Consumer Perception and Market Strategy in Nestle

PROJECT REPORT ON CONSUMER PERCEPTION AND MARKET STRATEGY IN NESTLE

At “NESTLE INDIA LTD"

SUMITTEDE TO:

SUBMMITTED BY:

(Dr.Manoj Mehrotra)

Rakesh Sharma Roll no: 2008037

NCR BUSINESS SCHOOL MODINAGAR{GHAZIBAD}

Table of Contents Contents

Page No.

Introduction

3

Objective of the Study

13

Scope of the study

14

Nestle India

17

Some Acquisitions & Mergers

55

Swot Analysis

73

Conclusion & Recommendation

78

Limitations

79

Bibliography

80

2

Introduction Customer Perception Theory (CPT) Customer Perception Theory (CPT) illustrates and explains one method through which advertising is effective. There are two basic concepts that need to be accepted in order for CPT to be understood: cultural filtration, perceptual reality. Cultural filtration is simply the reason that people perceive day to day life differently from one another. Each person is unique and has had a unique set of life events that shape the way they experience. An easy way of understanding cultural filtration is by comparing the cultural filter to a pair of sunglasses. When we wear tinted glasses we view the world as being the color of the lens, the same applies with our cultural filters. We gather our experiences on a wide variety of topics (politics, education, experience, vocabulary, travel, geographic location, cultural knowledge,

tradition,

family,

heritage,

race,

ethnicity,

sexuality, habits, etc) and form our own unique cultural filter. It is through this unique filter that we experience everything, including

advertising.

In

the

model

above

the

pink

tinted

rectangle represents the cultural filter. With cultural filtration in place, we can proceed through the steps of the model which define the theory. The process of CPT starts with the consumer: an individual toward which the message is directed. The consumer must first have a perceived need or want, and then actively experience an advertisement in the product category where the need or want exists. It is a catalyst for the model if this advertisement occurs at strategic timing in the process. After exposure, the consumer forms an 3

opinion about the product. This perception becomes the reality of that product to the consumer. It is possible that this truth could change with exposure to competitive messages from a wide variety of sources (other media, friends, advice columns etc).

If,

however,

the

product

is

perceived,

and

therefore

assigned the truth, of being positive it is then evaluated as to whether or not it fills the need or want. If it does indeed fit the need, it is likely that the consumer will proceed to the purchase stage

of

the

model.

In

the

purchase

stage

the

consumer

decides to purchase or not to purchase the product. Again, there are a number of variables surrounding this decision, as surround each step and decision in the model.

4

Marketing strategy A

marketing

organization greatest

strategy to

is

concentrate

opportunities

sustainable

a

to

competitive

process its

that

limited

increase

A

allow

resources

sales

advantage.

can and

on

achieve

marketing

an the a

strategy

should be centered around the key concept that customer satisfaction is the main goal.

Key part of the general corporate strategy A marketing strategy is most effective when it is an integral component of corporate strategy, defining how the organization will successfully engage customers, prospects, and competitors in

the

market

arena.

It

is

partially

derived

from

broader

corporate strategies, corporate missions, and corporate goals. As

the

customer

constitutes

the

source

of

a

company's

revenue, marketing strategy is closely linked with sales. A key component of marketing strategy is often to keep marketing in line with a company's overarching mission statement.

Basic theory: 5

1) Target Audience 2) Proposition/Key Element 3) Implementation

Sectorial tactics and actions A

marketing

strategy

can

serve

as

the

foundation

of

a

marketing plan. A marketing plan contains a set of specific actions

required

to

successfully

implement

a

marketing

strategy. For example: "Use a low cost product to attract consumers. Once our organization, via our low cost product, has

established

a

relationship

with

consumers,

our

organization will sell additional, higher-margin products and services that enhance the consumer's interaction with the lowcost product or service." A strategy consists of a well thought out series of tactics to make a marketing plan more effective. Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketing objectives. Plans

and

objectives

are

generally

tested

for

measurable

results.

A

marketing

strategy

often

integrates

an

organization's

marketing goals, policies, and action sequences (tactics) into a 6

cohesive whole. Similarly, the various strands of the strategy , which might include advertising, channel marketing, internet marketing, promotion and public relations can be orchestrated. Many

companies

cascade

a

strategy

throughout

an

organization, by creating strategy tactics that then become strategy goals for the next level or group. Each one group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable. Marketing strategies are dynamic and interactive. They are partially

planned

and

partially

unplanned.

dynamics.

Types of strategies

7

See

strategy

Marketing situation

strategies of

the

may

differ

individual

depending

business.

on

However

the there

unique are

a

number of ways of categorizing some generic strategies. A brief description of the most common categorizing schemes is presented below: Strategies based on market dominance - In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are three types of market dominance strategies: Leader Challenger Follower

Porter generic strategies –

8

strategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage.

Innovation strategies - This deals with the firm's rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are three types: Pioneers Close followers Late followers Growth strategies - In this scheme we ask the question, “How should the firm grow?”. There are a number of different ways of answering that question, but the most common gives four answers: Horizontal integration Vertical integration Diversification Intensification A more detailed scheme uses the categories: Prospector Analyzer Defender Reactor

Marketing warfare strategies –

9

This scheme draws parallels between marketing strategies and military strategies. Strategic models Marketing participants often employ strategic models and tools to analyze marketing decisions. When beginning a strategic analysis,

the

3Cs

can

be

employed

to

get

a

broad

understanding of the strategic environment. An Ansoff Matrix is also

often

used

to

convey

an

organization's

strategic

positioning of their marketing mix. The 4Ps can then be utilized to form a marketing plan to pursue a defined strategy.

Ways to Overcome Marketing Challenges Forever

10

For most small business owners, marketing is an overwhelming concept. They need marketing solutions that ensure a smoothrunning, profitable business yet most don't know where to begin or how to focus their efforts. 90% of small businesses don't even have a marketing plan. It's difficult to reach your destination if you don't know where you're going! If you're a small business owner looking for ease, focus and marketing

success, we

recommend

that

you

focus

on

just

following tactics:

Establish a memorable and unmistakable brand identity: The secret to business success is determined by your ability to powerfully communicate your business with laser precision and your

ability

to

deliver

a

clearly-defined

and

consistent

experience. In a nutshell... it's called branding, and, when done right, it ensures a thriving business with all the customers and profits you need. The secret is to establish a powerful brand identity that sings distinction. And establish that identity before you launch any marketing activities. 1. Create a deep connection with your core target audience your potential raving fans! 2. Who wants and needs what you have to offer? The only wrong answer is "everyone." If you're a pediatrician, you may

see

infants

and

children.

Are

they

your

target

audience? No! They are your patients, but it's the parents 11

you need to connect with to get the kids in your door. And it's not just any parents - it's a definite group of parents. 3. In marketing, you get a lot more "bang for your buck" if you

focus

your

spending

on

a

well-defined

group

of

people that you enjoy working with. The better you define this group, the more effective your marketing can be. 4. Design compelling offerings that pull customers in like a magnet. 5. 80% of all purchase decisions are based on emotion. It's your job as a marketer to know how your customers want to feel and to get them to visualize how your services can meet their needs. People want to know, "What's in it for me?" Tap into the emotion and create offerings that touch your customers.

Objective of study

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1. Provide our customers with superior quality products. 2. Provide our shareholders with rapid growth & fair returns. 3. Provide our employees a challenging & satisfying work environment. 4. To be a good corporate citizen & contribute positively to the society in which we operate.

13

Scope of the study 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 kid’s 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.

Data analysis Company profile FMCG refers to consumer non-durable goods required for daily or frequent use. Typically, a consumer buys these goods at least once a month. The sector covers a wide gamut of products such as detergents, toilet soaps, toothpaste, shampoos, creams, powders, food products, confectioneries, beverages, and cigarettes Typical characteristics of FMCG products are: Individual items are of small value. But all FMCG products put together account for a significant part of the consumer's budget. The consumer keeps limited inventory of these products and prefers to purchase them frequently, as and when required. Many of these products are perishable. The consumer spends little time on the purchase decision. Rarely does he/she look for technical specifications (in contrast to industrial goods). Brand loyalties or recommendations of reliable retailer/ dealer drive purchase decisions. Trial of a new product i.e. brand switching is often induced by heavy advertisement, recommendation of the retailer or neighbours/ friends. These products cater to necessities, comforts as well as luxuries. They meet the demands of the entire cross section of population. Price and income elasticity of demand varies across products and consumers. The FMCG sector 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.

15

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.

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Nestle India Nestle India is a subsidiary of Nestle S.A. of Switzerland headed by Mr.Martial G.Rolland, Chairman And Managing Director. With six factories and a large number of co-packers, Nestle India is a vibrant company that provides consumers in India with products of global standards and is committed to long term sustainable growth and shareholder satisfaction. The Company employs over 4500 people and for the full year 2005 Nestle India recorded net sales of Rs. 20477 Mio. 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 India Ltd, 51% subsidiary of Nestle SA, is among the leading branded food player in the country. It has a broad based presence in the foods sector with leading market shares in instant coffee, infant foods, milk products and noodles. It has also strengthened its presence in chocolates, confectioneries and other semi processed food products during the last few years. The company has

17

launched Dairy Products like UHT Milk, Butter and Curd and also ventured into the mineral water segment in 2001. Nestle’s leading brands include Cerelac, Nestum, Nescafe, Maggie, Kitkat, Munch and Pure Life. PRODUCT

Quality is the essential ingredients in all of our brands and the reason why millions of people choose Nestlé’s products every day. Our consumers have come to trust in Nestlé’s 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 Nestlé’s `Farine Lace’s 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 ill—he had been born prematurely and was refusing his mother’s milk and all other types of nourishment. Nestlé’s new food worked, and the boy survived from the very beginning, Nestle' product was never intended as a competitor for mother’s milk. In 1869, he wrote; “During the first months, the mother’s 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' company—quality and superior nutritional value—are 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

18

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. Nestlé’s expertise as the world’s 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 Nestlé’s 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.

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.

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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, science based 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.

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.

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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 19th 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 you’d never thought of and yet they’re commercially available: Sorbets- Smoked Salmon, Tomato, Cucumber Ice-Creams – Garlic, Avocado, Sweet Corn.

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 17 th century writer called “the only true food of the gods” has been a fine art, a delicate mixture of alchemy and science. Centuries ago it was discovered that by fermenting and roasting the beans, an almost otherworldly flavor could be created.

21

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 Nestlé’s started a company that would quickly become the world’s 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 Cadbury’s are launching indigenous product made to international standards of the 20,000 tonnes chocolates market worth about Rs 400 crore, Cadbury’s accounts for around 65% of market share followed by Nestlé’s around 23%. Amul has 5% of the share, with the minor players taking the Rest. 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 Barone 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 Cadbury’s Dairy Milk. E’CLAIRS: competing in the chewable toffee segment, E’clairs was relaunched by Cadbury’s during the mid-90 with a new name milk-e’clairs. Its worth is 4000 tones now. Nestle' also presents here NESTLE' E’CLAIRS. Due to launch of

22

multigrain’s Cadbury can not pay attention to brands like Mr. Pop Candy Lollypop. 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 Cadbury’s perk is with9%.

PRODUCT KIT- KAT

PRICE Rs. 14

PERK

Rs. 10

WEIGHT 36 gm. 2x17.5 gm.

Nestle' forayed into chocolate & confectionary in 1990 and has cornered a fourth share of the chocolate market in the country. The category contributes 14% to Nestlé’s turnover. It has expanded its products range to all segments of the market the Kit-Kat brand 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 of Polo, Soothers and Frootos. All sugar confectionary products are sold

23

under the umbrella brand Allen’s. Nestle' has also markeys some of its imported brands like Quality Street, Lions and After Eight. New launches such as Nestle’ Choco Stick and Milky Bar Choo at attractive price points to woo new consumers chocolate confectionary sales registered a strong 21.5% of growth in 2005 aided by good volume growth in Munch, Kit-Kat and Classic sales. Nestle' relaunched Bar-One during the year 1993.

PREPARED FOODS Convenience foods—packaged 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 food industry. By the turn of the century, Maggi & Company was producing not only powdered soups, but bouillion cubes, sauces and flavorings. Maggi merged with Nestle' in 1947. Buitoni the authentic Italian brand, which has been producing pasta and sauces in Italy since 1827, became part of the Nestle' Group in 1988.

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Ready to cook food/ cooking aids are sold under the umbrella brand name Maggie. Culinary product account for about 14% of Nestlé’s turnover. Maggie is the market 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. 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 strategy and is very fine at merchandising. These all are working together for the good of the company.

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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 world’s first commercially successful 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 world’s best-known brands. In addition, Nestle' is a major producer of chocolatebased 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 and Nescafe’ are sold in various forms (cans, bottles). These are distributed by Nestlé’s join-venture with the Coca-Cola Company, Beverages Partners Worldwide. Nestle' is also present in fruit juices (Libby’s) as well as espresso coffee in capsules (Nespresso). Beverages like coffee, tea and health drinks contribute to about 30% of Nestlé’s turnover. Beverages sales registered a 155 yoy growth during 2005. while about 14% of sales come from domestic market, exports contribute to about 16% of sales. Nestle' Nescafe’ dominates the premium instant coffee segment. Nestlé’s other coffee brand Sunrise has also been relaunched under the NESCAFE’ franchise

26

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 & Elaichi and coffee in three variants Classic, Cappuccino & Mochaccino to suit the taste of 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, Customer’s 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. Cadbury’s Bournvita & HLL with Boost are the major players in the market along with Milo. Bournvita 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 and Nescafe’ Frappe during 2002. 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.

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Beverages solutions featuring well known consumer brands such as Nescafe’, Nestea and Nesquik as well as host professional brands including Minor’s, Chief and 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 the owners of the Soci’e’te’ Ge’ne’le Des Mine’rale’s 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. It’s 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. By the end of 1997, the group was present on every continent, and the purchase of San 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,

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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' Water’s, a token of Nestle' decisive commitment to the bottled water market, which now represents 9% of its sales. Today, Nestle' Water’s 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.

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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. 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 or innovations 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 consumer’s 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 to caring for our consumers. Our people have expertise in a wide range of areas

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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 meeting their 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 company’s offer & to advocate the cause of its production in the minds of its audience. Thus informing, reminding & advocating about the company’s product are real purpose of the promotion component of the mix. 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 wide communication plan.

31

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 Nestlé’s 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 Nestlé’s 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.

32

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 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.

OTHERS Some other examples of exhibition in which NIL participated are: India international trade fare (IITF).  Nestle' Hungama 1998.  Maggie Display Contest.  Splendor 1999.  Boarding School Development Campaign.  Moga Summer School Camp.

The competitors of NIL are also very Active and they also participate in these events and sponsor some event in there own ways & methods. HLL participates in most of the regional trade shows through its retailers. It displays its new products at large. HLL is the 1st largest company of India in terms of advertising &

33

promotional expenditure. It also invents largely on window display contests retail level. Amul promotes its products by using emotional appeal in order to use the emotional aspects if Indian citizen. It uses kiosks and hoardings to promote its product range. The promotional expenses of Amul are not so big as that of the MNC’s but still it is a respected firm in our eyes. Cadburys under its promotional campaign that are designed by Ogilvy & Mather the adv shows the power of positioning with emotional benefits and it really works for Cadburys & leaves it with dramatic increase in sales.

NESTLE IN THE RACE OF TOP BRANDS A 50 country A.C. Nielsen survey finds out which brands have been successfully extents across categories across the globe. Business today presented an exclusive cross-section of the findings with a slant on India. Nestlé’s the topper among Top mega foods & Beverages Brands.

CADBURY GLOBAL RANK

SCHWEPPES

NESTLE

329

31

COUNTRY

Britain

Switzerland

MKT. VALUE (US $ MILLION)

11962

82997

PROFIT (US $ MILLION)

1049

5805

34

The brand value of Nestle is greater than $ 1 billion. In global Brand scoreboard Nestle has got 60th Rank (2005) with:

BRAND VALUE 2005($ billion) Nestlé India

4.46

%

RANK

2004($ billion)

CHANGE

3

4.43

+1

60

2 ………

From chocolates to baby formula the Swiss food giant keeps the world pantry stocked. Nestle India is ranked 6th top ad spender of the year in 2002. It spended Rs. 129.92 crores on TV&AD.

BUSINESS TODAY The 4th BT Stewart study reveals that NIL is the 9th largest wealth creating company in India with Money value added (MVA) of 4681 & High positive Economic value added (EVA) of 100. MVA is the difference between capital invested & its market valuation. EVA is the economic profit after deducting the cost of all the capital employed (both Debt & Equity) in all the business to generate operating profit.

35

A RESEARCH BY BUSINESS INDIA OF TOP 100 SUPPER BRANDS IN TERMS OF SALES Nestle' India is ranked 49th among super hundred companies for the year 2004 & 2005 in terms of sales. NESTLE INDIA

2007 (in crores) 1820.50

2008 (in crores) 1936.30

% change 6.36%

CADBURYS & AMUL WERE NOT THERE IN THE LIST OF TOP 100 IN TERMS OF PROFIT Profit is the major objects of every organization. In terms of profit sample list Nestle' India is ranked 32nd in 2005 & 37th in 2004 with profit of 259.60 crores in 2005 & 173.20 crores in 2004 with a change of 46.88%.

Cadbury was ranked 90th with 73.60 crores in 2003 & 59.70 crores in 2002. PROFIT 2005 (In crs.)

RANK 2004 (In crs.)

2005

2004

Change

Nestle'

259.60

173.20

2

7

9.88

India Cadburys

73.60

59.70

0

0

3.28

India

IN TERMS OF MARKET CAPITALISATION

36

Market capitalization is an important barometer of Indian incorporation’s performance. And many a management today is very concerned about market capitalization & how it compares with that of its peers. Hence there is a growing concern among promoters to see how they can reward their shareholders and see that the stock prices reflect the performance. Nestle' was ranked as followed.

Nestle' India

MARKET CAP. 2005 (in crs.) 2004 (in crs.)

RANK 2004 2005

Change

1707.12

1

26%

70.81

6

IN TERMS OF ASSETS With the current management focus on efficiently, the asset to turn over ratio assumes importance because Corporate India has undertaken a major restructuring exercise, resulting in trimmer balance sheet & improved sales & profitability on smaller assets bases.

NFA 2008 (In crs.) 2007 (In crs.) Nestle' India Cadburys

4.92 4.93

5.06 4.37

2008 68 67

RANK 2007 63 75

% Change 0.15% 0.56%

India IN TERMS RETURN ON CAPITAL EMPLOYED So, Nestle' India continues to deliver strong top line and bottom line growth driven largely by domestic foods business. A diversified product portfolio coupled 37

with continues new launches should see the growth momentum continuing into the foreseeable future. The parent company has been increasing its commitment to the Indian subsidiary via launch of new products and is also increasing its stake at progressively higher levels. Already in first half of 2006its holding has increased by further 1% by more than 5% over the last12 months, all through open market purchases. The high growth to NIL is coupled with High ROCE ……. What more can an investor want? Impressing percprmance of NIL in the past is likely to continue due to several reasons: •

Consumption of its main categories in the foods business is even now, largely an urban phenomenon .there is enough scope to increases consumption of its products in the larger towns before thinking about tapping the semi urban and rural areas.

•

Trends like nuclear families, working couples and general paucity of time in urban areas coupled with increasing awareness about health and hygiene will drive the growth of convenience products in the processed foods industry.

•

The company has been gaining market share in certain categories lid chocolate and malted beverage .this trend many well continue as Nestles share even now in this categories is very low.

WELL DIVERSIFIED PRODUCT PORTFOLIO INNOVATIVE APPROACH The company predict portfolio is well diversified and management is always loading for new categories of new products in exiting categores.also the

38

company a my has been at the forefront launching new price points for existing predicts such as chocolate and new innovations such as y to drink coffee sachets.

PRODUCT PROFILE “POLO” Background POLO is one of Nestlé’s key strategic confectionery brands worldwide, and represents Nestlé’s first entry into the large 50,000 tonne p.a. (organized sector) Indian Sugar confectionery market. While mint leaves are widely used as a culinary ingredient, and the taste is well liked and accepted, the mint confectionery habit is a very limited one. NINTO, the only national brand, has a volume of 250 tons p.a. There are also a couple of small regional brands: GOLD and ZERO. And of course, smuggled POLO sold for between Rs. 8/- to Rs. 12/- for 26 g roll (samples available in your market as well) The underdeveloped state of this market is perhaps due to the almost complete absence of any sustained, national level, marketing inputs. A related market which has responded well to marketing inputs in mentholated sweets (Vicks/Halls/Strepsils etc.) which is estimated at over 5000 t.p.a.

39

POLO will therefore, have to pioneer the development of the market for mint confectionery. This is an opportunity for us to firmly establish ourselves and dominate this market over the long run. Marketing Plan Objective: Minimum tonnage of 700 tons in 1995 Product & Positioning: POLO will be launched in two packs: 1. A 25 g roll containing 16 sweets; 20 rolls to a shrink wrapped display outer; 30 display outers to a shipping carton: Net weight 30x20x25g = 15 kg Standard case

:

15 kg

2. A single piece flow pack containing one sweet. To be packed into polybasic and shipping cartons. Sizes not yet finalized. This pack has been very successful in Thailand as a low unit cost trail/sampling/impulse purchase pack. Each sweet will be white in color and round in shape with a hole in the middle, and will carry "POLO" branding in raised letters on one side. The mint flavor will be mild and refreshing. The attempt will be to be as close a possible to the international product while using local (vegetarian) raw materials. POLO is small convenient enough to fit in almost any pocket or handbag and can be taken anywhere. The discreet nature of POLO makes it very acceptable. Once the tube is opened, it is easy to reseal to keep the product fresh. POLO is enjoyable and social: to offer someone a POLO does not suggest they need a breath freshener.

40

Different people have different ways of eating POLO: some people crunch POLO, others suck them until they disappear on the tongue. The tongue can play games with POLO, and this, combined with the hole, provides a unique and very personal eating experience. POLO should never be eaten in a hurry: its mild refreshing mint flavor should be savored. While POLO is targeted at people of all ages (in metros/mini metros, A&B SEC) the target for POLO advertising will be adults, 15-35 who are warm, sociable, friendly, with a sense of humor. The advertising will seek to position POLO as "the mild, refreshing mint sweet with the hole that's universally acceptable" and do this in a manner which is appealing, attractive, and above all, liked by consumers, because consumers will be attracted to the personality of the brand.

GENERATE IMPULSE It is a startling fact that 70% of confectionery is bought on impulse? Purchases of confectionery (for self consumption as well as for gifts) are not in general, pre-planned. Peoples are attracted by seeking something known to delicious They recognize a familiar brand and buy on impulse. How can we obtain maximum impulse sales? By having:

41

1. A popular brand 2. An eye catching pack 3. Good advertising 4. The most prominent display position

GENERATE EXCITEMENT 1. Breaking away from our normal retailers' margin of 10% and 12.5%, they offer the retailers a wholesome margin of 20%, and a TPP of 5% adding up to a 25% margin!! For the first time in Nestle history. 2. To encourage faster movement and therefore greater profits for the retailers, they have: •

A very attractive packaging and a low price

•

Attractive POS and Dispensers for key outlets

•

Each grey box is printed and shrink wrapped, to act as a dispenser!

3. Grab the hottest spot in any outlets: •

The cash counter

•

The front counter

•

The check out counter

4. Their selling in Norms are:

42

•

'A Class - 2.5 grey boxes

•

'B' class - 1 grey box

Their emphasis is on wide distribution, without loading anyone outlet. CRUX OF THE MATTER For the first time they have a product, which is affordable by everybody at Rs. 3/-. It is convenient to carry and eat; where no barriers are put on distribution. So, let’s show the world what widespread distribution is all about. Nestle have done it in the past. There is an opportunity to reassert their supremacy. A recent survey by A&M Magazine rated Nestle as having the best relations with the trade in India. Now use this strength for POLO To recap: Go all out to sell POLO: the mint with a hole. •

70% confectionery sells on impulse

•

For success they have: - a good product at affordable prices - Wholesale retail margin - an eye catching pck - good advertising

What they need:

43

- a prominent display - widest possible distribution Their objectives: - Each and every Nestle outlet - Unconventional outlets How do they get to these outlets? - Cycle boys - Wholesalers 2008 Sales Volume: POLO (In standard cases) October

-995

November

- 755

December

- 850

44

ON TEAMMATE It consists of an ORG synopsis, its analysis and a report on the various studies present within the organization to come out with facts and hypotheses which may be helpful in facilitating the launch of Teammate. The findings are: 1. Total milk powder market size - 66200 tons (including IMF) 2. Size of the market for tea whitening = 26000 tons. Factors working for Teammate 1. Price index of 93. This should expand the market and corner a huge chunk of the expanded market. 2. Higher value for money perception of such a brand 3. Industry likely to be increasingly price competitive due to increasing availability of liquid milk in future 4. High growth of economy segment 5. Whitener market growing rapidly (Due to switching from IMF's whitening tea/coffee to dairy whiteners) 6. 65% of non IMF milk powders used for tea whitening 7. Great distribution strength of Nestle 8. High on proteins (An attribute considered important by consumers).

45

Factors working against Teammate: 1. Increasing availability of liquid milk 2. Danger of odd smell/taste (Ref. Customers have complained of odd smell/taste in Everyday Dairy Whitener (EDW). Necessary to be very careful in a soya based whitener). 3. None enhanced with vitamins/minerals this. (This is an attribute considered important by users of Amulspray) 4. Single purpose product 5. Danger that EDW may be cannibalized 6. High brand loyalty to existing brands 7. People switch to milk powders after having used an IMF (Where does Teammate fit in this natural progression).

Facts gleaned from ORG data EDW losing market share heavily due to entry of Amulya. EDW is the market leader (if Amulspray misuse is exlcuded) in Metors, class I, II, III and IV towns (This implies great distribution strength). However, EDW is losing market share in metros, class II and III towns. It is gaining in class I and IV towns.

46

EDW is the leading brand outlet wise with highest sales through grocers, general stores and chemists. However, it is losing market share in groceries and general stores. East and south are the largest markets. West Bengal, Kerala, UP and Madhya Pradesh register the highest sales in the 4 zones. South and West zone are the fastest growing with North Zone declining Andhra Pradesh, Maharasthra, West Bengal and Rajasthan are the fastest growing states in the 4 zones. Madhya Pradesh, Punjab and Haryana are declining. 500 gram refill pack registers the highest volumes Calcutta and Madras are the highest volume metros followed by Delhi, Bombay and Bangalore. However, Bangalore is the fastest growing market followed by Calcutta. a) Amongst the metros EDW is the market leader in Bangalore, Bombay, Calcutta & Delhi with Amul WMP leading in Madras b) Sapan Dairy special & Amulya have registered the fastest growing overall in the 5 metros. EDW has registered declines in North, East and South Zones but has registered growth in the West Zone.

47

Before launching Teammate, a survey was conducted by Nestle India Limited so that it could launch Teammate at the right target market at the right time at the right price and to the right people. Estimation of size of market for tea whitening Two separate studies judged that size of market for tea whitening is 39% of total milk powder sales and 65% of milk powder (non IMF) sales. Both are close enough and the size of the market for tea whitening is 26000 p.a. Characteristics of the market a) Economy segment - 47000 - 51000 tons Premium segment - 15000-19000 tons b) Non IMF market has been growing at 10% p.a. with the economy segment growing at a faster rate than the premium segment. c) Nestle has a 78% of the premium segment but only an 18% share of the economy segment d) Dairy Whiteners comprise the fastest growing segment. Thus, the time is ripe for a brand like Teammate to be launched in the market as a whitener in the economy segment. Use of milk powder: 1. As a milk substitute when real milk is in short supply 2. As an additive/thickening agent 3. As a taste enhancer in tea/coffee 48

Value for money perceptions of consumers (based on): 1. Lesser quantity required for whitening 2. Thicker milk constancy 3. Larger, economy packs (1 kg packs preferred by many consumers). 4. A sweet taste which mean lesser sugar consumption.

ATTRIBUTES CONSIDERED IMPORTANT ATTRIBUTES

% OF RESPONDENTS IN FAVOR

Dissolves easily

89%

Tasty milk

59%

Vitamins/Proteins

59%

No smell in milk

56%

Variety of uses

51%

Economical to use

51%

Sweet taste

48%

Before launching Teammate following attributes have to be considered.

49

•

to save on excise, they do not enhance the product with vitamins

•

12% of consumers have found EDW to have an odd smell/taste. They shall have to ensure that the taste is good and that there is no smell to ensure acceptability (especially since it is a soya based product)

•

Variety of uses that a product can be put to 'was as important consideration'. Teammate may fall short here. However, if Bonus is a success, then it is possible that Teammate could be used to make soya milk or soya curd.

•

Teammate would have a price index of 97-99 and it is recommended that it has a sweet taste so that consumers have to use less sugar thus enhancing their value for money perceptions.

Competitors of Teammate •

EDW

•

Amulya

•

Anikspray

These brands are used mainly for tea whitening, are easy to dissolve and perceived as brands for modern people. Dangers of cannibalization With EDW being the market leader in the tea whitening category, the danger of cannibalization by Teammate is great. One possible way out is to position EDW as a multi purpose powder and Teammate as a brand specifically for tea

50

whitening. However, this may lead to diffused positioning of EDW and depressed sales of Teammate. PRICE INDICES OF THE EXISTING BRANDS BRAND

PRICE INDEX

Amulspray fix

100

Amulspray tin

108

Amulya WMP tin

121

Amulya fix

105

Sapan D. Special Fix

115

Sapan D. Tin

125

EDW bag

113

EDW tin

133

Everyday Goldfix

158

Sagar

97.5

Milkcare IF

158

Milkcare FP

158

Lactodex FP

158

Dexolac IF

164

Glacto tin

128

LFP flx

143

LFP tin

153

LIF tin

153

NSTG flx

114

51

NSTG tin

114

MILO BACKGROUND Milk additive market in India in formally here for the last three to four decades. Over 2 decades, there have been only two large players in the beverage segment - Bournvita and Boost. Horlicks and Complan are traditionally more strong brands in the South. Mumbai, being the base for Cadbury India Limited, Bournvita has been the strong brand here. Cadbury's aggressive sales distribution in Western Region is largely responsible for this. On communication front, Bournvita has had changed in positioning twice, Milk additive brands are traditionally positioned on three benefits - Taste, Nutrition or Energy. Bournvita is positioned closer to taste and energy benefit while Horlicks, Complan are closer to nutrition associated with the needs of growing children. As per an article in A&M magazine published in October 1995, brown beverage market was nearly under saturation with diminishing growing rate, and the possibility of a new entrant in this field was minimal. MARKETING PLAN Objective: Launching of international brand 'Milo' in India. PRODUCT AND POSITIONING

52

In August 1996, Nestle launched its internationally known Milo brand in India. Initially, launch was limited to Tamil Nadu. Estimated market of brown beverages in 1995 was 15,000 tons and market was growing with 6% per annum growth rate. Milo was launched with a pricing index of 100, 99 and 94 respectively of Milo. Boost and Bourn vita. With a slogan that said "Win with Milo" and its association with energy and sports, it was launched in an attractive pack of green color. In February 1996, Milo was launched in the city of Mumbai. The launch was a rather simple one with lease media hype. Instead of this, sampling was done in schools and at the places where direct trial to the end user could be included. There are few sports competitions also organized in schools as a launching strategy for Milo. After the months of launch of Milo, it was necessary to understand how Milo in doing on the retailer front and what is the retailer's response on various issues associated with distribution of Milo. At the same time, it was necessary to understand the awareness of Milo in consumers and their purchase and consumption habits of milk additive brands. Milo being a relatively new brand in India, Nestle carried out a research on its own. Recall of different brands - All the brands had similar overall recall if the TOM spontaneous aided recalls are added. However, in total spontaneous recall (TOM and unaided added), Bournvita had a 100% recall, followed by Boost with 76%. 60% retailers had a spontaneous recall of Milo and no one recalls Maltova.

53

PROMOTION Retailers most preferred option was of 'On pack Incentive'. This is followed by price-offs and extra quantity. Practically no retailer like redemption's discount coupons or contests kind of options. As consumers are not really concerned much if 4 to 5 rupees off is given or 20 to 50 gms is given extra, gifts turned out to be the best incentives. Bournvita and Maltiva is considered to be giving highest promotion and Milo had not offered any promotion since its launch. Milo should have been launched with a heavy promotion offer so as to induce trial, but it is not so. Milo had a biter taste, so it is not preferred as a drink for children. Milo had offered trade promotion only during the time of its launch. This is in the form of Rs. 5/- against display for a week.

INDUSTRIAL SCENARIO 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 been creating 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

54

sector. MNC’s 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. MNC’s 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 in instant 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 Perrier brand in the premium mineral segment and Pure Life in the purified water segment. SOME ACQUISITIONS & MERGERS 1866: Company Foundation. 1905: Merger Between Nestle' & Anglo-Swiss Condensed Milk Company. 1929: Merger with Peter Cailer-Kohler Chocolate Suisse S. A. 1947: Merger with Alimentana SA (Maggie). 1969: Vittel (equity interest) 1971: Acquisition of Ursina-Franck (Swiss). 1974: Acquisition of L’ Oreal (France). 1977: Acquisition of Alcon (2002: partial IPO).

55

1985: Acquisition of Carnation (USA). 1988: Acquisition of Buitoni-0-Perugina (Italy). 1988: Acquisition of Rowntree 1992: Acquisition of Perrier (France) 1998: Acquisition of San Pellegrino and Spillers Petfoods 2000: Acquisition of PowerBar 2001: Acquisition of Ralston Purina 2002: Acquisition of Scholler and Chef America 2004: Acquisition of Movenpick , Powwow and Dreyer’s 2007: Acquisition of Valio (ice cream activities) 2008: Acquisition of Wagner, Proteika, Musashi

SOME STRATEGIC ALLIANCES 1981: Galderna 1989: With Clintec (USA). 1989: CPW (USA) (Cereal Partner World Wide). 1990: Nestle' – Walt Disney (USA). 1991: Cooperation with Coca Cola (USA). LAUNCH STRATEGY

56

Let us begin by recalling a few basic principles of Confectionary distribution. Selling to cost much. Confectionary is easy every one buy’s it because: •

It tastes great.

•

It does not cost much.

•

It is all bought frequently.

All this is true. It is also a fact that 70% of confectionary is bought on impulse. Therefore, whosoever taps the impulse takes the major part of the business. HOW TO TAP THE IMPULSE? Buying consumers are usually form one of the three different frames of mind: First, Mr. Positive, He knows what he wets to ask for. Second, Mr. Peck-ish. He wants ht confectionary but, makes up his mind after seeing the displays. Third, Mr. Impulse he does not go to buy the confectionary but is drawn by the display & buys on impulse.

HOW CAN WE OBTAIN MAXIMUM SALES?  A popular Brand.  Eye catching Pack.  Good advertising.  The most prominent display position.

DISTRIBUTION STRAGEGY

57

The aim of Nestle India Ltd. is to cover & open the largest possible number of out lets in every nook & corner of the country. HOW IT IS PROCEEDING? Confectionary can be sold almost any where. In our regular outlets also. Some of the major and most approachable outlets are:  A school & college canteen.  Airport terminal.  Cinema hall.  Pan/cigrates kiosks.  Railway station/train vendors. The company is looking to ensure that: Any where the people congregate the aim is the representation in all these outlets as their distribution objective. Exclusive retail coverage is to focus to on whole seller, where endless stock could be dumped and from where stock reaches almost all outlets in the country. The whole seller channel could give us representation in outlets especially pan shops where they are not present.

DISTRIBUTION NETWORK OF NIL

MANUFACTURER

C & F AGENTS (1%-3-% Margin) 58

SUPER STOCKIST (3%-6%)

STOCKIST (3%-5%)

DISTRIBUTOR (4%-7%)

ORGANISED RETAILER (6%18%)

MARKETING STARTEGY The marketing strategies of NIL are aggressive enough and are designed keeping in mind. The changing taste and preferences of consumers. Attached cost structure. Working capital management. Broad based wide products offering is preparing NIL for paradigm shift from Low Growth Premium Products to High Volume Based Growth Portfolio that will take it to a strong double digit sales growth with improved profitability.

59

CHANGED PRODUCT PORTFOLIO According to Mr. Donati, MD of NIL, “The raising profits will not be zeroed down. Sales growth is important but achieving higher profit is even more important. So products that don’t make money would be axed out. Nestlé’s product portfolio has been pruned (macaroni for instance was withdrawn) and it has revamped its supply chain.”

TEST MARKETING NIL tests marketed many of its products before launching them in the market, so as to nullify the risk of failure and large sunk cost. Some of the products that were test marketed are: 1. Maggie Chinese noodles. 2. Maggie imli sauce. 3. Nestle' Maxi munch. 4. Nestle' Kream-o-cook. 5. Nestle' Fruitips Pagtilles. 6. Nescafe’ Redimi 7. Nestle' Dairymaid. 8. Nestle' has developed special machine for Nestle' Iced tea.

ROLE OF MAJOR PRODUCTS IN MAKING NIL A GRAND SUCCESS Nestle' India Limited works a lot before launching a product. It does a lot of test marketing & other marketing efforts for making its product & thus a company a

60

grand success. Nestle' believes in renting mind space by creating perception for the brand in the prospects mind so that it stands apart from the competing brand & approximates much more closely to what the customer wants. It covers that space in the customer’s mind as if they have won a long term lease and always keep out ‘squatters’. The market conditions before & after the launch of some major brands of Nestle' are given as under. MAGGIE NOODLES Maggie Noodles were launch in 1983, where their was a latent need for the Indian market to make foray into the fast food segment. Previous there was no trend of instant noodles in India, most of the people were aware of Chinese noodle only. In 1982 when Food Specialized Ltd. (associated with Nestle' considered launching Maggie instant noodles, the company had the option of choosing from several alternative positions. The product could have been launched, for the sake of argument, as the means of cooking tasty Chinese dishes at home, or as a “TV Dinner”, or as a ‘mini meal’. Through consumer research the company felt that the most profitable position would be as a tasty, instant snack, made at home & initially aimed at children. The target market was the in-home segment of the very substantial snack category. This positioning decision automatically determined the competition which included all snack products in general. These would range from ready to eat snacks-biscuits, wafers & peanuts-to ready prepared snacks such as samosas. All were bought out items.

Maggie noodles were launched in Delhi in January 1983 and it became an overnight success. The annual target for that market was increased from 50

61

tones to 600 tones. The Indian market was tipped to became the second largest Nestle' market for this product worldwide, next only to Malaysia. Maggie Noodles, as market results show, found a vacant, strong position and sat on it as “TASTE TO COOK, GOOD TO EAT” any time snack. RICH SOUPS (1989): traditionally at home the soup was made from Boiled vegetables & was used as filler. Maggie soups were convenient, healthy, tasty & notorious. In first half of the decade the soup market of Maggie grew up to 2500 tones, a large enough size to attract competition in a short time & in 1995 competition sets in. The company’s market research team gets the latest information regarding the changing taste and preferences, and suggested steps to improve the product. Aggressive consumer benefit strategy propelled the market, to touch the 500 tones in subsequent 2-3 years.

MILK MAID Milkmaid was launched in 1962 by Nestle' as a creamer or whitener for tea and office. The most interesting thing about Milkmaid is that it has been repositioned 4 times without any considerable changed in packaging & product remained totally unchanged. But off course it is the illustration & headlines that really determines the position which the consumer will give the brand in her mind. This repositioning strategy proved to be a great success for Nestle' each time the volume of sales got an upward shift & that too by a large denomination. They believe that the perceived image of the product belongs not to the product but

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rather is the property of the consumer’s mental perception. So the strategy should be: “Looks beyond the Product at the Customer & Use Knowledge to Repositioning the Brand” Five important rules for a successful repositioning: Renovation. Innovation. Customer communication Product must be a low cost & highly efficient operator. Product availability: wherever, whenever & however. Some time later milkmaid was positioned as “Tastiest milk maid”.

The concept was that you can get 1.6 liters of sweetened milk by adding water in that condensed milk. This positioned was visualized as it had relevance at a time when fresh milk was in short supply in some parts of India. Once again, we saw Milkmaid in yet another position as a topper on fruits, cakes, jelly etc. and then last time through a natural evolution-backed by consumer research & sound marketing judgment - we saw Milkmaid’s Present position: Milk maid for desert Recipes. In due course, the packaging was smartened up & changed to reflect the ‘recipe’ on culinary products; the label depicts a desert, gives the recipe on the reverse side & announces a ‘free recipe booklet’. From the time of the dessert recipe positioning (1982), milkmaid achieved a sales volume increase of 116% by 1988. Sales growth has been relatively steady tear after year (an average growth about of 20% annually), suggesting that more households are responding to this position. It is significant that even in traditional milk shortage areas, Milk maid usage now is largely in line with the culinary

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(dessert) positioning. This implies that housewives, who may have earlier perceived Milkmaid as a substitute for milk, have now given it a different place in their “frame of reference”. Recently Nestle Has Launched Milkmaid in a easy squeeze tubes which is attracting children also. Positioning above all, is a matter of the perception of your brand that we wish to do the product and more what we do to the product and more what we do to the consumer’s perception of the product.

NESCAFE (1918-1938) After the end of world war 1st their were crises for Nestlé’s Government contracts dried up following the hostilities, and the civilian consumer, who had grown accustomed to condensed & powdered milk during the War switched back to fresh milk when it became available again. In 1921 company recorded its 1st loss. Nestle management responded quickly and brought in Swiss Banking export, Louis Dapples to recognize the company. He streamlined the operations to bring production in line with sales and reduce the company’s outstanding debt. The manufacturing of chocolates became the company’s second most important activity. New products appeared steadily: Malted milk Milo Powdered butter milk for infants & Nescafe (1938) The Brazilian coffee institute approached Louis Dapples in 1930, seeking new product to reduce Brazil’s large coffee surplus. Eight years of research produced a soluble powder that revolutionized coffee drinking habits world wide.

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The most interesting thing to talk about Nescafe is its Brand personality. It is the personality that marketer wishes to attach to his brand & which actually enters the targets customer’s mind. In March 1989, the students of IIMC, conducted a small scale survey on personality of some major brands & and Nescafe was one among them Nescafe was compared to gold café-both were 100% pure instant coffees, both heavily advertised & both premium priced. Gold café was a successful competitor of Nescafe. The respondents were asked to describe the personality of the brands in terms of ‘Mr. Nescafe’ & ‘Mr. Gold café’. The respondent in one group based there observation on the advertisements of two brands. While other group made observations on the basis of other factors such as ‘history of the company’, ‘marketing strategy’, etc. one might describe them as the first group’s findings better because those reflected the consumer’s point of view better.

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MAJOR PRODUCTS & YEAR OF INCEPTION NIL is running with about 80 brands in India. Some major products under those brands are till the year 2003 is as follows: PRODUCTS

YEAR OF INCEPTION

MILKMADE NESCAFE LACTOGEN MAGGI NOODLES MAGGI SAUCES SUNRISE EVERY DAY MAGGI SOUPS ECLAIRS BARONE NESTLE BONUS CHOCOLATE KIT-KAT POLO MILO NES TEA NESTLE SLIM MILK

1962 1964 1968 1983 1985 1983 1986 1989 1991 1993 1995 1995 1995 1996 1996 2003

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RECENTLY LAUNCHED PRODUCTS

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Set Dahi New Tomato and Curry Flavors in Maggie Noodles New Dal and Atta in Maggie Noodles A new confectionery – Nestle Choco Stick Soft Chewy fudge Milky bar Choo Nestle` recently launched products Tea Iced Tea Nestle slim milk The company is also setting up ‘CAFÉ NESCAFE’ and ‘COFFEE CORNERS’ across metros and mini-metros in India. NESTLÉ: 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 2006." The Nestlé Group's consolidated sales for the first three months of 2006 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%. 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,

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Nestlé raised prices in 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.

OBJECTIVES OF NIL 1. Be in every way the leading company in Indian food industry. 2. Ensure high quality standards in everything we undertake. 3. Provide our consumers with superior quality products. 4. Provide our shareholders with rapid growth & fair returns. 5. Provide our employees a challenging & satisfying work environment. 6. To be a good corporate citizen & contribute positively to the society in which we operate.

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MICHAEL PORTER’S MODEL FOR COMPETITIVE ADVANTAGE There should be continuous efforts towards competence by drawing down costs and improving product quality. According to Michael Porter’s 5-point model for competitive edge, any corporate entity needs to counter threats posed by the following five market forces.

Potential Entrants

Competitors Activities

Suppliers

Buyers THE CORPORATE ENTITY

Substitutes

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POTENTIAL ENTRANTS With the increase in growth rate of the market and wide spread acceptance of chocolates in Indian Market, companies like Mars, Sara Lee etc. are eyeing the chocolate market. American Hershey foods etc., also plans to enter in it. Though these companies would facilitate further growth of the market, they would also want a share of the pie further; a favorable duty structure would facilitate import of international products than new manufacturing units being set up. SUPPLIERS A Bar of chocolate on an average contains about one-third cocoa, and the remaining includes malt, milk and sugar (Milk and malt are readily available in India). Hence, it becomes extremely important to manage the key raw material supplies well, in order to have a competitive advantage over the other players in the market. Corresponding to the chocolate capacity of 24000 tonnes (1999-estimate), the production of cocoa in the country has remained stagnant at 6000 tonnes. Therefore, cocoa is being imported to meet the industry requirement. Hence, cost effective sourcing of cocoa becomes of paramount importance. Various measures such as identifying cocoa growing areas, village adoption programmed, etc, can prove to be extremely beneficial in providing a sourcing advantage over competition. COCOA PRODUCTION-FUTURE Since, Cocoa is an inter crop, it does not require additional land. Hence, with proper policy measures, its production can be beefed up. The Government of India has been taking keen interest in order to provide a boost to cocoa production. The Budget ’97 had a provision of about Rs. 20 crores for cocoa

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production development. Measures adopted to give a fillip to cocoa production include the following: Cocoa Board merged with Cashew Board on the request of the Confectionery’s Manufacturer’s Association. A 10 fold increase possible with proper policy measures. Other Measures- Village adoption programmes, training programmes for field people in order to increase yields in the old cocoa gardens, better pest control measures, etc. BUYERS As far as buyers are concerned, there is sufficient demand growth (growing at 22.6%). Further, entry into the chocolate industry would further augment the growth of the chocolate market.

SUBSTITUTE Indian sweets and confectionery items are the nearest substitutes for chocolates. However, there is a shift away from heavy sweets towards lighter sweet offerings like chocolates. Proper segmentation and positioning can make a brand distinctively different from other confectioneries available in the market. (E.g. Kit Kat).

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SWOT ANALYSIS The SWOT Analysis shows the relationship between critical variables of the company. The SWOT matrix has a wider scope. The TWOS matrix is a conceptual framework for a systematic analysis that facilitates the external threats and opportunities with the internal weaknesses and strengths of the organization. It has been common to suggest that companies identify its strengths and weaknesses as well as opportunities and threats in the external environment. But what is often overlooked is that combining these factors may require distinct strategies choices. To systematize these choices, the TWOS matrix has been proposed. ‘T’ stands for threats, ‘W’ stands for weaknesses, ‘O’ stands for opportunities and ‘S’ stands for strengths. A marketing opportunity is aware of buyer need in which a company can perform profitably. An environment that would lead, in the absence of defensive marketing action, to deterioration in sales or profit. An ideal business is high in both major opportunities and low in major threats. A speculative business is high in both major opportunities and threats. A mature business is low in opportunities and high in threats. The TWOS matrix starts with the threats because in many situations a company undertakes strategic planning as a result of a perceived crisis, problems or threats.

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STRENGTHS 1. High brand equity ……… consumer & dealer regarding Nestle' as company delivery quality product. 2. Company processes an extensive powerful distribution network. 3. Company processes a dedicated & experienced sales staff. 4. Strong base in monitoring & controlling market. 5. Distributions are highly dedicated towards performance & experience. 6. Nestle India Limited (NIL) has a very strong parent company Nestle S.A. support with 51% of equity share holding, which is the world's largest food company. 7. NIL's milk products sold under Milkmaid and Everyday brands are market leaders. NIL has strong brand value in other products like KitKat, Polo, Milo, Maggi and Nescafe. 8. NIL - State of the Art Technology and production systems ensuring high technological/high value and optimum cost advantage to its product portfolio. 9. Idealization of products to suit local tastes are critical for success and NIL is converting its international products into Indian tastes products. 10. Nestle has altogether 570000 outlets in more than 3000 towns. This is one of the major strengths of the company. 11. NIL most of the products are being produced according to Indian tastes, priced within Rs. 25/- so that they are afforded by most of the people easily, advertised and promoted according to regional culture and values and is available to most of the consumers easily, at their nearby shops.

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WEAKNESSES 1. Company takes time in handling return claims on authorized whole seller. 2. Warehousing norms are not followed which account for increased breakage. 3. Restricted website minimizes marketing opportunities. 4. Yearly initiatives are not so motivating. 5. A high percentage of turnover and profits coming from a few products categories like Coffee/Maggi. 6. NIL has been in India since last 39 years yet its growth has been very slow. After the opening up of the economy, it has started growing but till then it did not launched much products. 7. The profits of NIL are also reduced because of increased Royalty payments that NIL is making to its parent Nestle, Switzerland. The higher royalty payments are made on account of new international brands launched by NIL in India. 8. NIL factories are not to meet the demands of products with the supply. 9. NIL's products range is so large that it is not able to give proper attention to all the products, their marketing strategies are not properly worked out as many of its products are dieing. There was an embarrassing starter like Nestea an iced tea, Nesfit - a glucose rich energy drink, Bonus, Milo is not given much of promotion. 10. Recently, there are difference between the Nestle S.A. parent company and Nestle India Limited and because of this there are in the top management of the NIL. Even its M.D Daravis E. Ardeshin has also resigned. 11. Proof financial distribution as the NIL is unnecessarily giving its shareholders high dividend, which could be avoided and be used for investment in plants for their capacity expansion.

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OPPORTUNITIES 1. Great quality. 2. Mass market is growing with established performances. 3. Growing middle class is increasing opportunities. 4. Great taste. 5. Low differentiation in market brands. 6. Credit facility given to dealers. 7. India being the second most populated country in the world, NIL has lot of opportunities of launching and selling new products and earning a record profit from this country. 8. As NIL has been in India since last 39 years, it has understood the culture, values, tastes and psychology of the Indian consumer and so it can easily develop Indianised products that will be acceptable to the Indian consumer. 9. Food industry is the second highest growing industry in India and offers a lot of opportunities for NIL in India.

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THREATS 1. Tough competition especially in premium segment. 2. Characteristics of premium segment that it is never brand loyal. 3. Tough competition (indirect) with barista, café coffee day. 4. Mere availability of best sellers from the parent’s portfolio does not guarantee a winner. Since most of these products would be fighting it out with their global competitors and then Indian counterparts on the Indian turf. 5. It faces fierce competition in almost all the segments it participates in like. It duels with Top Ramen in the instant noodle market, Kit-Kat vs. Perk, Polo vs. Minto, Milkmaid vs. Mithai Mate (launched by Amul at a staggering 60% discount to the market leader), Milo vs. Horlicks, Complan and Bournvita. 6. Recent turmoil and increased internal politics together with lack of apathy from their parent company is going to affect the performance of the company in the short to mid term. 7. Because of the present Swadesi prime and changing public opinion towards MNCs will affect NIL's future.

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CONCLUSION & RECOMMENDATIONS 1. Although product line is very good & has good width & depth, but NIL should try to make stronger brand equity in Dairy products, Amul is still leader. 2. It should work more on concept of CRM (Making new customers & retaining old ones. 3. Cash discounts must be given. 4. More competitive pricing to be done in the premium segment. 5. Increase their sales force to make more frequent visits to the sales person. 6. Should also look for rural markets. 7. Quick handling of problems of stockiest & dealers. 8. Online ordering facility & electronic payment through website can save a lot of time. 9. Due to sluggishness in a FMCG market, most of the companies are under pressure to maintain volume & market share. NIL should draw out an action plan to improve sales through new product launches. 10. Company should concentrate on all round cost saving & productivity gain, to neutralize the adverse impact of increased excise of confectionary. 11. The market strategy of the firm is a complete and unbeatable plan or an instrument designed specially for attaining the marketing objective of company. The formulation of the marketing strategy consists of two steps:12. Segmentation & target market selection. 13. Assembling the marketing mix.

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Limitations A Project that is undertaken, any research that is carried out or any venture that is to be accomplished is not without its share of limitations. Limitations are present irrespective of the scale of intensity of the research undertaken. I was no exception. I too came across limitation but was not discouraged. Nearly all the companies maintain a certain degree of secrecy. There were hesitations while providing an outsider with the information & feedback regarding the company’s strategies & even financial data. To overcome this shortcoming secondary sources were tapped for required information. These sources were checked for ensuring their Authenticity bias. Numbers of visits were made for procuring a single appointment. Though sample size is large enough it is cost so diversified to be called as exact. Inadequacy of time & other resources proved to be a strong limitation. The data collected from consumers may not be exactly what they think & use as they might have misinterpreted the objective of research. Throughout the study utmost care has been taken to avoid biases, errors so as to ensure authenticity and accuracy. But there is possibility for some discrepancies to come in between due to following limitations: Respondents may give their biased opinion, as they know the identity of interviewer. My study is based on responses of executives of mentioned companies of concerned department only, which may not give a true picture. Last but not the least and the most deciding factor paucity of time. But I have put in my honest efforts to make this project a useful one for every one who reads it.

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BIBLIOGRAPHY

INTERNET SITES www.nestle.com www.google.com www.yahoosearch.com MAGAZINES BUSINESS TODAY BUSINESS WORLD BUSINESS STANDARD MARKETING MANAGEMENT BY PHILIP KOTLER

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