Term Paper on "Nestle the Era of Nestle Food Empire"

Term Paper 11 pages (4593 words) Sources: 1+

[EXCERPT] . . . .

Nestle

The era of Nestle food Empire was initiated as an honest attempt to decline the infant mortality. With a view to providing a cost effective nutritious infant recipe for women who are unable to breast feed their babies, Henri Nestle, those had currently purchased a company that made rum and nut oils, stumbled onto a locate-laced gold mine in the 1860s. The Nestle Empire extended all over the Europe with the initiation of Farine Lactee Nestle an innovative mixture of milk of cow, wheat flour and sugar. Its growth becomes persistent with the marketing of condensed milk, milk chocolate and powdered soup companies. Nestle persistently assisted from its capability of adapting to the times: a shortage of milk during World War I compelling Nestle to progress much beyond its milk and chocolate business to become the conglomerate of today. The post war difficulties in the European market fostered Nestle to grow worldwide into the U.S. Market. Nestle the largest food company of world is presently so large that it does not know exactly how many products it makes. (Chocolate, coffee, and pet care?)

Nestle has a 134-year-old tradition and with 2, 30,000 people working in 509 factories in several countries all over the world. (Romance with E-business Strategy: Integrating E-business Strategy) About 98% of sales of Nestle are beyond Switzerland and there exists presently 489 factories in seventy-five countries. (Chapter 15: Control Strategies) the regional business networks of Nestle exist presently in Europe, Africa, North and South America, Asia and Oceania. Its product series extends like a grocery list exceeding 96 main brands in food and personal care products and about 13 of them are in dairy. (Hometwon, yet global - Nestle SA's global success) Irrespective of the fact that Nestle name continues to be on 8500 food, beverage and pharmaceutical brands, different packaging sizes increase the estimated product of the company to the aggregate of 22,000. Irrespective of the fact that in America it is implied to be the synonym of its chocolate Nestle Crunch bars and NesQuik powder flavoring, the company makes products in 10 different trades: "the baby foods and cereals, milk and dairy products, breakfast cereals, desserts, snacks and ice creams, chocolate and other confectioneries, prepared foods, beverages, pet care and pharmaceuticals." (Chocolate, coffee, and pet care?) Nestle is considered to be the global leader in mineral water and coffee sales also. The Headquarter of Nestle is in Vevey, Switzerland, and operates globally to feed the world. (Chocolate, coffee, and pet care?)

Nestle has a clear vision, Mission and corporate value statement with regard to the corporate management. (the Rhythm of Life) the business goal of Nestle is to produce and market the product of the Company in such a way so as to generate value that can be continued over the secular period for shareholders, employees, consumers, and business partners. (Business Principles) There is a positive intention toward work, a practical, realistic approach to perform business, an open minded approach to the world, a minimal number of systems and written guidelines, a personal style of management, an atmosphere of mutual trust, elimination of showing off, windy rhetoric and hypocritical remarks and special stress on real experience and on the fixation of good examples. A very significant issue at Nestle has to do with homogeneity, the required level of consistency of the norms of Nestle and its policies, rules of conduct and approaches. The extent to which they differ is based on the country subsidiary region, branch or group of products. Nestle tries to limit the uniformity of its policy to a required level. This minimum is then analytically imposed unless there are forceful reasons in a given market that validate the divergence from the policy. (Nestle Insight: Business Principles)

The strategy of the Nestle has always been stick to a well-known principle that thinks globally, act locally. To illustrate there exists Nestle a product world wide but have different flavors in different regions. According to the choices of the consumers there exist 180 different tastes. No global consumer ever exists. Consumption is regional and food is a very local thing. More often they operate under a global brand name but associated with the local taste and sometimes it is convenient also to produce a strong local brand. In devising new products they study the market and search out the information on consumers. (Selling Russia) Nestle depends mostly on budgets and reports along with the information accumulated through visits to local operations. Nestle does not desire to become either a multinational or a portfolio manager. Nestle desire to concentrate on those activities on which it has some special information and expertise. Nestle is a global company, not a corporation mixture. They give emphasis on the acquisitions and efforts at diversifications as logical ways to add to their business, however, only in the field of meticulously devised corporate marketing policy. (Nestle Insight: Business Principles)

The concentration of Nestle is on products. The final validation for a company is its ability to extend products that are alluring as a result of their quality, convenience, variety and price - products that can resist the fierce competition exerted by their adversaries. The food companies in most of the parts of the globe are struggling for their existence since with the passage of time the cash-rich consumers desert the kitchen for fast food restaurants and snacks eaten on the move. However, according to Brabeck the Chief of Nestle there is a scope for continuance of growing profitability in an industry where it has a small 1.8% of the global market. The impetus is being provided by the pressurization of the population growth, with the demography demonstrating a per annum growth rate of 2.5 and 2.8% in food consumption. More powerful is the globalizing economy that in the last decade supplemented 800m consumers to the existing purchaser of industrial food products. It is anticipated to have more 1.7 billion in the next decade and about 500m will be added into the per capita income band between U.S.$2,000 and U.S.$6,000 per annum where the consumption increased quite faster than the income. For this it has the objective of increase in their real internal sales to the tune of 4% per annum with a fixed target of Nestle much closer to the growth rate of 3.3% to 3.6%. (Success without a ripple at Nestle)

One mode of enhancing the growth in other industries would be increasing centralization to reduce the costs and release resources for marketing. That is an approach Nestle take on in products where tastes differ a little across borders of its pet food business, to illustrate second largest with brands like Friskies. However, Brabeck thinks that many of the large competitors of the group have failed to go with the performance of the Nestle since they have attempted to associate with such approaches in human foodstuffs, where tastes differ quite largely from country to country. The U.S. groups specifically, are leaning towards Europe as a homogeneous market but the tastes of the consumer differ between countries. The emotional link to the local consumer is considerably significant in their business. As a result of this it continues to be a fragmented industry and that is why their attempt to stay closer to the local consumers. This does not imply the food industry to vary. The expectations of the consumers are enhanced gradually, Brabeck terms it as CHEF: convenience, health, excitement and freshness. With attaining such objectives they are expected to attain the sustainable, profitable and secular growth. (Success without a ripple at Nestle)

Nestle splits the markets into the rapid increasing ones and those where the sales are not growing so rapidly. There are markets where their share on the global products is remarkably higher. Similar is the case with the Western Europe since most global brands were developed there. Above all, global brands like Nescafe, Nestea, Maggie, Buitoni, Friskies and Nestle, account for 78% of all sales all over the world. (Selling Russia) Irrespective of the Asian and Russian economic crises, Nestle accounted for a 2.6% increment in sales in 1998- slightly short of new CEO the objective of Peter Brabeck to be of 4%. The Company officials opine a flourishing demand in the west for products like Perrier mineral water and Alcon contact lens solution assisted to offset the sales decline in such areas. (Chocolate, coffee, and pet care?)

In 1999, Nestle proclaimed plans to sell Findus, a major global frozen food company and to concentrate on more profitable fractions in the market. Hill Bros, Chase & Sanborn, and MJB coffee brands to Sara Lee were also sold in December 1999. In an attempt to reinforce the cereal division, Nestle joined with General Mills in 1999 to launch a NesQuik cereal line in the United States. The company is also operating on complete domination of the frozen foods market. With an $80 million investment into its Ortega Mexican foods and Stouffer's Oven Sensations, in 2000 Nestle emerged to be… READ MORE

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