumers foods that are safe, of high quality and provide optimal nutrition to

meet physiological needs. In addition to nutrition, health and wellness, Nestl products

bring consumers the vital ingredients of taste and pleasure.

11


16/91

As consumers continue to make choices regarding foods and beverages they consume,

Nestl helps provide selections for all individual taste and lifestyle preferences.

Research is a key part of our heritage at Nestl and an essential element our future.

We know there is still much to discover about health, wellness and the role of food in

our lives, and we continue to search for answers to bring consumers Good Food for

Good Life.

Promote awareness of the effect of our lifestyle both on ourselves and on our

environment.

Exist as a financially successful, non-hierarchical, democratic organization where

workers participate in the creation and running of their working Environment, as an

example to encourage others to do likewise.

Provide an environment that encourages and helps people to develop and achieve

their potential.

Actively support co-operatives, fair trade, environmental issues and communityactivities.

Vision Statement

Your VISION defines your long-term dream. It should not be achievable.

That may sound ridiculous, but the objective is for your vision to always be just slightly

out of your reach. It's what you constantly strive to attain, and it becomes your reasonfor being.

12


17/91

ORGANISATION HISTORY

In 1860s Henri Nestle, a Swiss pharmacist, established the world-renowned

Nestl brand amid a spirit of innovation and goodwill. In 1866 he developed a food for

babies whose mothers were unable to breastfeed. His first success was a premature

infant who could not tolerate his own mother's milk or any of the usual substitutes. The

value of the new product was quickly recognized when his new formula saved the

child's life, and soon,Farine Lacte Henri Nestl was being sold in much ofEurope.

In 1905 Nestle merged with the Anglo-Swiss Condensed Milk Company. By

the early 1900s, the company was operating factories in the United States, UnitedKingdom, Germany and Spain. World War I created new demand for dairy products in

the form of government contracts. By the end of the war, Nestl's production more than

doubled.

The first Nestle factory to begin production in the United States was opened in

Fulton, Oswego County, New York. The factory however was closed in 2001, after the

company decided that the cost of restoring, and updating the factory could not

financially be justified.

Employees of the factory were furious, and raised the companyflag upside down the day the closing was announced.

After the war, government contracts dried up and consumers switched back to

fresh milk. However, Nestls management responded quickly, streamlining operations

and reducing debt. The 1920s saw Nestls first expansion into new products, with

chocolate the company's second most important activity.

Nestl felt the effects of World War II immediately. Profits dropped from

US$20 million in 1938 to US$6 million in 1939. Factories were established in

developing countries, particularly Latin America. Ironically, the war helped with the

introduction of the company's newest product,Nescafe, which was a staple drink of the

US military. Nestls production and sales rose in the wartime economy.

The end of World War II was the beginning of a dynamic phase for Nestl.

Growth accelerated and companies were acquired. In 1947 came the merger with

Maggi seasonings and soups. Crosse & Blackwell followed in 1950, as did Findus

(1963), Libby's (1971) and Stouffer's (1973). Diversification came with a shareholding

13
http://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Spainhttp://en.wikipedia.org/wiki/World_War_Ihttp://en.wikipedia.org/wiki/Fulton%2C_Oswego_County%2C_New_Yorkhttp://en.wikipedia.org/wiki/World_War_IIhttp://en.wikipedia.org/wiki/US$http://en.wikipedia.org/wiki/Latin_Americahttp://en.wikipedia.org/wiki/Nescaf%C3%A9http://en.wikipedia.org/wiki/Maggihttp://en.wikipedia.org/wiki/Crosse_%26_Blackwellhttp://en.wikipedia.org/wiki/Findushttp://en.wikipedia.org/wiki/Libby'shttp://en.wikipedia.org/wiki/Stouffer'shttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Spainhttp://en.wikipedia.org/wiki/World_War_Ihttp://en.wikipedia.org/wiki/Fulton%2C_Oswego_County%2C_New_Yorkhttp://en.wikipedia.org/wiki/World_War_IIhttp://en.wikipedia.org/wiki/US$http://en.wikipedia.org/wiki/Latin_Americahttp://en.wikipedia.org/wiki/Nescaf%C3%A9http://en.wikipedia.org/wiki/Maggihttp://en.wikipedia.org/wiki/Crosse_%26_Blackwellhttp://en.wikipedia.org/wiki/Findushttp://en.wikipedia.org/wiki/Libby'shttp://en.wikipedia.org/wiki/Stouffer's


18/91

in LOreal in 1974. In 1977, Nestl made its second venture outside the food industry

by acquiring Alcon Laboratories Inc.

The Brazilian president, Lula da Silva, inaugurates a factory in Feira de Santana

(Bahia), February, 2007.

In 1984, Nestls improved bottom line allowed the company to launch a new round of

acquisitions, notably American food giant Carnation and the British confectionery

company Rowntree Mackintosh in 1988, which brought the Willy Wonka Brand toNestle.

The first half of the 1990s proved to be favorable for Nestle: trade barriers

crumbled and world markets developed into more or less integrated trading areas. Since

1996 there have been acquisitions including San Pellegrino (1997), Spillers Petfoods

(1998), and Ralston Purina (2002). There were two major acquisitions in North

America, both in 2002: in June, Nestl merged its U.S. ice cream business into

Dreyer's, and in August a US$2.6 billion acquisition was announced of Chef America,

Inc. In the same time frame, Nestle came close to purchasing the iconic American

company Hershey's, though the deal fell through. Another recent purchase includes the

Jenny Craig fitness firm for US$600 million.

In December 2005 Nestl bought the Greek company Delta Ice Cream for240

million. In January 2006 it took full ownership of Dreyer's, thus becoming the world's

biggest ice cream maker with a 17.5% market share.[3]

14
http://en.wikipedia.org/wiki/L'Or%C3%A9alhttp://en.wikipedia.org/wiki/Alconhttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Lula_da_Silvahttp://en.wikipedia.org/wiki/Lula_da_Silvahttp://en.wikipedia.org/wiki/Feira_de_Santanahttp://en.wikipedia.org/wiki/Bahiahttp://en.wikipedia.org/wiki/Carnation_(trademark)http://en.wikipedia.org/wiki/Rowntree'shttp://en.wikipedia.org/wiki/The_Willy_Wonka_Candy_Companyhttp://en.wikipedia.org/wiki/San_Pellegrinohttp://en.wikipedia.org/w/index.php?title=Spillers_Petfoods&action=edithttp://en.wikipedia.org/wiki/Ralston_Purinahttp://en.wikipedia.org/wiki/North_Americahttp://en.wikipedia.org/wiki/North_Americahttp://en.wikipedia.org/wiki/Ice_creamhttp://en.wikipedia.org/wiki/Dreyer'shttp://en.wikipedia.org/w/index.php?title=Chef_America%2C_Inc.&action=edithttp://en.wikipedia.org/w/index.php?title=Chef_America%2C_Inc.&action=edithttp://en.wikipedia.org/wiki/Hershey'shttp://en.wikipedia.org/wiki/Jenny_Craighttp://en.wikipedia.org/wiki/Greecehttp://en.wikipedia.org/w/index.php?title=Delta_Ice_Cream&action=edithttp://en.wikipedia.org/wiki/Eurohttp://en.wikipedia.org/wiki/Nestl%C3%A9#_note-2%23_note-2http://en.wikipedia.org/wiki/Image:Nestl%C3%A91.jpghttp://en.wikipedia.org/wiki/L'Or%C3%A9alhttp://en.wikipedia.org/wiki/Alconhttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Lula_da_Silvahttp://en.wikipedia.org/wiki/Feira_de_Santanahttp://en.wikipedia.org/wiki/Bahiahttp://en.wikipedia.org/wiki/Carnation_(trademark)http://en.wikipedia.org/wiki/Rowntree'shttp://en.wikipedia.org/wiki/The_Willy_Wonka_Candy_Companyhttp://en.wikipedia.org/wiki/San_Pellegrinohttp://en.wikipedia.org/w/index.php?title=Spillers_Petfoods&action=edithttp://en.wikipedia.org/wiki/Ralston_Purinahttp://en.wikipedia.org/wiki/North_Americahttp://en.wikipedia.org/wiki/North_Americahttp://en.wikipedia.org/wiki/Ice_creamhttp://en.wikipedia.org/wiki/Dreyer'shttp://en.wikipedia.org/w/index.php?title=Chef_America%2C_Inc.&action=edithttp://en.wikipedia.org/w/index.php?title=Chef_America%2C_Inc.&action=edithttp://en.wikipedia.org/wiki/Hershey'shttp://en.wikipedia.org/wiki/Jenny_Craighttp://en.wikipedia.org/wiki/Greecehttp://en.wikipedia.org/w/index.php?title=Delta_Ice_Cream&action=edithttp://en.wikipedia.org/wiki/Eurohttp://en.wikipedia.org/wiki/Nestl%C3%A9#_note-2%23_note-2


19/91

In November 2006, Nestle purchased the Medical Nutrition division of Novartis

Pharmaceutical for $2.5B. In April 2007 Nestl bought baby food manufacturerGerber

for $5.5 billion.

NESTLE OVER THE YEAR

Nestle was established because of Henris concern for his fellow citizens. Henri, who

had a passionate interest in pursuing his work ideals, hoped that his efforts would one

day benefit society. He produced the first milk cereal food for children, an achievement

that even today, is recognized as one of the major advances in public health throughout

the world.

While the original business was based on milk and dietetic foods for children,

numerous other food products have been added to the range over the years. These

include chocolate, instant beverages, culinary, refrigerated and frozen products, ice

cream, mineral water and pet food.

Nestls other products include numerous chocolate bars as well as Nescafe

coffee and Perrier water.

15
http://en.wikipedia.org/wiki/Gerber_Products_Companyhttp://en.wikipedia.org/wiki/Gerber_Products_Company


20/91

TABLE1.2 OUR BRANDS

Milk Products & Nutrition Chocolates&Confectionery

NESTL EVERYDAY Dairy Whitener NESTL KITKAT

NESTL EVERYDAY Slim NESTLKIT KAT LITE

NESTL EVERYDAY Ghee NESTL MUNCH

NESTL Milk NESTL MUNCH POP CHOC

NESTL Slim Milk NESTL MILKYBAR

NESTL Fresh 'n' Natural Slim Dahi NESTL MILKYBAR CHOO

NESTL Jeera Raita NESTL BAR-ONE

NESTL NESVITA NESTL FUNBAR

NESTL NIDO NESTL Milk Chocolate

NESTL MILKMAID NESTL clairs

NESTL MILKMAID Fruit yoghurt POLO

NESTL MILKMAID FUNSHAKES POLO Powermint

NESTL CEREVITA POLO Zero

NESTL TANG EEZ

Beverages Prepared Dishes & Cooking Aids

NESCAF CLASSIC MAGGI 2-MINUTE Noodles

NESCAF SUNRISE MAGGI Vegetable Atta Noodles

NESTL MILO MAGGI Dal Atta Noodles

NESCAF Mild MAGGI Rice Noodles Mania

MAGGI Sauces

MAGGI Pizza Mazza

INDUSTRIAL SCENARIO

16
http://www.nestle.in/MilkProduct.aspx?OB=1&id=65http://www.nestle.in/MilkProduct.aspx?OB=1&id=42http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=4http://www.nestle.in/MilkProduct.aspx?OB=1&id=41http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=103http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=103http://www.nestle.in/MilkProduct.aspx?OB=1&id=43http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=5http://www.nestle.in/MilkProduct.aspx?OB=1&id=49http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=107http://www.nestle.in/MilkProduct.aspx?OB=1&id=50http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=52http://www.nestle.in/MilkProduct.aspx?OB=1&id=47http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=3http://www.nestle.in/MilkProduct.aspx?OB=1&id=48http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=6http://www.nestle.in/MilkProduct.aspx?OB=1&id=109http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=101http://www.nestle.in/MilkProduct.aspx?OB=1&id=108http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=7http://www.nestle.in/MilkProduct.aspx?OB=1&id=44http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=10http://www.nestle.in/MilkProduct.aspx?OB=1&id=102http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=8http://www.nestle.in/MilkProduct.aspx?OB=1&id=112http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=53http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=53http://www.nestle.in/MilkProduct.aspx?OB=1&id=117http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=111http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=110http://www.nestle.in/Beverages.aspx?OB=2&id=21http://www.nestle.in/PreparedDishes_CookingAids.aspx?OB=3&id=31http://www.nestle.in/Beverages.aspx?OB=2&id=22http://www.nestle.in/PreparedDishes_CookingAids.aspx?OB=3&id=32http://www.nestle.in/Beverages.aspx?OB=2&id=23http://www.nestle.in/PreparedDishes_CookingAids.aspx?OB=3&id=55http://www.nestle.in/Beverages.aspx?OB=2&id=116http://www.nestle.in/PreparedDishes_CookingAids.aspx?OB=3&id=106http://www.nestle.in/PreparedDishes_CookingAids.aspx?OB=3&id=33http://www.nestle.in/PreparedDishes_CookingAids.aspx?OB=3&id=104http://www.nestle.in/MilkProduct.aspx?OB=1&id=65http://www.nestle.in/MilkProduct.aspx?OB=1&id=42http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=4http://www.nestle.in/MilkProduct.aspx?OB=1&id=41http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=103http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=103http://www.nestle.in/MilkProduct.aspx?OB=1&id=43http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=5http://www.nestle.in/MilkProduct.aspx?OB=1&id=49http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=107http://www.nestle.in/MilkProduct.aspx?OB=1&id=50http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=52http://www.nestle.in/MilkProduct.aspx?OB=1&id=47http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=3http://www.nestle.in/MilkProduct.aspx?OB=1&id=48http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=6http://www.nestle.in/MilkProduct.aspx?OB=1&id=109http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=101http://www.nestle.in/MilkProduct.aspx?OB=1&id=108http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=7http://www.nestle.in/MilkProduct.aspx?OB=1&id=44http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=10http://www.nestle.in/MilkProduct.aspx?OB=1&id=102http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=8http://www.nestle.in/MilkProduct.aspx?OB=1&id=112http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=53http://www.nestle.in/MilkProduct.aspx?OB=1&id=117http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=111http://www.nestle.in/ChocolatesConf.aspx?OB=4&id=110http://www.nestle.in/Beverages.aspx?OB=2&id=21http://www.nestle.in/PreparedDishes_CookingAids.aspx?OB=3&id=31http://www.nestle.in/Beverages.aspx?OB=2&id=22http://www.nestle.in/PreparedDishes_CookingAids.aspx?OB=3&id=32http://www.nestle.in/Beverages.aspx?OB=2&id=23http://www.nestle.in/PreparedDishes_CookingAids.aspx?OB=3&id=55http://www.nestle.in/Beverages.aspx?OB=2&id=116http://www.nestle.in/PreparedDishes_CookingAids.aspx?OB=3&id=106http://www.nestle.in/PreparedDishes_CookingAids.aspx?OB=3&id=33http://www.nestle.in/PreparedDishes_CookingAids.aspx?OB=3&id=104


21/91

The processed foods sector, which currently accounts for less than 2% of total

food consumption in the country, is slated to grow at a fast pace. The Indian

Government has identified Food Processing as a high potential industry and has beencreating a policy environment conducive to its growth. Historically, the policy

framework favoured small and unorganized players while the MNC players were

restricted from adding capacities. This led to the mushrooming of a vast unorganized

sector. Large players with strong marketing network and brand equity were forced to

source from third party producers. During the last few years, however, several food

products have been de-reserved from small-scale sector. MNCs as well as domestic

players have made aggressive investments in the sector. Quantitative restrictions on

import of several food products have been lifted, leading to greater availability of

imported products. MNCs are able to offer a wider product range, without the need to

establish a manufacturing base.

COMPETITION

Baby food and Instant coffee are categories where brand loyalties are very

strong and Nestle is the market leader. HLL is a significant competitor to Nestle ininstant coffee; while Heinz is the main competitor in the baby foods market. The

market for culinary products, semi-processed foods such as noodles, ready mixes for

Indian ethnic breakfast and sweets, is largely an urban market. HLL and Indo Nissin

Foods are the main competitors in these product segments. Nestle has also achieved a

significant 25% share in the chocolate/confectionery market. The company has recently

expanded its dairy products portfolio to include, milk, curd and butter. The company

also forayed into the bottled water segment with the launch of its Perrierbrand in the

premium mineral segment andPure Life in the purified water segment.

17


22/91

OBJECTIVES OF NIL

Be in every way the leading company in Indian food industry. Ensure high quality standards in everything we undertake.

Provide our consumers with superior quality products.

Provide our shareholders with rapid growth & fair returns.

Provide our employees a challenging & satisfying work environment.

To be a good corporate citizen & contribute positively to the society in which

we operate.

DISTINGUISH CHARACTERISTICS OF THE INDUSTRY

FMCG companies sell their products directly to consumers. Major features

which distinguish this sector from the others are as follows:

LOW CAPITAL INTENSITYMost product categories in FMCG require relatively minor investment in plant and

machinery and other fixed assets. Therefore shortage of product for want of capacity

would be a rare phenomenon. The turnover is typically five to eight times the

investment made in a Greenfield plant at full capacity. This is also due to the fact that

the business being marketing driven, players do not integrate backward. Also, the

business has low working capital intensity as bulk of sales from manufacturers takes

place on a cash basis.

HIGH INITIAL LAUNCH COST

Nonetheless, there is a large front-ended investment made in new products

including cost of product development, market research, test marketing and most

importantly its launch. To create awareness and develop franchise for a new brand

requires enormous initial expenditure is required on launch advertisements, freesamples and product promotions. Launch costs are as high as 50-100% of revenue in

18


23/91

the first year and these costs progressively reduce as the brand matures, gains consumer

acceptance and turnover rises. For established brands, advertisement expenditure varies

from 5 - 12% depending on the categories. It is common to give occasional push by re-launches, which involves repositioning of brands with sizable marketing support.

TECHNOLOGY

Basic technology for manufacturing is easily available. Also, technology for

most products has been fairly stable. Modifications/ improvement rarely change the

basic process. Nonetheless, major global players spend enormous sums on R&D due totheir ability to spread cost over the wider base of their global operations. Their R&D

efforts are towards:

Cost effective manufacturing process without compromising on quality and

functional performance.

Research driven formulations, which give cutting edge.

High standards of hygiene/ purity for personal care and food products.

Standardized formulation, which can be used across countries.

MARKETING DRIVE

In relative terms, marketing function has greater importance in FMCG

companies. The players have to reach out to mass population and compete with several

other brands which essentially offer similar products. The perceived differences are

greater than the real differences in the product.

MARKET RESEARCH

Consumers' purchase decisions are based on perceptions about brands. They

also keep on changing with fashion, income and changes in lifestyle. Unlike industrial

products, it is difficult to differentiate products on technical or functional grounds.

19


24/91

With increasing competition, companies spend enormous sums on product launches.

Market research and test marketing become inevitable.

BALANCE SHEETS ARE MISLEADING

The most critical asset for FMCG companies is represented by its brands and

distribution network. Brands are bought and sold like any other assets. Typically, when

an FMCG business is sold, the value of the brand is several times of that of tangible

assets. However as per the current accounting practices in most countries, investment

made in building of brands are written off as revenue expenditure. This is due to highrisk involved with a new brand, subjectivity involved in its valuation, lack of

consistency and difficulty in separating a brand's value from that of tangible assets

employed in the business. While a successful brand will pay back the investment

several times, in case of brand failure, entire investment has to be written off. High

return on net worth of most established companies is also misleading due to the fact

that the assets sans brands are considerably understated in the balance sheet.

THIRD-PARTY MANUFACTURING

Manufacturing of products by third party vendors is quite common. Third party

manufacturing used to give fiscal advantages particularly of excise duties. These have

been considerably diluted in the past 7 years of reforms. In the last budget the

government proposed to change the basis of excise levy to MRP basis. A total of 43

product categories have been brought under the MRP net in the subsequent budgets.Besides excise benefits, third party manufacturing also provides other benefits.

20


25/91

TABLE 1.3 THE INDUSTRY CHRONOLOGY

YEARS DEMANDS

RUPEESTERMS

GROWTHRATE

1990 12 000tones

350 crores 2 %

March-1995

Excise Duty increased to 15percent

3 %

Excise duty further increasesto 28.75 % Cocoa Prices Zoom

Drops to 6-7%

1998 Excise duty reduced to 25 %,further to 20 percent and finally to18 %. Import Nestle launches Kit-Kat-sets up a new unit.Production Arrangement with CAMPCO continues. Mars selects production site.

2005 Market zooms up due to greater marketing thrust by players(especially Nestls) Chocolates-Selected importItem

23 %

2006 Chocolates-Open General License 20 000tones

23 %

2007 Quantitative restriction lifted 32000tones

23.6 %

The Indian Chocolate market can be sliced into four parts.

1. MOULD CHOCOLATE SEGMENT- comprising slab chocolates like Dairy milk

chocolates, etc. These are made by pouring the ingredients into moulds.

2. COUNT LINE SEGMENT- comprising bars like 5 star, Bar One, Perk, Kit Kat,

etc. These have ingredients other then chocolate and are usually Bar shaped, making for

chunky bites.

21


26/91

3. CHOCO-PANNED SEGMENT- comprising chocolate forms like Butterscotch,

Nutties, Tiffins, etc. Panned varieties have different cores/centers which are covered

with a layer of chocolate.

4. SUGAR-PANNED SEGMENT - comprising chocolate forms such as Gems,

Chocolate clairs, etc. These generally have a sugar coating on the outside. The

rejuvenation exercise of Nestls, was one of the key reasons behind the churning up of

the countrys Rs.350-crore chocolate market to a growth rate of 32 percent in 2005,

from a mere a few years earlier .

Chocolate Market shares

CADBURY

74%

NESTLE

20%

AMUL

5%

OTHERS

1%

CADBURY

NESTLE

AMUL

OTHERS

Fig.1.1

NESTLE FOODS INDIA LIMITED- HISTORIAL

HIGHLIGHTS

Incorporated in 1959 as Food specialties, Nest India (NIL) was promoted by

Nestle Alimantana, Switzerland, which presently holds 51% equity stake in the

22


27/91

company. Manufacturing in India began with the start up of the Moga Factory in 1962.

Nestls first unit at Moga, Punjab is manufacturing:

Milk products

Infant milk formulae

Weaning cereals

Culinary products

Beverages

It is the main manufacturing unit of Nestle India Limited. The second factory at

Choladi, Tamil Nadu to produce beverages i.e. 100% EOU for instant tea was set up in1967.

The third plant in Nanjangud, Karnataka was set up in 1989 to produce

Instant Coffee

Health Beverages

The fourth plant at Samalkha, Haryana, was set up in 1993, to produce

Weaning cereals

Culinary products Health beverages

Milk products

The fifth plant at Ponda, Goa was set up in 1994 to produce:

Wafers

Waffles

The sixth plant at Bicholine, Goa was set up in 1997 for manufacture ofculinary products. Nestle India is now putting up another factory at Pant Nagar in

Uttaranchal. Nestle India will invest over Rs 100 crores in the factory. This is the

seventh plant of Nestle India and like the other plants, this plant will also be of

international standards. This factory at Pant Nagar will initially manufacture culinary

products including its very popular MAGGI. The factory will benefit from and will be

closely aligned with the research and Development Facilities of Nestle Group and its

proprietary, world class technology.

23


28/91

Nestle India; the largest food company in the country is continuously looking at

new niches in the market place for its various products.

In milk products Nestle has made a considerable mark. For instance, the company was

the first to introduce a Dairy Whitener with its product 'Everyday'. And till today that

product is a brand leader despite the presence of a host of other brands in the field. IN

the case of Milkmaid condensed milk, Nestle relaunched the product as desert maker

and has seen the sales graph climbing since.

In baby foods, Nestle has made its strong hold with Lactones and Cerelac.Nestle is also popular in pure ghee segment. Its Everyday pure ghee has gained a quite

satisfactory market share; Nestle has also entered into fitness food products. Nestle

today is a household name. Nestle extended the product line in coffee by bringing in

Dolco, and then Sunrie.

In 1990, NIL entered the chocolate business introducing Nestle Premium

chocolate. Nestls products are sold under brand names such as a Milkmaid, Everyday,

Cerelac, Nescafe, Maggi, Lactones, and clairs etc. It launched the world famous KitKat chocolates in 1995. During the year 1996 Milo the world's largest selling chocolate

energy food drink was launched.

24


29/91

MAJOR PRODUCTS

25


30/91

RECENTLY LAUNCHED PRODUCTS

Set Dahi

New Tomato and Curry Flavors in Maggie Noodles

New Dal and Atta in Maggie Noodles

A new confectionery Nestle Choc Stick

Soft Chewy fudge Milky bar Choo

Nestle` recently launched products Tea Iced Tea

Nestle slim milk

The company is also setting up CAF NESCAFE and COFFEE CORNERSacross metros and mini-metros in India.

NESTL: 4.6% ORGANIC GROWTH IN FIRST QUARTER

Group-wide organic growth of 4.6%

6.3% sales increase at constant exchange rates

Swiss franc sales down 7.5% as a result of a 13.8% negative foreign exchange

impact

The overall organic growth of 4.6% in a difficult quarter, aggravated by late

Easter, is mainly due to our successful drive for innovation and our strong market

positions. Our consolidated sales clearly took a hit from the strong Swiss franc, but we

expect this effect to taper off in the course of the year. We are confident that the rest

of the year will bring an acceleration of growth and that we will therefore achieve our

stated objective of improving the Group's performance in constant currencies for 2007."

The Nestl Group's consolidated sales for the first three months of 2007

amounted to CHF 19.7 billion. In constant currencies, sales increased by 6.3%,

reflecting organic growth of 4.6% (real internal growth 2.5%, pricing and others 2.1%),

as well as a small contribution from acquisitions, net of divestitures. As a result of the

strong Swiss franc, the adverse foreign exchange effect was 13.8%.

26


31/91

Foreign exchange factor held back consolidated sales, and real internal growth was

impacted by the late Easter date and the competitive situation in Japan. Additionally, in

keeping with the Group's policy of ensuring margin improvements, Nestl raised pricesin several product categories to reflect cost increases. Nevertheless, the Group expects

its strong brands, its broad distribution network and its capacity for innovation to lead

to an improvement in sales growth as the year goes on.

TABLE 1.4 SALES BY MANAGEMENT RESPONSIBILITIES ANDGEOGRAPHIC AREA

Jan.-MarchJan.-

MarchOrganic Growth RIG

2007 2006 Jan-March 2007 Jan-March 2007In CHF million % %

Zone Europe 6'778 '628 +1.8 -0.4

Zone Americas5'978 '154

+4.8 +1.9

Zone Asia, Oceania andAfrica 3'291 '633

+3.2 +1.9

Nestl Waters1'719 '740

+10.9 +10.7

Other Activities *1'947 '156

+9.4 +8.4

Total 9'713 1'311 +4.6 +2.5

The growth rate in Western Europe reflects the importance of chocolate and ice cream

to that Zone, both of which were impacted by the late Easter date. There should be

some improvement, therefore, in the first half. Canada and the US performed well, but

there was some slowness in Latin America. Importantly, however, the key markets of

27


32/91

Brazil and Mexico both achieved positive RIG and organic growth. Most Asian

markets are growing at a good rate, with Greater China outperforming its ambitious

target of double-digit RIG. In Japan measures were taken to improve the quality ofsales in the ready-to-drink business. The water business and Alcon again delivered

good growth, capitalizing on their leadership positions in their respective markets.

28


33/91

SALE In CHF million

Among the product groups, beverages, especially soluble coffee and coffee

mixes under the Nescafe brand, and powdered beverages, under brands such as Milo

and Mosque, did well, as did the specialty roast & ground coffees. There was good

progress also in the chilled and the frozen culinary sector; the recently acquired Chef

America achieved double-digit growth. The performance of chocolate and

confectionery was impacted by the late Easter, as well as by price increases.

29

2006

2007


34/91

MARKETING STRATEGY

IMPROVED PENETRATION

Improved penetration of brands is an important consideration in the Companys

vision of sustained growth. Expansion of distribution and reach was a focus area. Some

of the initiatives that are expected to contribute significantly include introduction of

single serve convenience packs at affordable price point, such as NESCAFE Redimix

and MAGGI Hot Cup Soup Powder. The initiative to automate distributor operation has

continued and is expected to be complete during 2005. This will help NIL achieve

greater speed and transparency in the flow of information, ensure better levels of

customer contact and enable faster response to consumer needs.

OUT-OF-HOME CONSUMPTION

The Company continued to strengthen initiatives to facilitate availability of

products for out of-home consumption. These initiatives were supported by a numberof new product launches. The development of NESTEA Instant Tea premix for hot

vending offers consistency and convenience as compared to tea bag preparation;

NESCAFE Frappe premix fort cold vending has been introduced in Quick Serve

Restaurants; Low Sugar NESCAFE premix has been developed for health conscious

consumers; MAGGI Hot Cup Soup dispensed through vending machines is an

innovative and pioneering concept in the market. Large number of Nestle Consumption

Zones including Cafe NESCAFE, Coffee Corners and multibrands stalls were set up

and innovative vending machines were introduced for Iced Tea. Sustained focus on

continuously improving the value to the consumer, helped to introduce vending

machines with eight beverage options to offer consumers a range of specialty beverage

at the same location.

On the manpower development front, programmed during the year continued to be

focused on the operational front more particularly sales and production.

30


35/91

To support the growth plans and distribution strategy, and simultaneously improve

the operational efficiency, the on strengthening chain continued to receive attention

during the year.

INNOVATION, RENOVATION AND TECHNOLOGY FROM

NESTLE

The continuous efforts on product innovation and renovation during the year has

contributed significantly to the performance of the Company during the year and would

remain a key element even in the future to sustain leadership and profitable growth,

especially in a market that is becoming increasingly competitive under the General

License Agreement with Nestle Group, NIL has the license for know- how, patents,

brands and other intellectual property, in relation to the products manufactured and/or

sold by your Company. Access to proprietary technology of Nestle and the fruits of

extensive centralized Research and Development is available on a continual basis. The

excellent performance of the Company over the years has been greatly influenced by

these inputs.

COMMUNITY DEVELOPMENT

Initiatives by the Company, for community development continued to be focused

on programmed in the areas where the factories are located. These programmed gives

importance to providing drinking water facilities in schools, supporting and

participating in immunization programmers, providing basic facilities to local schools

and arranging medical camp.

SUPPLY CHAIN (DISTRIBUTION STRATEGY)

Thrust on strengthening the supply chain continued to receive attention during theyear and the Company advanced towards becoming the Best in Class Supply Chain in

the FMCG sector. Distribution costs were contained by increase and efficient use of

railways for primary dispatches. Simultaneously, the vehicles transporting raw and

packing to factories were used for finished goods dispatches too, thereby saving freight

costs. Efforts in collaborative logistics with other companies and third party services

providers have begun to yield benefits.

In order to improve response to customer demand, forecasting was given

considerable attention. This has led to an empowered demand planning role that

31


36/91

ensures optimized inventory as well as satisfaction of consumer demand. Initiatives in

e-connectivity with the distributors and also with the suppliers are further aligning our

efforts in this direction.

MARKETING STARTEGIES - NIL

Marketing strategy is the complete and unbeatable plan designed especially for

attaining the marketing objective of the firm.

The marketing objectives indicate what the firm wants to achieve; the marketing

strategy that decides the success at the business unit level which in turn decides the

total corporations success. The link between marketing strategy and overall success is

indeed direct and vital. And in this linkage lies the significance of marketing strategy.

Nestle India ltd. has an aggressive marketing strategy which is very well

understood when one goes through the in-depth study of the 4-Ps of the marketing and

price strategies with respect to its products. One comes to the conclusion that NIL has a

well defined roadmap to success i.e. to reach its ultimate objective of realizingcustomer satisfaction through value for price products.

PRODUCTS

Quality is the essential ingredients in all of our brands and the reason why

millions of people choose Nestls products every day. Our consumers have come to

trust in Nestls commitment to excellence and turn to Nestle brands to maintain

nutritional balance in a fast paced world.

BABY FOODS

The production of infant food goes right back to the origins of the Nestle

Company. Henri Nestls `Farine Laces was the first product to bear the Nestle name.

In 1867 a physician persuaded Henri Nestle to give his product to an infant

who was very illhe had been born prematurely and was refusing his mothers milk

and all other types of nourishment. Nestls new food worked, and the boy survived

32


37/91

from the very beginning, Nestle' product was never intended as a competitor for

mothers milk.

In 1869, he wrote; During the first months, the mothers milk will always be

the most natural nutrient, and every mother able to do so should herself suckle her

children.

The factor that made baby foods success in the early days of the Nestle

companyquality and superior nutritional valueare still as valid today for the wide

range of infant of infant formula, cereals and baby food made by Nestle. The World

Health Organization (WHO) recognizes that there is a legitimate market for infant

formula, when a mother cannot or chooses not to breast feed her child. Nestle' markets

infant formula according to the principles and aims of the WHO International Code of

Marketing Breast Milk Substitutes, and seeks dialogue and cooperation with the

international health community and in particular with the WHO and UNICEF, to

identify problems and their solution. Nestls expertise as the worlds leading food

manufacturer

Gained over more than 125 years, is put the disposal of health authorities, the

medical profession and mothers and children everywhere.

Milk based products and baby food contributes to 34% of Nestls turnover. For

ensuring regular procurement of good quality milk, Nestle has developed a network

around its Moga factory for collection of fresh milk everyday from the farmers. Nestle'

has a dominating 87%market share in the baby weaning foods with its Cerelac and

Nestum brands. Infant milk powder is sold under the Lactogen and Nestogen brands.

Brand loyalties are very high in categories such as infant food and weaving cereals,

enabling the company to command a price premium.

Other milk products include dairy whiteners (21% market share ) sold under

the Every Day and Tea Make brands, sweetened condensed milk and ready to cook

mixes for traditional Indian sweets sold under theMilkmaidbrands. The company also

markets ghee (6% market share) under the Every Day)brand. Nestle has expanded its

milk product portfolio with the launch of new dairy products such as UHT milk, Curd

and Butter. Huge investments arte being made in building a diversified dairy businessand the distribution infrastructure for the same. Milk products sales registered a 10.6%

33


38/91

growth during 2006. The major competitors are HLL with Milkana, Amul with

Amulya, Britannia with Britannia Dairy Whitener, and Kwality with Kream Kountry.

Britannia with 11% of market share, Amul with 19%, and HLL with 8%, Kwality with4% of it, Rest of the market share lies with local players like Nova, Indiana etc. local

players are very active & some of them are operating under the small scale industries.

Nestle is still the market leader in the long term & is continuously on the 4-Ps to grow

further.

DAIRY BRANDS

Nestle' has long been a major player in the dairy industry, originally with well

known shelf stable brands such as Nido, Nespray, La Lechera and Carnation, then

building a strong international presence in Chilled dairy and Ice cream under the Nestle'

brand.

Innovation and renovation play a major role in the development of milk based products

as well as of breakfast cereals, managed as a joint venture with General Mills.

The area of nutrition, with its benefits to health and wellbeing, is having a

significant impact on the development of our business. A wide range of proven, sciencebased solutions such as starter and follow-up formulas, growing-up milks, cereals,

eternal diets, oral supplements and performance foods are actively developed and

successfully brought to market under the Nestle brand.

BREAKFAST CERAELS

Although cereals have been with mankind in form or another for millennia, it

was not until the mid 19th century that scientific research, technological innovation and

then influence of a group of American health reformers, gave rise to the currently

foodstuff we know today as breakfast cereal.

Nestle' has a joint venture with General Mills outside North America, Cereal

Pardoners Worldwide, which is active in more than 80 countries.

The joint venture began in 1990 and its rapid growth has been characterized by

branding and lately the launching of breakfast cereal brands into the fast-growing cereal

bar market.

34


39/91

ICE CREAM

There are many myths and stories as to the invention of ice cream: was it Macro

Polo who brought it back from China (along with pasta)? Probably not, considering he

most likely never visited China.

The story of its popularity is however connected with the invention of

technology to make it on an industrial scale and to keep it cold once made. Before

refrigeration techniques, food was frozen with the aid of ice mixed with salt which was

either stored in ice house or shipped from cold countries. But then at the end of the 19 th

century, both making and freezing it became easier and together with the invention of

the ice cream cone made the product boom.

Today the United States is the absolute leader in terms of volume consumed but

the highest per head consumers are in New Zealand. Flavors youd never thought of

and yet theyre commercially available:

Sorbets- Smoked Salmon, Tomato, Cucumber Ice-Creams Garlic, Avocado, Sweet

Corn.

The ice cream cone is the most environmentally friendly form of packaging. A

system from Damascus, Ernest E Hamwi is credited with its invention. Apparently

during the 1904 St Luis Worlds fair. His waffle booth was next to an ice cream vendor

who ran short of dishes. Hamwi rolled a waffle to contain ice cream and the cone was

born.

CHOCOLATE & CONFECTIONARY

The story of chocolate began in the New World with the Mayans, who drank a

dark brew called cacahuaquchtl. Later, the Aztecs consumed chacahoua and used the

cocoa bean for currency. In 1523, they offered cocoa beans to Cortez, who introduced

chocolate to the Old world, where it swiftly became a favorite food among the rich and

noble of Europe.

From the beginning, turning raw, bitter cocoa beans into what one 17th century

writer called the only true food of the gods has been a fine art, a delicate mixture of

35


40/91

alchemy and science. Centuries ago it was discovered that by fermenting and roasting

the beans, an almost otherworldly flavor could be created.

In 1875, after years of trying, a 31-year old candy madder in Vevey named

Daniel Peter figured out how to combine milk and cocoa powder. The result milk

chocolate.

Peter, a friend and neighbor of Henri Nestls started a company that would

quickly become the worlds leading maker of chocolate. For three decades the company

called Peter, Cailler, Kohler relied on Nestle for milk and marketing expertise. In 1929,

the almost inevitable merger took place as Nestle acquired Peter, Cailler, and Kohler.

Indian chocolate market is growing day by day. Premium segment is opening

upon. The companies like Nestls are launching indigenous product made to

international standards of the 20,000 tonnes chocolates market worth about Rs 400

crore, Nestles accounts for around 65% of market share followed by Nestls around

23%. Amul has 5% of the share, with the minor players taking the Rest.

Though with much smaller portfolios, Nestle is putting up a touch fight from

the treat for kids, chocolate are now being positioned as near- meal substitute. Thanksto the initiative taken by Nestls India. The market has become broad based in the

sense that adults are important target segments now. The repositioning of Nestls dairy

milk in 1994 as real taste of life grew the entire category of milk chocolates by 20%.

If facilitated the repositioning of Nestle brands in the basket.

5 STARS: As energy bar, earlier targeted to teenager, before launch of perk 5 star

energy bar positioning made it snacking chocolate with Nestle' pitching Bar-one in

1993 gaian it For those in between times.

MUNCH: Munch is the market leader in the chocolates. It is the largest selling

chocolate in India & is followed by Nestls Dairy Milk.

ECLAIRS: competing in the chewable toffee segment, clairs was relaunched by

Nestls during the mid-90 with a new name milk-clairs. Its worth is 4000 tones now.

Nestle' also presents hereNESTLE' ECLAIRS. Due to launch of multibrands Nestle can

not pay attention to brands like Mr. Pop Candy Lollypop.

36


41/91

KIT-KAT: Kit- Kat which was launched in India in 1995 today leads the chocolate

coated wafer bars category. It has 11.5% share of chocolate market. But Nestles perk

is with9%.

PRODUCT PRICE WEIGHT

KIT- KAT Rs. 14 36 gm.

PERK Rs. 10 2x17.5 gm.

Nestle forayed into chocolate & confectionary in 1990 and has cornered afourth share of the chocolate market in the country. The category contributes 14% to

Nestls turnover. It has expanded its products range to all segments of the market the

Kit-Katbrand is the largest selling chocolate brand in the world. Other brands include

Milky Bar, Marbles, Crunch, Nestle Rich Dark, Bar-one, Munch etc.

Amul is also competing in this category especially in western regions of India.

But Nestle' still has its own position in the market. The sugar confectionary portfolio

consists ofPolo, Soothers and Frootos. All sugar confectionary products are sold under

the umbrella brand Allens. Nestle has also markeys some of its imported brands like

Quality Street, Lions and After Eight. New launches such as Nestle Choc Stick and

Milky Bar Choo at attractive price points to woo new consumers chocolate

confectionary sales registered a strong 21.5% of growth in 2006 aided by good volume

growth inMunch, Kit-Katand Classic sales. Nestle relaunched Bar-One during the year

1993.

PREPARED FOODS

37


42/91

Convenience foodspackaged soups, frozen meals, prepared souses and

flavorings----date back more than a century. With the industrial revolution came

factory jobs for women and less time to prepare meals.

The problem was so widespread that it became the object of intense study in 1882 by

the Swiss Public Welfare Society, which offered a series of recommendations,

including an increase in the consumption of vegetables.

The society commissioned Julius Maggi, a miller with a reputation as an

invention and capable businessman, to create a vegetable food product that would be

quick to prepare and easy to digest. The results two instant pea soups and an instant

bean soup --- helped launch one of the best known brands in the history of the foodindustry. By the turn of the century, Maggi & Company was producing not only

powdered soups, but bouillon cubes, sauces and flavorings.

Maggimerged with Nestle in 1947.

Buitonithe authentic Italian brand, which has been producing pasta and sauces in Italy

since 1827, became part of the Nestle' Group in 1988.

Ready to cook food/ cooking aids are sold under the umbrella brand name

Maggie.Culinary product account for about 14% of Nestls turnover. Maggie is themarket leader in the noodles (45% market share), the Ketchup (43% market share) and

soups (41% market share) categories.

Other products sold under the umbrella brand Maggie, are ready-to-cook

gravy/sauces, soups, seasonings, as well as traditional Indian foods such as pickles and

instant snack mixes (dosa mixes). New taste variants are continuously launched to add

variety to the product offerings.

HLL, Heinz, Knor & Indo Nissin Foods are Major competitors in this category.Gits mixes, Top Raman, Hot serve, are some products that are in competition to

products under Maggie brand. But Maggie has used Quick and Easy cooking as its

Unique Selling Preposition that worked to distinguish the Nestle' to lie ahead than all

brands. HLL as brand Wagon is the part of our daily life uses creative selling

prepositions to maintain its position as the top FMCG firm in India. Its marketing

strategies (including launch, pricing & distribution strategy are good enough to shatter

the competition, so Nestle is working as an early worker to remain and lead in the

market.

38


43/91

The distribution network of Indo Nissin food is strong enough & it has covered

a large portion of market in very short time. Its distribution network is not very long &

the prices are also low. The company had adopted a low budget promotional strategyand is very fine at merchandising. These all are working together for the good of the

company.

Nestle has the advantage of great brand image & it is actually working for maintenance

and growing it.

BEVERAGES

In 1937, Nestle scientists perfected a powered coffee product that was

introduced in 1938 under the brand name Nescafe- the worlds first commerciallysuccessful soluble coffee.

It became so popular during World War II that for one full year the entire output

of the Nescafe plant in the United States (more than one million cases) was reserved

for military use only. Since then, Nescafe has become one of the worlds best-known

brands. In addition, Nestle' is a major producer of chocolate-based and malted drinks.

Its leading brands, Nesquik, Milo and Nescau are very popular with a growing

number of young people around the world. Nestle' ready-to-drink beverages Nestea andNescafe are sold in various forms (cans, bottles). These are distributed by Nestls

joint-venture with the Coca-Cola Company, Beverages Partners Worldwide. Nestle' is

also present in fruit juices (Libbys) as well as espresso coffee in capsules (Nespresso).

Beverages like coffee, tea and health drinks contribute to about 30% of Nestls

turnover. Beverages sales registered a 155% growth during 2007. While about 14% of

sales come from domestic market, exports contribute to about 16% of sales.

Nestle Nescafedominates the premium instant coffee segment. Nestls othercoffee brand Sunrise has also been relaunched under the NESCAFE franchise to

leverage on the existing equity of the brand. Nestle' has focused on expanding the

domestic market through price cuts and product repositioning. However it has been

losing share in the domestic market, where it has a 37% market share.

The major competitors are Coca-Cola, which launched coffee & tea under brand

name Georgia in 2002. Its tea in four flavors which are classic, Adark, Masal & Elaichiand coffee in three variants Classic, Cappuccino & Mochaccino to suit the taste of

39


44/91

customer. They adopted the strategy to distribute vending machine to even small

retailer so as to cover a large market. Tata coffee also Works against Nestle'. But n is

still the market leader in terms of market share, Customers choice & quality.

Milo,brown-malted beverages was launched in 1996. It has an estimated

volumes share of about 35 in the malted food drink segment.

Nestls Bourn vita & HLL with Boost are the major players in the market

along with Milo. Bourn vita is with largest market share of 35%. The promotional

strategies of Nestle' for Milo are working fast for the good of Milo. Nestle' has

launched non-carbonated cold beverages such as Nestea Iced Tea andNescafe Frappe

during 2004.BEVERAGES

Nestle' Food Services provides food and beverages professionals with a wide

selection of branded products. Our solutions meet the growing opportunities to service

consumers in out-of-home channels.

Beverages solutions featuring well known consumer brands such as Nescafe,

Nestea and Nesquikas well as host professional brands including Minors, Chiefand

Davigel are part of the diverse portfolio of Nestle' Food Services.

Working to meet the need of Food Service operators across a wide spectrum of

business channels such as quick service restaurants supports our commitment to giving

consumers the brands and quality they come to expect and rely on in the home as well

as out of the home.

BOTTLED WATER

Nestle' brgan its entry into the water business in 1969 with a 30% stake in theowners of the SocieTe Genele Des Minerals De Vittal. It acquired a controlling

interest in SGEMV in January 1992, and went on in May of the same year to buy the

entire Perrier Group.

In 1992, Nestle' was the first company to dare to launch a mineral water,

Valvert, in five different countries at once. Its originally lied in the use of an all-new

plastic, P.E.T. (Polyethylene teraphthalate), which is stronger and more elastic than the

PVC used since 1968. Besides P.E.T. is recyclable.

40


45/91

By the end of 1997, the group was present on every continent, and the purchase

ofSan Pellegrino gave it the leadership in the Italian market. In 1998 f or the first time

in its history, Nestle' associated its name with bottled water: Nestle Pure Life.

The brand was launched in Pakistan and soon appeared in Brazil, followed by

Argentina, Thailand and Philippines, China and Mexico in 2000. in 2001 India, Jordan,

and Lebanon followed and in 2002, Egypt, Uzbekistan and then United States.

Nestle Pure Life is drinking water that has been treated and rematerialized

using a standardized industrial process to ensure purity and quality and is marketed in

emerging countries.

A second product with the Nestle' name was launched in May 2000, this time in

six European countries: Nestle Aquarelle. A natural spring water currently from nine

different springs in France, Germany, Belgium, Hungry, Italy and Spain, Nestle'

Aquarel also uses the multi-source concept to satisfy new consumer expectations,

especially for water with a low mineral content that the whole family can drink.

In April 2002, the group changed its name to Nestle' Waters, a token of Nestle'

decisive commitment to the bottled water market, which now represents 9% of its sales.Today, Nestle' Waters is established in 130 countries and markets about 70 different

brands. The group is able to offer top quality brands ad innovative packaging to meet

the individual needs of the water consumer all over the world, whenever, wherever and

however thanks to the wide variety of its offer in terms of distribution and product mix.

PETCARE

Nestle' entered the pet care business with the purchase of carnation in 1985, and

we consolidated our position in Europe with acquisition of the spillers brand in 1998,

and further with the acquisition of Ralston-Purina in 2001 creating Nestle' Purina Pet

Care.

Carnation for its part developed the Friskies brand in the United States in the

1930s and in selected markets in Europe and Asia since the 1960s. Today Nestle' is

well-positioned with a balanced portfolio of internally developed and recently acquired

brands.

41


46/91

Technologies to develop and add value continually for pets and their owners are

engineered into our current product range. These include state-of-the-art nutritional

innovations, such as products which help maintain feline urinary tract health orinnovations for the most discriminating of pets and their owners. Nestle' has already

become an industry leader and we continue to develop our international presence.

CONSUMER SERVICES

At Nestle' we are committed to offering consumers high-quality food products

that are safe, tasty and affordable. The Nestle' seal of guarantee is a symbol of this

commitment.

We also believe in maintaining regular contact with our consumers. This applies

both to how we present our products and to how we address our consumers questions

and concerns. When Henri Nestle' prepared his first boxes of infant formula for sale, he

put his address on the packages so people would know where to go if they had

questions. Today our consumer relationship panel with the words Talk to Nestle'

expresses the same commitment.

This is why we have a worldwide Nestle' consumer services network devoted tocaring for our consumers. Our people have expertise in a wide range of areas such as

nutrition, food science, food safety and culinary expertise. They provide the prompt,

efficient and high quality service that consumers expect from Nestle'.

In addition we teach them talk with consumers and above all, to listen.

Listening helps us to understand what people want. Nestle' uses the insights gained

from relationships with consumers to driver product development.

At Nestle' we care for our consumers because our success depends on meetingtheir needs and expectations. Through listening and understanding we can make

products that they will want to use all through their lives.

PROMOTION

Promotion is an attempt to influence customers. Its aim is inform & remind the

prospective consumers of the companys offer & to advocate the cause of its production

in the minds of its audience. Thus informing, reminding & advocating about the

companys product are real purpose of the promotion component of the mix.

42


47/91

NIL has rightly understood the production of a good product is not enough to

ensure success in the market, unless target customers are aware of its existence,

features and products. So company has framed a very strong and very widecommunication plan.

ADVERTISING

NIL is associated with MUDRA advertising company in India. It has properly studied

the market and developed the commercials in several languages. NIL has booked spot

for the advertising in almost all the channels.

EXHIBITIONS & TRADE SHOWS

It also participates in trade shows & exhibitions.

IN 1997, at Jawaharlal Nehru Stadium in an exhibition NIL displayed its all old and

new products. This was the time when MILO was launched in India.

AHARA 97, Here Nestle' India Ltd. presented its wonderful world of Nestls

recipes along with its products. It also exhibited the various to make Maggie tastier.

This shows that Nestle' never leave its product even if it is market leader & is the good

source of its revenue.

FOOD EXPO 98, organized by CII & attended by over 100000 people. The

Mumbai branch of NIL ensured high visibility for its products like products under

Maggie brand, MILO & chocolates by setting the venue ablaze with Nestls hues Vic

banners, umbrellas posters & product displays.

INTERNATIONAL FOOD CONFEDERATION 1998: IFCON provided

opportunity for the leading, international food scientists, technologists & research

institutes to reflect massive change sweeping across the food processing sector.

FOOD EXPO 1999:

In October in Chicago NIL participated there also.

CHILDREN SPORT MEET 98:

At DPS R. K. Puram children between age group of 4-13 years put their best

foot & arm forward. Attired in colorful MILO T-Shirts & Caps they participated in 12

events.

FREE GIFTS

43


48/91

Like giving school Kit i.e., pen scale etc, with Maggie. Noodles & chocolates,

Free Cricket bag or a sport watch, badminton racket, bag etc on the payment of a very

minimal amount of Rs. 10 with Milo.

TABLE 1.5 DISTRIBUTION NETWORK OF NIL

44

DISTRIBUTOR (4%-7%)

C & F AGENTS (1%-3-%Margin)

SUPER STOCKIST (3%-6%)

MANUFACTURER

STOCKIST (3%-5%)

ORGANISED RETAILER (6%-

18%)


49/91

TABLE1.6 NESTLES MOST LIKED PRODUCTS

PRODUCTS PERCENTAGE

CHOCOLATE 10%

COFFEE 28%

MILKMADE 5%

MAGGIE 40%

MINERAL WATER 2%

INFANT FOODS 5%

SOUPS 4%

SAUCES 6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

PERCENTAGE

CHOCOLATE COFFEE MILKMADEMAGGIE MINERAL WATER INFANT FOODSSOUPS SAUCES

45


50/91

10% people like chocolates as Nestls best product. Among chocolates the Kit-

Kat & Munch are the most liked ones. Munch is the largest selling chocolates in Indian

chocolate market followed by Nestls Dairy milk. Coffee is considered as the bestproduct of Nestle' by 28% of respondents. They like the taste & aroma as it best

quality. Milkmaid is liked by 5% of people & this crowd involves women &

surprisingly children. Maggie noodle is the most loved product by 40% respondents

especially mothers & children as they consider it as the all time dish (Fast to cook,

good to eat). Infant products are liked by 9% of respondents, most of them were

mothers but, it is very interesting to quote that some mothers them & their elder

children liked the taste of Cerelac & it increased the purchasing frequency of theproduct.

Fig.1.2 REASONS TO LIKE NESTLES PRODUCTS

REASONS TO LIKE NESTLE' PRODUCTS

COLOR

TASTEPACKAGIN

G

PRICE

ADVERTIS

EMENT

Fig1.2

46


51/91

TABLE 1.7

FEATURES PERCENTAGE

COLOR 2%

TASTE 64%

PACKAGING 4%

PRICE 20%

ADVERTISEMENT 10%

Most of the respondent (64%) liked the products because of the great taste of

products like Maggie, Munch , Kit-Kat, Coffee, Frappe, Slim Milk & sauces. 2% of

the respondents say that they like the color of the product most as it shows the

freshness of the product. 20% people are satisfied with the price.

TABLE 1.9BRAND LOYALTY FOR NESTLES

LOYALTY STATUS CONTRIBUTORS

HARD CORE LOYALTY 53%

SHIFTING LOYALS 19%

SWITCHERS 28%

BRAND LOYALTY FOR NESTLE

53%

19%

28%

HARDCORE

LOYALTYS

HIFTING

LOYALSSWITCHERS

CONTRIBUTORS

Fig.1.3

47


52/91

BRAND LOYALTY FOR NESTLE

Brand loyalty is very high for Nestle' as 53% of respondents denied to switchover to other product, when any gift or scheme is offered by the competitors. Products

that have highly loyal customers are Maggie noodles, coffee, munch & everyday.

People also like & are loyal for sauces and it is showing an increasing trend (Heinz

recently started the Diwali offer to give 500 gm only for Rs. 39. people responded that

the offer wasnt so interesting to switch from Maggie & also it was a short-term offer.

19% respondents said that they w

nestle - marketing strategies of nestle foods india ltd. chocolate segment as compared with its

Documents