EFFECT OF BRANDING ON CONSUMER PURCHASE

DECISION OF NESTLE

1.1 INTRODUCTION

The processed foods sector, which currently accounts for less than
2% of total food consumption in the country, is slated to grow at a
fast pace. The Indian Government has identified Food Processing
as a high potential industry and has been creating a policy
environment conducive to its growth. Historically, the policy
framework favored small and unorganized players while the
MNC players were restricted from adding capacities. This led to
the mushrooming of a vast unorganized sector. Large players with
strong marketing network and brand equity were forced to source
from third party producers. During the last few years, however,
several food products have been de-reserved from small-scale
sector. MNC’s as well as domestic players have made aggressive
investments in the sector. Quantitative restrictions on import of
several food products have been lifted, leading to greater
availability of imported products. MNC’s are able to offer a wider
product range, without the need to establish a manufacturing base.
Nestle is considered to be one among them.

Nestle India Ltd, 51% subsidiary of Nestle SA, is among the

leading branded food player in the country. It has a broad
based presence in the foods sector with leading market shares
in instant coffee, infant foods, milk products and noodles. It
has also strengthened its presence in chocolates,
confectioneries and other semi processed food products
during the last few years. The company has launched Dairy
Products like UHT Milk, Butter and Curd and also ventured
into the mineral water segment in 2001. Nestle’s leading
brands include Cerelac, Nestum, Nescafe, Maggie, Kitkat, Munch
and Pure Life.

1.2 OBJECTIVES OF THE PRESENT STUDY

Following are the basic objective of the current study.
1. To make a study of various developmental initiatives
undertaken by the company.

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 2. To determine the profitability position of the Company.
3. To analyze the various timely changes in the financial
position.
4. To have some idea about the company.
1.3 SCOPE OF THE STUDY
The scope of the project “financial Statement Analysis of Nestlé “is
not very vast. It is to some extent limited. This project contains
mainly the information of three year.
 Profit & Loss account.
 Analysis and interpretation of profit and loss account.
 Balance sheet.
 Analysis and interpretation of Balance Sheet.
Though the project has been designed to give the reader a true,
complete picture and draw a satisfactory conclusion, any lacuna,
flaw and defect should be pardoned on the ground that it has been
submitted in fulfillment of the requirement of the Bachelor Degree.

1.4 METHODOLOGY OF THE STUDY

Secondary data has been collected from the Internet and from the
Nestle office of Bhubaneswar and internet which has been used in
the study. Comparative position and Income statement have been
prepared and its respective interpretation made.
1.5 LIMITATIONS OF THE STUDY
 Due to limited quantitative data relating the financial matter.
It is not possible on my part to prepare the common size
statement.
 Time factors are the constraint for study.
 Cost factor is another minor problem for researcher.

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 CHAPTER-II

NESTLE - AN OVERVIEW
2.1 Nestle India
2.2 Presence Across in India

2.3 History of Nestle

2.4 Management of Profile

2.5 Products of Nestle India

2.1 NESTLE INDIA

Nestlé has been a partner in India's growth for over nine decades
now and has built a very special relationship of trust and
commitment with the people of India. The Company's activities in
India have facilitated direct and indirect employment and
provides livelihood to about one million people including farmers,
suppliers of packaging materials, services and other goods.

2.2 PRESENCE ACROSS IN INDIA

Beginning with its first investment in Moga in 1961, Nestlé’s
regular and substantial investments established that it was here to
stay. In 1967, Nestlé set up its next factory at Choladi (Tamil
Nadu) as a pilot plant to process the tea grown in the area into
soluble tea. The Nanjangud factory (Karnataka), became
operational in 1989, the Samalkha factory (Haryana), in 1993 and
in 1995 and 1997, Nestlé commissioned two factories in Goa at
Ponda and Bicholim respectively. Nestlé India has commissioned
in 2006 its 7th factory at Pant Nagar in Uttarakhand.

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2.3 HISTORY OF NESTLE
Nestlé began in Switzerland in the mid 1860s when founder Henri
Nestlé created one of the first baby formulas. Henri realized the
need for a healthy and economical product to serve as an
alternative for mothers who could not breastfeed their babies.
Mothers who were unable to breastfeed often lost their infants to
malnutrition. Henri’s product was a carefully formulated mixture
of cow’s milk, flour and sugar. Nestlé’s first product was called
Farine Lactée (“cornflour gruel” in French) Henri Nestlé. The
product was first used on a premature baby who could not tolerate
his mother’s milk or other alternative products of that time.
Doctors gave up on treating the infant. Miraculously the baby
tolerated Henri’s new formula and it provided the nourishment
that saved his life. Within a few years the first Nestlé product was
marketed in Europe.

According to Nestlé the World Health Organization never made

statements tying infant death or malnutrition with baby formulas.
The company didn’t deny the superiority of breastfeeding and
agreed that substituting breast milk for other substances could be
very dangerous. Nestlé explained that breastfeeding and non-
breastfeeding mothers in developing countries often gave their

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babies whole cow’s milk, tea, cornstarch, rice water or a mix of
flour and water. These alternatives were very unhealthy and a
nutritional baby formula was a better choice. Nestlé says that it has
never discouraged breastfeeding when it was possible. Nestlé
agreed to follow the International Code in developing countries in
1984, and the boycott was suspended. It resumed several years
later when the organizations believed Nestlé was sending free or
low cost baby formulas to developing countries. Nestlé said it only
sent formula to countries that allow donations for orphans,
multiple births, and babies with no access to breast milk. The
company has stopped all public advertising for formula in
developing countries for almost 20 years. The boycott continues to
some extent to this day without satisfactory resolution.

By the 1980s Nestlé had a new Chief Executive Officer. The

company focused on improving its financial situation and
continuing to expand. In the one of the largest takeovers at that
time, Nestlé bought Carnation for $3 billion and parted with any
unprofitable businesses. International trade barriers diminished in
the 1990s, opening trade with parts of Europe and China. In the
1990s Nestlé acquired San Pellegrino, and Spillers Petfoods of the
UK. With the acquisition of Ralston Purina in 2002, the Nestlé-
owned pet care businesses joined to form the industry leader
Nestlé Purina PetCare. The leading in the food industry, Nestlé
brings in $81 billion in overall sales and has 470 factories around
the world. Nestlé will continue to grow, introduce new products
and renovate existing ones. The company’s mission is to focus on
long-term potential over short-term performance.
2.4 MANAGEMENT OF PROFILE
Board of Directors
Mr. Martial G. Rolland : Chairman & Managing Director
Mr. Shobinder Duggal : Director - Finance & Control
Mr. Michael W.O. Garrett : Non Executive Director
Mr. Ravinder Narain : Non Executive Director
Mr. Pradip Baijal : Non Executive Director
Mr. Rajendra S. Pawar : Non Executive Director

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Mr. Richard Sykes : Alternate Director to Mr.
Michael W.O Garrett
Company Secretary
Mr. B. Murli : Company Secretary
Audit Committee
Mr. Pradip Baijal : Chairman
Mr. Rajendra S. Pawar : Member
Mr. Ravinder Narain : Member

Shareholder / Investor Grievance Committee

Mr. Ravinder Narain : Chairman
Mr. Martial G. Rolland : Member
2.5 PRODUCTS OF NESTLE INDIA
Nestle India Limited has spread its wings to significant areas
within the food and beverage industry. It has various products like
chocolates, infant food, confectionery, prepared dishes and so on.
The company produces delicious chocolates of varied tastes,
quality, make, and ingredients to allure the taste buds to the level
of indulgence with such widely known chocolates as Milky Bar
and Kit Kat, which differ in their hues. The beverage section offers
refreshing Nescafe, and health drinks such as Milo, Nestle Milk
and the mouth-watering condensed milk, known as Milkmaid.
Maggi noodles, Nestle Jeera Raita fall under the category of
prepared dishes, whereas the latest additions of Nestle India like
Nestle Fresh "n" Natural Dahi and Nestle Slim Milk have won
million hearts with their exquisite flavors.

MILK PRODUCTS

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NESTLÉ EVERYDAY Ghee is 100% pure Clarified Butter
hygienically packed to preserve its rich aroma and granular
texture. As a cooking medium, NESTLÉ EVERYDAY Ghee helps
you add that authentic ethnic aroma and flavor to Indian
preparations every time, everyday.

A Partly Skimmed Sweetened Condensed Milk,

NESTLÉ MILKMAID is a versatile product and
excellent as a dessert ingredient. With MILKMAID,
you can whip up lip-smacking desserts for your
family in the shortest possible time.
NESTLÉ EVERYDAY Dairy Whitener is a
creamy Dairy Whitener specially made to add
a rich, smooth taste to your tea. Every time,
every day.
POLO is a mint roll popularly described as
‘The Mint with the hole’. Now also in the new
extra strong singles format as POLO Powermint
These products are currently being exported to the following
markets Sri Lanka , Bangladesh , Papua New Guinea, Fiji , Kenya.

CHAPTER-III

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 A CONCEPTUAL STUDY ON
FINANCIAL STATEMENT
ANALYSIS

3.1 Balance sheet & it’s interpretation

3.2 Profit loss account & it’s interpretation
3.3 Cash flow & it’s interpretation

3.1 BALANCE SHEET (Rs crore)

Dec ' 10 Dec ' 09 Dec ' 08 Dec ' 07 Dec ' 06
Sources of funds
Owner's fund
Equity share capital 96.42 96.42 96.42 96.42 96.42
Share application money - - - - -
Preference share capital - - - - -
Reserves & surplus 322.01 292.47 257.72 222.99 238.58
Loan funds
Secured loans 2.87 16.27 14.30 7.91 5.10
Unsecured loans - - - - -
Total 421.30 405.16 368.44 327.31 340.10
Uses of funds
Fixed assets
Gross block 1,179.77 1,058.27 942.40 838.16 789.45
Less : revaluation reserve - - - - -
Less : accumulated depreciation 577.96 516.48 468.63 440.94 398.08
Net block 601.81 541.80 473.77 397.22 391.37
Capital work-in-progress 73.70 38.24 22.83 34.09 13.94
Investments 94.40 77.77 104.43 154.86 73.64
Net current assets
Current assets, loans & advances 678.69 583.45 514.59 421.20 412.39
Less : current liabilities & provisions 1,027.31 836.10 747.18 680.05 551.24
Total net current assets -348.61 -252.65 -232.59 -258.86 -138.85
Miscellaneous expenses not written - - - - -
Total 421.30 405.16 368.44 327.31 340.10
Notes:

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Book value of unquoted investments 94.40 77.77 104.43 154.86 73.64
Market value of quoted investments - - - - -
Contingent liabilities 63.27 35.93 50.04 10.39 4.87
Number of equity sharesoutstanding (Lacs) 964.16 964.16 964.16 964.16 964.16

INTERPRETATION

1. The balance sheet of the company reveals that during 2010

their has been an increase in fixed asset of rupees 121.11

crore that is 17.04%. While the liabilities are increased and

decreased in reasonal condition. So there is no effect in

working capital .

2. The current assets have increased 95.34crore i.e. 16.34% and

the current liabilities are also increased of rupees 191.21crore

i.e. 22.80%.

This further confirms that the company has raised long term

finances even for the current assets resulting into an

improvement in the liquidity position of the company.

3. Reserve and surplus has also increased from the base year

i.e. 2009 at rupees 29.54crore i.e. 10.11% which shows that

the company has utilized Reserve and surplus for the

payment.

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 4. The overall financial position of the companies is

satisfactory.

3.2 PROFIT LOSS ACCOUNT (Rs crore)

Dec '10 Dec ' 09 Dec ' 08 Dec ' 07 Dec ' 06
Income:
Operating income 3,500.96 2,819.16 2,475.09 2,229.42 2,160.21
Expenses
Material consumed 1,692.53 1,334.79 1,119.07 1,041.44 963.27
Manufacturing expenses 186.09 168.21 152.97 126.15 130.66
Personnel expenses 269.44 216.16 183.29 164.25 158.67
Selling expenses 340.20 278.33 268.77 242.90 252.63
Adminstrative expenses 329.73 289.75 248.55 226.48 223.51
Expenses capitalised - - - - -
Cost of sales 2,817.99 2,287.24 1,972.65 1,801.22 1,728.73
Operating profit 682.97 531.92 502.43 428.20 431.48
Other recurring income 25.13 20.61 23.00 11.09 16.19
Adjusted PBDIT 708.10 552.53 525.44 439.30 447.67
Financial expenses 0.85 0.44 0.21 0.78 1.92
Depreciation 74.74 66.28 56.84 49.14 46.27
Other write offs - - - - -
Adjusted PBT 632.50 485.80 468.39 389.38 399.47
Tax charges 214.80 165.43 159.49 134.58 136.06
Adjusted PAT 417.70 320.37 308.90 254.80 263.40
Non recurring items -3.89 -5.28 0.67 -2.88 -0.32
Other non cash adjustments - - - - -
Reported net profit 413.81 315.10 309.57 251.92 263.08
Earnigs before appropriation 424.28 322.32 313.03 296.15 288.08
Equity dividend 318.17 245.86 241.04 236.22 192.83
Preference dividend - - - - -
Dividend tax 52.21 34.48 33.81 31.29 24.71
Retained earnings 53.90 41.98 38.18 28.65 70.54

INTERPRETATION

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 1) The Gross profit ratio has improved in 2010 because the

company has been able to reduce cost of sales. The cost of

sales much was 76.34% in 2009 was brought down to 70.84%

in 2010.

2) The concern has able to reduce operational empresses too,

this has helped the company to increase operating profit

from 16.73% to 17.07%.

3) Let profit ratio has almost double during the 09

4) Profitability of the company has improved a let in 2010. this

has been possible for two reasons, one is that the company

has increased sales by Rs 1000 crore in 2010 form 2009, the

second reason is that the company has not only control but

reduced its operating cost.

3.3 CASH FLOW (Rs crore)

Dec ' 10 Dec ' 09 Dec ' 08 Dec ' 07 Dec ' 06
Profit before tax 628.61 480.52 469.06 386.49 390.12
Net cashflow-operating activity 519.19 418.55 403.06 365.18 358.78
Net cash used in investing activity -168.71 -121.73 -130.36 -65.04 -40.89
Netcash used in fin. activity -372.45 -283.76 -295.94 -215.75 -276.45
Net inc/dec in cash and equivlnt -21.97 13.06 -23.24 84.38 41.44
Cash and equivalnt begin of year 154.13 141.07 164.31 79.93 38.49
Cash and equivalnt end of year 132.16 154.13 141.07 164.31 79.93

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INTERPRETATION

The net cash flow in authorizing activities are increased 100.64

crore in 2009. In whole totally the cash flow that is inflow is also

increased from 2009-10. Show the financial position of Nestle

India Ltd. Is very strong & is very satisfactory.

CHAPTER-IV
CONCLUSION
4.1 Findings
4.2 Conclusion
4.3 Bibliography
4.1 FINDINGS
Nestle India Limited has grown over the years into the most
desired brand in the food and beverage sector in India. The
company has succeeded in meeting the expectations of the Indian
government in bringing a marked change in the milk industry
through its suggestion on latest dairy farming techniques and
upkeep of cows to improve the milk yield. Nestle India Limited
gave directions to the farmers in incorporating the advanced
technological methods with regard to crop maintenance and
irrigation. The company proposed the set up of centers that not
only catered to the storing and selling of milk, but also maintained
contacts with the farmers.
Nestle India's popularity is visible in its financial figures published
for the second quarter starting from April and ending in June 2007.

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The net profit for this quarter records a growth of 18.1%,
amounting to Rs. 95.7crores, and the net sales figure marks a rise
of 23.2%; whereas the exports delineate improvement by 15.6 %,
which is calculated as Rs. 82crores. The net domestic sales have
also grown at a very fast pace to Rs. 756.9 crores, showing a jump
of approximately 24 %, when compared with the financial figures
of the same period, that is, from April to June in the previous year.
4.2 CONCLUSION
Since Henri Nestlé developed the first milk food for infants in
1867, and saved the life of a neighbor’s child, the Nestlé Company
has aimed to build a business as the world's leading nutrition,
health and wellness company based on sound human values and
principles.

While Nestlé Corporate Business Principles will continue to

evolve and adapt to a changing world, the basic foundation is
unchanged from the time of the origins of the Company, and
reflects the basic ideas of fairness, honesty, and a general concern
for people.

Nestlé is committed to the following Business Principles in all

countries, taking into account local legislation, cultural and
religious practices:

 Nestlé's business objective 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 shareholders,
employees, consumers, and business partners.
 Nestlé does not favor short-term profit at the expense of
successful long-term business development.
 Nestlé recognizes that its consumers have a sincere and
legitimate interest in the behavior, beliefs and actions of the
Company behind brands in which they place their trust, and
that without its consumers the Company would not exist.
 Nestlé believes that, as a general rule, legislation is the most
effective safeguard of responsible conduct, although in
certain areas, additional guidance to staff in the form of
voluntary business principles is beneficial in order to ensure
that the highest standards are met throughout the
organization.

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4.3 BIBLIOGRAPHY
WEBSITE
 www.nestleindia.in
 www.nestle.in
 www.google.com
DATA COLLECTED FROM NEWSPAPERS & MAGAZINES
 Times of India
 The Hindu
 Competition Success Review
BOOKS
 Management Accounting : Sharma & Gupta

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