Introduction:

Nescafe, being a product of a famous brand nestle have been successful in capturing a high
market share of instant coffee. The word Nescafe is actually the portmanteau of two words that
are “Nestle” and “café”. Max Mergenthaler along with his team members had worked hard for
almost seven years to make coffee powder. On April 1, 1930 for the first time in Switzerland,
they succeeded. It was launched in the United States with a brand name known as Taster’s
Choice Nescafe. However, the brand name was once again changed and was then known as
Nescafe Taster Choice.

Marketing Structure:

Marketing Strategy:

Nestle is one of those products that is considered to be people and brand oriented rather than
being system oriented. Their marketing strategy is designed in a way that gives importance to
the needs and lifestyles of their consumers. The product is of high quality they also try to
improve their pricing strategy and distribution networks. Along with all these priorities they
are able to generate annual profits. Nestle Nescafe has been able to satisfy its customers by
providing them with products of good quality. This is given intense value. Nescafe seeks to
have loyal customers for which they renovate and innovate their products. Nestle prefers to
have increased flexibility in its business for which it has become decentralized. To gain the
satisfaction of its customers it involves itself in improving its activities along with segmenting
its market, targeting different group of customers and positioning. The market of coffee is
intense around the world. Out of 73% of the instant coffee market nestle has been able to
occupy around 72%. This shows the brand loyalty and their marketing strategy that Nescafe
adopts around the world.

The three vital elements on which the marketing strategy of Nescafe is dependent on is shown
by the following formulation:

- Consumer
- Competition
- Quality

The discussion of how, when and where to compete is considered less important for Nescafe
than quality that they produce to satisfy their consumer’s wants. This is a part of their effective
marketing strategy.
Target Market:
The company is mainly targeting the class of consumers that are socio-economic. Those people
who accept that Nestle provides products that are of good quality are its potential consumers.
However, the prices of its products are not very low, and therefore, not everyone can afford it.
Following is a strategy that they use to choose the market that they plan to target:

- Quality realization
- Education
- Income level

Brand Positioning Strategy:

- The composition of the product

- The distinguishing position
- Being concerned about the health of its consumers
- Combination of taste with quality

SWOT Analysis:

Strengths:

 Strong brand name

 Diversified product
 Strong marketing campaigns
 Strong financial position
 Good quality control

Weakness:

 Nescafe is reliant on a mass market; this can cause problems as they try to market
their products where there is a need for premium quality at an acceptable price
 There is a customer bias against most of Nescafe’s products as the majority contain
caffeine which can create a bad image for the company as they try to create a healthy
image
 In recent years Nescafe created a bad ethical image as they target young people with
their caffeine based drinks, this has questioned their ethical beliefs by the consumer
Opportunities:

 Highlight health benefits of coffee

 Expand the business to the rural areas
 Launch premium coffee products for some market e.g. Russia

Threats:

 Competitors in the global market

 Coffee’s bad effect on health

Sources of Communication:

Online marketing and social media:

At the Global level, the best promotional channel are the online and digital channel. The
creation of online communities and online content is the perfect way to bring people together.
A good strategy is the launch of a viral hashtag in Instagram and Twitter.

#MorningAccent: people can take pictures with a red Nescafé cup and post it with the
respective hashtag. The best pictures and the most liked one can win a prize.
Q2. Demographics affecting the industry:

The demographic environment would be very important to Nescafe as it shows who exactly
makes up the total market but also who is in the coffee market showing details about age
structure and diversity within the market. Nescafe’s marketers would track their market very
closely as they will study trends and try to predict change in the market so that they can come
up with solutions for problems before they arise in the market to ensure they act quicker than
competitors, also known as being proactive. For example before the majority of food
Production Company’s introduced themselves into the fair trade sector of the market, Nescafe
were already selling fair trade produce. They recognised that the market wanted coffee where
everyone was paid on a fair basis. So when a customer buys Nescafe coffee, they are satisfied
with the level and are ensured that the coffee they buy has been produced and sold fairly
allowing the customers to have a clear conscience.

Economic:

This consists of the factors that affect spending patterns and purchasing power. The marketers
at Nescafe must pay a lot of attention to the market to identify purchasing patterns to identify
how the market actually buys their products and possible reactions to future products. The
marketers can classify the market into sub categories depending on their purchasing power.
They would identify what price they can charge for their products and who they can aim the
product at, known as target market, there is no point aiming a premium priced product at lower
class people within the market as they wouldn’t have the buying power to purchase it. An
example of this would be the Nespresso range. This range consists of premium priced quality
coffee and coffee machines that range from €100 to €500 with the pods/coffee selling at 69cent
each. They identified that this would be a premium product that not all of their market would
be able to afford, but to actually make sales they would position their product in prestigious
stores around the world due to the fact that the people who shop there.

Technology:

Technology is changing every day it’s the most dramatic force that can shape an organisation.
Every year a company must update itself to keep up with the competition; if the company fails
to do so then they will fall behind. Technology enables us to work incredibly faster than ever
before; however technology costs a lot of money to implement into the company and the cost
of training the employees will only make the costs go up. Nescafe is now able to get orders
from anywhere around the world, from this they can produce and transport their product
anywhere in a matter of days, this enables them to create sales much faster than ever before,
maximising profits and produce

Political:
The political environment consists of laws, rules, regulations, government agencies and
pressure groups which can limit the activities of a company. The Brazilian government
introduced new laws to protect the Amazon rainforest, before these laws were implemented
Nestle had plans to cut down a section of the rainforest which had perfect conditions to grow
coffee, they were not allowed to do so as their plans were rejected on the grounds that the
region was now protected. This could have severe consequences for the company as they
wanted to gain a greater market share and produce more sales and profit. Nescafe now had to
come up with another plan after spending so much time and money. These laws are a huge
implications for Nestle as they depend so much on regions that are now becoming rarer to find
and harder to get permission to do anything on them.
Cultural:
People all over the world grow up in different was and demand different things than others
might from a different region. Peoples values, perceptions, preferences and behaviours are all
shaped by the location in which the live and grow up in. People may view an organisation
different to others in a different region depending how the organisation affects them. For
example the people in the western world believed that farmers who work for Nestle produce
the crops may have had a negative view of the organisation before as they believed the farmers
had to work in poor conditions with minimal pay whereas the actual farmers liked working for
them as they worked for a fair trade company which treated the employees in the correct way
giving them fair wages and conditions to work in. People in the western world automatically
presume that a growing county would have poor working conditions just because of its location
which is why Nestle now promote the fact that they are now a fair trade company