nestle india confectionery market

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Nestle India: Challenges Faced in the Indian Confectionary Market S ubmitted By- Millan Sahoo (43) Namrata singhal (47) Subhodeep Biswas (86) Prasun Chandra (57) Vijay Kumar Mishra(98)

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Despite performing well & being a market leader in almost all segments viz. beverages, food, milk, noodles and culinary products in India, the company is yet to display the same growth success in confectionery segment. The report provides inclusive and in-depth analysis of the scopes and challenges for Nestle India and is going to analyze the major industry drivers, along with the challenges hindering the growth of the company in this booming industry

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Page 1: Nestle India Confectionery Market

Nestle India: Challenges Faced in the Indian Confectionary Market

Submitted By- Millan Sahoo (43)Namrata singhal (47)Subhodeep Biswas (86)Prasun Chandra (57)Vijay Kumar Mishra(98)

Page 2: Nestle India Confectionery Market

subsidiary of Nestlé S.A. of Switzerland. vibrant Company that provides products of global standards and is committed to long-term sustainable growth

employ around 2, 80,000 people and have factories or operations in almost every country in the world.

The Company is acknowledged amongst India's 'Most Respected Companies' and amongst the 'Top Wealth Creators of India‘.

The culture of innovation and renovation within the Company and access to the Nestlé Group's proprietary technology/Brands expertise and the extensive centralized Research and Development facilities.

Nestle India- a brief profile

Page 3: Nestle India Confectionery Market

Food is a source of nourishment and satisfaction, but also pleasure, health, happiness and peace of mind.

Nestle – strive to make their products tastier and healthier.

Largest R&D network of any food company in the world, with 34 R&D facilities (3 Science & Research centers and 31 Product Technology Centres and R&D centers worldwide), and over 5,000 people involved in R&D.

Are able and committed to create trustworthy products, systems and services that contribute to improving the quality of consumers’ lives.

Vision

Page 4: Nestle India Confectionery Market

"Good Food, Good Life" 

Best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night.

Mission

Page 5: Nestle India Confectionery Market

Falling much behind Cadbury in the race - market share continues to decrease.

Opportunities & challenges in a bulging market with changing trends

Recent splurge in investment in India- ambitious plan of a long term growth.

The Challenges Facing Nestle India- in the confectionary market

Page 6: Nestle India Confectionery Market

Relative profit Share Across Product Portfolio

Page 7: Nestle India Confectionery Market

Product Portfolio

Page 8: Nestle India Confectionery Market

Strength (S)• Strong Brand Recognition• Experience of operating in Indian Market• Capital & R&D support from the Parent company• Competitive Pricing• High quality of Manufacturing

Swot Analysis

Page 9: Nestle India Confectionery Market

Weakness ( W)• Less products in the premium segment• Profit margin low• Supply chain Opportunity (O)• Expansion• High Growth Confectionary Market• Recent Investments in R&D • Global Strategy stressing profit from Nestle India

Swot Analysis

Page 10: Nestle India Confectionery Market

Threat • High Market Share of the Immediate Competitor• Ever Increasing competition in the confectionary

Industry• Sectoral woes • Trend towards healthy eating• Growth of private labels

Swot Analysis

Page 11: Nestle India Confectionery Market

Bargaining Power of Customers

Competitive Rivalry within the Industry

Porter’s 5 Forces Model

Bargaining Power of Suppliers

Threat of Substitute Goods

Threat of New Entrants

Page 12: Nestle India Confectionery Market

BCG MatrixStar Products

Maggie NoodlesProcessed food & Beverages

Question Mark• C

hocolate & Confectionary

Cash Cow• M

ilk Products & Nutrition

Dog• N

estle Dahi

BCG Matrix

Relative Market Share

Market Growth

rate

Page 13: Nestle India Confectionery Market

The confectionery industry in India is approximately divided into:• Chocolates• Hard-boiled candies• Éclairs & toffees• Chewing gums• Lollipops• Bubble gum• Mints and lozenges

Confectionery Industry Analysis India

Page 14: Nestle India Confectionery Market

World confectionary market

Page 15: Nestle India Confectionery Market

Common factorGovt policiesTaxes Labour skill & wages Power & water supplyTechnology & Infrastructure

Uncommon factors ResourcesTransportation

Operation Factors

Page 16: Nestle India Confectionery Market

Nestlé's Facility Locations

.

Manufacturing Plant State Location

 Moga (Punjab) 1961

Choladi (Tamil Nadu) 1967

Nanjangud (Karnataka), 1989

Samalkha (Haryana) 1993

Ponda and Bicholim (Goa) 1995 & 1997

Pantnagar (Uttarakhand) 2006

Tahliwal (Himachal Pradesh)

2012 choladi

Nanjangud

Goa

MogaPantnagar

Samalkha

Tahliwal

Gurgaon

Page 17: Nestle India Confectionery Market

Cadbury’s Facility Locations

• .Manufacturing Plant State Location

Thane 1948

Induri, Pune

Malanpur, Gwalior 1989

Baddi, HP

Bangalore 1950

Hyderabad 2006

Cocoa OperationsDharapuram

1970

Page 18: Nestle India Confectionery Market

Facility Locations

• . Tahliwal

Kolkata

Pant nagarHariyana

Panjab

Goa

KarnatakaTN

Page 19: Nestle India Confectionery Market

Most Important ingredients Milk Sugar others

Largest Sugar producing states

1. AP

2. Bihar

3. Gujarat

Department of Food & Public Distribution report

NDDB

• Largest Milk Producing states

1. UP

2. Rajasthan

3. AP

4. Gujarat

5. Punjab

Resource Factor

Page 20: Nestle India Confectionery Market

M A N U F A C T U R E R

Carriage & Forward agent

Distributer /Wholesaler

Retailer

End customer

Distribution channel

Page 21: Nestle India Confectionery Market

Procurement( vendor selection )

Modernizing Ware house (RF)

Distribution (customer)

Transportation

Process & Design

Page 22: Nestle India Confectionery Market

M A N U F A C T U R E R ( 8 in the country) C & F agent (1 Each state) Super stockiest ( 1 Each state) Distributer (depend on size of city), 1300 till 2010 Retailers ( 5.5 Lakhs) End customer  Wholesaler ( unstructured)

SCM

Page 23: Nestle India Confectionery Market

Complexity

Page 24: Nestle India Confectionery Market
Page 25: Nestle India Confectionery Market

Profitability Ratio• EBIT is good as it is increasing constantly which is good sign for

company. However in EBITD is low due to high depreciation. Gross profit margin is constant in these years as it should not fluctuate. Net profit margin is constant as profit is also increasing proportionally to sales.

• The reason behind decrease in ROCE is mainly because company has invested huge capital in last three years and it will take few years to recover the amount.

Financial Analysis

Page 26: Nestle India Confectionery Market

Efficiency Ratio• ITR: It shows how many times a company's inventory is sold and replaced

over a period. It implies poor sales and, therefore excess inventory. • DTR: It is used to quantify a firm's effectiveness in extending credit as

well as collecting debts. A high ratio implies either that a company operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient.

• FATR: It has declined significantly as amount is locked up in fixed asset Rs 3000 crores in upgrading and expanding existing capacities as well as setting up new plants.

Financial Analysis

Page 27: Nestle India Confectionery Market

2008 2009 2010 2011 20120

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Net Sales & PAT (Rs in crores)

Net SalesPAT

Page 28: Nestle India Confectionery Market

Liquidity Ratio• Liquidity Ratios are quite manageable and under control and it has

shown the trend of constant decrease in these ratios which is good sign for the company. But one alarming fact is that gap between Current and Quick Ratio as good amount of investment is blocked in Inventory.

Financial Analysis

Page 29: Nestle India Confectionery Market

• During past 3 years Nestle India has invested around Rs 3000 crores in upgrading and expanding existing capacities as well as setting up new plants to prepare of new reality.

• It added another 5,00,000 outlets accelerating from 4,00,000 incremental outlets in the previous year.

• During the year, export grew by 7.6% which was around 12% last year.

• The company completed its expansion plan in Tahilwal (HP), Samalkha (Haryana), Ponda (Goa) and in Moga (punjab).

Important points

Page 30: Nestle India Confectionery Market

• Finance cost has increased significantly from Rs 51 million to Rs 266 million as Nestle India has borrow money from Nestle SA parent company through (External Commercial Borrowing) ECB route.

• We will accelerate penetration and increase frequency and develop winning concepts.

• We will focus on both growth and margins.• Nestle runs 30 research and development centers, with 5,000

employees, globally and its research budget was 1.4 billion Swiss francs in 2011.

Important points

Page 31: Nestle India Confectionery Market

• Learning is an integral part of Nestlé’s culture.• People development is the driving force of the policy.• The policy deals with recruitment, remuneration and training

and development and emphasizes individual responsibility, strong leadership and a commitment to life-long learning.

• Training is done on-the-job.• Formal training programs are generally purpose-oriented and

designed to improve relevant skills and competencies.

Culture at Nestlé and Human Resources Policy

Page 32: Nestle India Confectionery Market

• Apprenticeship programs have been an essential part of Nestlé training where the young trainees spent three days a week at work and two at school.

• It’s not only a matter of learning bakery; trainees also learn about microbiology, finance, budgeting, costs, sales, how to treat the customer, and so on.

• Additional courses are held outside the factory when required, generally in connection with the operation of new technology.

Nestlé Apprentice Program

Page 33: Nestle India Confectionery Market

• Training farmers on cattle raising, feeding & breeding practices and on health of daily herds.

• course is designed specifically to cover farm management, milk production, cattle health, nutrition and breeding.

• Deployed trained veterinarians & other experts to local farmers in order to transfer knowledge, equipment & technology required to enhance calf-survival rate & set up of a farm infrastructure.

• Village Women Development Programme – 30000 trained women dairy farmers.

Local Training

Page 34: Nestle India Confectionery Market

Nestlé Healthy Kids Program• In collaboration with Universities Nestlé Healthy Kids for

Delhi Health Camp: Micronutrient awareness • In collaboration with Drishtee Foundation

Shared value ( Nutrition)

Page 35: Nestle India Confectionery Market

Milk Farmers, technical assistance and training to farmers Village Women Dairy Development Program Chicory

farmers Training, Improve chicory quality and productivity The

NESCAFÉ Plan Launched on 5th Jan 2012 Sanitation facilities Sanitation projects benefitting girl students

Shared value ( Rural development)

Page 36: Nestle India Confectionery Market

Clean Drinking Water Projects Access to clean drinking water in village schools across

factories Water Awareness Program Creating awareness among village school students

International Water management Institute Water Awareness Program for milk farmers

Shared value ( Water)

Page 37: Nestle India Confectionery Market

Marketing• Develop Exclusive packaging ( Brand Recall)• Focus should be more on Premium chocolate

• Re-positioning of Alpino.

Operation• Establish Facility in UP or near by, that improve presence in central India as well as

they can buy resources at more cast effective manner• Fix or Remove whole sellers ( Define responsibility & Area)

Financial• Loan Restructure

HR• They believe it pays off in the long run in their business results.• It is important to give people the opportunities for life-long learning.

Suggestions

Page 38: Nestle India Confectionery Market

Thank You