Nestle IndiaSUBMITTED TOPROF. SHRIPAD KULKARNI

Submitted ByAdwait DwivediKhushal solankiRuchika AgarwalSomanath singh

Introduction

• Most crucial aspect of the business for Survival is LPG• Analysis of internal and external factors• Industry competitive analysis• SWOT Analysis

About the company

• It has started in 1912 by entering into dairy business.• In 1961 Nestlé set up its first factory in Moga, Punjab. • Nestlé India today has 8 factories across the country. Quality is

the core value that unites them.• It took Nestlé almost three decades to build a beloved noodle

brand in India.

Vision

to 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.

Mission "Nestlé 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, Nestlé 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 today’s and tomorrow’s consumers.

Objective

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

External Analysis

Political/Legal Segment

Nestlé'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.

Economic Segment

It 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.

Social Factors

Decent eating regimen Satisfactory food supply Maintaining health and hygiene forcefulness of utilizing innovation.

Technological Factors

Web and Mobile Technology By analysing data to identify the need of the customer.

Environmental Factors

Conscious to have clean environment Attention towards the social contribution Recycling and the issues pertaining to the packing

Porter’s Five Forces Model

Threat of New Entrants

Economies of Scale Switching Cost Government Policies Capital Requirement Industry Profitability

Bargaining Power of Supplier

Differentiation of inputs Switching costs Substitute Products Supplier concentration relative to industry concentration Treat of forward integration

Bargaining Power of Buyers

Differentiation of outputs Presence of substitute Industry concentration relative to buyer Threat of backward integration

Threat of Substitute Products

The relative price performance of substitutes Switching cost Buyer propensity to substitute

Intensity of Rivalry among Competitors

Industry growth rate High fixed cost Intermitted over capacity Switching costs Brand Identity

Competitive Environment

Taste Vs. Nutrition Need high level R&D capability Price of the products

Competitive advantage

People culture values and attitude Unmatched geographic presence Unmatched research and development capability Unmatched product and brand portfolio

Internal Analysis: Core Competencies Analysis

Innovation and renovation Whenever, wherever and however Operational Efficiency Consumer Engagement

Value Chain Analysis

Primary Activities: Inbound Logistics

Raw materials Warehouses Training to the farmers

Operations

Processing Packaging: The Design lab |QR code 11 Internal and external laboratories to ensure food

safety Adopted 3R methodology (For Water) – Reduce, Recycle,

Reuse

Outbound Logistics

Inventory management On time delivery Transaction management Order fulfilment Invoice accuracy

Marketing and Sales

Price Brand loyalty Habitual to taste Public Relation

Services

2 Minutes Cooking time strategy Maggi masala Cuppa Maggi Noodles

Supporting Activities: Procurement

It provides sustainable and profitable development for the company

Supply of raw material at specified quality, quantity and low cost

Technological Development

Focuses more on Research and development Continuously improving their technology to increase the

efficiency

Human Resources Management

Right people with right skill Almost zero percentage attrition rate of the employees Trust factor among the employees Single objective Management training program to develop young employees

Firm Infrastructure

Nestlé 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.

SWOT Analysis: Strengths

Unmatched research and development capability- Nestlé’s key competitive advantage is its R&D. It has the largest R&D centres’

with one of the best geographically diversified revenue sources- Nestlé 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.

Nestlé’s product portfolio is wider than any of its rivals in the industry.

Environmental sustainability efforts- Nestle pride itself on company’s sustainability efforts.

Ownership of some of the most recognizable brands in the world- Nestle owns and markets a few well recognized brands, such as Nestlé, Nescafé

Weakness

Criticism over high water usage, selling contaminated food, anti-unionism, forced child labour and using other unethical practices

Contaminated 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 reputation

Complex supply chain configuration.

Opportunities

Nestle, which has a history of providing misleading nutritional information on its labels should improve its practices and clearly label the products.

Nestlé 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, Nestlé could increase its investments in start-ups that will help the company to meet the future challenges and increase the sales.

Threats

In the future, water scarcity will likely become a more significant problem that will negatively impact company’s 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.

Nestlé’s 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 Analysis

Profitability Ratios 2015 2014 2013 2012 2011PBDIT Margin (%) 20.36 21.5 22.31 22.27 20.57PBIT Margin (%) 16.11 18.07 18.68 18.94 18.53PBT Margin (%) 9.95 18 18.43 18.62 18.46Net Profit Margin (%) 6.88 12.02 12.27 12.81 12.79Return on Net worth / Equity (%) 19.98 41.75 47.16 59.38 75.47Return on Capital Employed (%) 12.23 26.53 22.49 26.53 32.76

Return on Assets (%) 9.26 20.35 17.69 20.68 21.84Total Debt/Equity (X) 0.01 0.01 0.5 0.58 0.76Asset Turnover Ratio (%) 134.45 169.34 144.13 161.39 170.71Liquidity Ratios          Current Ratio (X) 1.68 1.45 1.71 1.31 0.88Quick Ratio (X) 1.12 0.83 1.16 0.65 0.38           

Inventory Turnover Ratio (X)9.96 11.67 12.37 11.18 10.24

Basic EPS (Rs.) 58.42 122.87 115.87 110.76 99.73

Dividend Payout Ratio (%) 83.01 51.27 41.85 43.78 48.63

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

Strategy

Your Company’s 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 Nestlé 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.

The ‘Chocolate and Confectionery’ business worked on improving consumer insights and has been working with Nestlé 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.

Nestlé ‘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 was‘Breastfeeding is not just a mother’s 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.

Nestlé’s 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).

Strategy

2013 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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