COMPANY ANALYSIS ON NESTLE-INDIA LIMITED
• • • • • •
Over view of the food industry Company overview Vision, mission and objectives History and growth of the company Milestones Products Research and development
Human resource management in NESTLE-INDIA LIMITED
Marketing activities and management in NESTLE-INDIA LIMITED
• • Financial data analysis SWOT analysis Reference
OVERVIEW OF FOOD PROCESSING INDUSTRY India is one of the key food producers in the world, with the second largest arable land area. It is the largest producer of milk, pulses, sugarcane and tea in the world and the second largest producer of wheat, rice, fruits and vegetables. India’s Food Processing industry is one of the largest industries in the country - it is ranked fifth in terms of production, consumption, export and expected growth. The Indian food industry is estimated to be worth over US$ 200 billion and is expected to grow to US$ 310 billion by 2015. India is one of the world’s major food producers but accounts for only 1.7 per cent (valued at US$ 7.5 billion) of world trade in this sector – this share is slated to increase to 3 per cent (US$ 20 billion) by 2015. Food processing is a large sector that covers activities such as agriculture, horticulture, plantation, animal husbandry and fisheries. It also includes other industries that use agriculture inputs for manufacturing of edible products. The Ministry of Food Processing, Government of India has defined the following segments within the Food Processing industry: • Dairy, fruits & vegetable processing • Grain processing • Meat & poultry processing • Fisheries • Consumer foods including packaged foods, beverages
And packaged drinking water. While the industry is large in terms of size, it is still at a nascent stage in terms of development. Out of the country’s total agriculture and food produce, only 2 per cent is processed. The highest share of processed food is in the Dairy sector, where 37 per cent of the total produce is processed, of which 15 per cent is processed by the organized sector.
Primary food processing (packaged fruit and vegetables, milk, milled flour and rice, tea, spices, etc.) constitutes around 60 per cent of processed foods. It has a highly fragmented structure. Several processing units are in unorganized sector In comparison, with the organized sector .
NESTLE Group Background
Nestle SA, Switzerland is amongst the world’s largest food and beverages companies. The company is progressively evolving from a respected, trustworthy food and beverage company to a respected, trustworthy food, beverage, nutrition, health and wellness company. This objective is encapsulated in “Good Food, Good Life”. The principle activities of the group encompass: beverages, milk products, nutrition and ice cream; prepared dishes and cooking aids; chocolate, confectionery and biscuits; water; and pet care. It has 511 factories in 86 countries around the world.
Background - Nestle India Nestle India is one of the leading companies in the FMCG space in India. The company is acknowledged amongst India’s ‘Most Respected Companies’. Nestle products are sold throughout India and are also exported to Russia, Hungary, Japan, USA and several other countries. These include certain international products like Nescafe and Lactogen, For three years in succession [from 1999-2000 to 2001-2002], Nestle India was recognised with the top Exporter Award for export of Instant Coffee, and for export of all coffees to Russia and CIS Countries. Nestlé set up its operations in India, as a trading company in 1959 and began manufacturing at the Moga factory in 1962. The production started with the manufacture of Milkmaid and other products were gradually brought into the fold. Nestlé India Limited was formally incorporated in 1978 prior to which the manufacturing license was issued in the name of the Food Specialties Limited. The corporate office is located at Gurgaon and the registered office at M-5A, Cannaught Circus, New Delhi.
At present Nestlé has 7 manufacturing units countrywide which are successfully engaged in meeting the domestic as well as the exports demand. In addition there are several co packing units. Manufacturing units are located at,
Choladi (Tamilnadu) -- Instant Tea Export 1969 Nanjangud (Karnataka) -- Coffee & Milo 1989 Samalkha (Haryana) -- Cereals, Milkmaid Deserts 1992 Ponda (Goa) -- Chocolates & Confectionery 1995 Bicholim (Goa) -- Noodles and Cold Sauces 1997 Panth nagar (Uttranchal) -– Noodles 2006 Moga (panjab) -- Milkmaid and other products 1962.
VISION: “Respected, Trustworthy food, Nutrition, Health and Wellness Company” To rapidly build Nestle India as the respected and trustworthy leading food, nutrition, health and wellness company ensuring long term sustainable and profitable growth. MISSION: “ Nestle is dedicated to providing the best foods to people throughout the day, throughout their lives, throughout the world. With our unique experience of anticipating consumer’s needs and creating solutions, Nestle contributes to your well-being and enhances your quality of life”.
OBJECTIVES: To make company’s customers winners by constantly exceeding their expectations Nestle India’s main objective is to manufacture and market the products in such a way as to create value that can be sustained over the long term for shareholders, employees, consumers, and business partners.
Be a good corporate citizen and contribute positively to the society in which it operates.
Conservation of natural resources and minimization of waste. HISTORY AND GROWTH
In 1959, on 28th March, the Company was incorporated at New Delhi. The company was promoted by Nestle Alimentana S.A. through a wholly Owned subsidiary Nestle Holdings Ltd. In 1989 The name of the company was changed from `Food Specialties Ltd.' to `Nestle India Ltd.' on 24th March. 1990 - During the year company entered into chocolate business by introducing Nestle premium chocolates. 1993 - Samalkha factory was commissioned during the year and underwent expansion for cereal based products. - 196,07,054 shares 47,51,625 No. of Equity shares of Rs 10 each allotted to M/s. Nestle SA Switzerland to raise the stake to 51%. 128,55,429 bonus shares issued in prop. 1:4. 1994 -During the year company launched a number of new products viz., Cerelac Soya, Milk maid, Dessert Mixes, Maggo Tonit's Special Cooking Bases, Maggi 1-2-3 noodles,
Contodina snack dressing and the chocolate items, milky base marbles and bar one peanut. And also launched Bonus and Polo. 1995 - During the year company commenced construction of a new factory at Bicholim, Goa. At the same year, instant noodles factory was Installed and commissioned at Samalkha factory. - During the year company launched Kit Kat manufactures at the new factory at Ponda, Goa. -The Chennai-based Indian Food Fermentations tied up with Nestle India Ltd., to market its dosa and vada batter in consumer pack, in the country. The company has signed an agreement to this effect recently. Nestle would sell the ready-to-use dosa, vada, sambhar and unique masala dosa batter in consumer packs, under its own brand name in the country.
1996 -During the year company launched MILO-Chocolate energy food drink in South India and a range of culinary products like, Dosa and Sambar mixes, pickles and new varieties of soups under the brand Maggi. 1997 - NIL stood as one of the top players in the processed food & beverages industry and the largest producer of instant coffee with a 49 percent market share. 2000 - Nestle is set to enter the domestic bottled water business and will launch the product under the brand name `Pure Life'. -The Company has launched its ultra heat treated liquid milk, `Nestle Pure Milk', in Bangalore, Chennai, Hyderabad and Kochi.
- Nestle India Ltd. to launch Nescafe Gold and Nescafe Gold Decaffeinated. - Nestle India has launched a range of gift packs under the Fox confectionery brand name for the festival seasons.
2005 -Nestle India introduced new variants of Maggi into the market.
MILESTONES OF THE COMPANY: Nestle India got Tetra Pak's annual dairy and beverage industry award in 2004. NIL is one of the top players in the processed food and beverages segment and the largest producer of instant coffee with a 49% market share.
MANAGEMENT OF NESTLE-INDIA LIMITED: Mr. Martial G. Rolland Mr. Shobinder Duggal Mr. Michael W.O. Garrett Mr. Ravinder Narain Mr. Pradip Baijal Mr. Rajendra S. Pawar Mr. Richard Sykes Chairman & Managing Director Director - Finance & Control Non Executive Director Non Executive Director Non Executive Director Non Executive Director Alternate Director to Mr. Michael
PRODUCTS RANGE OF NESTLE-INDIA LIMITED
Nestle operates in four key segments viz., Milk Products & Infant Nutrition, Prepared Dishes & Cooking Aids, Beverages and Chocolate & Confectionery. The company enjoys leadership position in its core categories like Baby Foods, Instant Noodles and Instant Coffee. Nestle enjoys distinct advantage over its competitors in the F&B space on account of its strong focus on developing products around the Nutrition, Health and Wellness platform and a culture of renovation and innovation in its offerings backed by strong parent support (largest Food company in the world).
Milk Products & Infant Nutrition: Everyday, Milkmaid, Nestle dahi, Nesvita (Probiotic dahi)
Prepared Dishes & Cooking Aids: Maggi
Beverages : Nescafe, Sunrise, Nestea, Milo
Chocolate & Confectionery: Kit Kat, Milkybar, Eclairs, Polo
To target the massive potential offered by the tea-whitening segment, NESTLE EVERYDAY tea whitener was launched in 1992. Supported by aggressive marketing using multi-media activities, focused distribution with sampling drives and excellent consumer acceptance, the brand has shown strong growth and holds good promise for the future.
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CHOCLATE AND CONFECTIONARY:
Kit Kat, Milkybar, Eclairs, Polo are the strong
brands available in the market
To provide convenience to consumers, NESTLE MILO was launched in its new 130gm. With an attractive airtight jar in February2000. This was done with a view to bring our packaging in line with the industry practice of making milk fortifiers and modifiers available in jars and tins and to reverse the trend of consumer preference for imported MILO or similar products over local MILO. Consumer response to the new initiative has been very positive. NESCAFE CLASSIC
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NESCAFE, Nestlé’s international flagship brand, is locally repacked and marketed in 2gm. and25gm. Sachet, 75gm. bottles and 500gm. Soft packs. The brand enjoys a special position in the country's coffee consuming segment. LACTOGEN LACTOGEN 1 and LACTOGEN 2 are infant and follow-up formulae launched in 1991 and are available in two sizes. The brands provide both affordability and quality. CERELAC Launched in 1989, CERELAC is the dominant player in the growing infant cereal market. Available in 5 flavors, the brand provides balanced nutrition to infants from 4. months onwards. MAGGI 2-MINUTE NOODLES:
Fast to cook, good to eat - MAGGI 2-MINUTE NOODLES were launched with local Production in 1992 and in doing so Nestle pioneered the category of instant noodles in India. MAGGI 2-MINUTE NOODLES have special appeal for children, are fun to eat and offer a range of interesting flavors, namely: Masala, Chilli and Chatkhara.Affordably priced and backed by focused marketing activities, MAGGI NOODLES have shown good progress in 2000. 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
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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 value added 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. HANDLING OF RAWMATEREALS: The Nestlé Group is in principle not directly involved in primary production of raw materials and other food ingredients. In general it uses locally available raw materials and purchases 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, purchasing specifications comply not only with legal requirements but go further to ensure highest safety and wholesomeness of our products. NIL gives 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, it encourages local production and provides assistance for cultivation and dairy farm management.
CORECOMPETENCIES OF THE COMPANY:
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The culture of innovation and renovation, continuous improvement and the thrust on value-for-money and affordability have helped the company to focus on adding value for the consumer. Its Competitive advantages are,
A pool of qualified suppliers that are directly aligned with under represented and emerging communities and can promote positive relationships with customers, Better quality goods and services at a lower price as a result of increased competition and an extended supply base, Access to new capabilities and innovations, Competence in research and development: The company has access to Nestle group’s technology, brands, expertise and the extensive centralized research and development facilities.
FUTURE PLANS: The company continuously focuses its efforts to better understand the changing lifestyles of modern India and anticipate consumer needs in order to provide convenience, taste, nutrition and wellness through its product offerings. Nestle aims to create value for consumers that can be sustained over the long term by offering a wide variety of high quality, safe food products at affordable prices.
Nestle is focused on product expansion and improvement of distribution efficiency.
KEY COMPETETORS OF NESTLE-INDIA: The growth potential of the food processing industry would attract domestic as well as multinational players in the market. The present market is seeing players like Heinz,
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Mars, Conagra, Hershey, Pepsi, ITC, Dabur, Britannia, Cadbury, HLL, Pillsbury, Nestle and Amul, Smithkline Beecham, etc and a host of local manufacturers offering competition with their established brands on national level. Key Competitors for Nestle- India
Category Milk Products Chocolate Baby Food Prepared Dishes
Key Competitors of Nestle-India Competitors Amul, Britannia Cadbury, Hershey, Parle, Wrigley, Perfetti Wockhardt HUL, ITC, Indo Nissin
Baby food and Instant coffee are categories where brand loyalties are very strong and Nestle is the market leader. HUL is a significant competitor to Nestle in instant coffee. While Wockhardt 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. HUL 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’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.
Nestlé India believes that people are most valuable assets in enriching, the company provides an extraordinary mix of cultures and nationalities, we can have a constant access to people from all over the world. Nestlé India believes in giving as much responsibility as possible to the individual. This inherent trust means employee can quickly establish his/her own credibility, prove their professionalism and make a valuable contribution to the company. The working conditions at Nestlé India match or are above
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those in comparable companies, and the company encourages a healthy work / life balance for all employees.
Nestle-India as a manufacturing and marketing company, what counts is professional skills, personality and strength of character, and to contribute actively to the long term sustainable growth of the business. With career options spanning Sales, Marketing, Supply Chain, Human Resources, Finance & Control, Technical and various other functions, Nestlé India offers a wide range of opportunities for people. Technical Management Trainees are selected from reputed engineering institutes, specializing in the streams of Chemical, Electronics, and Automation & Industrial Engineering. They are required to undergo an intensive on-thejob training programme in Factories and Head Office. To create a pool of high caliber managerial talent, Nestlé India hires fresh management graduates from premier management institutes across the country. The Management Trainees are selected mainly in the areas of Sales & marketing, Human Resources and Supply Chain. All the Technical Management Trainees are selected, required to undergo an intensive on-the-job training programme, they undergo a preplanned training programme in Factories and Head Office. Nestlé India offers a wide range of opportunities for people. It believes in offering the best training and development that will enable people to grow continuously and maximize their potent. Nestle-India believes in empowering people. So employees are given early responsibilities, each person is encouraged to take personal responsibility, and to contribute actively to the long term sustainable growth of the business. Almost from their first day on the job, young managers have the opportunity to acquire and develop skills in leadership, people management, change management, and decision making. Nestlé India recognizes that people make the difference. The Company encourages and supports its people to inculcate the clearly laid down Nestlé India Leadership Principles to enable them to take up responsibilities and challenges early in their career. Nestlé does give their employees a chance to discuss their career development for future accomplishments. They send their efficient workers and
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employees abroad for the improvement in their career. They also conduct workshops and seminars for this purpose. Nestle has established a separate compensation department for its employees. They offer incentive pay and special bonuses to employees; they also provide disability benefits to their employees. The success of an individual is very much dependent on his ability, willingness to learn and align his objectives with that of the organization. In the course of career employees are encouraged constantly to learn more. Nestlé India will push every individual to broaden his/her horizon, both nationally & internationally. Everyone has an equal chance to move on to higher responsibilities. It is up to the individual to make the most of those opportunities.
Nestlé India is a Vibrant Company that provides consumers in India with products of global standards and is committed to long-term sustainable growth and stakeholder satisfaction. PRODUCT DIFFERENTIATION STRATEGY: Nestle is using the product differentiation strategy by providing the superior quality products. Their main focus is to keep the customers loyal. They bought shelve space in
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different departmental stores to attract the customers. They tried to reach each group of people in which they have succeeded. MARKETING MIX PRODUCT: NIL is well known for its rendered services in food sector. Nestlé has recognized the special nutritional requirements which start from infants and covers the range to all age groups. They add specific nutrients to milk and encourage children to consume nutritious Products with different flavors, colors and shapes. For small children, and families, Nestlé offers smaller sizes and portion able packs. Nestle milk and dairy products are recognized throughout the world. PRICING Nestle has its own set of techniques for setting the prices of the product. It does not primarily focus on the competitor’s pricing strategies. It emphasizes on the market demand of the product. The prices of the products are also subjected to the type of consumer product. If the product is a daily use then it can have a minimum price to attract the customer towards your product. Thus the company cannot influence much on the prices. PLACE Nestle’s products are available at every corner of the country regardless of rural or urban areas. PROMOTION The following are some of the promotional strategies used by Nestle for market expansion,
New consumption opportunities for chocolates and confectionery were identified and developed in areas like railway platforms, college canteens and major events.
Nestle set up ‘Café Nescafe’ and ‘Coffee Corners’across metros and mini-metros.
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It also uses other below line activities to promote its product like by using the Following techniques: • • • Free sampling Door to selling Prizes
DISTRIBUTION: The distribution comprises of six branches located in Calcutta, Delhi, Mumbai, Chennai, Bangalore and Chandigarh. The distribution network functions efficiently with the transfer of goods from the factories to the Mother Godowns, which in turn are transferred to the clearing and the sales agents. The C&S agents sell it to the cash distribution that makes the secondary sale in the market. Distribution Situation: Company is using 2 channels for distribution, • • Retail outlets (indirect channel) Sales promotion officers
FINANCIAL PERFORMANCE AND DATA ANALYSIS OF NESTLEINDIA: Financial statements:
Profit & Loss account of Nestle India
------------------- in Rs. Cr. ------------------'04 Dec '05 12 mths Dec '06 12 mths Dec '07 12 mths Dec '08 12 mths
12 mths Income
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Sales Turnover Excise Duty
Other Income Stock Adjustments Total Income Expenditure
2,373.17 143.75 2,229.42 8.21 6.55 2,244.18 1,047.99 85.07 164.25 41.08 423.06 42.76 0.00 1,804.21 Dec '04 12 mths
2,643.96 168.87 2,475.09 23.67 16.73 2,515.49
2,944.20 125.04 2,819.16 15.33 13.42 2,847.91
3,647.49 146.53 3,500.96 21.24 71.01 3,593.21 1,763.54 123.94 269.44 62.14 496.22 172.54 0.00 2,887.82 Dec '07 12 mths 684.15 705.39 0.85 704.54 74.74 0.00 629.80 0.00 629.80 214.80 413.81 1,124.29 0.00 318.17 52.21 964.16 42.92 330.00
4,472.04 143.39 4,328.65 29.88 31.11 4,389.64 2,153.85 159.76 314.58 73.46 736.73 81.40 0.00 3,519.78 Dec '08 12 mths 839.98 869.86 1.64 868.22 92.36 0.00 775.86 0.00 775.86 238.74 534.08 1,365.92 0.00 409.77 69.64 964.16 55.39 425.00
Power & Fuel Cost
Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses
1,135.80 1,348.21 103.91 115.56 183.29 216.16 49.06 52.65 460.53 480.14 56.78 87.55 0.00 0.00 1,989.37 2,300.27 Dec '05 Dec '06 12 mths 502.45 526.12 0.21 525.91 56.84 0.00 469.07 0.00 469.07 159.49 309.57 853.58 0.00 241.04 33.81 964.16 32.11 250.00 12 mths 532.31 547.64 0.44 547.20 66.28 0.00 480.92 0.00 480.92 165.43 315.10 952.06 0.00 245.86 34.48 964.16 32.68 255.00
Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%)
431.76 439.97 0.78 439.19 49.14 0.00 390.05 0.00 390.05 134.58 251.92 756.21 0.00 236.22 31.29 964.16 26.13 245.00
Balance Sheet of Nestle ------------------- in Rs. Cr. ------------------India
Dec '05 12 mths
Dec '07 Dec '08
12 mths 12 mths 12 mths
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Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans
Total Debt Total Liabilities
96.42 96.42 0.00 0.00 222.99 0.00 319.41 7.91 0.00 7.91 327.32 Dec '04 12 mths
96.42 96.42 0.00 0.00 257.72 0.00 354.14 14.30 0.00 14.30 368.44 Dec '05 12 mths 942.40 468.63 473.77 22.83 104.43 253.10 30.52 3.64 287.26 194.33 33.00 514.59 0.00 381.68 365.50 747.18 -232.59 0.00 368.44 50.04 36.73
96.42 96.42 0.00 0.00 292.47 0.00 388.89 16.27 0.00 16.27 405.16 Dec '06
96.42 96.42 0.00 0.00 322.01 0.00 418.43 2.87 0.00 2.87 421.30 Dec '07
96.42 96.42 0.00 0.00 376.93 0.00 473.35 0.82 0.00 0.82 474.17 Dec '08
12 mths 12 mths 12 mths 1,058.27 1,179.77 516.48 541.79 38.24 77.77 276.22 55.76 6.53 338.51 175.12 69.82 583.45 0.00 440.82 395.28 -252.65 0.00 405.15 35.93 40.33 577.96 601.81 73.70 94.40 401.22 53.49 15.75 470.46 186.23 22.01 678.70 0.00 529.51 497.79 -348.60 0.00 421.31 63.27 43.40 1,404.8 5 651.85 753.00 109.17 34.90 434.91 45.59 12.66 493.16 162.67 181.03 836.86 0.00 582.44 677.32 1,259.7 6 -422.90 0.00 474.17 84.90 49.09
Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 838.16 440.94 397.22 34.09 154.86 216.67 26.17 9.45 252.29 168.91 0.00 421.20 0.00 331.18 348.87 680.05 -258.85 0.00 327.32 10.39 33.13
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The analysis of the financial performance for the year ended March 31, 2008 in comparison to the previous year is as under : INCOME Total Income for the year at Rs.4,389.64 crores increased by 28% over the total income of Rs.3593.29 crores in the previous year, the Net Income from sales, work bills, service and commission increased by 24% from Rs.4328.65 crores in the previous year to Rs3593.21 crores in 2007-08. NETSALES Total nets ales for the year at Rs 4328.65 crores increased by 28.59% over the total net sales of Rs 3500.96 crores in the previous year.
SAL ES 40 50 40 00 30 50 30 00 20 50 20 00 10 50 10 00 50 0 0 1 2 3 4 SALES
OPERATING AND GENERAL EXPENSES: Operating and General expenses amounted to Rs.153.01 crores, increasing by over the previous year. As a percentage of Total Income, the Operating and General expenses for the year were increased 6% as compared to 5.2% in the previous year.
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NET PROFIT Net profit for the year was Rs.534.08 crores as compared to Rs.413.81 crores in the previous year, representing an increase of 169.48%. Excluding an amount of Rs.27.32 crores being the profit on the sale of shares (net of tax thereon), the Net Profit was Rs.413.81 crores, an increase of 131.32% over the previous year. Profit before Tax for the year stood at Rs.775.86 crores, a rise of 161.31% over the previous year.
1 .4 2
NET PROFIT RATIO: Indicates the overall profitability of the company. Net profit Net profit ratio = ------------- X 100 Sales
1 .2 2
YEAR/PARTICULARS NET PROFIT SALES RATIO
2008 534.08 4,328.65 12.33
1 .8 1 1 .6 1
2007 413.81 3500.96 11.81
2006 315.10 2819.16 11.17
1 .4 1
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1 .2 1
This ratio indicates the overall profitability of the company; Nestle-India is maintaining an increasing profitability ratio from year to year. As sales are increasing , net profit of the company is also increasing on path, hence it shows the growth of the company is satisfactory.
1 .4 2 1 .2 2
OPERATING PROFIT RATIO: Operating profit Operating profit ratio = ---------------------- X 100 Sales Operating profit = gross profit – (employee remuneration and benefit + operating and general expenses + depreciation)
1 .8 1 1 .6 1 1 .4 1 1 .2 1
YEAR/PARTICULARS OOPERATING PROFIT SALES RATIO
2008 839.98 4,328.65 19.40
2007 684.15 3500.96 19.54
2006 532.31 2819.16 18.84
1 .6 9
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1 .8 0
Operating profit ratio has a stable growth from past three years. This increase in operating profit is attributed to increase in sales. The ratio indicated that despite increase in sales value the operating expenses like office and selling have been contained effect on operating profit. CURRENT RATIO: This ratio indicates the ability to repay short term commitments promptly. Current asset Current ratio = --------------------Current liability YEAR/PARTICULARS CUREENT ASSETS CURRENT LIABILITIES RATIO 2008 836.86 1259.76 .66 2007 678.70 1027.30 .66 2006 583.45 836.10 .69
0 9 .6 5
Ideal current ratio is 2:1, the ratio of the company for the previous 2 years and current year is also less than ideal, but when we see that, the reason for increase in current liabilities are because of increased provisions. Total current liabilities without provisions are less than the total current assets. So, the company has sufficient liquid assets, there is no threat of temporary insolvency. However in this rapidly changing world of finance, with E-Banking system, they are providing protection against the risk of technical solvency without sacrificing the opportunities of earnings of substantial returns from multiple investment avenues.
0 9 .6
0 8 .6 5
RETURN ON NETWORTH: Net profit Return on equity = ---------------------*100 Shareholders equity
0 8 .6
0 7 .6 5
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The return on net worth captures the return being earned by investors who have borne risk of business. It indicates the return which the shareholders are earning on their resources invested in the business. Net worth = Equity share capital + Preferential share capital+ Reserves and surplus Net profit = Earnings after tax YEAR/PARTICULARS Net profit Net worth RATIO 2008 534.08 473.35 112.82 2007 413.81 418.43 98.8 2006 315.10 388.89 81.02
The company has an increasing return on net worth ratio, there is an incline in RONW during three years, this indicates that company is making best use of assets(NW) to increase the profits this ratio indicates value addition ,because market price of share is dependent on earnings per share and price earning principle.
ASSETS TURNOVER RATIO:
Cost of goods sold Asset turnover ratio = ----------------------Total assets
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YEAR/PARTICULARS CGS TOTAL ASSETS RATIO
2008 3606.86 836.86 4.30
2007 2944.14 678.70 3.33
2006 2397.39 583.45 4.10
Cost of goods sold = sales-gross profit (or) opening stock+ purchases + manufacturing – closing stock.
Assets turnover ratio helps in identifying, how the available assets are managed to yield better results. There is a little bit increase in this ratio from past three years, this indicates that the potential of the total assets are not fully exploited to improve this ratio, subject to other constraints if any.
RETURN ON INVESTMENT: This ratio reveals the earning capacity of the firm’s capital employed in the business. YEAR/PARTICULARS NP+INTREST CAPITAL EMPLOYED RATIO
2008 535.72 474.17 112.98
2007 414.66 418.43 99.09
2006 315.54 388.89 81.13
CAPITAI EMPLOYED = Equity share capital + pref.Share capital + Reserves and surplus + debentures and long term loans – accumulated losses – non trade investments.
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R I O
10 2 10 0 8 0 6 0 4 0 2 0 0 1 2 3 4 R T A IO
Higher and increasing ROCE indicates the management efficiency of the firm , this is because of the strategies developed by the company to generate return for its shareholders. strategies developed to increase ROI might be, Increasing volume of sales, (or) Reducing the cost of production. DEBTORS TURNOVER RATIO; Average a/c receivable Debtors turnover ratio = ----------------------------------- X 365 days Net sales Sundry debtor opening + sundry debtor closing Average a/c receivable = -------------------------------------------------2 YEAR/PARTICULARS RATIO 2008 77.05 days 2007 87.32 days 2006 65.35 days
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Ther is an increase in debtors turnover ratio in 2008 when compared to 2006, it might be that the company has extended their credit period to customers /dealers to increase sales, the percentage increase in sales in 2008 supports this view. INVENTORY TURN OVER RATIO: Average inventory Inventory turnover ratio = -------------------------- X 12 months Cost of goods sold Opening inventory + closing inventory Average inventory = ---------------------------------------------------2 YEAR/PARTICULARS CGS AVERAGE STOCK RATIO 2008 3606.86 418.06 10.34 2007 2944.14 338.72 8.69 2006 2397.39 264.66 9.05
ra tio 1 .5 0 1 0 9 .5 9 8 .5 8 7 .5 1 2 3 4 ra tio
The stock turnover ratio indicates, the extent of stock requirements to be held in order to achieve a desired level of sales. In order to meetthe growing cost of goods sold the management should keep sufficient stock to avoid a stock out situation. The higher inventory turnover ratio indicates the good management policy in holding their requirements of stock , organizations always strive to have higher turnover ratio ,as it gives more profits because inventory holding costs are reduced and profits can be increased. Ideal ratio for food industry is 8, the company having more than ideal ratio indicates that the stocks are fast moving and get converted into sales and it is increasing year by year. SWOT ANALYSIS OF NESTLE-INDIA LIMITED
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High quality and safe food products at affordable prices, endorsed by the Nestle Seal of Guarantee. Access to Nestle's Proprietary technology brands and expertise Strong & well differentiated brands with leading market shares Ongoing product innovation and renovation to convert consumer insights Distribution structure that allows wide reach and coverage in the target markets Well diversified product portfolio. Efficient supply chain. Capable and committed human resources.
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Ability to pass through cost increases in price points SKU
OPPORTUNITIES: • • Potential for growth through increased penetration. Growing trend for “Out of Home” consumption. Potential for expansion in the smaller towns and other geographies Development of modern retail formats
Competitive environment with diverse players
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Rising prices of commodities, and raw materials
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