NestléEEEE is one of the world’s largest and most admired consumer foods company.

It has
established a presence in almost every single country and employs over 320,000 people around the
globe. In 1997, then CEO Peter Brabeck committed to becoming the world’s leading nutrition health and
wellness (NHW) company and Nestlé remains true to that goal. Recently, Nestlé, although highly
profitable, has fallen short of its growth and margin targets. In order to increase the likelihood of
achieving these goals we find that Nestlé should revitalize its business strategy. This research paper will,
in light of an analysis of the company and its industry, draw up a number of strategic alternatives Nestlé
may pursue and in particular make one specific strategic recommendation coupled with a three to five
year implementation plan.
SWOT

Strengths:
- 4 Competitive Advantages – extensive product and
brand portfolio; unmatched research and development
capability; unmatched geographic presence; and people,
culture, values, and company attitude (long-term
mindset and short-term action) -2011 Annual Report
- World’s largest food company –balanced sales,
billionaire brands, industry power, large consumer base
-Strong, selective acquisition strategy – eliminate
competitors and expand rapidly
-60/40+ makes products healthier
-#1 in world in sales for infant nutrition, #2 in healthcare
nutrition, and #1 in North America for customized
weight management services
-Industry’s largest R&D network – Nestlé Health Science
SA and Nestlé Institute of Health Sciences in Switzerland
-Largest publisher of nutritional information for scientists
– makes them an attractive employer
Opportunities:
-The NHW strategy yielded lower than
expected profits, so there is a major
opportunity to tinker with this and create
a new strategy
-Consistently rising health concerns
encourage the consumption of health
products
-10 year plan rolled out in 2007 that
includes investing in startups and growth-
phase companies in NHW ($1.5 billion)
-Using R&D to create scientific solutions to
personalize nutrition problems and
chronic diseases
-Vitaflo acquisition provides an entry point
into British market
-10 year, $500 million investment plan and
2 new units: Nestlé Health Science SA and
Nestlé Institute of Health Services, which
provide short and long-term benefits,
respectively
-Blue Ocean between food and pharma
-Partnerships with Hsu Fu Chi and Yinlu
provide entry point into Chinese market
-Investments in Russia, India, and African
and Latin American countries
-Nestlé Health Science’s 3 major
investments, including Prometheus Lab,
Inc.
-Acquisition of Pfizer’s baby food arm
helps Nestlé dominate the infant market

Weaknesses: Threats:
 -Consumer perceptions – Nestlé still viewed as Food &
Beverage company instead of NHW
-Conflicting acquisitions – Nestlé would not purchase
Uncle Toby’s salty and savory snacks, yet purchased
Kraft’s frozen pizzas
-Did not meet long term financial goals set in 2006 for
NHW
-When removing the sale of Alcon, sales were down
~4.5%, so Nestlé appears to look better on paper than in
reality
-Contradictory acquisitions discredit the
NHW strategy and lead to Nestlé having
too broad of a focus
-Possibly becoming too narrow in focusing
efforts towards NHW niche and limiting
consumer base
-Competitors – such as Kraft and Kellogg’s
-Foreign exchange rates providing difficulty
in performing international business
-Various foreign regulations could be
difficult to work with (i.e. FDA,
international equivalents, as each has
different standards, making uniformity
difficult to achieve
-Recent attention from anti-trust bodies

Porter’s Five Forces industry analysis

Competitive Rivalry within Industry
Nestlé has a strong brand name within its industry. It is this strong brand name which allows
Nestlé to address specific age groups and customer profiles and gives it a competitive advantage which
allows for a steady flow of revenue. It is the revenue generated from Nestlé’s brand name which allows
it to continue to grow and control its industry. Nestlé’s greatest strength is its ability to create brands
with distinct positioning within their markets.
Another key strength Nestlé possesses which gives it a competitive advantage in its industry is its
ability to customize products so that they are best suited to sell in their local markets. For example
Nestlé’s confectionary product sold in the U.K. is called Rolo while the same product is sold in Russia
under the name Rossyia. This customization creates brand loyalty in local markets giving Nestlé’s brand
names a distinct advantage over their competitors. In conclusion the strong brand name of Nestlé is the
backbone of the competitive advantage the company enjoys in most of its major industries, which means
competitive rivalry is weak.
Bargaining Power of Suppliers
The bargaining power of suppliers is crucial to the survival of any major corporation. For a
company like Nestlé this force is extremely important to the overall success of the company. Nestlé is
not a supplier. Instead, it is a brand producer so it relies on other suppliers for the raw materials
necessary to create the brands which make it so successful. If another company was ever able to take
away Nestlé’s suppliers or find other suppliers able to supply raw materials cheaper than those available
to Nestlé, then it would be able to generate a comparable product at a cheaper price. In this case
Nestlé’s strong brand name would mean nothing because the competition would be selling the same
product as Nestlé at a cheaper price. The bargaining power of supplier is a chief concern for all major
corporations because it is the one aspect of their industry that they cannot control. It is in the best
interest of any company to have an amiable relationship with their supplier. Nestlé does this through its
strong brand name. It is in the best interest of any supplier to try to supply the top company in any
market because that company is gaining the most profit and in turn, buying the most raw materials.
Therefore, bargaining power of suppliers is moderate.
Bargaining power of customers

Customers have a large influence on the success of a corporation. It is the customers who buy the
products and as a result, provide the revenue for the corporation to continue operate and grow. An
important concern of any corporation is keeping their customer base satisfied. Nestlé does an excellent
job of this by targeting local markets with specific brand names. Nestlé creates a sense of customer
loyalty to their brand names which ensures that they are able to keep a strong, loyal customer base.
Another aspect of maintaining a strong customer base is to keep a wholesome corporate image. If the
customers feel there are unethical business practices going on behind closed doors then it possible that
they will look somewhere else for the products they need. Nestlé has had some issues with this in the
past. They have repeatedly faced allegations of using child labor in order to obtain cocoa on the Western
coast of Africa. If Nestlé alienates its customer base through unethical practices then the strength of
their brand name will cease to serve its purpose. Therefore, because of this relationship, the bargaining
power of customers is quite high.
Threat of new entrants
The entry of new firms, especially private ones, must be an area of concern for Nestlé in the
future. It is an issue they will need to address in a world that is becoming more price conscious. If they
are unable to compete with the prices private firms are able to offer then there is more incentive for
even more private firms to enter the market sector. As the number of firms increase, Nestlé will see its
profits slowly diminish as a result of the increased competition. Although the threat is minimal now, the
opportunity for more private firms to enter the market and make a significant profit exists. It is
important that Nestlé address this concern now before they see a serious loss in profit.
Threat of substitute products

The threat of substitute products is closely tied with the threat of new entrants. The key to reducing the
amount of readily available substitutes is keep the amount of new entrants in a market to a minimum.
Nestlé does this through brand loyalty and creating products specifically tailored to each individual
consumer in each individual market. It is important to remember that if a company is able create the
highest quality product in the most efficient manner they will have an advantage over their competition
regardless of how many substitutes exist. This is an area where Nestlé excels. Two of Nestlé’s greatest
strengths are its ability to customize its products to meet the needs of specific markets and strong
management initiatives to work towards maximum efficiency. This is one of many aspects of Nestlé
which has allowed it to enjoy success for so many years and which means that the threat of substitutes is
low.
Key Issues

 Transition from a Food and Beverage company to a NHW company

o Are they losing business by leaving the traditional Food and Beverage industry?

o Nestlé wanted to use a differentiation strategy to drive high profit margins

 Credibility - Have a portfolio that’s not fully in NHW

o Offering legitimate nutrition options while still monitoring price/profit - inherent conflict
as these are more expensive to produce.
  NHW aspect of products accounts for only 12% of revenue

 Succession - Bulcke seems conservative. What if his vision diverges from Brabek’s?

 Numbers are reported in Swiss Franc, so they are inflated when translated to dollars, euro

 Acquisition strategy - How is culture affected?

 Research & Development -

o Nestlé owns the industry’s largest R&D network

o Is the largest publisher of nutritional information for scientists

o They created the Nestlé Research Center in Switzerland - partnered with universities and
scientists - closely resembled a pharmaceutical model

 Nestlé still invested in non-health foods and acquired Kraft’s frozen pizza business in 2010 - hurts
their efforts to become ‘the’ NHW company

o Very contradictory of their previous strategy - decline deal with PepsiCo, excluded Uncle
Toby’s salty and savory snack portfolio from Uncle Toby’s acquisition

o Bulcke redefined their strategy, claiming Nestlé wants to educate people about health
consumption and offer healthier foods, not simply health-food

 Mid-2010: Nutrition business missed financial targets that were set in 2006

o Excluding sale of Alcon, sales were down by 4.8%

o Should they change their goal or change their approach to reaching the goal?

 Vitaflo acquisition, sold Alcon

 2 new units: Nestlé Health Science SA and Nestlé Institute of Health Sciences

o Institute aims at Long Term; Health Science SA aims at Short Term

 Nestlé needs to increase brand recognition. Their billionaire brands are huge, but the fact that
Nestlé owns so many is often lost on consumers, which limits Nestlé’s credibility

Strategic Alternatives
Acquire GNC/Kashi type company

One strategic option is for Nestlé to pursue its NHW growth through acquisitions of companies in health
food or supplement niches to reinforce their brand strength. One acquisition opportunity that has grown
dominant within its particular niche is GNC Holdings Inc., which is described as “a global specialty retailer
of health and wellness products, including vitamins, minerals and herbal supplements products, sports
nutrition products and diet products.”[i] Over the past three years, GNC has seen modest growth in sales
(from 3.03% in ’09 to 13.72% in ’11)[ii] and net income (from 27.20% in ’09 to 37.04% in ’11)[iii], and the
Nutrition Business Journal's Supplement Business Report 2011, projects GNC’s industry to grow steadily
through 2017[iv].
Another option for acquisition that steers more towards a health food producer rather than a health and
wellness provider could be Kashi brand. Kashi, acquired by Kellogg Company in 2000, specializes in a
wide variety of foods and advertises their products as containing a blend of seven whole grains,
emphasizing high protein and fiber content[v]. With a company like Kashi, that strives for nutritional,
health, and wellness and has tapped a market that is more committed to healthy living, Nestlé could
reinforce its NHW initiative while gaining credibility within the health foods market.

However, acquisitions of any kind may not be feasible for Nestlé at the moment. With Nestlé’s
acquisition of Pfizer, they have been downgraded by the credit agencies to AA, which means that a major
acquisition of GNC or Kashi could put them in jeopardy of be downgraded again.

Succession Plan

We believe that Brabeck and Bulcke’s strategic vision and leadership has played a key role in Nestlé
success over the past decade and a half. This year, however, as the two men turn 68, and 58 respectively
concerns arise regarding sustaining Nestlé’s strategy for the indefinite future. Considering the potential
consequences of a disorderly succession to the roles of CEO and Chairman may have upon the firm's
strategy, reputation and investors, we find it prudent that Nestlé considers instituting a clear succession
plan.

Nestlé should start by identifying a number of key internal candidates for accession, but without singling
out a single person. This avoids the risk of having this candidate ‘pinched’ or demotivating other higher
performing candidates for the job. Also, potential outside candidates should be identified to mitigate
conformity bias. Next, a succession plan consisting of the following elements should be instituted: an
executive training program for the potential candidates, extensive collaboration between the current
CEO, Chairman and the potential candidates in order to further strengthen the candidates’ sense of
strategic direction and imprint the current leadership culture upon them and clear communication to
investors that a succession plan exists.

Although instituting a succession plan is of importance to the long term stability and success of Nestlé
we believe there are other measures the company should first consider and focus its attention to as
these have a greater ability to create sustained long term value for stakeholders.
Social awareness

Nestlé is a large, globally recognized brand and because of this, they impact millions of people’s lives. Its
leadership has taken to heart the responsibility of social awareness, and have made numerous initiatives
to create shared value. Nestlé uses science based approaches to improve nutrition for all people and
address deficiency in vitamins and minerals. They also have initiatives that address water scarcity, rural
development, environmental sustainability, and compliance with national and international laws and
regulations. All of these approaches weave together to create a company that believes in giving back. In
order to gain the most from these initiatives, Nestlé must make a stronger effort to publicize these
efforts, which will paint Nestlé in a very positive light. While this is a strong strategy, we deem that
Nestlé currently makes sufficient efforts in this area, and other strategies may be more beneficial to
growing the brand moving forward.

Nestlé for Life Plan

As a global brand, Nestlé is able to make an impact on millions of lives daily. In order to make the most of
this, Nestlé should roll out a whole new approach to their business strategy called Nestlé for Life. This
plan would consist of altering four areas of Nestlé’s business strategy: Operations, Acquisitions, R&D, and
Marketing. Better aligning operations will allow for a cohesive culture to emerge that guides the
company towards its goals. Allocating resources toward acquisitions will help fill gaps in Nestlé’s product
line and help branch out to different age groups. An increase in R&D will help Nestlé remain at the
forefront of the health food industry and will create more opportunities for the future. The marketing
aspect will make Nestlé’s NHW approach much more visible to the public and will help customers
associate Nestlé with a health food brand.
Strategic Recommendations
Nestlé for Life

“Nestlé for Life” is a tangible overarching strategy aimed at taking the current NHW products to the next
level in terms of quality, internal consistency and consumer awareness. Historically, Nestlé would simply
release their NHW products without any specific strategy linking the products. In order to push these
nutritious and healthy products to the forefront of consumers’ minds, we recommend Nestlé to pursue a
branding approach that allows customers to clearly appreciate the added value these products have to
the challenges of maintaining a healthy lifestyle. Whereas it is crucial that Nestlé maintain their
commitment to emerging markets, Out-Of-Home leadership, and premiumisation, the Nestlé for Life
design is the next step in the evolution of its NHW strategy. The Nestlé for life model establishes internal
focus and commitment to providing customers with nutritious and healthy food options throughout their
entire lives. The ultimate goal is to establish Nestlé as the go-to-brand for health conscious consumers
through the provision of a complete array of nutritious products easily accessible at affordable prices.

The Nestlé for Life strategy has the power to be exceptionally effective due to its strategic fit with the
other strategies Nestlé is currently employing to drive growth and profit. For example, the Out-Of-Home
consumption strategy seeks to make quality products available to the consumer whether they are on the
road, at school, or in a hospital. Through combining the Out-Of-Home and Nestlé for Life strategies
Nestlé will seek to make high quality, nutritious, healthy food available when away from home. Further,
with its focus on emerging markets Nestlé will be in a position to offer healthy and tasty diet options for
billions of consumers and inspire consumer trust and brand loyalty all around the world.
Marketing
Nestlé will market its NHW-Pharma products - the emerging line of healthy foods designed to limit
chronic diseases like diabetes and Alzheimer’s - to customers as part of the “Nestlé for Life” series, a
rebranding strategy for all NHW products. Due to NHW failing to meet profit goals set in 2006, we
thought it prudent to rebrand the products as a part of a larger movement to create sustainable healthy
lifestyles through daily diets. All “Nestlé for Life” products will be given a blue badge containing the
words, “Nestlé for Life,” and a brief, paragraph description on the back of the packaging explaining the
new series of Nestlé health foods. The blue badge will remain there for the entire life of the series, while
the paragraph description will remain there until customer surveys show that a majority of consumers
understand “Nestlé for Life.” While this new strategy will be applied broadly to all NHW products,
customers will have the option to learn about and choose products that target their specific needs. On
Nestlé’s website, in addition to the “Nestlé Family” page, we will create a page similar to that of One-A-
Day Vitamins. One-A-Day’s website[vi] gives customers the option to choose their age, gender, country,
and specific needs (for instance, muscular health) and then recommends a specific product to the
customer based on their selections. The reason customers should select a country is because Nestlé’s
products are differentiated in different parts of the world, depending on customer tastes. While “Nestlé
for Life” is a broad product base designed simply to introduce customers to Nestlé’s NHW products, we
believe that the option to target specific needs and personalize the “Nestlé for Life” experience will go a
long way towards increasing the effectiveness of and customer loyalty with our new branding strategy.

Under the new marketing strategy, Nestlé will use its industry leading research and development
capabilities to test all competing products, as well as their own, and compare them in all nutritional
categories. If Nestlé’s products are found to be healthier than their competitors’ in a majority of
categories, they will advertise this by marking the product’s packaging with a noticeable green badge
containing the words “Healthiest Choice” to designate it to consumers. This badge will be in addition to
the blue, “Nestlé for Life” badge, and will have a paragraph on the packaging that explains both badges,
as well as the nutritional compass which already exists. Recently, some companies have found that
their healthy product choices are pigeonholing consumers by lacking gender neutrality. Diet Dr. Pepper,
after failing to attract significant attention to its male consumers, created Dr. Pepper Ten[vii], which
accomplishes essentially the same product goals as Diet Dr. Pepper, but features the slogan “It’s Not For
Women” in order to appeal to the male audience. Weight Watchers has encountered a similar problem,
in that a bulk of their users is women. Instead of creating new products, however, they have changed
their marketing strategy by employing Charles Barkley, a former professional basketball player, to be
their spokesperson and generate more male users via their new slogan “Lose Like A Man.[viii]” Should
Nestlé’s use of green and blue - two colors typically recognized as gender neutral - fail to quell the
potential for gender biases in the future, we recommend first utilizing the Weight Watchers approach
and trying out a spokesperson of the consumer-lagging gender. In the event that this approach fails, the
next step would be to use the gender differentiating approach utilized by Dr. Pepper.
Nestlé’s acquisitions of both Gerber and Pfizer’s baby food business are significant steps towards
establishing dominance in the infant market. Nestlé still has a lot of work to do, however, in establishing
dominance for NHW products in older age groups. We propose that Nestlé creates partnerships with
universities around the globe in order to increase its visibility with that audience. Similarly to how
universities often have loyalties to either Coke or Pepsi beverages, Nestlé should push to establish brand
loyalty by getting their products into on-campus stores. Furthermore, much like how Deloitte sponsors
case competitions for business students at Cornell, we believe that Nestlé should sponsor food research
and nutrition competitions for food science and nutrition majors at top universities. Doing so not only
establishes brand awareness for collegiate consumers, but also will pay dividends with regards to human
capital. By showing their expertise and abilities in the NHW industry to top college students, Nestlé has
the potential to become the “go to” company for students aspiring to have a career in nutrition, food
science, human development, or related work areas. These competitions are inexpensive and provide
both students and Nestlé recruiters the platform with which to establish connections. The costs for such
a competition are low, given the potential for high returns in the form of human capital and brand
awareness.

For implementing the “Nestlé for Life” strategy we propose that Nestlé takes the remainder of 2012 to
test industry products in order to determine which NHW products deserve a green label as well as the
blue label. Nestlé should promote the series for approximately three months leading up to a grand
campaign launch, which should start January 1, 2013, to coincide with new year’s resolutions and the
fresh start associated with a new year. We recommend that Nestlé advertises across the internet, high
traffic television stations such as news channels, sports channels, the food network, and have articles in
high profile magazines such as Men’s Health and Cosmopolitan, as well as comparable foreign
magazines. Furthermore, on-campus competitions should begin in the spring of 2015 - providing Nestlé
with two years to grow “Nestlé for Life” before launching on college campuses. A red flag with this
strategy is the potential for competitors to create a healthier product than a Nestlé green badge product.
In the event that this happens, we propose that Nestlé adopt a policy where researchers have until the
end of the fiscal year to either create a product that reclaims the position as healthiest in the industry, or
repackage the product in such a way that it is not blatantly obvious to the customer that the green badge
is no longer present.
Acquisition Strategy
In relation to the Nestlé for Life strategy, Nestlé will need to extend its examination of potential
gaps in its product portfolio and identify potential acquisition targets as a way of filling such gaps.
However, due to its current bid to acquire Pfizer’s Global Infant Nutrition business for $11.85 billion, we
believe Nestlé should avoid an aggressive acquisition strategy until its capital structure can better sustain
it. We find that maintaining its current AA rating must be a priority and refraining from major
acquisitions in the next five years is key to this goal.
Going along this line, Nestlé should critically look at small, venture companies that have a
progressive product offering a great potential fit with the NHW line. In this case, the small companies
can be incorporated to take advantage of Nestlé’s large international distribution network, already
existing economies of scale, and mass advertising budget to increase their profitability. Most of these
small-scale acquisitions would be focused on purchasing the new nutrition-technology that these start-
up ventures have discovered and processing them through the Nestlé Institute of Health Science.
Further, participating in early funding for promising ventures in order to obtain warrants on the venture
is a cost effective way to increase exposure to such products.
An example of putting this small scale acquisition strategy into action would the purchase of
Qivana, a small network marketing company. Qivana is a new company that offers customers a mix of
natural products designed to aid in weight loss, boost immune systems, naturally enhance energy, and
improve the vascular system. It would cost Nestlé an estimated $20 million to purchase Qivana and
process this product group through their Institute of Health Science. This would give Nestlé access to
potentially invaluable new technology. Secondly Nestlé can match Qivana products with it current
offering to adults as a simple means of losing weight or maintaining health during the hectic work
schedule of most middle age people. Nestlé has already identified the goal of investing $1.5 billion in 10
years since 2007 in entrepreneurial ventures that may have discovered new blockbuster products but
lack the resources to take their products to the next step. With this funding, Nestlé will easily be able to
fund this venture acquisition approach and can focus on increasing the nutritional technology in their
current and future products.

Research & Development

In order to move “Nestlé for Life” strategy forward and keep Nestlé at the forefront of the NHW industry,
strategic and sustained research and development is a necessity. Currently, Nestlé is one of the
worldwide leaders in nutrition research. They have a annual average investment of nearly $2 billion,
partnerships with 1,500 universities and more than 100,000 scientists across suppliers and governments
to develop new nutrition technology.[ix] In addition, the crown jewel of Nestlé’s R&D efforts is the Nestlé
Institute of Health Sciences, whose mission is to “create a world-leading scientific base for health science
nutrition.” We recognize that such ambitious and well-funded research is key to the success of the
“Nestlé for Life” initiative.

In order to promote the initiative and ensure wider adoption, Nestlé should target the different age
groups that “Nestlé for Life” markets to. By researching consumer preferences as well as dietary needs,
the two could be merged to create delicious products that contain nutrients a person might be naturally
deficient in. For example, average adolescents are deficient in Calcium.[x] So, fortifying foods must be
considered while balancing the risks of overexposure.

There is already a great deal of this research that goes into infant nutrition, but expanding it to cover all
age groups is crucial to the success of the Nestlé for Life strategy. In September 2010, Nestlé pledged to
invest $500 million to create food and beverages with health benefits over the next ten years.
[xi] Therefore, Nestlé already has the funding it needs to make this transition happen. As there are
already branches of Nestlé research that focus on infant nutrition and ageing, the funding should be
distributed to where half goes towards middle age and adolescence research and development. The
Nestlé Institute of Health Sciences will be able to develop a niche for this research that will undoubtedly
grow with the success of this initiative.

Furthermore, Nestlé should also use its R&D capabilities to research the nutritional benefits of
competitors’ products. If researchers find that a Nestlé good is deemed “healthier,” then it could be
marked with a distinct label that is laid out further in our marketing strategy. Also, this could help
identify the specific products that are lagging behind. Those products would then be given priority to
undergo the 60/40+ process. Each year, about 20% of products for sale undergo 60/40+ testing and
improvement. It is an intensive process, so strategic research would target the areas where testing would
be most beneficial. This would lend to an aggressive strategy that focuses on keeping Nestlé on pace
with or one step ahead of its competition.

Moving forward, we recommend that Nestlé implement these R&D goals over the course of the
next six months. The changes are not drastic ones that alter the functioning of the business, so we feel
there will not be any problems in slowly phasing in the new strategies.

Operations
“We [Nestlé] recognise that trust is earned over a long period of time by consistently delivering on our
promises.”

Nestlé’s current strategy and the success of the Nestlé for Life initiative are highly contingent upon
building and maintaining trust and confidence with consumers. Nestlé as a firm is faced with choices that
impact its reputation every day. Inherent in its business model is the conflict between profitability and
delivering high quality, healthy food. Nestlé can, at the expense of its own long-term success, reduce the
quality of its products for a short term, windfall profit. Further, over half of Nestlé’s current revenue is
originated in parts of the business that, strictly speaking, cannot be defined as healthy products such as
pizza and ice cream.

We find that the first step to handle these conflicts of interest is to acknowledge their existence.
Secondly, we propose that Nestlé review all of its products by the 60/40+ program within a five-year
cycle. This will ensure that all products are as healthy as possible by incorporating the latest R&D
acquired knowledge. Further, this will create awareness among customers, as well as internally of
Nestlé’s commitment to producing the healthiest foods possible within all product categories. It will also
support the Nestlé for Life strategy by helping determine what products meet the high standards
necessary to participate under this umbrella.

A related concern is the possible confusion that Nestlé’s broad product portfolio may cause. Nestlé must
undertake every effort to convey the message that their products represent the healthiest alternative,
relative to similar products on the market. As a consequence of this we will present further
recommendations with regards to the packaging of Nestlé products.

Beyond the aforementioned strengthening of the 60/40+ program and new packaging, we see a need to
create internal awareness among all 320,000 employees regarding Nestlé’s commitment to NHW and the
Nestlé for Life strategy. Firstly, the board of directors should identify and communicate throughout the
organization, annual and five-year goals that are clearly measurable and impacted by internal operations.
Such goals must also be realistic, with an estimated 80% chance of being achievable on time. Also, they
should not be tied too closely to profits in order to escape potentially damaging short-termism. Should
targets not be met, a thorough evaluation should be conducted, preferably in cooperation with external
advisors. Secondly, top management should regularly emphasize its belief in an “it can be done” attitude
where people take responsibility and the needs of consumers are tailored to. Internal memorandums
and actions to follow up on words are good ways to spread such awareness. Lastly, we propose that the
CEO speaks to all employees through an internal video to be released monthly, lasting 5-7 minutes. Here,
he should address progress towards the annual and five-year goals, any challenges the company is
facing, and praise specific, lower level alternatives identified by HR or managers, pointing out their
specific contributions to Nestlé’s future success. Should the situation merit, such releases may be made
more frequently and on an ad hoc basis.
Strategic Implementation

In each subset of our strategic recommendation, we have already included the proposed timeline for
instituting each aspect. It should be a fairly seamless transition, and one we are confident Nestlé can
execute superbly. That being said, before moving forward, looking at the financial feasibility of the
strategy is a must. There is not too much of a financial overhauling necessary to make the “Nestlé for
Life” plan work. For Operations, the changes are just a cultural shift that requires strong internal
leadership. In regards to Acquisitions, the $1.5 billion that has already been pledged through to 2017 is
enough to fund that part of the recommendation. As for R&D, there is just a subtle change in the
direction of research. There is already $500 million allocated to research through 2020, and we feel like
that is sufficient to start. The challenge is more reallocating resources rather than adding to them.
Finally, and most costly is advertising. Costs associated with that will be: designing the new webpage
($1200-$1500), the research competition (estimated $2.5 million for promoting the competition
worldwide), and print and television advertisements (average cost of a commercial is $130,000).[xii] The
cost of adding the colored tabs to the packaging is negligible. Currently, Nestlé’s annual marketing
budget is a substantial $2.5 billion, so an additional $30 million plus a reallocation of funds would be
suitable.[xiii]

Despite the costs, the benefits that “Nestlé for Life” offers are far more significant. In America, 45
million people diet each year,[xiv] and the number one New Year’s resolution is to eat healthier.
[xv] Additionally, the health craze is international, as 1 in 4 adults in the UK try dieting.[xvi] Americans
spend $1-$2 billion each year on weight-loss programs, so informing the public about the health benefits
of the “Nestlé for Life” plan in such a way could tap into that market.[xvii] In taking the U.S. as an
example: Nestlé is projected to gain 5-7% of this dieting niche within 2 years, bringing in an additional 3
million customers and $90 million in sales. That does not include the increase in sales that will come
from normal, health-conscious consumers as well as those that spontaneously buy the products because
of taste. In addition, this is just a projection for the U.S. While the health craze is arguably biggest there,
the Nestlé for Life strategy will position Nestlé to take advantage of its core competencies in all markets.
Also, on top of the monetary benefits, the “Nestlé for Life” plan will build a strong culture within the
company, lend more credibility and visibility to Nestlé’s NHW arm, ensure sustainability and longevity
while making Nestlé the most revered player in the NHW industry. The tremendous upside will continue
to take Nestlé above and beyond all competition in every aspect of the business.
Conslusion
The building blocks of Nestlé’s NHW transition, such as 60/40+ and the nutritional compass, were
a good start, however, “Nestlé for Life” will make the transformation complete and truly allow Nestlé to
fulfill their goal of becoming the world’s leading NHW company. Nestlé’s key issues moving forward do
not revolve so much around strategic vision as they do with strategic implementation. By focusing their
efforts across four main areas of business: operations, R&D, acquisitions, and marketing, Nestlé is
putting themselves into optimal position to implement the necessary changes and lead the evolution of
not only their own company, but the food industry itself.