Nestlé Case Study

1. 1. Nestlé Case Study Lauren and Florian

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