Nestle India

Nestle IndiaSubmitted toProf. Shripad KulkarniSubmitted ByAdwait DwivediKhushal solankiRuchika AgarwalSomanath singh

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IntroductionMost crucial aspect of the business for Survival is LPGAnalysis of internal and external factorsIndustry competitive analysisSWOT Analysis

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About the companyIt has started in 1912 by entering into dairy business.In 1961 Nestl set up its first factory in Moga, Punjab. Nestl India today has 8 factories across the country. Quality is the core value that unites them.It took Nestl almost three decades to build a beloved noodle brand in India.

Visionto be a leading, competitive, nutrition, health and wellness company delivering improved shareholder value by being a preferred corporate citizen, preferred employer, and preferred supplier selling preferred products.

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Mission"Nestl is...the world's leading nutrition, health and wellness company. Our mission of 'Good Food, Good Life' is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night."These statements mirror the organization's long haul business strategy. With regards to its guaranteed commitment to nutrition to improve health and well-being of its consumers, Nestl has also invested into scientific research on the nutritional value of the products it offers. For instance, it has concentrated the impacts of chocolate on digestion and gut microscopic organisms. The focus of the company is to meet needs and desires of todays and tomorrows consumers.

ObjectiveOur objective is to be the leader in Nutrition, Health and Wellness, and the industry reference for financial performance, trusted by stakeholders.

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External Analysis

Political/Legal SegmentNestl's products are accompanied with the seal of assurance.Strict quality control plays important part in political variable as well.It gives the guarantee that customer does not purchase any fake item.

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Economic SegmentIt imparts its knowledge and expertise to local small and medium organizations.Nestle works along with the local government to help the farmers in planting and reaping crops.It will benefit the customers whereby they will be getting the products at low prices.

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Social FactorsDecent eating regimenSatisfactory food supplyMaintaining health and hygieneforcefulness of utilizing innovation.

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Technological FactorsWeb and Mobile TechnologyBy analysing data to identify the need of the customer.

Environmental FactorsConscious to have clean environmentAttention towards the social contributionRecycling and the issues pertaining to the packing

Porters Five Forces Model

Threat of New EntrantsEconomies of ScaleSwitching CostGovernment PoliciesCapital RequirementIndustry Profitability

Bargaining Power of SupplierDifferentiation of inputsSwitching costsSubstitute ProductsSupplier concentration relative to industry concentrationTreat of forward integration

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Bargaining Power of BuyersDifferentiation of outputsPresence of substituteIndustry concentration relative to buyer Threat of backward integration

Threat of Substitute ProductsThe relative price performance of substitutesSwitching costBuyer propensity to substitute

Intensity of Rivalry among CompetitorsIndustry growth rateHigh fixed costIntermitted over capacitySwitching costsBrand Identity

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Competitive EnvironmentTaste Vs. NutritionNeed high level R&D capabilityPrice of the products

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Competitive advantagePeople culture values and attitudeUnmatched geographic presenceUnmatched research and development capabilityUnmatched product and brand portfolio

Internal Analysis: Core Competencies AnalysisInnovation and renovationWhenever, wherever and howeverOperational EfficiencyConsumer Engagement

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Value Chain Analysis

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Primary Activities: Inbound LogisticsRaw materialsWarehousesTraining to the farmers

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OperationsProcessingPackaging: The Design lab |QR code11 Internal and external laboratories to ensure food safetyAdopted 3R methodology (For Water) Reduce, Recycle, Reuse

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Outbound LogisticsInventory managementOn time deliveryTransaction managementOrder fulfilmentInvoice accuracy

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Marketing and SalesPriceBrand loyalty Habitual to tastePublic Relation

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Services2 Minutes Cooking time strategyMaggi masalaCuppa Maggi Noodles

Supporting Activities: Procurement It provides sustainable and profitable development for the companySupply of raw material at specified quality, quantity and low cost

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Technological DevelopmentFocuses more on Research and developmentContinuously improving their technology to increase the efficiency

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Human Resources ManagementRight people with right skillAlmost zero percentage attrition rate of the employeesTrust factor among the employeesSingle objectiveManagement training program to develop young employees

Firm InfrastructureNestl India today has 8 factories across the country. Quality is the core value that unites them.Manufacturing plants have helped to create large skilled labor forces in rural areas.Its infrastructure strives to identify external opportunities and threats.

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SWOT Analysis: StrengthsUnmatched research and development capability- Nestls key competitive advantage is its R&D. It has the largest R&D centres with one of the best geographically diversified revenue sources- Nestl operates and sells its products in 189 countries, reaching almost the entire world.Maggi. Brand awareness helps the company to introduce new products and sell the current products more easily.

Nestls product portfolio is wider than any of its rivals in the industry. Environmental sustainability efforts- Nestle pride itself on companys sustainability efforts. Ownership of some of the most recognizable brands in the world- Nestle owns and markets a few well recognized brands, such as Nestl, Nescaf

WeaknessCriticism over high water usage, selling contaminated food, anti-unionism, forced child labour and using other unethical practicesContaminated food recalls- In 2015, Nestle recalled and destroyed 35,000 tons of contaminated Maggi noodles in India. This resulted in hundreds of millions in lost sales and damaged brand reputationComplex supply chain configuration.

OpportunitiesNestle, which has a history of providing misleading nutritional information on its labels should improve its practices and clearly label the products.Nestl could start sourcing all of its materials from sustainably grown plantations and farms.where the established brands are losing sales and the capital is still very cheap, Nestl could increase its investments in start-ups that will help the company to meet the future challenges and increase the sales.

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ThreatsIn the future, water scarcity will likely become a more significant problem that will negatively impact companys operations.Food and beverage markets are growing very slowly and with so many new start-ups, Nestle will find it hard to compete in the future.Nestls profit margins are dependent, to some extent, on the price of coffee beans, which over the past several years has been very volatile

BCG Matrix

Ratio AnalysisProfitability Ratios20152014201320122011PBDIT Margin (%)20.3621.522.3122.2720.57PBIT Margin (%)16.1118.0718.6818.9418.53PBT Margin (%)9.951818.4318.6218.46Net Profit Margin (%)6.8812.0212.2712.8112.79Return on Net worth / Equity (%)19.9841.7547.1659.3875.47Return on Capital Employed (%)12.2326.5322.4926.5332.76Return on Assets (%)9.2620.3517.6920.6821.84Total Debt/Equity (X)0.010.010.50.580.76Asset Turnover Ratio (%)134.45169.34144.13161.39170.71Liquidity RatiosCurrent Ratio (X)1.681.451.711.310.88Quick Ratio (X)1.120.831.160.650.38

Inventory Turnover Ratio (X)9.9611.6712.3711.1810.24Basic EPS (Rs.)58.42122.87115.87110.7699.73Dividend Payout Ratio (%)83.0151.2741.8543.7848.63

Net Profit Margin has significantly decreased in 2015 by almost half proportion. This is because of the huge losses Nestle Maggi has incurred due to its ban in June, 2015. Almost 35000 tonnes of Maggi was called back and destroyed.This has also reduced return on equity for shareholders. Inventory turnover ratio has also decreased in 2015 due to reduction in inventories. Earnings per share has also decreased substantially in 2015

StrategyYour Companys objective is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions and help consumers maintain optimum Nutrition, Health and Wellness. Your Company has access to the extensive global network of Nestl R&D. This is a competitive advantage in the rapidly emerging areas of technology and scientific research and enables your Company to provide safe and nutritious products of very high quality.

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The Chocolate and Confectionery business worked on improving consumer insights and has been working with Nestl R&D to innovate and renovate products that will strengthen its portfolio. The focus was also on portfolio optimization for long term benefit, though it impacted short term growth.Towards the end of the year it launched MUNCH NUTS, a new extension of the ever popular MUNCH.

Nestl Start Healthy Stay Healthy reached out to the supporting eco system of mothers to emphasize the importance of their role in continued breastfeeding with the objective to build greater awareness and advocacy.The key message wasBreastfeeding is not just a mothers responsibility. The campaign received 9.1 million views out performing industry benchmarks.

During the year your Company enhanced labelling of products with QR codes. This enables consumers to use their mobile phones to scan the QR code on the label for information on Nutrition, Environment and Community as relevant to the product.During the year your Company also created The Design Lab to inspire a strategic shift in packaging design keeping the consumer experience in mind and to achieve operational excellence.

During the year, 54 Energy reduction projects and 40 water reduction projects were completed in factories.During 2015 your Company consolidated and further accelerated the current improvement programs. It continued to upgrade its warehousing infrastructure with key distribution centers ready to operate in the future with proper infrastructures, systems, processes and a sound safety

During the year your Company has successfully piloted a new demand forecasting system based on analytics and also automated the replenishment to the distribution centres in all factories, improving accuracy and people productivity.The roll out of the ware house management systems (WMS) with Radio Frequency (RF) technology has been extended to additional factories. During the year your Company focused on further improving freshness of products on shelf for consumers and reduce waste.

Nestls approach to business is Creating Shared Value or Saanjhapan as used by your Company and it is about the impact of the business and engagement through it. Your Company has been conducting business in a way that both deliver longterm shareholder value and benefit society under approach of Creating Shared Value (hereinafter CSV).

Strategy2013 focused on Nutrition, product development2014 Renovation and innovation, market development, product development2015 Renovation and innovation, market development, product developmentContinually development in supply chain

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