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NESTLE INDIA LTD.

Project Report On

Submittd by : PRASHEET SINGH TOMAR

PI ONEER INSTITUTE OF PROFESSNAL STUDIES MADHYA PRADESH

NESTLE INDIA LTD.

NESTLE INDIA LTD.

NESTLE INDIA LTD.

TABLE OF CONTENTS

PSIS

SYNO 1

ODUCTION

INTR 5

HODOLOGY

MET 103

NGS

FINDI 106

ATION

LIMIT 143

CLUSION

CON 153

NESTLE INDIA LTD.

NDICS

APPE 173

OGRAPHY

BIBLI 177

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ACKNOWLEDGEMENT
This project is dedicated to the institute of

marketing and Technolgoy the outset I express my deep sense of gratitude to mr. , for providing me

an opportunity to understand and thus gave chance to design the project. I would like to thank Mr. Ravinder choudhary , assistant director and all faculty members for guiding me while project . making this

I also thank all those who helped me and all respondents (retailers) for giving their precious time and support. Manik Duggal 01-AII-227

NESTLE INDIA LTD.

UNDERTAKING
This is certify that this project report MANIK Institute DUGGAL of (01-AII-227), and a made by student of is

Marketing

Technology,

original and authentic and has been made as part of MBA curriculum. There is no

manipulation of the data. All the facts and figures are true. MANIK DUGGAL (01-AII-277)

NESTLE INDIA LTD.

ATTESTATION

I certify that Manik Duggal S/o Mr. Vijay Kumar Duggal, a bonafide student of Institute of

Marketing and Technology (01-AII-277) has done this project specializing in the fields marketing and advertising, on the company "NESTLE INDIA LTD.." On his own. The facts and figures

provided in this report are original and true.

NESTLE INDIA LTD.

SYNOPSIS

T
India

his report presents on in-depth analysis of marketing and Advertising and public Relations

of Nestle India Ltd.-one of the well known and esteemed organisations in the FMCG Sector in the country. Nestle

Ltd. is a company which is multinational company and has its operations in many countries in the world. Carlos Donati is the CEO & Managing Director of the N.I.L who is from suitzerland. It is one of the big Companies in the FMCG Sector. The Nestle India Ltd. deals in chocolates, Milk products, Maggi, Soup, Sauce, Cofee, Tea, Milkmaid and Mineral water etc. the Nestle I. Ltd. is working in India for the last 40 years. Nestle I. Ltd has 51% holding in Nestle. The Company has 6 factories and 6 sales Branches. The company is emphasizing on building new products to its customers & satisfying them.

NESTLE INDIA LTD.

The reports begin with Introduction, which deals with the objective of the product, Introduction to marketing and Advertising and Public Relations. The Introduction to marketing comprises of the

definition of marketing, Marketing before and now, the marketing system, the emergence of marketing as a discipline, marketing management and marketing

Philosphies. It points out that the rules of the Past are no longer applicable in marketing through the strategic Paradigm of marketing and the Views of Philip Kotler. The Introduction to Advertising and PR comprises of the definition of advertising, the Need of Advertising, its Benefits, its role, its limitation, the future of advertising in India. It also deals with the definition of Public Relations, the Need for PK, its limits, its scope & its future in India. The company profile in which Nestle India Limited operates also form Part of the Introduction.

NESTLE INDIA LTD.

This section of the Report, provides an insight into the Nestle India Limited, its statistical profile, its salient features, its products, Target Customer and its market size and growth. This Sector of the report also discusses also deals with the competitors of the N.T.L in the FMCG sector in India. This is followed by the History of N.T.L., Board of Directors, its Subdivision, and the network, its foreign activities

collabrations,

social

welfare

undertaken by it. This is followed by the profile of the Carlos Donati, its areas of operations, finanancial performance and future plans. The Introduction is followed by a detailed description of the methodology used to conduct the research and getting the information required for the project in which the primary and secondary of data have been specified.

NESTLE INDIA LTD.

The methodology is followed by findings which entails an in depth analysis of marketing and Advertising and public Relations of N.I.L. This section also discusses the 4ps of marketing, Marketing Strategy of N.I.L., Market Segmentation. This section also includes the Advertising strategy of N.I.L., and different advertisements that has helped company in its growth. The is followed by the limitations, condusions and Recommendations respectively. Bibliography and Appendics form the last two section of the report.

NESTLE INDIA LTD.

Nestle India Ltd., is a part of the Nestle SA group, which is one of the largest manufacturing

companies in the world. The company (with its headquarters in Vevey, Switzerland) was founded by Henri Nestle in 1867. Nestle has two major

divisions- Le Societe des Produits which looks after the production and marketing and Nesstec Ltd. which provides the technical assistance to the group companies. Since its inception in 1867, the company has diversified it product range from the infant weaning formula (which was its first product) to beverages, confectionery, ice creams and pet foods among others. In a span of 130 years the company has ranked 26 th among the world's largest corporations and boasts of a turnover of $48932.5 million and an employee strength of 221,144 people spread over 75 countries worldwide (Annexure A).

NESTLE INDIA LTD.

Nestle has long been viewed as one of the most multinational of the multinationals. This is because today only 2% of its turnover comes from

Switzerland. Out of the remaining 98%, Europe contributes 43.5%, North and South America

contribute 36.5% and 18% is contributed by Africa and Asia Pacific Regions.

NESTLE INDIA LTD.

OVERVIEW
Although Nestle has been associated with India since the beginning of the century through the importing and trading of infant food and condensed milk, manufacturing in India only began with the setting up of the factory in Moga in 1962. The first product to be manufactured was Milkmaid. In the last 35 years the company has shown rapid

progress and has increased its product range to 80 products as of October 1997. Nestle India Ltd. now rank 22 nd amongst India's most valuable companies (Annexure B). Its gross revenue has increased from Rs. 1001.1 crores to Rs. 1213.8 crores in 1996. This remarkable growth has been achieved through:

Rapidly creating greater manufacturing capacity, both at factories as well as with copackers.

NESTLE INDIA LTD.

Taking

measures

to

ensure

availability

and

improved quality of key raw materials-fresh milk in particular.

Strengthening

of

the

sales

and

distribution

network (particularly in smaller towns).

Ambitious and cohesive manpower training and development programs for the personnel of the company across all disciplines.

The company's exports also resulted in a very successful year in this area as exports grew by 27% to Rs. 250.8 crores in 1996. The main contributors to this increase were the export of tea and coffee to USA, Japan, Russia, Hungary and Taiwan.

Nestle India Ltd. wants to further increase its operations in India and has started construction of its sixth Factory at Bicholim, Goa for the

manufacture of culinary products (a key thrust area) for this purpose.

NESTLE INDIA LTD.

INTRODUCTION TO MARKETING
1. Much of marketing concerned with the problem of profitably disposing off that is produced.

2.

Marketing is a Phenomen brought about by the pressure of mass production and increased spending Power.

3.

Marketing

is

the

performance

of

business

activities that direct the flow of goods and services from the producer to the consumer.

Marketing

was

quite

simple

subject

in

1967,Consumer marketing largely operated on mass marketing principles, and business marketing

primarily concerned itself with how to build the best sales force. All the time marketers has faced a number of tough decisions. The marketers had to determine product features and quality,

establishing accompanying sources, set the price,

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determine the distribution channels, decide how much to spend on marketing, & decide how to divide these resources among advertising, sales force & other promotional tools.

Today, the time has changed from the previous years. Today, the market place is enormously more complex. Domestic markets, at on time safe from foreign invaders, are now the happy hunting

grounds of giant global coorporations as well as global Niche specialists. New products are launched at an astonishing placed & are available worldwide in a short time. New Communications Distribution media are and

proliferating.

Channels

formats keep apparition. Competitors are every there & hungry.

The whole marketing system moves like this. In this diagram I will trying to show how marketing system moves between the seller & buyer. In this Diagram there are buyers and sellers who transact over a

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particular product or particular class. These buyers and sellers are connected by four flows. The seller send goods & services and communication to the marketing, in return they receive money and

Infrastructure.

Evolution of marketing as a business discipline

The evolution of marketing as a business discipline provides an insight into it emergence as one of the most important functions of management in any business. The evolution of marketing as a business discipline comprises of following stages :-

a. The stage of barter

b. The stage of money economy

c.The stage of industrial evolution

d.The stage of competition

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e.The emergence of marketing

Marketing Management

We will discuss the what exactly the marketing is in the language of Philip Kotler.

Marketing is a Social and Managerial process by which individuals & groups obtain what they need & want through creating, offering and exchanging products of value with others.

According directed

to at

Philip

Kotler, needs

A &

human wants

activity through

satisfying

exchange process.

Basically there are different concepts of marketing which are very important for marketing. These concepts are need, wants and Demand. The starting point in the discipline of marketing is to identify the needs of consumer. Every person has some need. These needs are not created by marketers or

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society, they exist in the very texture of human biology and human conditions. Wants are the

desires for specific satisfaction of these deeper needs people needs are few but there wants are many.

Demands are

wants for specific products that are

backed up by the ability & willingness to buy them.

In marketing we pass through three stages.

1.

Entrepreneurial marketing

The entrepreneurial marketing is first stage of marketing started by the entrepreneur who start his business by Direct selling of goods & Public relations. He starts his business from the first stage of business & starts his business individually. In this stage the company did not advertise because he cannot afford to spend

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money on advertising because he is in the first stage of marketing.

2.

Formulated marketing

When a company achieves success in business, the company is in a stage of formulated

marketing i.e. the second stage of marketing. In this stage the company can afford

advertising Budget because the company has achieved adopting success. some of Now the the company used is in

tools

professionally run marketing companies.

3.

Entrepreneurial Marketing

This is the third stage of marketing when companies have to maintain success

throughout there life of business. This is the last stage of marketing where company has a success or it can fail. The companies main aim

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in this stage is that there brand & product managers need to get out of the office & start living with their Customers & Visualize new ways to add value to their customer lives.

MARKETING PHILOSPHIES

We Will be discussing about the five important marketing concepts used in marketing:

1.

PRODUCTION CONCEPT

The production concept is one of the oldest concept guiding sellers. It holds that consumers will favour those products that are widen available & low in

cost. Managers of production oriented organisations concentrate on achieving high production efficiency and wide distribution coverage.

2.

The product concept

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This hold that consumers will favour those products that offer the most quality or performance.

Managers in these product oriented organisations focus their energy on making good products & improving there over time.

3.

The selling concept

The selling concepts holds that consumers if left alone will ordinarily not buy enough of the origins products. The organisation must therefore

undertake an aggressive selling & promotion effort.

4.

The marketing concept

The

marketing

concept

holds

that

the

key

to in

achieving

organisational

goals

consists

determining the needs & wants of Target markets & delivering the desired satisfaction more efficiently and effectively then the competitors.

5.

The societal marketing concept

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The

societal marketing Concept holds that the

organisation task is to determine the needs, wants & interest of target markets & to deliver the satisfactions more effectively & efficiently then the competitors in a way that preseures or enchances

the consumers & societys well being.

NESTLE INDIA LTD.

INTRODUCTION TO ADVERTISING
Doing business without advertising is like working at a girl in the dark; you know what you are doing but no body else

does.

Advertising is Multi-dimensional. It is a form of mass Communication, a powerful marketing tool, a component of the economic system, a means of financing the mass media a Social institution, an ART FORM, AN a INSTRUMENT field of OF Business & a

management, profession.

employment

Advertising today is very necessary. Today we are exposed to large number of commercial messages that at any time in the past. Newspapers &

magazines are full of advertisements, today, from

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not only the quantity increased even the quality of advertising has improved considerably.

The

means

of

advertising

such

as

the

radio,

television, the cinema & BillBoards etc., have also amply contributed to the growth of this industry. Advertising which has become a marketing force helping mass selling & distribution.

Now,

will

be

discussing

the

definition

of

advertising the simplest definition of advertising is the Public announcement.

According to American Management Association, Advertising as any paid form of non personal presentation of ideas Goods & Services by an identified Sponsor.

Advertising as a tool of Communication

Advertising is as old as man. There is Semblance of advertising in the many activities of a human being

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especially those activities, which influence other either favourably or otherwise. A baby crying for its feed want to communicate to persuade, to influence & to lead to some action. All this has been a part of human life almost from the time it took shape.

Advertising is the most visible marketing tool, which seeks to transmit an effective message from the marketer marketers to a group of individuals. basically it Though is a

use

advertising,

communication process.

Benefits of advertising

1.

Advertising

establishes

link

between

the

manufacturer and the consumer. It is a form of mass communication. Through advertising, the advertiser reaches a Vast Number of

Consumers and makes his Product known to them.

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2.

Advertising keeps the consumers well-informed about the products & Services-styles, features, sizes, colours, specifications, price etc.

3.

Advertising

expands

markets,

builds

up

volume, gives a market share & profitability, and reduces prices.

4.

Advertising

guides

the

consumers

in

his

product choice. It gives the information about the product, the benefits it offers.

5.

Advertising contributes to consumer welfare. It helps consumers in a variety of ways. It tells what to buy, how to buy & why to buy.

NESTLE INDIA LTD.

INTRODUCTION TO PUBLIC RELATION


The ultimate aim of Public Relation is to develop a favourable image in the eyes of public. It refers to a companys communication & relationships with

various sections of the public-customers, suppliers, share-holders, society at large. employees, governments, media,

According to the Institute of Public Relation, London defines Public Relation as the deliberate, Planned & sustained effort to establish & maintain

understanding between an organisation & its public.

Public Relation is low cost compared to advertising for the publicity obtained, say in the press, through public relations is not directly paid for. Indirectly, the expenses involves keeping in close close touch with people in the media through press conferences, press visits & press releases.

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There are four element to the mechanics of Public Relation:

1.

The message to be transmitted.

2.

An

independent

third

party

endorser

to

transmit the message.

3.

A target audience that it is hoped will be motivated to buy whatever is being sold, and

4.

medium

through

which

message

is

transmitted.

NESTLE INDIA LTD.

THE SPIRIT OF NESTLE


"Organizational excellence is never achieved

through a one time efforts; It is always a process of continuous improvement across a number of areas of operation."

A key factor for Nestle's success has been its quest for continuous improvement through ushering in greater everyday productivity operations and more the efficiency in

Despite

infrastructure

impediments in India, Nestle has set itself high standards of business performance. This is reflected through the essence of the company-its mission statement.

Nestle's mission

"To be in every way the leading company in the Indian food industry and a good corporate citizen by providing our consumers with superior quality

NESTLE INDIA LTD.

products, our shareholders with rapid growth and fair returns and our employees with a challenging and satisfying work environment."

To

translate

this

spirit

into

a has

planned set up

and key

measurable

process,

Nestle

objectives across all divisions.

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KEY OBJECTIVES
Production

To optimize production costs while enhancing product quality so as to make Nestle products even more competitive in the market place.

Sales and Marketing

To reach a sales turnover of 3000 crores by the year 2000.

To double the turnover every years.

People

To

help

employees

to

retain

long-term

perspective and integrate them fully with the company's business goals.

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To retain a broad perspective while addressing individual needs

To view growth as a continuous process.

To

concentrate

on

attitudinal

changes

by

developing leadership skills, an appreciation of interdependence between units and the

enhancement of a sense of belonging to Nestle.

Finance

To maintain profit levels above the average for the food industry in India.

NESTLE INDIA LTD.

KEY FACT

This section offers a quick and simple overview of NESTLE, making it an excellent place to begin learning more about the Worlds Largest Food

Company. Here introduction is given with some key facts and figures, including 2001 Financial Historical

Information,

Company

Profile,

Development and Main Brand .

Financial Information

In millions of CHF Sales EBITDA (a) as % of sales EBITA (b) as % of sales Trading Profit

2001 81 422 12 516 15.4% 9600 11.8% 9 186

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as % of sales Net Profit as % of sales Capital expenditure Equity Total Assets Research and development costs Market Capitalization, end December (a) Mainly Pharmaceutical products

11.3% 5 763 7.1% 3305 29 904 65 524 1 038 146 864 and Water,

managed on a worldwide basis.

(b)

Mainly

corporate

expenses,

research

and

development costs, amortisation of goodwill

NESTLE INDIA LTD.

SALES ANALYSIS
By Geographic Area

In Million of CHF

2001 (%)

Europe North and South America Africa, Asia and Oceania Other Activities

25/706 22/262 13/493 8/537 69/998

36.7 31.8 19.3 12.2

Other Activities 12.2% Africa, Asia and Oceania 19.3%

Europe 36.7%

North and South Am erica 31.8%

BY MAIN PRODUCT GROUP

NESTLE INDIA LTD.

In Million of CHF

2001(% )

Beverages Milk Products, Nutrition

19/142 and 334

27.4 27.6

Ice Cream Prepared Dishes and Cooking 17/660 Aids Chocolate and Confectionery Pharmaceuticals 10/663 3/1999 15.2 4.6 25.2

Chocolate and Cofectionary 15.2%

Pharm aceutic als 4.6%

Beverages 27.4%

Prepared Dishes and Cooking Aids 25.2%

Milk Products, Nutrition and Ice Cream 27.6%

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Breakdown of 2001 Trading Expenses (in %) Percentage Raw Materials Packaging Salaries and Welfare Expenses Depreciation Other Trading Expenses Total Trading Expenses Trading Profit 26.2 8.8 16.6 4.1 34.5 90.2 9.8

Go to Financial Guide for additional facts and figures.

Trading Profit 5.2%

Raw Materials 13.8% Packaging 4.6% Salaries and Welfare Expenses 8.7% Depreciation 2.2%

Total Trading Expenses 47.4%

Other Trading Expenses 18.1%

Company Profile

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Chairman of the Board: Helmut O. Maucher

Chief Executive Officer: Peter Brabeck-Letmathe

Worlds leading food company

Switzerlands largest industrial company

Worldwide operations

495 factories

Groups total work force: 225, 808 people.

Historical Development

1866 1905

Companys foundation Merger between Nestle and Anglo-Swiss

Condensed Milk Company 1929 Merger with Peter-Cailler-Kohler Chocolates Suisses. S. A. 1947 Merger with Alimentana S.A. (Maggi)

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1971 1985 1988 1988 1992 1998 1999

Merger with Ursina-Franck (Switzerland) Acquisition of Carnation (USA) Acquisition of Buitoni-Perugina (Italy) Acquisition of Rowntree (GB) Acquisition of Perrier (France) Acquisition of Spillers (GB) Divestiture of Findus brand and parts of Nestl's frozen food business in Europe.

Divestiture of Hills Bros, MJB and Chase & Sanborn roast and ground coffee brands (USA). 2000 Acquisition of PowerBar.

Factories

Nestle has 6 factories in India. These are

1. Moga (punjab)

The Nestle factory in Moga has the pride of being the first and most comprehensive factory of Nestle India. Set up in 1962, it represents the core

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competence of Nestle India in the manufacture of milk products (Everyday, Milkmaid), beverages,

culinary products (Maggi sauces, noodles, soups etc.), weaning cereals (Cerelac) and infant milk formulae.

2. Choladi ( Tamil Nadu)

The factory in Choladi started production in 1967. Situated about 60 miles from Calicut, the factory today has 81 employees and produces 1.5% of the total turnover of Nestle India. It is a 100 percent export oriented unit which processes freshly picked tea leaves into soluble instant tea.

3. Nanjagud (Karnataka)

Production in this factory began in 1989 with the manufacture of Nestle instant coffee and Sunrise. Today in addition to instant coffee the factory also manufactures health beverages. The plant to

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manufacture MILO was also commissioned at this factory. This factory employs 145 people and is cited as a model in terms of environment protection for its installations to purify waste water as well as for its provisions for recycling coffee wastes.

4.Samalakha (Haryana)

This

factory

was

set

up

in

1993.

Located

70

kilometres from Delhi ,

it manufactures weaning

cereals , culinary products ,health beverages and milk products. Recently the expansion of

manufacturing capacity for Milkmaid Dessert Mixes was undertaken at this factory as this new and unique product category is viewed to have great potential in the future.

5.Ponda (Goa)

This Kit-Kat factory was set up in Goa in 1995 at a cost of Rs. 50 crores. It represented a major step by

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Nestle towards becoming the Number 1 Chocolates and Confectionery Company in India.

6.Bicholim (Goa )

The

construction with

work speed.

at

this

new

factory will

is

progressing

This

factory

soon

commence the manufacture of culinary products, which is a key thrust area for the company and will include latest technological improvements relating to this category of products.

As a part of Nestles efforts towards continuous improvement and excellence in Manufacturing

operation, a Moga Improvement team (MIT) was put in place at the Moga factory. The team comprised of international experts from Nestle Technical Services (NESTEC) and the local staff. In 1996, it embarked on a program with the single minded objective of optimizing production costs while enhancing the product quality so as to make Nestle products even

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more competitive in the market place. Drawing upon Nestles global experience and manufacturing expertise in 75 countries the team identified the following areas for detailed study -

Process improvement to ensure the optimal usage of resources

Improvement of operational efficiency

Cost optimization

A series of small but critically important initiatives ranging from of redesigning raw materials laboratories and to

palletisation

packaging

material utilization, manufacturing and filling loses and labour man hours resulting in substantial

savings and improved productivity and machine utilization. In addition, several non tangible benefits in the form of systems for sustainable improvement in areas like factory maintenance planning tools ,

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down

time

recording

systems

and

performance

measurement tools were also realized .

This project was highly successful and the company is now implementing its key learnings of MIT in its other factories.

In a country as vast and diverse as India, supply chain management is absolutely critical to rapid growth. Through BECA, Nestle has concentrated heavily on streamlining and improving their supply chain management more in order to make it more most

dependable,

cost

effective

and

importantly, more responsive to market needs.

For better supply chain integration the planning of key operations - purchase, production, distribution and sales are synchronised to ensure that

everybody works towards a common business plan. Monthly objectives are broken down into weekly and (wherever necessary) into daily plans and

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monitored

regularly

to

ensure

smooth

implementation and quick corrective action when needed . Major benefits accrued thus far include reduction in working capital through lower

inventories of finished goods and materials, better stock availability and reduction in obsolescence of materials.

In addition to traditional performance indicators, quantifiable performance measures have been

identified and implemented in all functional areas such as sales planning, production output, quality assurance, warehouse monitored material ordering transportation measures the extent and are of

management. regularly to

These gauge

improvement and identify root problems for taking corrective actions.

Teams have been put in place at all factories and sales offices to and ensure the implementation Areas is of

continuous

self-sustaining.

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improvement are regularly identified and timebound action plans established. For this purpose, standard tools such a Total Quality Management(TQM),

Kaizen, 5S and Small Group improvement activity (SGIA) are being extensively used.

The efficacy of this hierarchical structure is seen in Nestles performance over past few years of various products.

By 1989 the company had achieved a sales figure of approximately Rs. 258 crores. 1989 was the year of launches. Seven new product lines were launched in this year. This was also the year in which the Nanjagud factory was set up. By the year 1992, this sales figure was touching Rs 500 crores. In the 1990s the pace of launches quickened and since the construction of the factory at Samalakha, 20 new products had have been 76 introduced. By 1996, in its

Nestle

about

different

products

portfolio with various new products in the pipeline

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as well. The sales figure now touched Rs. 1214 crores. Thus sales grew by 450% over a period of one and a half decades.

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Nestles Product Range is detailed below Product Milkmaid Nescafe Lactogen Ricori Cerelac Maggi Cubes Nestum Nespray Lactogen 1 Sunrise Maggi Noodles Maggi Sauces Everyday Cerelac (wheat-apple, orange) Maggi Sauces(Chilli Masala Chilli) Everyday Ghee Maggi soups( tomato,chicken) Taster choice(leaf tea) Sunrise extra(originally Ricory) Nestogen 2 Sunrise Premium Year of inception 1962 1964 1968 1972 1974 1974 1978 1982 1982 1983 1983 1985 1986 1987

Garlic 1987 1989 1989 1989 1989 1989 1989

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Cerelac(Wheat-vegetable) Chocolates(Nestle crunch) Nestle eclairs Bar- one Milky

1989 bar, 1990 1991 1991

Maggi Soups( mixed vegetables, 1991 chicken noodles) Nestogen 1 Everyday gold (originally nespray) Maggi Super seasoning 1993 (originally Maggi cubes) Nestle Bonus POLO Nestle Bar peanuts) one 1993 1993 (roasted 1993 1993 1993 1994 1991 1992

Tasters choice (dust tea) Contadina Snack Dressing Cerelac (wheat-soya)

Milkmaid Dessert Mixes (custard 1994 powder, gulab jamun , Kesar Kulfi, Shahi Rabri) Maggi Tonites special sauces) Nescafe Premix Everyday premix (Gravy 1994 1994 1994

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Nestle Bonus(chocolate) Kit -Kat Toffo POLO (Paan) Nestle MILO Milkmaid (Kalakand) Dessert

1995 1995 1995 1995 1996 mixes 1996

Maggi Pickles( lime ,mango , 1996 mixed , mango punjabi, lime sweet. Maggi Dosa Mixes plain, sambhar) (masala, 1996

Maggi Soups (Chicken Sweet 1996 Corn, Hot and Sour, Rasam) POLO (Spearmint) 1996

Cerelac - Rice Tasters Choice - Tea Bags Tea mate - Dairy Whitener Splash - Candy Maggi Macaroni Mithaimagic

1996 1996 1996 1996 1996 1996

NESTLE INDIA LTD.

TODAY

NESTLE

IS

PRESENT

IN

DIFFERENT

MARKETS WITH THE FOLLOWING MAIN BRANDS

Soluble coffee

Nescafe, Taster's Choice, Ricore, Ricoffy.

Roast and Ground Coffee

Hills Bros., MJB, Bonka, Zoegas, Loumidis

Mineral Water

Perrier, Contrex, Vittel, Valvert, Quezac, Arrowhead, Poland Spring, Buxton, Vera, Blaue Quellen,

Calistoga, Santa Maria, San Pellegrino.

Other beverages

Nesquik, Nescau, Nestea, Milo, Carnation, Libby's Caro.

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Dairy Product

Nido,

Nespray,

Carnation,

Milkmaid/

La

Lechera, Gloria, Neslac, Barenmarke.

Breakfast Cereals

Nestle

Coffee Creamers

Coffee-mate

Infant Foods and Dietetic Products

Nestle, Nan, Lactogen, Cerelac, Nestum, Guigoz

Culinary seasonings,

Products prepared

(Bouillons, dishes, canned

soups, food,

pasta, sauces)

NESTLE INDIA LTD.

Maggi,

Crosse

and

Blackwell,

Libby's,

Thomy,

Builtoni, Contadina

Frozen Foods

Findus, Stouffer's Buitoni, Maggi

Ice Cream

Nestle, Frisco, Dairy Farm, Magnolia, Motta, Camy , ect.

Refrigerated pasta sauces)

Products

(yogurts,

desserts,

Nestle, Locatelli, Vismara, Buitoni, Contadina

Chocolate and Confectionery

Nestle,

Crunch,

Cailler, Yes,

Frigor, Kat,

Chokito, Quality

Sarotti, Street,

Galak/Milkybar,

Kit

NESTLE INDIA LTD.

Smarties, Baci, After Eight, Baby Ruth, Butterfinger, Lion, Nuts, Rolo, Aero, Polo, etc.

NESTLE INDIA LTD.

Food Services and Professional Products

Chef, Davigel, Santa Rica

Pet Care

Friskies, Fancy Feast, Aplo, Mighty Dog, Gourmet.

Specialized products for the food industry

Food Ingredients Specialties (FIS)

Ophthalmological products

Alcon

Cosmetics

L'Oreal

NESTLE INDIA LTD.

NESTLE INDIA LTD.

NESTLE INDIA LTD.

NEW PRODUCT LAUNCHES


To put all the product launches into perspective, Nestle flavors now and has 80 products this including list various of 80

variants

awesome

products for most companies is an overfull palate. Nestle India Ltd. still has a variety of new products in the pipelines. It believes in slowly colonizing as much territory as fast as it can, adapting to native conditions and then work at 'Holding off the

advancing herds'. Nestle products can be broadly classified into 5 main ranges:

Milk Product

Chocolate and Confectionery

Beverages

Culinary

NESTLE INDIA LTD.

Food Service.

Milk Products

This category which comprises of condensed milk, baby milk foods, milk powders, acidified infant food, and other milk products, showed a slump in 1996 as sales of milk products fell from Rs. 31.4 crores in 1995 to Rs. 31.2 crores in the said year. Consumer off take remained depressed throughout this year as a consequence of high price increases

necessitated by substantial increases (+ 50%) in the cost of basic raw materials (fresh milk), over the past two year.

However Nestle retained its leadership in the infant food market with Cerelac Lactogen and Nestum and even introduced a new flavor of Cerelac-Cerelac Rice in 1996.

NESTLE INDIA LTD.

Chocolates and Confectionery

Nestle pursues the objective of accounting for one in every three rupees in its sales figures through chocolates and confectionery. This has thus been one of the thrust areas in Nestle. Nestle this year widened its range of flavors in POLO, backed by its tremendous success in the Indian Market by adding POLO Spearmint to its Portfolio. This new flavor has also received an encouraging response in the

market according to market analysts.

Milkybar also retained its position as the number one white chocolate brand in India, however it did not record a significant increase in sales, as a majority of Indian tastes still do not accept this flavor.

This year however, was a year of tremendous success for Kit Kat. This internationally renowned brand gained a large increase in the Market share in

NESTLE INDIA LTD.

the past year and Nestle officials are hopeful that this will further increase in the coming years. However this brand along with its success has brought with it its share of Controversy as the Union of India has launched a Litigation against the Kit Kat family pack.

In 1997 Nestle added to its range of confectionery by introducing SPLASH, "A soft hearted, hard boiled sweet" this is being promoted as a sweet unique to India and is positioned to a target audience in the age group of 4 to 12 years and "anyone with a soft heart" is a potential customer. Priced at Rs. 1 for a 7.5-gram candy Splash has been introduced

selectively in the South and has been speculated to repeat Polo's performance. Nestle's officials claim that this candy has the potential to grab a quarter of the 700 crores confectionery market.

The

most

recent

of

Nestle

affairs

with

the

confectionery market has been the introduction of

NESTLE INDIA LTD.

Mithai Magic, which is "a little Mithai, a little magic." This new product was launched in

September 1997, in time for the Diwali purchases of sweets. This brand has been positioned somewhere between chocolates and traditional sweets and the company is employing a push strategy to promote this brand.

The latest launch of Nestle in the Chocolate and confectionery division is Charge .

Beverages

This year has been very successful in the beverages market for Nestle. The sales of beverage have increased from Rs. 323.3 crores in 1995 to Rs. 398.8 crores in 1996.

Nestles Flagship Nescafe, which was pegged at Rupees 1040 per kilogram before the launch of Tata Cafe, met with stiff competition from Tata Cafe

NESTLE INDIA LTD.

priced

at

Rupees

550

per

Kg.,

once

it

was

introduced. Tata cafe claimed to have garnered a market share of 17% by December 1996. This forced Nestle to cut prices of Nescafe to Rupees 840 per Kg. However Nescafe still retains 83% market share in the Rs. 177 Crores market for pure instant coffee.

Nestle Sunrise also showed an increase in sales and captured 20% of the Rs. 253 crores market in Mixed instant coffee.

This

year

Nestle

also

launched

MILO,

an

internationally renowned chocolate energy drink, and the response for this has been encouraging.

Nestle

has

introduced

Tasters

Choice

tea

bag

pitched against Taj Mahal Tea bags.

Culinary Products

NESTLE INDIA LTD.

The market in culinary products had witnessed a high growth consequent to aggressive pricing

decisions on existing products and the introduction of a variety of new products to match the needs of the Indian Housewife. Encouraged by this success Nestle launched Maggi Macoroni Snack in three flavors-Chicken, Masala and Tomato. Nestle

officials say that this would consolidate Maggis position as the number 1 culinary brand in India. The product focuses on convenience and innovation as its Unique Selling Proposition. This snack has opened a new segment for the maggi brands. The brand is positioned as Youthful and is represented by the twists and curls of the macaronic snack. It is speculated to be introduced in a phase manner nationwide to be place in the 7.5-lakh outlets that Maggi noodles sells in.

In the spirit of catering to Indian tastes Maggi introduced maggi pickles in five variants

benchmarked to give the "ghar ka swad". Maggi

NESTLE INDIA LTD.

Dosa Mix was also introduced to offer superior quality and added convenience. Apart from this Milkmaid Kalakand Mix, a traditional north Indian sweet of premium quality was added to the

milkmaid dessert mixes. Maggi soup also launched three new variants. Maggi Rassam in particular was noticeable as yet another attempt to make

traditional Indian cooking a little bit easier.

Food Services

Food service items basically deal with the out of home segments, which would include vending

machines. Nestle's food service business is poised for rapid expansion to meet the growing need for such a reliable, time saving and cost effective service in this modern age.

Nestle wants to sell 500 million cups of tea and coffee through its vending machines in the year 2000. It currently has 3500 vending machines at

NESTLE INDIA LTD.

assorted locations (both public and private). In 1995 Nestle food service did well to vend 40 million cups of Nescafe and Tasters Choice tea. Its 1996 sales were placed at 59 million cups of Nescafe and 36 million cups of tea; this figure was however way below the expected sales for the year.

In 2001 and 2002 nestle has come with a number of new products like it has come with many of the diary products like milk. The milk is avaliable in the market in the full cream , toned and double toned milk. The nestle has also come with the dahi, butter which is available in the market but at very few shops .

NESTLE has also come with the products which will target the children like FRUITIPS,MILKYBAR CHOO,NESTLE CHINESE MAGGI NOODLES.

NESTLE INDIA LTD.

NESTL CORPORATE BUSINESS PRINCIPLES


Nestl is committed to the following business

principles in all countries, taking into account local legislation, cultural and religious practice:

Nestl's

business

objective

and

that

of

management and employees at all levels, 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

consumers, shareholders, employees, business partners and the large number of national economies in which Nestl operates.

Nestl does not favour short-term profit and at the expense of successful long term business development, but recognises the need to

generate profit each year in order to maintain

NESTLE INDIA LTD.

the support of the financial markets, and to finance investments.

Nestl

believes

that,

as

general

rule,

legislation is the most effective safeguard of ethical conduct, although to in certain areas, and

additional

guidance

management

employees in the form of voluntary business principles, is beneficial in order to ensure that the highest standards are met throughout the organisation.

Nestl is conscious of the fact that the success of a corporation is a reflection of the

professionalism, conduct and ethical values of its management and employees, therefore

recruitment of the right people, and ongoing training and development are crucial.

Nestl

recognises

that

consumers

have

legitimate interest in the company behind the

NESTLE INDIA LTD.

Nestl brands, and the way in which the Nestl Company operates.

Legislation

and

International

Recommendations

Nestl :

complies

with

the

laws

applicable

in

the

countries in which it operates.

ensures that the highest standards of ethical conduct are met throughout the organisation, by complying in a responsible way with the Business Principles, which guide company

activities and relationships world-wide in each sector of business interest.

is aware that increasing globalisation is leading to the development of more and more

international recommendations. Although, as a

NESTLE INDIA LTD.

general

rule, to

these

recommendations they

are

addressed

governments,

inevitably

impact on business practices; Nestl has taken such recommendations as the ILO Basic Rights, and the International Code of Marketing of Breast-milk Substitutes (WHO) into account in its policies.

generally

endorses

commitments

and

recommendations for voluntary self regulation issued by competent sectoral organisations, provided they have been developed in full consultation with the parties concerned; these include the ICC Business and Charter the for OECD

Sustainable

Development,

Guidelines for Multinational Enterprises.

Consumers

Nestl aims to create value for consumers that can be sustained over the long term by offering

NESTLE INDIA LTD.

wide

variety

of

high

quality,

safe

food

products, at affordable prices.

Nestl

believes

that play

advertising an

and

other in

communications

important

role

encouraging consumers to exercise their right to informed choice. In order to fulfil this role in a responsible way, the Company makes determined advertising: effort to ensure that a

Nestl

does not mislead as to the benefits derived from use of the product

does

not

use

gratuitous

violence,

sex

or

profanity

does not depict discriminating or offensive attitudes to religious, political, ethnic, cultural or social groups

NESTLE INDIA LTD.

avoids

demonstrations

that

encourage

dangerous, or inappropriate use of the product

does

not

portray nor

competitors' denigrate

products

inaccurately, products

competitors'

avoids the exploitation of media events which could be in bad taste or conflict with the corporate image.

In addition to the above principles, Nestl does not sponsor TV and radio programmes or magazines whose strategy of attracting viewers or readers lies clearly in the use of gratuitous violence, sex or offensive attitudes to either majority or minority groups.

NESTLE INDIA LTD.

Children as Consumers

Nestl has developed the following principles for advertising to children:

communications (including advertising, events, sponsorships) to children should should not be disguised as programming or editorial;

advertising to children should not attempt to undermine the authority, responsibility or

judgement of parents or care providers;

advertising

to

children

should

not

portray

children in unsafe situations nor encourage them to accept invitations from people they do not know;

food and beverage communication should not demonstrate consumption. either unsafe or irresponsible

NESTLE INDIA LTD.

Human Resources and the Workplace

Nestl regards its management and employees as its most valuable assets. Involvement at all levels starts with open communication, whether on

specific aspects of the business, or about the activities of the Company in general. Suggestions for changes and proposals for improvements of Nestl's practices are encouraged.

The Company's business practices are designed to:

promote a sense of identification among all employees all over the world, and apply a number of common rules while at the same time adapting the expression of these rules to local customs and traditions;

encourage training, and the improvement of professional skills;

NESTLE INDIA LTD.

offer opportunities for promotion based upon merit, irrespective of race, religion, sex or nationality. Professional skills, experience, and the capacity and willingness to apply Nestl management promotion. principles are the criteria for

offer competitive salaries and social benefits. Working hours, wages and overtime pay

comply with applicable local laws and are in line with conditions offered by similar

companies.

limit factory overtime to a reasonable level;

create a safe working environment for each employee;

respect the right of employees to join legally recognised labor unions;

NESTLE INDIA LTD.

treat every employee with respect and dignity, and not tolerate any form of physical or sexual harassment or abuse; preclude the use of forced labor or involuntary prison labor.

NESTLE INDIA LTD.

CEO'S VISION
According to Mr. Carlo Mavia Donati Opportunities (CEO) "New opportunities have opened up with the emergence of a new middle class. Today the Indian youth is much more open to international trends the media and communication revolution has also

exposed the Indian people to new life styles. And in the process, this has created new opportunities for our products" and Donati is pretty clear-he will ensure that Nestle grabs these opportunities.

THE NESTL POLICY ON THE ENVIRONMENT

CEO's Statement

Over the past several decades, significant progress has been achieved towards protecting the world's environment. This objective remains a fundamental duty and a collective responsibility that must be

NESTLE INDIA LTD.

shared between the public, governments and the private sector.

As the World Food Company, Nestl is dedicated to providing consumers with the best food throughout life. Our Company's primary function is the

transformation finished

of perishable raw materials into that meet consumers'

products

expectations for safety, quality, convenience, and value. From our earliest days, we have recognized the need to protect the environment in our business activities. Exercising this commitment, which is part of our broader commitment towards the good of the community, remains central to our business today and tomorrow.

The Nestl Policy on the Environment was published in 1991 to define our world-wide strategy on

environmental issues and to state our long-standing commitment to environmentally sound business

practices. It is communicated internally within the

NESTLE INDIA LTD.

Nestl Group and externally to all interested parties and institutions. Following its publication, the Nestl Environmental established to Management consolidate System (NEMS) all was

environmental

measures taken by the Nestl Group. The NEMS is being implemented across our entire business.

Today, preserving natural resources and minimizing waste has become a part of day-to-day business for our employees and is an integral part of our strategy to achieve global competitiveness. The 1999 update of the Nestl Policy on the

Environment reiterates our strong environmental commitment and reflects our priorities as we move into the new millennium. It also recognises

developments in the international environmental arena.

The

application

of

the

Nestl

Policy

on

the

Environment at every level of our operation forms an essential part of the Nestl Corporate Business

NESTLE INDIA LTD.

Principles

and

enables

us

to

contribute

to

sustainable development meeting the needs of the present, without compromising the ability of future generations to meet their own needs

Compliance

Nestl is committed to the application of these principles in all countries, and wherever they are not in conflict with relevant local legislation where it operates.

Nestl

compliance

with

its

Corporate

Business

Principles is regularly monitored by its internal auditors on the basis of clear auditing instructions, which are certified by the external auditing firm KPMG.

Findings and recommendations are reported to the Nestl S.A. Board of Directors.

NESTLE INDIA LTD.

Nestl's Environment Progress Report 2001, many years of real work experience

Nestl is committed to environmentally sound business practices

Environmental Update

Message from the CEO

Nestl was founded in 1867 by pharmacist Henri Nestl on the shores of Lake Geneva in Vevey, Switzerland. One hundred and thirty-four years later, our headquarters are still in Vevey,

surrounded by the Swiss Alps in one of the worlds best-preserved environmental settings.

As they have grown from humble beginnings into the worlds largest food company, we have

attempted to take the fundamental cultural values

NESTLE INDIA LTD.

of environmental preservation and cleanliness into every country where we operate.

They spend a great deal of time travelling to these countries and have personally visited many of the 479 Nestl factories currently in operation. One of the reasons for doing so is to see for myself that our facilities reflect the environmental values basic to our Company. Nestl announces publication of

the Environment - Progress Report 2000.

The Nestl Environment Progress Report 2000 has been published and can be ordered from the Nestl Environmental Affairs Department. The

Environment Progress Report 2000 - Highlights was distributed together with the Nestl Management Report 2000.

Moreover,

the

company including

follows the

environmental of our The

performance, environmental

results

performance

indicators.

NESTLE INDIA LTD.

Environmental Officer reports directly to General Management to ensure there is on-going awareness regarding environ mental affairs. Also, the Nestl Environmental Advisory Group (made up of

corporate experts from many functions) meets regularly to review current environmental issues and to anticipate potential concerns. This allows us to maximise to control over our activities in and the

contribute

sustainable

development

countries where we operate.

The Nestl Environment Progress Report 2000 describes the results of continuous improvement in our environmental practices. The progress in a number of key areas, including a significant decline in the amounts of water and energy used to bring each kilo of Nestl products into your home, and a similar reduction in factors which potentially affect global never warming. completely However, satisfied however with they were

their

current

NESTLE INDIA LTD.

performance,

and

are

committed

to

further

environmental improvements.

The try to remain sensitive to the environmental concerns of our consumers and the public as a whole. As a charter member of the World Business Council for Sustainable Development, They attempt to keep their policies at the forefront of industrial companies. For this reason, they have pledged their adherence to The Business of the Charter for

Sustainable

Development

International

Chamber of Commerce, and we are committed to being a leader in environmental performance.

This

leadership

is

only

possible

through

the

collective commitment of the tens of thousands of individual Nestl employees who, on a daily basis, work to make this a better planet on which to live. This Report is dedicated to them.

NESTLE INDIA LTD.

Peter Brabeck-Letmathe

Chief Executive Officer

Nestl Corporate Business Principles

Nestl

is

committed

to

the

following

business

principles in all countries, taking into account local legislation, cultural and religious practice:

Nestl's

business

objective

and

that

of

management and employees at all levels, 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

consumers, shareholders, employees, business

NESTLE INDIA LTD.

partners and the large number of national economies in which Nestl operates.

Nestl does not favour short-term profit and at the expense of successful long term business development, but recognises the need to

generate profit each year in order to maintain the support of the financial markets, and to finance investments.

Nestl

believes

that,

as

general

rule,

legislation is the most effective safeguard of ethical conduct, although to in certain areas, and

additional

guidance

management

employees in the form of voluntary business principles, is beneficial in order to ensure that the highest standards are met throughout the organisation.

Nestl is conscious of the fact that the success of a corporation is a reflection of the

NESTLE INDIA LTD.

professionalism, conduct and ethical values of its management and employees, therefore

recruitment of the right people, and ongoing training and development are crucial.

Nestl

recognises

that

consumers

have

legitimate interest in the company behind the Nestl brands, and the way in which the Nestl Company operates.

NESTLE INDIA LTD.

Vevey, October 23, 2001

Nestl To Invest CHF 100 Million in New Swiss Airline

Vevey, October 23, 2001 Nestl S.A. will take a participation of up to CHF 100 million in the new Swiss airline, fully expecting this investment to yield a return to its shareholders after the initial launch phase. The project appears to be based on a reasoned, viable business plan, with a fair chance of attaining its objectives. Nestl will assume no

responsibility of any kind at management or board level of the airline. Nestl sees its limited

investment in the new venture in the following

NESTLE INDIA LTD.

context: as all internationally active corporations based in Switzerland, Nestl needs frequent

intercontinental airline connections. Nestl is often identified by authorities and consumers as a Swiss corporation whose products stand for quality and reliability. The company cannot be indifferent to the quality of the image of Switzerland abroad, which would have substantially suffered from the inability to find a constructive solution. Nestl is an international company with a substantial Swiss

shareholding and it is based in Switzerland. As such, it does not operate in a vacuum and is well aware of the social, political and economic environment in which it functions. Participating in an effort that encompasses all the major players in the Swiss economy, is consistent with the position it occupies in its country of origin as well as with its attitude of responsible corporate citizenship. During the earlier attempts to solve the difficulties resulting from the impending failure of Swissair, Nestl has

NESTLE INDIA LTD.

consistently responsibility would not

signaled vis--vis commit

that, its

in

view

of

its it a

own

shareholders, funds on

shareholders'

gratuitous base, simply to "rescue" Swissair. Over the past weeks, however, the Swiss government as well as representatives of the Swiss economy,

discussed the creation of a new Swiss airline that would ensure that Switzerland remains well served with intercontinental flights and that the existing infrastructures would continue to function. Nestl's small minority stake in the new venture corresponds to about three percent of the Nestl Group's yearly investment volume in fixed assets.

NESTLE'S CORPORATE CULTURE

As we had discussed before, Nestle is one of the most multinational of multinationals and is spread over 75 countries worldwide. This implies that it has employees from diverse cultural backgrounds.

Nestle respects the distinctive culture, mentality

NESTLE INDIA LTD.

and traditions of every employee in every country. What Nestle aims at is to incorporate its own culture into its employees without stifling the individual employee's culture and identity. When we went to Nestle we could feel the existence of a distinctive work culture amongst the management-the staff seemed highly motivated and cheerful and

everybody had pin up boards in front of their tables with reminders, motivational messages and even timelogs (the Nestle people seemed as if they availed of the benefits of time management).

Nestle has a diverse product range and so it also has diversified risks. Thus Management on

Information System plays a vital role in Nestle to provide information to the Sales and marketing as well a finance department. The Electronic Data Processing Information Department Systems. looks The after Management of this

Hierarchy

department is given below;

NESTLE INDIA LTD.

Controller

Head of E.D.P.

Controller

Apart from this, Nestle has a vast distribution network. In order to support the BECA process, an integrated computer system has been put in place across the company to link all functional areas and locations. This common linked

system will improve information availability, aid quick decision-making and improve supply chain integration.

NESTLE INDIA LTD.

GLOBAL OPERATION : COUNTRY WISE


Company Description : Nestle India

Nestle India. The principal activity of the company is the manufacture of soluble beverage powder, milk products, surplus fat and other food products.

Products of the company include soluble coffees, coffee blends, tea, preparation of milk, cream and cereals and milk concentrated/condensed. are located at The

manufacturing

plants

Moga,

Samalkha, Nanjangud, Choladi, Ponda and Bicholim. The company exports it's products to Russia, Nepal and Bhutan. Soluble beverage powder accounted for 29% of 2000 revenues; milk products, 26%; surplus fat, 3% and other foods, 42%.

Competitor Analysis

Nestle India operates within the Dry, condensed, evaporated products sector. This analysis compares

NESTLE INDIA LTD.

Nestle India with three other dairy companies in Asia: Alaska Milk Corporation of Philippines (2000 sales of 3.79 billion Philippine Pesos [US$73.12 million] ), Smithkline Beecham Consumer

Healthcare (8.58 billion Indian Rupees [US$178.71 million] of which 95% was Malted Milkfood/Food), and Pure Foods Corporation which is based in Philippines (12.65 billion Philippine Pesos

[US$243.90 million] ).

Officers

Executive

Chairman

&

Managing

Director

Carlo M.V. Donati

Executive Director Finance

Jean Marc Waelti

Secretary B. Murli

NESTLE INDIA LTD.

USA MARKET

Nestl USA is named America's Most Admired Food Company for the fourth consecutive year.

As

many

of

its

rivals

seek

growth

through

consolidation, Nestl instead looks within for ways to boost sales...In the process, it has posted sales growth of more than 4%, higher than the industry average of 2.5%.

Together, present Weller's a

Nestl's

disparate of

Internet

ventures CEO global

mountain

opportunity...U.S. is leading the

Net-savvy

unit

company in its e-enterprise

Their vision as part of the world's leading food company is to provide families with the best food and beverages throughout their lives. Our success is based on the quality we of our products build and on our

relationships

continually

with

NESTLE INDIA LTD.

customers, our employees, our communities and our suppliers - who continually look to our company to be the very best. Our commitment to achieving this vision is a source of Nestl pride.

For well over a century, Nestl has been making the very best food and beverage products for families around the world. We believe that food should provide for the spirit as well as the body, and strive to ensure that every product we prepare also enriches the experience of life itself. We believe it is our unique understanding of the integral role of food in good living that's helped us to become a part of the world's largest food company.

Corporate Governance Principles

Since its foundation in 1866, Nestl has

built consumers' trust through the quality of its products;

NESTLE INDIA LTD.

respected

the

social,

political

and

cultural

tradition of all countries in which it operates;

taken

long-term

approach

to

strategic the

decision-making, interests of our

which

recognises

shareholders,

consumers,

employees, business partners as well as those of all the national economies in which we operate.

Nestl's commitment to good Corporate Governance goes back to its very early days. Today, as both legislation and international recommendations

indicate growing public interest in the issue, we take the opportunity to publish the Nestl

"Corporate Governance Principles" that reflect and highlight our ongoing commitment.

NESTLE INDIA LTD.

Legislation

and

International

Recommendations

Nestl complies with the laws applicable in the countries in which it operates;

ensures that the highest standards of conduct are met throughout the organisation by

complying in a responsible way with the Nestl Corporate company Business activities Principles, and which guide world-

relationships

wide in each sector of business interest;

is aware that increasing globalisation is leading to the development of more and more

international recommendations. Although, as a general rule, to these recommendations they are

addressed

governments,

inevitably

have an impact on business practices. Nestl

NESTLE INDIA LTD.

takes such recommendations into account in its policies;

generally

endorses

commitments

and

recommendations for voluntary self-regulation issued by competent sectoral organisations, provided they have been developed in full consultation with the parties concerned; these include the ICC Business Charter for

Sustainable Development

(1991), the OECD

Guidelines for Multinational Enterprises (1976), and the OECD Principles of Corporate

Governance (1999).

The Principles

They cover four areas:

I.

The rights and responsibilities of shareholders

II.

The equitable treatment of shareholders

NESTLE INDIA LTD.

III.

The duties and responsibilities of the Board of Directors

IV.

Disclosure and transparency and are based on Swiss legislation, since Nestl S.A. has its registered offices in Switzerland (Cham and Vevey), as well as on Nestl S.A.'s Articles of Association.

The rights and responsibilities of shareholders

The shareholders' rights are protected by law, by the Articles of Association, and by the Corporate Governance Principles, which are also intended to ensure the sustainable development of Nestl S.A.

Nestl

S.A.'s

basic

shareholders'

rights

and

responsibilities include the right to:

secure methods of ownership registration;

NESTLE INDIA LTD.

obtain relevant information on Nestl S.A. on a regular and timely basis;

participate in and vote at General Meetings of the Shareholders in person or in absentia (by proxy), subject the Nestl S.A.'s Articles of Association;

approve the annual report and the annual financial statements of Nestl S.A.;

approve the consolidated financial statements of the Group;

grant the discharge to the Board of Directors (hereafter referred to as the "Board") and to the Management;

decide on the appropriation of profits resulting from the balance sheet of Nestl S.A., in particular dividend; determine the amount of the

NESTLE INDIA LTD.

elect and remove the members of the Board and the Auditors of the annual financial

statements, and of the consolidated financial statements;

adopt and amend the Articles of Association;

take all decisions, which by law or under its Articles of Association, are within the

jurisdiction of the General Meeting;

participate in the decisions in extraordinary meetings;

be informed sufficiently ahead of time of the date, location and agenda of General Meetings;

place items on the agenda and ask questions at General Meetings in accordance with the

Articles of Association, and - for the questions -

NESTLE INDIA LTD.

subject to reasonable limitations inasmuch as the topics are related to the business activities.

Any Nestl S.A. shareholder has the right to request effective redress of violation of his/her rights in accordance with the Swiss law.

NESTLE INDIA LTD.

The duties and responsibilities of the Board

The Board ensures the strategic guidance of Nestl S.A. and the effective monitoring of its

management.

The Board is accountable to the shareholders. In order to fulfil their duties and their responsibilities, Board members receive and can request accurate, relevant and timely information.

Board members act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of Nestl S.A.

Disclosure and transparency

Nestl S.A. aims to ensure that shareholders have access to relevant, up-to-date and

consistent information. This information should allow shareholders as well as prospective

NESTLE INDIA LTD.

investors

to

make

an

informed

judgement

about Nestl S.A. shares.

Nestl S.A. will pursue a policy of disclosure and transparency. This policy will be modified only when it is necessary to protect the

company's competitive, commercial or legal position.

Nestl

S.A.

complies

with

all

legal

and

regulatory requirements applicable where its shares are listed. Nestl S.A. will monitor all changes and take part whenever possible in the discussion preceding listing such changes in

legislation

and

regulations.

Nestl S.A. is aware of its obligation to make information that is relevant to the market publicly available in simultaneous fashion. To this effect, "quiet periods", during which no

NESTLE INDIA LTD.

relevant financial information will be provided to third parties, have been introduced.

Independent

auditors

elected

by

the

shareholders conduct the annual audit in order to provide an external and objective assurance on the way in which financial statements have been prepared and presented.

NESTLE INDIA LTD.

DISTRIBUTION NETWORK
THE DISTRIBUTION CHAIN NOW

FMCG Manufacture

Clearing and forwarding agents (1-3% margins)

Super stockists (3-6% margins)

Stockists (3-5%)

Distributor (4-7%)

Organized retailer (6-15%)

WHAT RETAIL CHAINS WANT

FMCG manufacturer

Organized retailer (current 6-15% margin + 11-21% savings from disintermediation)

NESTLE INDIA LTD.

THE RETAIL DEMANDS

What FMCG companies give 6% to 15% 7-10 days 12 days Margins Credit days Minimum levels 20% to 25% Stock outs

What retail chains wants At least 20% 15-30 days stock 7 days

Less than 5%

NESTLE INDIA LTD.

NESTLE INDIA LTD.

Methodology

The nature of the project work has been exploratory as no hypothesis, is taken to be tested. Though the conclusions drawn could be taken as the hypothesis and further tested by the research work undertaken in the relevant field. The reason for choosing the exploratory research design is the fact the project report has been primarily based upon the secondary sources of data and whose authenticity could be assured of.

The

reluctance

of

the

company's

personnel

in

parting with much of information led the project report to be based substantially on the secondary source of data. The sources of data used in data collection are the following:

NESTLE INDIA LTD.

Primary sources

In order to gather information about the various products, I personally visited a number of retail markets and collected data pertaining to the prices of the products offered. The market visits were useful quality in of knowing the the comparative brands prices and the

offered

vis--vis

competitive brands. Detail regarding the packaging of the products were collected were collected and I also inquired about the various sales promotion schemes followed by the three companies.

By interviewing these retailers valuable information was collected. I inquired from them about their marketing advertising and distribution strategies.

NESTLE INDIA LTD.

Secondary sources Information was collected from secondary sources such as public libraries, newspapers, business

magazines. Beside these the use of Internet was also made in collecting relevant information. The data collected from the above mentioned and sources used at has been

adequately

structured

appropriate

places in the report. This particular way of data collection was used because of its low cost (except data collected through surfing the internet) and less time consumption. The information gathered included:

Their annual reports (Procter & Gamble and Johnson and Johnson).

Pamphlets. Posters. Press clippings. News releases. Newsletters. Pictures.

NESTLE INDIA LTD.

Mc

Curtty

has

popularized

four

factor

classification of these loots called the 4 p. These are:

MARKETING MIX

PRODUCT Product variety quality design features brand name packaging sizes

TARGET MARKET

PLACE Channels coverage Assortments Locations Inventory transport

PRICE List price discounts allowances payment period credit terms

PROMOTION Sales promotion advertising sales force PR direct marketing

Once should note that the 4Ps represent the sellers view of the marketing tools available for influencing buyers. From a buyers point of view, each marketing tool is designed to deliver a custom

NESTLE INDIA LTD.

benefit. The 4 Ps correspond to the customers 4 Cs as:

4Ps Product

4Cs Customer wants needs and

Price Place Promotion Product

Cost to the customers Convenience Communication

In the product the companies started a spate of freebies with their products e.g. Godrej offered a cordless Rx 1234 off with its refrigerators. Peter England gave Rs 100 off on for its sheets. One must try to create new segments for people who want to go to a higher segment but are not in a position to do so.Nestle introduces milk and dahi for higher segment people. Many companies are bringing in cheaper ranges to the existing ranges so that once

NESTLE INDIA LTD.

the people have tried & tested their products they can be made to upgrade to their premium ranges.

One must also target the others customers because this is not exactly the right time to expand the market but to make the existing customers buy again. For grabbing others share one must try to attack on the rivals achelles heal with high dose of speed & surprise, catching him unawares e.g. LML followed the same strategy in UP, MP & Rajasthan where its competitors position was relatively weak. Nestle again repositioned the chocolate bar one. Nestle has been coming with the different

productsand trying to target the different segments.

Nestle is also trying to give the customer more choice, so that they can choose the product which they like. The company is also trying to bring a variety of products in every segment.

NESTLE INDIA LTD.

The companies should also try to offer emotional value to the customer a Pt. New customers can't be attracted with the same benefits as in good tones. For, the resistance to experiment, whether with a new product or a brand is much higher unless that is, the benefit can mow down the barrier. According to Puris Lintas Mehra consumers look for safe choices during a recession. This is not the time for new brands to come in, unless their attributes are very strong.

Price:

Is an important tool to break down barrier to a product or brand 'Shunv' acceptance. Sen,59, the According CEO of to

Siddhartha

Suadra

Advisory Services "Statinzg the price upfront can lower the consumer's expectation from a brand". But one can't be convinced of the value connotation of year brand, the customer will still use the expensive, but more trusted product although in

NESTLE INDIA LTD.

smaller quantities or a fewer occasions than before to project her budget So what next ? The price warriors must make their offer either qualitatively different or quantitatively superior to the

competition. And then slip in the lower price to seal the deal. This double differentiation will double your impression in the customer's mind.

In consumer durables the demand for these goods falls rapidly in a recession the consumer postponing his buy as long as he can. The marketers in this time must lure the customers with much more than then their lower prices but by schemes such as exchange offers.

Nestlae has been always pricing the products as premium price. The strategy of the nestle is to set the priceas premium. The price is always set as that price that can be afforded by the customers .the company should set the price for those also who have low spending budgets, they can not only

NESTLE INDIA LTD.

service the old customers but also bring in new for whom earlier price was the main barrier.

Price One can reach for the consumers purse on the basis of price but to stay there on the basis of price is pretty cough.az Because every one tries to imitate the low prices if the players are new. To ensure price as a sustained competitive advantage, the differentiation should be continuos. Imitation should be warded off, consumers kept interested & build image around price rather than as a discount player.

Promotion:-

In recession the marketers must find innovative ways to promote its product because the promotion must and from the clutter. The marketer has to make the consumer try his product & in order to make them try marketer's uses giving samples of his product. If the product is worthy or the customer

NESTLE INDIA LTD.

finds the product satisfactorily then the product gets listed on his list & it can be considered in the next purchase. The marketer has also the use different media to catch the attention of the buyers apart from T.V. & the print media. He has to use new methods of promotions in order to get the consumers attention.

Nestle

has

also

implemented

many

promotion

schemes . the company has also promoted there products like giving free samples of the new

products. or giving the new product free wiyh old popular and famous product.

Place:-

In recession times when the demand in urban markets is not growing at a fast rate the marketer must find new markets where he can sell his products. For today's Urban-centric marketer, one

NESTLE INDIA LTD.

way to beat the recession is to tune into rural markets.

Many companies have resorted to direct selling . This is because companies can save on costs of distribution channel. The company chose direct

marketing or what is presently called as mutti-levelmarketing where customer doubles as distributors. The advantage the distributors in addition to being a seller also doubles as a customer & his giving away of experiences is genuine.

So one can finally say

PRODUC T

PRICE

PROMOTIO N

PLACE

PAYMENT

PACKING

Consumer Nondurables

Create

new

Use sampling and multiple media

Go rural; use shops-in shops

Designs small oat prices units lower

segments within earlier segments

Consumer Durables

Offer frills

no-

Use exchange offers

Use announceme nt

Use dired selling

Offer financing and

Bundle products into single

options

NESTLE INDIA LTD.

advertising

installment s

units

MARKETING
Sales and Marketing are amongst the main strengths of Nestle

It is the hierarchy, which has strengthened the foundation of Nestles marketing force, is as in fig 1:

Managing director

Vice President (Marketing)

The efficacy of this hierarchical structure is seen in Nestle's performance over past few years of various products.

NESTLE INDIA LTD.

By 1989 the company had achieved a sales figure of approximately Rs. 258 crores. 1989 was the year of launches. Seven new product lines were launched in this year. This was also the year in which the Nanjagud factory was set up. By the year 1992, this sales figure was touching Rs. 500 crores. In the 1990's the pace of launches quickened and since the construction of the factory at Samalakha, 20 new products had have been 76 introduced. By 1996, in its

Nestle

about

different

products

portfolio with various new products in the pipeline as well. The sales figure now touched Rs. 1214 crores. Thus sales grew by 450% over a period of one and a half decades.

NESTLE INDIA LTD.

MARKETING STRATEGY
Nestle has adopted a four pronged growth strategy: 1. Gunning the market with new products and brand extensions. 2. Expansion of the distribution network to small towns for extensive availability 3. Reduce prices and introduce smaller packages for products to make them more affordable (a tool to enter price sensitive markets). 4. Focus on employ training and develop a positive attitude through enhanced manpower

development. 5. By year 2000 it expects chocolate and

confectionery to account for one in every third rupee in sale.

NESTLE INDIA LTD.

In the late 1996 fear of breading complacency by not having a continuous improvement, gave birth to an international sales and marketing improvement teams (SMIT). SMIT maps the latest in helping towards the target of year 2000. The SMIT exercise is a major global initiative of Nestle to enhance sales and marketing productivity. Linked with the already existing BECA project, which in turn emphasizes on excellence by improving the distribution set up, this gave rise to the following growth objectives for the year 2000: Ensure direct coverage of all urban towns in India. Expand distribution to reach I million retail outlet on a regular basis. Work in partnership with the distributor for the achievement of these objectives.

NESTLE INDIA LTD.

Provide

sustainable

solution

to

optimize

our

secondary sales from distributor to retailer.

PRODUCTION
As a part of Nestles efforts towards continuous improvement and excellence in Manufacturing

operation, a Maga Improvement Team (MIT) was put in place at the Maga factory. The team comprised of international experts from Nestle Technical Service (NESTEC) and the local staff. In 1996, it embarked on a program with the single-minded objective of optimizing production costs while enhancing the product quality so as to make Nestle products even more competitive in the market place. Drawing upon Nestle's global experience and manufacturing expertise in 75 countries the team identified the following areas for detailed study:

Process

improvement

to

ensure

the

optimal

usage of resources

NESTLE INDIA LTD.

Improvement of operational efficiency

Cost optimization.

As series of small but critically important initiatives ranging from of redesigning raw materials laboratories and to

palletisation

packaging

material utilization, manufacturing and filling loses and labor man-hours resulting in substantial savings and improved productivity and machine utilization. In addition, several non-tangible benefits in the form of systems for sustainable improvement in areas like factory maintenance planning tools, down time recording systems and performance

measurement tools were also realized.

This project was highly successful and the company is now implementing its key learning's of MIT in its other factories.

NESTLE INDIA LTD.

In a country as vast and diverse as India, Supply Chain Management is absolutely critical to rapid growth. Through BECA, Nestle has concentrated heavily on streamlining and improving their supply chain management more in order to make it more most

dependable,

cost

effective

and

importantly, more responsive to market needs.

For better supply chain integration the planning of key operations-purchase, production, distribution

and sales are synchronized to ensure that every body works towards a common business plan.

Monthly objectives are broken down into weekly and 9wherever monitored necessary) regularly into to daily ensure plans and

smooth

implementation and quick corrective action when needed. Major benefits accrued thus far include reduction in working capital through lower

inventories of finished goods and materials, better stock availability and reduction in obsolescence of materials.

NESTLE INDIA LTD.

In addition to traditional performance indicators, quantifiable performance measures have been

identified and implemented in all functional areas such as sales planning, production output, quality assurance, warehouse monitored material ordering transportation measure the extent and are of

management. regularly to

These gauge

improvement and identify root problems for taking corrective actions.

Teams have been put in place at all factories and sales offices to and are ensure the implementation Areas and is of time

continuous improvement

self-sustaining. regularly identified

bound action plans established. For this purpose, standard tools such a Total Quality Management (TQM), Kaizen, 5S and Small Group improvement activity (SGIA) are being extensively used.

NESTLE INDIA LTD.

ADVERTISING STRATEGY
Nestle, a cash rich company has plenty of marketing prowess. This can be credited to a strong and sound advertising strategy.

Nestle in the year 1995 had an advertisement spending of Rs. 43.3 crores (net). Tracing Nestle advertising responses the ad campaign by HTA of 'Hot and Sweet' was a runway success this ad was actually meant to fend off a challenge from H.J. Heinz. The Maggi range of sauces were introduced in 1985 but sales didn't catch up until 1990. At this point the popular and memorable campaign of Javed Jaffrey and Pankaj Kapoor was launched by Producer Pralad Kakkar. This commercial was an instant success. The volume of sales kept rising from an initial growth of 13% to 20% in the next year. Today the sales figure for Maggi Sauces is growing at a steady 6% per year.

NESTLE INDIA LTD.

Another noteworthy campaign was that of POLO (the mint with a hole), devised by Mudra advertising agency. This campaign was awarded 11 industry ad awards.

In

1996

the

advertisement

budget

has

been

approximately Rs. 56 crores where again innovation was the main focus. The new nationwide product launch of Maggi Macaroni Snack and Mithai Magic have been designed by Mudra. The macaroni ad with its use of "Hinglish" and a catchy beat (which is the latest trend amongst the Indian Advertisers) appeals well to the target audience and the Mithai Magic Commercial does keep the secret of the contents in the box, intact.

NESTLE INDIA LTD.

WORKING OF THE EXCLUSIVE DISTRIBUTION SYSTEM


What is an exclusive distribution system?

Exclusive distribution runs on a line similar to the Trade Distribution System. It is when the goods reach the cash distributors' godown that the

difference first shows up.

When a company is into a number of different category products, with a wide range in each of the categories, it becomes increasingly difficult for its to pay attention to each and every product of each and every category. In order to maintain its stress on each category and monitor them in a more organized manner it is necessary to create an exclusive distribution for each of these categories i.e., each category has a distribution network

exclusive to itself. There are separate units/vans,

NESTLE INDIA LTD.

with separate categories of products of the same brand, plying to the same dealers. The dealer thus can concentrate better on the variety of products in each category. Similar categories can be clubbed together e.g., chocolate and confectionery.

The exclusive distribution system developed by Nestle has the following salient features:

The Chocolate and Confectionery division was separated from the Instant drink and Culinary divisions to start the Exclusive distribution for the former, sometime during the end of the year 1997.

Four metros and around 37 semi metro towns have been covered under the exclusive

distribution. Seventeen Cash Distributors were appointed in Delhi itself to carry out this new system.

NESTLE INDIA LTD.

The chocolate and confectionery are transferred from the factories, where they are manufactured to the Mother godown after they are quality approved. From the Mother godown the products are transferred to the respective cash

Distributors godown.

According

to

the

company

norms

cash

distributor holds the stock of two week and therefore fortnight. the stocks are replenished every

Sales Analysis

During the year ended December of 2000, sales at Nestle India were 15.82 billion Indian Rupees

(US$329.38 million). This is an increase of 8.0% versus 1999, when the company's sales were 14.65 billion Indian Rupees. Sales of Surplus Fat saw an increase that was more than double the company's growth rate: sales were up 1,174.6% in 2000, from

NESTLE INDIA LTD.

546.01 million Indian Rupees to 6.96 billion Indian Rupees. Not all segments of Nestle India

experienced an increase in sales in 2000: sales of Milk Products fell 86.3% to 569.45 million Indian Rupees.

Recent Sales at Nestle India

9.5

11.5

13.7

15.3

14.6

15.8

1995

1996

1997

1998

1999

2000

(Figures in Billions of Indian Rupees)

NESTLE INDIA LTD.

1 1 1 1 1 1 00 0 0 0 0 0 00 00

Figures in Billion

1 1 1 1

000 0

1 1 1 1

1 1 1 1

1 1 1 1

Nestle India has changed its product mix within the past five years. In 2000, the largest segment was Surplus Fat, while in 1996, the largest segment was Other Foods. During the past four years, sales of Surplus Fat increased 1,374.2% (from 472.07 million Indian Rupees to 6.96 billion Indian Rupees), while during the same period, sales of Other Foods

experienced an increase of only 22.8% (from 3.99 billion Indian Rupees to 4.90 billion Indian Rupees).

Although sales at this company increased, they increased at a slower rate than the three

comparable companies in 2000. The sales increase of 8.0% was less than those at Alaska Milk

Corporation

(up

14.7%),

Smithkline

Beecham

NESTLE INDIA LTD.

Consumer

Healthcare

(41.2%),

and

Pure

Foods

Corporation (18.9%).

The company currently employs 2,963. With sales of 15.82 billion Indian Rupees (US$329.38 million) , this equates to sales of US$111,164 per employee.

Sales Comparisons (Fiscal Year ending 2000)

Company

Sales Sales (US$mlns) Growth

Sales/ Largest Emp (US$)Region India (100.0%) N/A

Nestle India

329.379

8.0%

111,164

Alaska Milk Corporation 73.122 Smithkline Beecham 178.707 Consumer Healthcare Pure Foods Corporation 243.899

14.7%

93,268

41.2%

N/A

(100.0%)

18.9%

64,729

N/A

NESTLE INDIA LTD.

Recent Stock Performance

For the 52 weeks ending 10/19/01, the stock of this company was down 0.3% to 505.95 Indian

Rupees. During the past 13 weeks, the stock has fallen 4.5%.

During the 12 months ending 12/31/00, earnings per share totalled 12.30 Indian Rupees per share. Thus, the Price / Earnings ratio is 41.13. Earnings per

NESTLE INDIA LTD.

share rose 20.4% in 2000 from 1999. Note that the earnings number includes a $.35 pre-tax charge and $.11 pre-tax credit in 2000.

This company is currently trading at 3.08 times sales. This is at a higher ratio than all three comparable companies, which are trading between 0.51 and 2.15 times sales. Nestle India is trading at 18.91 times book value. The company's price to book ratio is significantly higher than that of all three comparable companies, which are trading between 0.81 and 4.94 times book value.

Summary of company valuations

Company Nestle India Alaska Milk Corporation

Date

P/E

Price/ Book 18.91 0.81

Price/ Sales 3.08 0.51

52 Wk Pr Chg -0.30% 10.53%

10/19/01 41.1 10/19/01 7.2

Smithkline Beecham 10/19/01 N/A Consumer Healthcare Pure Foods Corporation 10/9/01 7.9

4.94

2.15

N/A

1.83

0.60

35.00%

NESTLE INDIA LTD.

The market capitalization of this company is 48.78 billion Indian Rupees (US$1.02 billion) . The

capitalization of the floating stock (i.e., that which is not closely held) is 34.89 billion Indian Rupees (US$726.33 million) .

Dividend Analysis

During the 12 months ending 12/31/00, Nestle India paid dividends totalling 14.00 Indian Rupees per share. Since the stock is currently trading at 505.95 Indian Rupees, this implies a dividend yield of 2.8%. Nestle India has increased its dividend during each of the past 5 fiscal years (in 1995, the dividends were 3.33 Indian Rupees per share).

During the same 12 month period ended 12/31/00, the Company reported earnings of 12.30 Indian Rupees per share. Thus, the company is paying out dividends that are higher than the earnings.

NESTLE INDIA LTD.

Profitability Analysis

On the 15.82 billion Indian Rupees in sales reported by the company in 2000, the cost of goods sold totalled 12.61 billion Indian Rupees, or 79.7% of sales (i.e., the gross profit was 20.3% of sales). This gross profit margin is better than the company achieved in 1999, when cost of goods sold totalled 81.2% of sales. In 2000, the gross margin was the highest of the previous five years (and in 1996 was as low as 13.9%).

Nestle India's 2000 gross profit margin of 20.3% was lower than all three comparable companies (which had gross profits in 2000 between 25.5% and 57.1% of sales).

The

company's

earnings

before

interest,

taxes,

depreciation and amorization (EBITDA) were 2.47 billion Indian Rupees, or 15.6% of sales. This

EBITDA to sales ratio is roughly on par with what

NESTLE INDIA LTD.

the company achieved in 1999, when the EBITDA ratio was 15.7% of sales. The three comparable companies had EBITDA margins that were all fairly close (between 13.2% and 17.0%) to that achieved by Nestle India.

In 2000, earnings before extraordinary items at Nestle India were 1.19 billion Indian Rupees, or 7.5% of sales. This profit margin is an improvement over the level the company achieved in 1999, when the profit margin was 6.7% of sales. Earnings before extraordinary items have grown for each of the past 5 years (and since 1996, earnings before

extraordinary items have grown a total of 119%).

The company's return on equity in 2000 was 41.1%. This was significantly better than the already high 35.7% return the company achieved in 1999.

(Extraordinary items have been excluded).

NESTLE INDIA LTD.

Profitability Comparison

Company

Year

Gross Profit Margin 20.3% 18.8%

EBITDA Margin

Earns bef. extra 7.5% 6.7%

Nestle India Nestle India

2000 1999

15.6% 15.7%

Alaska Corporation

Milk

2000

31.4%

13.2%

10.2%

Smithkline Beecham Consumer Healthcare Pure Corporation Foods

2000

57.1%

17.0%

13.1%

2000

25.5%

14.3%

7.0%

Inventory Analysis

As of December 2000, the value of the company's inventory totalled 2.06 billion Indian Rupees. Since the cost of goods sold was 12.61 billion Indian Rupees for the year, the company had 60 days of inventory on hand (another way to look at this is to say that the company turned over its inventory 6.1

NESTLE INDIA LTD.

times per year). This is an increase in days in inventory from December 1999, when the company had 1.62 billion Indian Rupees, which was only 50 days of sales in inventory.

The 60 days in inventory is lower than the three comparable companies, which had inventories

between 91 and 106 days at the end of 2000.

Financial Position

At the end of 2000, Nestle India had negative working capital, as current liabilities were 3.73 billion Indian Rupees while total current assets were only 3.35 billion Indian Rupees. The fact that the company has negative working capital could

indicate that the company will have problems in expanding. However, negative working capital in and of itself is not necessarily bad, and could indicate that the company is very efficient at

NESTLE INDIA LTD.

turning over inventory, or that the company has large financial subsidiaries.

As of December 2000, the company's long term debt was 790.06 million Indian Rupees and total liabilities (i.e., all monies owed) were 4.94 billion Indian Rupees. The long term debt to equity ratio of the company is 0.31.

As of December 2000, the accounts receivable for the company were 1.17 billion Indian Rupees, which is equivalent to 27 days of sales. This is an improvement over the end of 1999, when Nestle India had 36 days of sales in accounts receivable.

The 27 days of accounts receivable at Nestle India are lower than all three comparable companies: Alaska Milk Corporation had 72 days, Smithkline Beecham Consumer Healthcare had 46 days, while Pure Foods Corporation had 62 days outstanding at the end of the fiscal year 2000.

NESTLE INDIA LTD.

Financial Positions

Company

Year

LT Debt/ Equity 0.31

Days AR 27

Days Inv. 60

Nestle India Alaska Milk Corporation Smithkline Beecham Consumer Healthcare Pure Foods Corporation

2000

2000

0.01

72

106

2000

0.15

46

91

2000

0.07

62

104

NESTLE INDIA LTD.

SWOT ANALYSIS
Strength

The basic Aim of Nestle is to become the leading company in the Indian food industry. It was linked to India from the starting of the century (1900). Through exports, manufacturing in India only began in 1962. In very short span it had established itself as a major player in Indian food industry.

The remarkable growth has been achieved through.

a. Rapidly capacity.

creating

greater

has

manufacturing

b. Taking steps to ensure availability of good quality of products.

c. Strengthening of distribution and sales network particularly in rural areas.

NESTLE INDIA LTD.

d. Sales

and

marketing

are

among

the

major

strength of the Nestle.

Weakness

a. Nestle aims only of capturing young market, which is quiet clear from the advertisements in India.

Opportunities

Threats

a. Cadbury

In

creasing

popularity

of

Cadbury's

products in markets is a major threat to Nestle.

b. Introduction of foreign food product in India is another threat to Nestle.

NESTLE INDIA LTD.

RESULTS OF MARKET SURVEY


PEOPLE LISTINGS

40 35 30 25 20 15 10 5 0 Nestle HLL Amul

40 35 30 25 20 15 10 5 0 Chocolates Maggi Milkmaid Coffee

NESTLE INDIA LTD.

Milky bar 22%

Munch 23%

Bar One 22% Kit Kat 22%

Classic 11%

80 70 60 50 40 30 20 10 0 Yes No

NESTLE INDIA LTD.

RECOMMENDATIONS AND SUGGESTIONS


Recommendation and suggestions forms the most critical part of the report. These are based on hard nose feedback collected from the retailers and distributors and my personal experiences in the market.

1.

It

has

been

found

for

increasing

the

sales

Displays and Consumer offers have to be given simultaneously this helps in two ways, attracts the customer attention through product display and prompts him to buy, the offer on the product further strengthens this feeling to

indulge in buying . But both the tools should be used with adequate planning and precision and only then would they reap benefits . We can provide the trade loads as the Displays. As has been found retailers are more satisfied with the

NESTLE INDIA LTD.

displays. It would also improve the image of the company as the one that cares for its channel members. But whole process should be cautiously handled with prompt payments. Delay in

payments would lead to bad reputation in the market.

2.

Inspite

of

the

best

of

the

marketing

communication strategies adopted by us we are not doing well. Possible reason could be lack of motivation at the lowest possible but the most important level that is the sales officer and the RS salesman. We should organize a contest for weeks or month time between the entire RS salesman and the sales officers separately. Whoever makes the maximum sales during the week/month would be entitled for a vacation or cash incentives by the company. He would have to generate a list of retailers/wholesalers where he has made the sales. This would act as a tool to

NESTLE INDIA LTD.

keep a check on the stock being dumped in the wholesale market.

3. It has been found that the sales officers often fail to carry the catalogs and samples with them. We can design a sales promotion kit , which would act as a handy tool for them in the market. It would consist of advertisement proofs, product samples, illustrations of POP displays, description of spec ial deal or contest featured in the

promotion. I feel that all the sales process revolve around the following basic seven steps:

Get set to sell. Spark the interest. Dramatize the need. Prepare the proposal Capitalize on objections. Cut the order

NESTLE INDIA LTD.

Follow through 4. Our department could print a dealers manual which would elaborate on the above points.

For EG: Capitalize on objections would list all the possible objections that that prospect may voice and each of the corresponding well thought of answer. These small efforts on our part would help us overcome barriers and clear out the most taken for granted things. This would also come in handy for the managers when they feel like building pressure on the channel members.

5. It has been my experience that there is an flaw in the working of the sales officers. They are often unclear about the targets and the schemes. They have to be briefed more frequently and trained accordingly. They should be provided a company T-shirt that would distinguish them from other salesman.

NESTLE INDIA LTD.

6. There is a dire need of the Institutional selling unit which all major companies have. NESTLE in Delhi has a lot of distributors specifically for this purpose. They cater to demand from super

bazaars, kendriya bhandars, railway canteens and other cooperative stores.

7. The display windows provided by us are not a least bit attractive to draw attention of any customer standing in the shop. We should have really skilled team of workers (or single person) doing up the windows. This would also act as a safeguard for proper utilization of display budget. If we are spending on displays then we must capitalize on these things, which is not happening now. Hence professional merchandisers should be appointed.

8. Distributors image in a area plays a major role in boosting sales. Company should take strict action against those distributors with tarnished

NESTLE INDIA LTD.

image as they spoil the companies reputation also. If the need be they should replace the distributor. interval The company should the in regular as

take

feedback

from

retailers

regards to the distributor.

9. There should be adequate supply of the POP material. The sales officers and merchandizers should properly put them on the outlets visited during the day.

10. As found in the study that the displays are a major motivating factor, the display claims should be promptly cleared on time. This maintains the companies image across the retail outlets and keeps the retailers satisfied. It was a general feeling across the Delhi metro.

11. At present the company does not have any Target based incentives to the retailers. We give trade loads at the time of purchase by the

NESTLE INDIA LTD.

retailer and then forget him for 15 days. It should be other way round. On selling certain units the retailers should be offered incentives in form of gifts like Cameras, Walkman, Mobile phones etc. This would motivate him to push the companies product as compared to the competitors. It would also ensure actual consumption of the product and control dumping at the retailers outlet.

12. The company can prepare Cardboard stands on which the nivea products could be placed. These stands should be placed at the front of retailers desk. Recently FA has prepared such stands. This ensures high visibility of the product category and prompts the customer to take impulse

decisions. They are cost effective too.

13. HOME TO HOME SELLING

The success mantra of HLL is that it applies all possible channels of selling emphasizing on

NESTLE INDIA LTD.

direct

selling

whereby

company

employed

people interact with the customer personally. They sell the product and offer discount coupons on next purchases. Our company must explore this channel that ensures sales and builds repeat purchases . Discount coupons should be distributed across the household in Delhi Metro. This would build awareness about

thechocolates products and would overcome its major weakness of lack of awareness on part of customer about the range of products. The retail outlets in the areas where coupon are distributed must be flooded with our range of products so that there is no shortage of supply.

14. As revealed by the survey Spot Promotions are a cheap and effective way of sales promotion. For this purpose the company should make one time investment chocolates in preparing maggi of stalls, products

stalls,new

range

stalls ( we know your skin better ) and placing

NESTLE INDIA LTD.

them at prominent places at regular intervals. To begin with 2 mobile stalls could be prepared and the concept be tested across the Delhi metro. Each stall would cost approx Rs 1200. The stall would sell our range of items at Discounted price ( Minus the retailers and distributors

margin as the products would be directly sourced from the C&F agents). Nestle representative

wearing nestle T-shirts and Blue colored caps would counsel the public.

It would serve twin objective of increasing the awareness of the product as well as boosting the sales. The sales officers should be asked to identify crowded market places in their areas where such efforts could be made. Specially, On festival occasions when the expenditure by public increases we could cash on the opportunity.

15. The wholesalers are found to undercut whatever extra margin he gets in form of Schemes etc, So

NESTLE INDIA LTD.

for proper channel balance we need to keep strict control over our sales to the wholesalers. This would also help the distributors to maintain their ROI . .

NESTLE INDIA LTD.

LIMITATIONS
Sample size: The sample size chosen was 250 for the whole Delhi metro where there are so many people. This could have affected the results, which may not hold true in all parts.

Concerned

persons

were

not

available

despite

appointments at some times. It was difficult to tap the distributors and the ASM of nestle.

The marketing and the advertising managers were not ready to give any infomationabout the

company . They were not willing to tell about any strategy of marketingand advertising . so very less information can be gas\thered about the strategy of marketing.

The

distributors

were

reluctant

to

share

information regarding the trade insights.

NESTLE INDIA LTD.

CONCLUSIONS
Sales growth in 2001 led by a robust 20% growth in volumes

Nestles domestic sales registered a 18.5% volume growth during the first 9 months of 2001. Exports registered a 31% yoy volume growth. In value terms, domestic sales grew by 15.8% yoy to

Rs12.1bn, while Exports grew by 26.4% yoy to Rs2.4bn.

Jan-Sep Volume Growth (tons) Domestic Exports Total 2001 105718 13402 119120

Jan-Sep 2000 89176 10216 99392

% yoy

18.5 31.2 19.8

NESTLE INDIA LTD.

Value Growth mn)Domestic Exports Total

(Rs 12107

10454

15.8

2424 14531

1918 12372

26.4 17.5

Beverages leading volume growth, value growth being led by culinary segment

Beverage sales have grown at a fast pace of 42% in the first 9 months of 2001 driven by rising exports and revised pricing strategy in domestic market. Growth in value terms is however lower due to a sharp 15% decline in realizations. Culinary product sales grew by 20% in volumes and 22% in value. Volume growth in chocolate & confectionery

segment was 12%, which was higher then market leader and average industry growth, signifying that the company has been able to improve market share in the category.

NESTLE INDIA LTD.

Turnover Contribution by

Turnover contribution Volum e Milk & Nutrition Products Beverages Culinary Products Chocolates Confectionery & 18 24 11 29 14 14 42 20 12 47 43 15 Value Volume

Growth

Value

Realization

13

-1.4

21 22 20

-15.1 1.9 6.8

Milk products, which account for a significant 43% of Nestles revenues have grown at steady 15% in volume terms. Turnover contribution of beverages is 29%, while culinary each products contribute and chocolate to &

confectionery

14%

Nestle

Rs14.5bn turnover in the first 9 months of 2001..

NESTLE INDIA LTD.

Profit Margin

Operating margins have improved from 18.1% to 18.5% in 2001 driven by lower material cost. Raw material cost declined from 44.4% of sales in F12/00 to 43.1% of sales in F12/01.

Operating Margins EBITDA Adjusted EBITDA Improved management working

2001 18.5 18.5 capital and

2000 18.1 17.7 asset

The company has been able to improve working capital management. Operating cash flow has

registered a CAGR of 15% in the last 4 years. Fixed asset turnover has also gradually improved over the last 3 years. Net indebtedness (total financial

liabilities net of liquid assets) has declined from a high 2.5x in 1998 to 0.3z currently.

NESTLE INDIA LTD.

1998

1999

2000

2001Sep 1966 18.1

Operating Cash Flow Rotation of Operating Net Working Capital Rotation of Fixed Assets Net Indebtedness

1743 7.1

2391 9.6

2420 14.7

4.0 2.5

3.9 1.0

4.2 0.9

4.7 0.3

1. Operations:

Domestic Sales grew by 7% in value and 15% in volume terms, during the year. Export Sales grew by 16% in value and 32% in volume. Profit After Tax grew by 20% from Rs985mn to Rs1186mn.

During the year, the Company retired certain fixed assets from active use at various locations and the impairment loss on such fixed assets has been charged to the Profit and Loss Account.

Out

of

business the

prudence, Contingency

the

Company with

supplemented

Provision

NESTLE INDIA LTD.

further amount in 2000 of Rs295mn (net) to provide for various contingencies resulting from matters mainly relating to issues under litigation, dispute and management discretion.

The current year has commenced as per plan in the domestic market and your Directors are hopeful of continued good results. However, with the current level of inflation and economic indicators pointing towards a sluggish market, it would be difficult for the Company to maintain the level of earnings unless the Company takes price increase on finished products which would depend on market conditions and competitor activities.

NESTLE INDIA LTD.

2. Exports:

Export Sales for the year at Rs2655mn have grown by 32% in volume terms, over the last year. This has been mainly due to the higher exports of NESCAFE to Russia, buoyant sales of Instant Tea and good performance of the culinary products. However, depressed green coffee prices in domestic and international markets kept the export

realisations low. Measures taken for tapping new market and product to of this value opportunities growth. added have The instant also export coffee

contributed

competitiveness

manufactured in India continues to be adversely affected by the purchase tax levied on green coffee. Efforts continue to tap new market and product opportunities.

3. Dividends:

NESTLE INDIA LTD.

Interim dividend of Rs. 8.00 per equity share, including Rs4.50 per equity share out of

undistributed profits of the previous financial years, was paid during 2000.

4. Business Development:

In line with the Company's objective to provide superior value in every product category and

market sector, efforts were focussed to provide quality products to customers at attractive price points. While the Company continued to generally maintain price points across all the product

categories, the pricing of some products were also reduced to meet consumer expectations.

MAGGI Noodles re launched in 1999 in response to popular consumer taste preference, continued to boost sales during 2000 in the culinary segment. New flavour profiles were introduced in the bouillon business.

NESTLE INDIA LTD.

The market continued to react positively to the initiatives taken in the recent past to grow the consumption of instant coffee in the domestic

market. The new NESCAFE pricing and bringing the popular SUNRISE brand under NESCAFE umbrella to benefit from its association continued to strengthen the category. NESCAFE Frappe a blend of coffee, mocha and vanilla, which makes a delicious frothy cold coffee was launched in select metropolitan cities in the third quarter. This was another

strategic launch and seeks to address consumer with preference for cold drinks. NESCAFE Frappe has received encouraging response.

In the area of Chocolate and Confectionery NESTLE MUNCH Crisp wafer biscuit with chocolayer, which was launched in select markets in1999, was rolled out nationally during 2000 and had good growth. Continuing with the efforts to meet consumer

expectation on price points, the pricing of KITKAT was also reduced during the later half of the year.

NESTLE INDIA LTD.

Moulded

Chocolates growths.

and This

Eclairs has

also

showed in

satisfactory

also

helped

improving the infrastructure and distribution reach of the Company in the Chocolate and Confectionery segment.

In the milk and cereal categories, EVERYDAY Dairy Whitener and cereals had satisfactory growth.

NESTLE Growing up Milk, a new product offering superior nutrition, launched in 1999 was rolled out nationally during the year.

The Company has also entered the Chilled Dairy business with the recent launch of NESTLE Dahi in select cities of the North. The initial response has been very encouraging and the Company is working on plans to further leverage the international

expertise of Nestle Group, Switzerland in the area of Chilled Dairy.

NESTLE INDIA LTD.

The performance of other products were generally in line with expectations. A few products whose performance was not considered satisfactory are under constant review for corrective action.

The

directors

were

pleased

to

report

the

implementation of the two new projects undertaken by the Company during 2000 packaged milk and packaged drinking water. Both the projects seek to leverage the worldwide experience and knowledge of Nestle Group, Switzerland who are the leaders in these product categories.

In line with its objective of long term growth and entry in significant value added food segments, the Company forayed into the Ultra Heat Treated (UHT) liquid milk business in April 2000 by launch in Mumbai. Packaged UHT milk seeks to address

growing consumer concerns on adulteration and product safety and brings with it reliability,

complete hygiene and safety. It offers convenience

NESTLE INDIA LTD.

to the consumer, in terms of a shelf life without any deterioration in the product quality and easy usage without refrigeration or boiling. UHT Milk has

received encouraging response and has been rolled out in select cities of the West, South and North.

The project for bottled water was implemented at the Samalkha factory and water launched in

February, 2001 under the brand NESTLE PURE LIFE and is available in select cities. NESTLE PURE LIFE contains a balance of essential minerals and a light pleasant taste and is manufactured under stringent quality control. The packaging has been specially designed to maximise safety for the consumer and protect from possible tampering.

The new categories like bottled water and liquid milk are lower margin categories and will require considerable investments. The Company sees them as strategic and as requiring support on a sustained basis.

NESTLE INDIA LTD.

The two new Sales Branches at Bangalore and Chandigarh set up in 1999 to further strengthen the flexibility of the Sales organisation and for speedier response to the market conditions, have started showing positive results during the year. With a view to expand distribution and increase

penetration in smaller towns, a concerted drive was undertaken to make products affordable and

accessible to consumers. Initiatives taken include more penetrative pricing and smaller packs

covering brands such as EVERYDAY Dairy Whitener, MAGGI Noodles, MILO Chocolate Energy Drink and NESCAFE Instant Coffee. The response has been encouraging.

The Alternative Trade Channel unit created in 1999 undertook initiatives to tap the opportunities for out of home consumption, particularly for instant coffee and chocolate and confectionery and to extend availability of product to nontraditional outlets. The

NESTLE INDIA LTD.

outcome of these initiatives has been encouraging and is being consolidated.

Availability of NESCAFE has been enhanced through an expansion of the vending machine network and new consumption opportunities for Chocolates and Confectionery were identified and developed in areas like railway platforms, college canteens and major events.

On the manpower development front, programmes during the year continued to be focussed on the operational production. front more particularly sales and

To

support

the and

growth

plans

and

distribution the

strategy,

simultaneously

improve

operational efficiency, the thrust on strengthening supply chain continued to receive attention during the year. In addition to consolidating the

NESTLE INDIA LTD.

improvements

made

over

the

last

two

years,

significant progress was recorded in following areas:

a) Reduction in finished goods inventory pipeline to improve freshness of stocks and reduce working capital.

b) Control of distribution costs through innovative measures, despite steep increases in cost of fuel.

c) Sustained improvement in customer service level to improve product availability across all

geographies and channels.

d) Reduction in obsolescence of materials.

5. Technology from Nestle:

The Company benefits from its access to proprietary technology, technical and non technical expertise and the fruits of the extensive centralised Research and Development. The diversified knowledge and

NESTLE INDIA LTD.

expertise

have

contributed

significantly

to

the

operations of your Company over the years. Some of the key areas, which have benefited are:

a) Manufacture of products of truly international quality. Product quality, which encompasses taste, appearance, convenience and overall value for

money, is a critical factor in consumer choice and in a competitive market like India could determine the very survival of the products. The high quality of products of your Company is borne out by the position and image the products enjoy in the market and your Company continuing to be a leading exporter of value added Instant Coffee in the country.

b) Benchmarking of products against competition to achieve an advantage in product quality, for

increasing competitiveness.

NESTLE INDIA LTD.

c) Access to latest technological developments, such as Spearpoint Technology for Cocoa based products implemented during 2000 which would improve product quality and competitiveness and the MUCH technology for instant coffee manufacture implemented during 1999, which would enhance the productivity by increased extraction of coffee solids from coffee beans.

d) Implementation of project for bottled drinking water.

e)

Product

innovation

and

renovation

some

illustrations are MUNCH Crisp wafer biscuit with chocolayer; Nestle Dahi; Nestle Milk (UHT); Junior Foods; NESCAFE Frappe; KITKAT of Milky; newand and

improved

flavours

profiles

bouillons;

relaunch of MAGGI Noodles.

f)

Enhancement

of

skill

and

competence

of

Company personnel due to the training received.

NESTLE INDIA LTD.

g)

Implementation

of

environmentally

sound

business practices.

h) Technical expertise in various forms including Information Technology, which has enabled the business of your Company to grow and sustain.

i) Providing assistance by way of improved technical and quality standards to local manufacturers, who have contract manufacturing arrangements with your Company.

6. Information Technology:

The

Company in

continued the to

to

make

significant of

investments Technology

Information cope with

Services the

area

growing

information needs necessary to manage operations more effectively in a complex supply chain

environment.

NESTLE INDIA LTD.

7. Community Health:

Recognising its responsibility to the community in which it operates, the Company over the years has been taking initiatives in the area of community health at locations around its factories. Some of the initiates taken in the recent past are:

a) Provide Government and village schools with facilities for toilets and hygiene drinking water including deep bore wells, where necessary.

b)

Support

to

health

officials

in

Pulse

Polio

programmes.

c) Sponsorship of treatment of TB patients at clinic run by NGO.

d) Healthcare Programmes with focus being on well being of employees and their families covering

NESTLE INDIA LTD.

vaccination, check up.

awareness

programmes

and

health

The

company

performance

is

much

better

in

comparison to its competitors.

NESTLE INDIA LTD.

QUESTIONNAIRE
Tel.: Personal: Name : Age : Class : School/ college : Tel.:

1. How many Nestle Products Have your consumed so far? 2. How do you like those products? Good Bad

3. Which of these Nestle products do you like? a) Chocolates c) Milk product e) Coffee g) Milkmaid b) Maggi d) Mineral water f) Infant products h) Soups

4. Why do you like the nestle products? It is due to its.

NESTLE INDIA LTD.

Colour

Taste

Packing

/Pack

Size

Advertisement 5. Which brand of Particular product do you like? Specify Brand 6. Do you like the advertisement of Nestle? Yes No the name_____________ Product _______

7. Which advertisement do you like and why? ________________________________________________ ________________________________________________ 8. Do you think some brand ambassador Should come in the advertisement of Nestle? Yes No

9. Whom do you think should endorse the brand Nestle?

NESTLE INDIA LTD.

1. _ 2. _

___________________________________________

___________________________________________

10. What strikes to your mind, when you think "Good Food Good Life" ________________________________________________ 11. Will you switch over to some other brand, if there is a gift/offer with the other brand Yes No

12. Have you tried the new range of Products from Nestle? If yes specify the name. Yes No

13. How do you like the new range of products from other competitors products which are same? ________________________________________________

NESTLE INDIA LTD.

14. Do you think Nestle should come with some new products? If yes specify some name ________________________________________________ 15. Are you satisfied from quality of Nestle

products? Yes No

16. Where you rank Nestle from others? Very Good Bad Good Satisfactory

NESTLE INDIA LTD.

BIBLIOGRAPHY
MARKETING MANAGEMENT: PHILIP KOTTLER

BUSINESS INDIA BUSINESS TIMES

BUSINESS TODAY

Business world

NEWSPAPERS

&

JOURNALS

(TIMES

OF

INDIA,

ECONOMICS TIMES)

IIM LIBRARY (DELHI)