2. 2. Mission“To provide consumers withthe best tasting, mostnutritious choices in a widerange of food and beveragecategories and eatingoccasions, from morning tonight.” 3. 3. Nestlé Overview∗ Nestlé S.A. is a Swiss company, established in 1905∗ The company started with condensed milk and infant formula∗ Now Nestlé sells baby food, bottled water, cereal, chocolate and other confections, frozen food, dairy, drinks, food service, health and sports nutrition, pet care, and weight management products 4. 4. Brief Summary of Case∗ Nestlé was in a good position, but needed to grow internally∗ The company was able to increase its competitive advantage by continuing to innovate or renovate products, acquire firms that fit its brand, and divest itself of lines that were not contributing to earnings 5. 5. Core Competencies as Illustrated in the Case∗ Global market share and brand recognition∗ Innovation and market predictions∗ Ability to acquire new firms and divest itself of unprofitable lines in order to strengthen branding and earnings∗ Successful programs to increase efficiency 6. 6. SWOT Analysis Based on Case Facts∗ Strengths: Diversified global food company, scale and market reach, knowledge of global markets, greatly improved operating efficiency, R&D and innovation∗ Weaknesses: In the past the firm’s revenue was 70% in markets with limited potential for growth, weak profitability due to some of its acquisitions, some low-margin products∗ Opportunities: Goal of 4% new organic internal growth, improved efficiency, health food industry, maintain momentum∗ Threats: Fierce competition, food-producing rivals had improved operating efficiency, possible brand overextension 7. 7. Developments Since 2007∗ Current CEO is Paul Bulcke∗ The company continued to acquire and divest itself of product lines and brands∗ Global economic downturn∗ Invests in countries where raw materials are produced∗ Increased emphasis on environmental awareness and free trade and sustainable farming techniques in developing countries 8. 8. Nestlé’s Current Position∗ Strong sales, operating cash flow, and returns to shareholders∗ Continued momentum, but with volatile currency values and raw material prices∗ Consumer confidence shaky, but balanced by emerging markets∗ 2011 goal of 5-6% organic growth and EBIT margin improvement∗ Focus on functional foods with higher margin, which means increased spending in R&D 9. 9. Competitive Advantages and Growth DriversNestlé’s growth drivers are:∗Nutrition, health, and wellness∗Emerging markets∗Out-of-home consumption∗PremiumizationCompetitive Advantages 10. 10. Financial Information∗ The Group achieved organic growth of 6.2% in 2010∗ Sales Group 2010: CHF109.7 bn (88.8€ bn)∗ EBIT 2010: CHF 16.2 bn (13.1 € bn)∗ Net profit 2010: CHF 34.2 bn (27,7 € bn)∗ Dividend in 2010 was CHF 1.85 (1.49 €) per share to shareholders (an increase of 15.6% compared to 2009) 11. 11. Recommendations General∗ Continued focus on sales in emerging markets such Asia, Africa, and Latin America∗ Perhaps raw materials can be sourced from some of these emerging markets, provided there is stability∗ Follow through with constant streamlining of operating processes to increase efficiency∗ Increased advertising: due to Nestlés strong position it can afford to advertise when their competitors might not be able to, at the same level 12. 12. Recommendations Specific∗ Continue to strengthen presence in frozen and convenience food industry, as well as the area between health food and pharmaceuticals∗ Strengthen the connection to Nestlé’s commitment to ‘green’ movement and sustainable farming to brands∗ Tighten up brand cohesion; may be necessary to continue to divest product lines that are not a good fit for the company 13. 13. Conclusion∗ Through smart strategic management decisions Nestle succeeded and became a multinational∗ Today, Nestle is still the largest food and nutrition company in the world in terms of sales (#42 Fortunes in 2010) 14. 14. Sources∗ Course text’s Nestle case∗ www.nestle.com∗ Nestle 2010 Annual Report∗ http://www.economist.com/node/14744982∗ www.hoovers.com