nestle project

PROFILE OF THE COMPANY

Nestlé with headquarters in Vevey, Switzerland was founded in 1866 by Henri

Nestlé and is today the world's biggest food and beverage company. Sales at the

end of 2004 were CHF 87 bn, with a net profit of CHF 6.7 bn. We employ around

247,000 people and have factories or operations in almost every country in the

world.

The Company's strategy is guided by several fundamental principles. Nestlé's

existing products grow through innovation and renovation while maintaining a

balance in geographic activities and product lines. Long-term potential is never

sacrificed for short-term performance. The Company's priority is to bring the best

and most relevant products to people, wherever they are, whatever their needs,

throughout their lives.

Submitted by SUHAS S DHAGE. 1

BACKGROUND

Nestle was promoted by Nestle Alimentana, Switzerland, a wholly owned

subsidiary of Nestle Holdings Ltd., Nassau, Bahama Islands. Nestle is one of the

oldest food MNC operating in India, with a presence of over a century. For a long

time, Nestle India’s operations were restricted to importing and trading of

condensed milk and infant food. Over the years, the Company expanded its

product range with new products in instant coffee, noodles, sauces, pickles,

culinary aids, chocolates and confectionery, dairy products and mineral water.

Nestle was incorporated as a limited company in 1959. In 1978, the Company

issued shares to the Indian public to reduce its foreign holdings to 40%. Its name

was changed from Foods Specialties Ltd. to the current name in 1981.The parent

held 51% stake in the company as at 2000 end. It has FIPB approval to hike

stake by 10% and has been gradually acquiring shares from the open market.

Parent stake in the company as at 2001 end stood at 53.8%. The parent plans to

continue hiking stake through open market purchases.

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

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.


PLANT LOCATIONS

Nestle started its manufacturing operations with Milkmaid in 1962 at Moga

factory. Manufacturing of Nescafe started in 1964 at the same factory. The

company set up another factory at Cherambadi in Tamil Nadu, for manufacture of

infant foods, coffee etc. For almost two decades there were no new additions of

manufacturing facilities due to restrictive policy environment. The company set

up its Nanjangad (Karnataka) factory in 1989 and the Samlakha (Haryana)

factory in 1992. The Ponda (Goa) factory started operations in 1995. The

Company set up its sixth manufacturing unit in 1997 at Bicholim in Goa

BUSINESS PRINCIPLES

Since Henri Nestlé developed the first milk food for infants in 1867, and saved

the life of a neighbor’s child, the Nestlé Company has aimed to build a business

based on sound human values and principles.

While our Nestlé Corporate Business Principles will continue to evolve and adapt

to a changing world, our basic foundation is unchanged from the time of the

origins of the Company, and reflects the basic ideas of fairness, honesty, and a

general concern for people.


People first

Employees, people and products are more important at Nestlé than systems.

Systems and methods, while necessary and valuable in running a complex

organization, should remain managerial and operational aids but should not

become ends in themselves. It is a question of priorities. A strong orientation

toward human beings, employees and executives is a decisive, if not the

decisive, component of long-term success.

Quality products

Our focus is on products. The ultimate justification for a company is its ability to

offer products that are appealing because of their quality, convenience, variety

and price -- products that can stand their ground even in the face of fierce

competition.

Long-term view

Nestlé makes clear a distinction between strategy and tactics. It gives priority to

the long-range view. Long-term thinking defuses many of the conflicts and

contentions among groups -- this applies to employment conditions and relations

with employees as well as to the conflicts and opposing interests of the trade and

the industry. Of course, our ability to focus on long-term considerations is only

possible if the company is successful in the struggle for short-term survival. This

is why Nestlé strives to maintain a satisfactory level of profits every year.

Decentralization

Switzerland is home to Nestlé's Swiss subsidiary, its international headquarters

and the registered office of Nestlé's holding company, but Nestlé does not regard

its Swiss headquarters as the center of the universe. Decentralization is a basic

principle of Nestlé. Our policy is to adapt as much as possible to regional

circumstances, mentalities and situations. By decentralizing operational


responsibility, we create strength and flexibility and are able to make decisions

that are better attuned to specific situations in a given country. Policies and

decisions concerning personnel, marketing and products are largely determined

locally. This policy creates stronger motivation for Nestlé's executives and

employees and a greater sense of identification with Nestlé's business. It is not

Nestlé's policy to generate most of its sales in Switzerland, supplemented by a

few satellite subsidiaries abroad. Nestlé strives to be an "insider" in every country

in which it operates, not an "outsider."

Uniformity

A very important concern at Nestlé has to do with uniformity: how consistent

Nestlé's principles, policies, rules of conduct and strategies should be, and to

what extent they should differ depending on the country, subsidiary, region,

branch or group of products. In general, Nestlé tries to limit the uniformity of its

policy to a requisite minimum. This minimum is then systematically enforced,

unless there are compelling reasons in a given market that justify deviation from

policy.

Diversification

Nestlé does not want to become either a conglomerate or a portfolio manager.

Nestlé wants to operate only those businesses about which it has some special

knowledge and expertise. Nestlé is a global company, not a conglomerate

hodgepodge. We regard acquisitions and efforts at diversification as logical ways

to supplement our business, but only in the context of a carefully considered

corporate marketing policy.

Nestlé is committed to the following Business Principles in all countries, taking

into account local legislation, cultural and religious practices:

Nestlé's business objective is to manufacture and market the Company's

products in such a way as to create value that can be sustained over the


long term for shareholders, employees, consumers, and business

partners.

Nestlé does not favor short-term profit at the expense of successful long-

term business development.

Nestlé recognizes that its consumers have a sincere and legitimate

interest in the behavior, beliefs and actions of the Company behind brands

in which they place their trust and that without its consumers the Company

would not exist.

Nestlé believes that, as a general rule, legislation is the most effective

safeguard of responsible conduct, although in certain areas, additional

guidance to staff in the form of voluntary business principles is beneficial

in order to ensure that the highest standards are met throughout the

organization.

Nestlé is conscious of the fact that the success of a corporation is a

reflection of the professionalism, conduct and the responsible attitude of

its management and employees. Therefore recruitment of the right people

and ongoing training and development are crucial.

Nestlé continues to maintain its commitment to follow and respect all

applicable local laws in each of its

Research and development

The Nestlé research and development centers have two main tasks: to create

new products and manufacturing processes and to improve those that already

exist. These centers play a key role in product safety and quality and also have

their role in conserving resources and protecting the environment. Environmental

concerns are an integral part of any development process to ensure that our

future commercial operations meet the desired criteria.

The Nestlé Research Center provides the scientific support needed to prevent

and solve environmental problems arising in the development groups as well as

manufacturing. In addition, studies are carried out to find new ways of using


industrial residues to create valueadded byproducts. This will reduce total

emissions and effluents.

The Nestlé development centers prepare environmental impact studies for new

products and manufacturing processes. These cover all aspects, from raw

materials, through processing, to the final packed product. These analyses

provide additional elements for use in deciding whether to commercialize a new

product, or to introduce a new or modified process.

Foresight

At present, the world faces daunting questions about its ability to provide enough

wholesome food for everyone. Malnutrition and poor eating habits are still serious

problems in many developing countries. By 2100, the world's population will

double. Will it be possible to feed a world with so many inhabitants? At Nestlé,

the big picture is all about feeding the world and providing food and nutrition for

an ever-growing population. Our response to this situation is to intensify

research, strive for innovations and improve quality.

Flexibility and simplicity

The public's sense of the power and size of a corporation is often inaccurate, for

a company's power is limited by a host of factors including legislation,

competition, regulatory bodies and publicity. From a business point of view, it is

desirable for a firm to achieve the size best suited to a specific industry or mode

of production. To be competitive internationally and make significant investments

in research and technology, a larger company has an advantage. From a strictly

organizational point of view, flexible, simple structures work best and excessively

large units should be avoided whenever possible. In both respects Nestlé has a

natural advantage: Although it is a big company, it is spread out over many

countries and each of Nestlé's factories has its own management and

responsibility.


Handling of raw materials

The Nestlé Group is in principle not directly involved in primary production of raw

materials and other food ingredients. In general we use locally available raw

materials and purchase them either directly from producers or through existing

trade channels.

Raw materials have to meet clearly established quality criteria and are checked

for possible contaminants including environmental contaminants. Our purchasing

specifications comply not only with legal requirements but go further to ensure

highest safety and wholesomeness of our products.

Whenever possible we give preference to those goods for which environmental

aspects have been taken into consideration. In those cases where the required

agricultural raw materials are not available locally, but the natural production

conditions exist, we encourage local production and provide assistance for

cultivation and dairy farm management.

We support plant growing and livestock husbandry methods which:

preserve and improve natural soil productivity and economize and protect

water resources

allow the lowest, most appropriate and safe use of agro-chemicals

use the least energy.

Packaging

Manufacturing comprises all unit operations necessary to transform perishable

raw materials into finished products, with the aim to make them safe and

convenient for the consumers. The manufacturing activities of the Nestlé Group:

respect natural resources by efficient use of raw materials and energy

minimize waste generation and emissions


ensure environmentally safe disposal of all waste which cannot be

recycled.

Regular assessments of processing practices are carried out. These

assessments include:

evaluation of individual plant performance with regard to operations which

have an impact on the environment

definition of targets for improvement

review of plant compliance with local government regulations, company

environmental standards, as well as results achieved in comparison with

targets for improvement

full investigation of incidents which may affect the environment.

Information on developments in environmental protection technology and

practices is disseminated as required to ensure that all plants are using the most

effective environmental practices for their type of processing. This applies also

for co packers.

Marketing and distribution

Marketing is based on the principle of satisfying consumer needs. This is the

foundation also for the environmental marketing approach of Nestlé.

Environmental product claims in advertising, promotional material and on

packaging are in accordance with legal requirements, based on solid scientific

evidence and used in a serious and reasonable manner.

Our aim is to minimize wastage in communication, publicity and promotional

material, in particular through more precise targeting of marketing activities.

Consumer promotions and merchandising material such as consumer offers, in-

store promotions, display material, leaflets, printed matter, etc. take

environmental aspects into account.


This means due consideration of environmental impact in selecting both

materials and printing methods.

In distribution, energy efficient and pollution controlled methods are encouraged

wherever possible.

Information, communication and education

Nestlé's policy is designed to provide correct and coherent information on the

activities of the Group.

Activities related to the environment benefit from the same treatment and their

communication is secured through all currently available means inside and

outside the Group.

It is furthermore Nestlé's duty to create awareness, to train and motivate

employees on their personal responsibility with regard to the protection of the

environment.

Legislation and regulations

It is the policy of the Nestlé Group to strictly comply with all laws and regulations

relevant to our activities. We participate in discussions on food legislation and

regulations between international organizations, government representatives,

industry, the scientific world and consumer associations. We also apply this

policy to environment related matters.

In doing so, we cooperate with legislators through local industry associations in

order to promote laws and regulations in the field of environment which are

reasonable, rational, realistic, applicable and enforceable. We oppose unjustified

bans and any other discriminatory measures.

We favor the harmonization of food regulations in order to remove existing trade

barriers and to avoid the creation of new ones. This applies also to environmental


issues. We favor the exchange of information, of experience and of knowledge

between the various interested parties.

Thanks to all these synergies, we can contribute to valuable discussions and be

recognized as an active partner in helping authorities to formulate

comprehensive strategies in the field of the environment.

THE NESTLÉ POLICY ON THE ENVIRONMENT

Nestlé respects the environment and is committed to environmentally sound

business practices throughout the world, thus taking into account the need to

preserve natural resources and save energy.

This commitment is put into practice by considering local legal requirements as a

minimum standard. If these do not exist, our internal rules, adjusted to local

conditions, apply. Research and Development and new investments include an

evaluation to ensure environmentally appropriate products, packaging and

processes.

Management and personnel within the Nestlé organization worldwide are

encouraged to help resolve environmental problems within their own sphere of

influence.


NESTLE’S BRANDS

Quality and nutritional value are the essential ingredients in all of the nestle’s

brands. Millions of people prefer Nestlé products every day, happy with the

addition to their wellness that they bring. If you are looking for a specific brand

our product, just use the alphabetical index below to jump straight to a listing. Or

you can explore by category.


Baby Foods

The production of infant food goes right back to the origins of the Nestlé

Company. Henri Nestlé's 'Farine Lactée' was the first product to bear the Nestlé

name.

In 1867 a physician persuaded Henri Nestlé 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, Nestlé's 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 factors that made baby foods success in the early days of the Nestlé

company — quality and superior nutritional value — are still as valid today for the

wide range of infant formula, cereals and baby food made by Nestlé. 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 her child. Nestlé

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 infant food manufacturer, gained over more than 125 years, is

put at the disposal of health authorities, the medical profession and mothers and

children everywhere.


Chocolate & Confectionery

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. Nestle forayed into chocolates &

confectionery in 1990 and has cornered a fourth share of the chocolate market in

the country.. It has expanded its products range to all segments of the market

The Kitkat brand is the largest selling chocolate brand in the world. Other brands

include Milky Bar, Marbles, Crunch, Nestle Rich Dark, Bar-One, Munch etc. The

sugar confectionery portfolio consists of Polo, Soothers, Frootos and Milkybar

Eclairs. All sugar confectionery products are sold under the umbrella brand

Allen's. Nestle has also markets 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 confectionery

sales registered a strong 21.5% yoy growth in 2001 aided by good volume

growth in Munch, Kitkat and Classic sales. Nestle relaunched Bar-One during the

year.

From the beginning, turning raw, bitter cocoa beans into what one 17th century

writer called "the only true food of the gods" has been a fine art, a delicate

mixture of alchemy and science.


Ice Cream

There are many myths and stories as to the invention of ice cream: was it Marco

Polo who brought it back from China (along with pasta)? Probably not,

considering he most likely never visited China.

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 houses 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

have thought of and yet they're commercially available:

Sorbets - Smoked Salmon, Tomato, Cucumber

Ice Creams - Garlic, Avocado, Sweet corn.

The ice cream cone is the most environmentally friendly form of packaging. A

Syrian from Damascus, Ernest E Hamwi is credited with its invention. Apparently,

during the 1904 St Louis World's Fair, his waffle booth was next to an ice cream

vendor who ran short of dishes. Hamwi rolled a waffle to contain ice cream and

the cone was born.


Prepared Foods

Convenience foods — packaged soups, frozen meals, prepared sauces 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

inventive 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 bouillon cubes, sauces and

flavorings.

.Maggi merged with Nestlé in 1947. Buitoni, the authentic Italian brand, which

has been producing pasta and sauces in Italy since 1827, became part of the

Nestlé Group in 1988.


Beverages

Beverages like coffee, tea and health drinks contribute to about 30% of Nestle’s

turnover. Beverage sales registered a 15% yoy growth during 2001. While about

14% of sales come from domestic market, exports contribute to about 16% of

sales.

Nestle's Nescafe dominates the premium instant coffee segment. Nestle’s other

coffee brand Sunrise has also been relaunched under the Nescafe franchise 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.

Milo, a brown-malted beverage was launched in 1996. It has an estimated

volume share of about 3% in the malted food drink segment. Nestle has

launched non-carbonated cold beverages such as Nestea Iced Tea and Nescafe

Frappe during 2001.

Nestle is one of the largest coffee exporter in the country. Key export market is

Russia, besides Hungary, Poland and Taiwan. Nestle has received an award for

highest export of instant coffee and highest export of coffee to Russia and CIS

for FY00 and FY01. Turnover contribution from exports registered a 17.5%

volume growth in F12/01. Nescafe sales to Russia accounts for 80% (Rs2.5bn)

of Nestlé’s Rs3bn export turnover.


QUALITY

Everyday, millions of people all over the world show their confidence in us by

choosing Nestlé products. This confidence is based on our quality image and a

reputation for high standards that has been built up over many years.

Quality is the cornerstone of our success

Every product on the shelf, every service and every customer contact helps to

shape this image. A Nestlé brand name on a product is a promise to the

customer that it is safe to consume, that it complies with all regulations and that it

meets high standards of quality. Customers expect us to keep this promise every

time.

Under no circumstances will we compromise on the safety of a product and every

effort must be made to avoid hazards to health. Likewise, compliance with all

relevant laws and regulations is a must and is not negotiable. People, equipment

and instruments are made available to ensure safety and conformity of Nestlé

products at all times. The effort is worth it. Companies with huge quality

standards make fewer mistakes, waste less time and money and are more

productive. They also make higher profits. Quality is their most successful

product. It is the key to their success, today and tomorrow.

The customer comes first

Nestle want to win and keep customers: distributors, supermarkets, hotels,

shopkeepers and the final consumers. They have very different requirements.

Trade customers expect excellent service, correct information and timely

delivery. Consumers consider taste, appearance and price when they make their

choice. Its task is to understand what customers want and respond to their

expectations rapidly and effectively. We serve various groups of consumers and

there is demand for products at different levels of perceived quality and price. All

customers, however, expect value for their money – good quality at a reasonable

price.


When offering quality to customers we also mean environmental quality. Nestlé

shares society’s concern for the environment and is committed to

environmentally sound business practices throughout the world.

Customers are central to their business and they always respect their needs and

preferences.

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.


Quality is a competitive advantage

We live in a competitive world and must never forget that their customers have a

choice. If they are not satisfied with a Nestlé product, they will switch to another

brand. Their goal, therefore, is to provide superior value in every product

category and market sector in which we compete. The pursuit of highest quality

at any price is no guarantee for success, nor is a single-minded cost-cutting

approach. Lasting competitive advantage is gained from a balanced search for

optimal value to customers, by simultaneous improvement of quality and

reduction cost. Success can never be taken for granted. We must watch and

learn from our competitors. If they do something better, we must improve our

own performance. We can achieve competitive advantage through Quality.

Quality is a joint effort

Operating companies are fully responsible for maintaining agreed quality

standards. Not only Production units, but also Marketing, Purchasing, Distribution

and Sales have a vital role to play in providing quality to customers. This implies

a thorough knowledge of the products and services we offer.

Quality units at different levels of the organization provide specific support,

promote quality awareness, assume guardianship and audit the system. Quality

departments monitor operations against agreed standards and must intervene in

case of non-conformity. Quality policy and principles, the mandatory standards

and the recommended tools for implementation are laid down in the Nestlé

Quality System which is applicable throughout the group. Further directions are

given through instructions, norms and guidelines, often specific to a product.

Our business products, such as raw material producers, packaging suppliers,

contract manufacturers and distributors are expected to share our concern for

Quality. They too must set up an adequate quality system, so as to meet our

requirements consistently. The quality efforts must be shared by every function

and department in the company as well as our business partners.


Quality is made by people

Adequate equipment, procedures and systems are needed to make Quality; so

are involved and dedicated people. Each and every Nestlé employee must do his

best to provide quality products and services. Training and teamwork are crucial

to the successful implementation of high quality standards. Continuous training

ensures that everyone understands his tasks and has the necessary skills to

carry them out. Teamwork allows us to achieve results that are greater than the

sum of individual efforts. We motivate employees by demonstrating management

commitment to Quality, by setting challenging goals and by giving them

responsibility and recognition. It is through employee involvement that goals and

targets can be achieved in the shortest time. Quality must be a way of life for

everyone in the company.

Quality is action

Quality is the result of deliberate action. It is the responsibility of senior managers

to communicate the quality objectives and to provide the resources necessary for

their implementation. It is then up to all employees to make Quality happen

throughout the company. Progress is followed by listening to our customers and

by measuring our performance. Shortcomings and mistakes must be analyzed

and corrected. Problems must be anticipated and prevented before they occur.

We also must identify and take advantage of opportunities.To stand still is to fall

behind. So we must strive for continuous improvement in every area. It is through

many small improvements as well as through major breakthroughs that we will

achieve excellence. At Nestlé, Quality is our first priority. Let us practice it every

day.


Consumer Services

At Nestlé, we are committed to offering consumers high-quality food products

that are safe, tasty and affordable. The Nestlé 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 consumers'

questions and concerns. When Henri Nestlé 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 Nestlé" expresses the same commitment.

This is why we have a worldwide Nestlé Consumer Services network devoted to

caring for our consumers. Our people have expertise in a wide range of areas

such as nutrition, food science, food safety and culinary expertise. They provide

the prompt, efficient and high quality service that consumers expect from Nestlé.

In addition, we teach them talk with consumers and above all, to listen. Listening

helps us to understand what people want. Nestlé uses the insights gained from

relationships with consumers to drive product development.

At Nestlé, 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.


FUTURE PROSPECTS

Nestle is focused on product expansion and improvement of distribution

efficiency. The Dairy business is being expanded and is expected to drive growth

in the long run, although short-term profitability may be impacted in the

investment stage. The company’s entry into the mineral water segment is a

concern, as the segment is already overcrowded and the company faces stiff

competition especially from the Cola manufacturers. Acquisition of an established

brand could catapult Nestlé’s position in the segment. In categories like

beverages, culinary products and chocolate confectionery, the company is

looking at driving growth through launch of smaller SKU’s, thus enabling

affordability to a wide section of the population.
