Confectionery Industry 27.06.2020

UNIVERSITY OF MANAGEMENT AND TECHNOLOGY,
LAHORE
CONFECTIONERY INDUSTRY
SUBMITTED BY
Sifat Ullah Khan
Students of MPM, 4th Semester
Muhammad Zain Tariq, Abid Irfan & Afnan Zahid
Student of MPM, 2th Semester
at
School of Professional Advancement
University of Managemnet and Technology, Lahore
SUBMITTED TO
Ma’am Anila Riaz
Subject_PM-455: Project Risk and Procurement Management
Submission Date: June 27, 2020

Table of content
1. Abstract ............................................................................................................. 01
2. What is meant by Sector in Business..................................................................02
2.1. Types of Sectors in Business…………………………...……….….02
3. Industry................................................................................................................03
3.1. Types of Industries…………………………………….………..….03
4. Procurement…………………………………………………………………….04
4.1. Steps in Procurement…………………………………..…………...04
4.2. Importance of Procurement for Business……………….….……….05
4.3. Purchasing……………………………………………….………….05
4.3.1. Placing an Order…………………………….…………..05
4.3.2. Communication with the supplier……………...…….…05
4.3.3. Receiving and goods and services from the supplier…...06
4.3.4. Preparing and invoice receipt…………………………...06
4.3.5. Payment to the supplier…………………….…………...06
4.4. Measuring the procurement Effectiveness………………………….06
5. Business………………………………………………………………………...07
6. Confectionery Industry ………………………………………………………...08
6.1. Introduction…….…………………………………..…………….....08
6.2. History………………………………………………………...……10
6.3. Major Products of Confectionery…………………………………...14
6.4. Current Statistics in Business Locally and Internationally…………17
6.4.1. Confectionery Business Statics n Pakistan ...…………..17
6.4.1.1. Demand Conditions ……………….……18

6.4.2. Confectionery Business Statistics Globally …….….…..19
6.4.2.1. Impact of the pandemic…..……….…….18
6.5. Example of Leading Companies working in the in the industry...….23
6.5.1. International Companies……………………………..….23
6.5.2. Local Companies ……………………………………….25
6.6. Procurement Practices use by the Companies………………………26
6.6.1. Nestle .……………………….………………………….26
6.6.1.1. Nestle Procurement Policy ….……….…..26
6.6.1.2. Applications ……………………………..27
6.6.1.3. Nestle’s Procurement Vision ……………27
6.6.1.4. Nestle’s Procurement Mission …………..27
6.6.1.5. Nestle’s Aggregation of Spend ………….28
6.6.1.6. Early Involvement of Procurement ……...28
6.6.1.7. Step Strategic Sourcing Process ………...28
6.6.1.8. Nestle’s 7 Vendor Selection Rues ………29
6.6.2. Mars ……………………………………………..……..34
6.6.2.1. Mars Procurement Policy ………………34
6.6.2.2. Expectations for Suppliers …….……….35
6.6.2.3. Sub-Contracting ………………………..35
6.6.2.4. Communication ………………………..35
6.6.2.5. Assignment of Responsibility ……...….36
6.6.2.6. Compliance Monitoring ……………….36
6.6.2.7. Transparency in Procurement ……..…..36
6.6.2.8. Standard Procurement Terms ………….37

6.7. Sensitivity analysis of Nestle and Mars …………… …..…….……41
6.7.1. Mars ……………………………………………………42
6.7.1.1. Strengths………………………………..42
6.7.1.2. Weaknesses …………………………….43
6.7.1.3. Opportunities …………………………...43
6.7.1.4. Threats ………………………………….44
6.7.2. Nestle……………………………………………………45
6.7.2.1. Strengths………………………………..45
6.7.2.2. Weaknesses …………………………….47
6.7.2.3. Opportunities …………………………...49
6.7.2.4. Threats ………………………………….50
6.7.3. Sensitivity Analysis Conclusion ….………………….…51
6.8. Risks faced by the industry locally and Globally …..…….………...53
6.8.1. Health Risk………………………………..…………….53
6.8.2. Low Quality Off Brand Products………...………….….54
6.8.3. Sustainability Issue………………………….....……….55
6.8.4. Fluctuation in Prices………………………..…………..55
6.8.5. Competition in Business………………………………..55
6.8.6. Tax Related Risks……………………………….……...55
6.9. Recommendations to overcome risks…………………..………….56
6.9.1. Using of Healthy Ingredients…………………………..56
6.9.2. Using of Sustainable packaging material……...….……56
6.9.3. Quality Control authority…………………..…………...56
6.9.4. Solution to the Risk of Prices Fluctuation..…………….57
6.9.5. Solution to the Risk of Competitors taking over our…...57

6.10. Future of the industry in next 5 years locally and internationally.....58
6.10.1. Locally/in Pakistan……………………………………..58
6.10.2. Globally…………………………………………..…….59
6.11. Globalization in Confectionery industry……………………………60
6.11.1. Drivers for Globalization ………………………………60
6.11.2. Major Market Drivers ………………………………….61
6.12. Risks Associated with Confectionery due to Globalization ……….62
6.12.1. Political ………………………………………………...62
6.12.2. Property Loss …………………………………………..62
6.12.3. Liability Loss …………………………………………..63
6.12.4. Employment Injury …………………………………….63
6.12.5. Contract Language …………………………………......63
6.13. Conclusion …………………………………………………………64

CONFECTIONERY INDUSTRY 1
1. ABSTRACT
This paper is about a very interesting, and very sweet topic Confectionery industry,
whenever we listen to this word, we will be feeling hungry. This paper is not scary as it
seems to be because of the numbers of pages. The material is so interested that no one will
feel bored during reading this paper till the end.
First, we have explained some important business terminologies briefly that after
that discussed about the confectionery industry, its introduction and then we have explained
a brief history of confectionery industry globally. We have mentioned some the most
famous confectionery items with pictures.
Then we have talk about different confectionery companies who is leading in the
industry Globally and in Pakistan. We have discussed Procurement practices of two of the
leading companies, and did sensitive analysis, and we have checked their market share and
different statistics. And then we have discussed some of the risks associated with the
confectionery industry and how to overcome those risks. you will find some detail about
Growth forecast of the industry globally and in Pakistan.
And at the end We will be knowing about Globalization in confectionery industry
and what risk we could face to make a company globalized.

2. WHAT IS MEANT BY SECTOR IN BUSINESS?
Sector is a broader or a very general term, which tells us the segments of an
economy, in which large group of business are categorized. Each sector contains many
industries. for example, at Material sector there could be different industries such as
exploration, processing, or selling raw materials such as Gold, Crude oil, etc.
2.1. Types of Sectors in Business
There are 4 types of sectors in every economy. Such as
Primary Sector: This sector deals with exploration and agriculture
industries
Secondary Sector: this sector represents the industries which
relates with construction and manufacturing which provides us
finish goods by processing raw materials.
Tertiary sector: this sector represents the industries which provides
services to the customers, such as retailing industry, entertainment,
financial etc.
Quaternary sector: this sector includes the industries which deals
with knowledge and education, such as R&D, education,
consulting services etc.

3. WHAT IS MEANS BY AN INDUSTRY IN BUSINESS?
When we break down the sector into more specific group then it became an
industry. In simple words group of companies in a specific business is called an industry.
Most of activities of these businesses are very similar. And also, sometimes the industry
can be sub divided in to more specific divisions for example if we talk about insurance
industry then we can sub divide it into more divisions such as home insurance, life
insurance, auto insurance, corporate insurance etc.
3.1. Types of Industries
Every sector could be divided into dozens of industries, the most common industries
operating in Pakistan are…
Sports industry
Textile industry
Sugar industry
Cement industry
Fertilizing industry
4. PROCUREMENT
Sourcing and acquiring of goods and services to fulfil an organization needs to
achieve their goals on long- and short-term bases is called procurement. And to perform
this process in a logical or systematic way is called procurement management.
A proper procurement management strategy could save an organization’s financial
assets, by negotiating desired terms and conditions, pricing and by providing suppliers who
can deliver quality material on time with a required quantity.
8.1. Steps in Procurement
Procurement in not that easy to just take money and buy something from the market
for the organization. It is a proper system which contains logical steps by which the
procurement process could be performed well.
Procurement could be done by the following steps.
Identify which goods and services the company needs
Submit a purchase request to the company
Identify, Assess and select vendors
Negotiate price and terms with the vendor
Create a purchase order
Receive and inspect the delivered goods
Conduct three-way matching, by matching the invoice, the
Purchase order, and the receiving Report
Approve the invoice and arrange payment
Documenting all the records

8.2. Importance of Procurement for Business
Procurement plays very important role in any business because it is directly related
with the company’s profit. To get profit the cost of procuring goods should be less than
the amount of goods for which it has been sold and deduction of all the associated costs
for processing those goods and to sell them.
Remember that procurement process depends on the business size, nature of the
business and available resources. Market condition, company capability, and management
will shape the procurement process. The company should put right people for the right job
to govern the organization in a proper way and to generate maximum profit for the
organization.
8.3. Purchasing
Actually, purchasing is a subset of procurement, which involves buying goods and
services. It involves tasks such as ordering, raising purchase orders, receiving, and
arranging payment.
The important elements or the steps in the purchasing process are as follows…
8.3.1. Placing an order
If This activity performed without proper planning or without approved purchase
order. Then it could cause wasting of money and other budget related issues.
8.3.2. Communication with the Supplier
The company should have good relations with the supplier, in these days most of
companies maintain their list of suppliers to overcome the risk of late supply or not
availability of the material.

8.3.3. Receiving Goods and Services from the supplier
This activity requires receipt for the good and services which the organization has
been received. And its is better to record the receipt of the purchases at this stage.
8.3.4. Preparing the Invoice receipt
In this step the invoice has been generated, there should be automated system who
verify the invoice otherwise the invoice will need to be verified by hand which is a
time-consuming process and could cause error.
8.3.5. Payment to the supplier
In this stage the 3-way match verification process should be done of all the three
components before process the payment, such as the invoice, the Purchase order, and
the receiving Report. If it not done properly then there are chances of late payment,
over payment for the goods which are not received yet, and duplicate payments.
8.4. Measuring Procurement Effectiveness
There are some elements by which we can check and measure the effectiveness of
the procurement management.
The elements are as follows.
The cycle time of the procurement
Performance of the vendor
Management expenditures
Cost saving ratio
Percentage of POs that are catalog-based
(Khalife, n.d.)
5. BUSINESS
Business could be an organization or it could be an economic system in which goods
and services is being produced and sell them to the people who needs them. Its goals
are to make profits by satisfying people needs. There are three major characteristics
every business must have such as
Working together of individuals with an organized way
It should satisfy someone’s need
It should generate profits.
Following of all these characteristics some time the business could be for a non profit
purpose such as businesses governed by governments organizations. Other
businesses could be privately owned or could be corporate business such as PepsiCo
etc. (D, n.d.)

6. CONFECTIONERY INDUSTRY
6.1. Introduction
Confectionery is an art to make confections, these are the food items that are rich
in sugar and carbohydrates. Although, confectionery is divided into two broad and
somewhat overlapping types. These types are bakers’ confections and sugar confections.
Bakers' confectionery, is also called flour confections which includes principally sweet
pastries, cakes, and baked goods.
Sugar confectionery on the other hand includes candies, candied nuts, chocolates,
chewing gum, bubble gum, pastilles, and other confections that are made primarily of
sugar. In some cases, chocolate confections are treated as a separate type, as are sugar-free
versions of sugar confections.
Starting the confectionery business is an exciting and challenging thing to do and
extremely satisfying if it is successful. There some of the important issues we have to
consider, choices we may have to make and where it may be useful to seek specialist
advice. This industry requires specialized training schools and extensive historical records.
They are delicious and sweetmeats which have sugar as a principal ingredient,
combined with coloring matter and flavoring and often with fruit and nuts. These products
contain a large amount of sugar, having a high caloric content and pleasant taste and smell,
and easily assimilated by the body. Ingredients include sugar, syrup, honey, fruits and
berries, wheat flour, milk and butter, fats, starch, cocoa, nuts, eggs, acids, and gelatinizing
agents and flavorings these are processed by heat and various mechanical means. These
products contain high carbohydrates, fats, proteins and some of them are containing
vitamins also.
Because of the ingredients and the production methodology and what would be the
final product the confectionery divided in to three larger groups. Such as
Chocolates group
The other group is Sugar confectionery which includes products like
caramel, candies, cocoa, toffees, fruit marmalade sweets etc.
And the third group is called flour confectionery which including products
like cookies, crackers, wafers, cakes, pastries, breads, bun etc.
In these days their different types of Confectioneries have been produced for
different type of people. For example, high protein chocolate bars for athletes, sugar free
confectionaries for diabetic’s people, coffee candies for the substitute of coffee if not
available to get the work done quickly.

6.2. History
The history of confectionery started from the caveman when they were extracting
honey from beehives and was using it to add sweetness to make confectionery products.
And also, history tells us that the history of bakery items is started with the honey.
History says that Indians, chinses, and Egyptians were also using honey to make their
natural sweets. At that time the confectionery was different compare to modern
confectionery Ancient Egyptians were making candies from the flour and crude starch,
sweetened with honey, with additions of spices and sweets. Ancient Romans and Greeks
were making their confectionaries by combining honey with flour paste and fruits.
Sugar was identified in roman times, first it was invented for medical purpose but
after that it became the major part of the confectionery industry. And became a highly
traded commodity.
In middle ages the confectionery was only made to serve rich and wealthy people.
Because of the expensive ingredients and expensive process to make those confectionaries,
only wealthy people could afford it. But in eighteenth century the confectioners have got
great value and respect. Because it was a trend at those days that people were using
confectionaries as dessert such as biscuits, cakes etc. but the prices were not that cheap
because the ingredients and the process were still expensive
In nineteenth century when there was technological improvement many of the
confectionery items came into mass production instead of hand craft. And the market gets
wider. And the prices get dropped because of the mass production.
There was great revolution in the confectionery industry after the discovering of
cocoa or the combination of the sugar and cocoa confectionery, history says that it started
from London in 1657.
After 100 of years the first chocolate bar was produced in 1853 by Fry’s, and have
launched there second chocolate bar with the combination of stick cream in 1866, in
England. Then in 1905 the big giant John Cadbury came in to action who was selling tea,
coffee and cocoa in his shop which was opened by him in 1824. And have launched his
first Cadbury Dairy Milk chocolate in 1905 in England.
Cadbury has launched their first

First chocolate bar by Fry’s in 1853
chocolate bar in 1905
First ever advertisement of chocolate bar made by Fry’s

These all were followed by rapid development in the quality, production, and
technology. Here is the brief list of the launching dates of the famous brands
1866 Fry’s Chocolate Cream Bar 1948 Polo Mints
1905 Cadbury Dairy Milk 1935 Rowntree’s Aero

. 1935 Kit Kat
1910 Cadbury Bourneville Plain
Chocolate 1936 Quality Street
1911 Wrigley’s Juicy Fruit and 1936 Rowntree’s Dairy Box
spearmint Gum 1948 Spangles
1915 Cadbury Milk Tray 1951 Bounty
1932 Terry’s All Gold 1958 Galaxy
1932 Mars Bar 1962 After Eight Mints
1933 Rowntree’s Black Magic 1967 Twix
1935 Milky Way 1967 Marathon
1936 Maltesers 1976 Yorkie
1937 Rolo 1977 Double Decker
1937 Smarties
(hancocks.co.uk, n.d.)
The confectionery business is not a science-based business. It is an industry that
has been built on the confectioner’s craft. Confectionery is normally divided into three
types. Such as
These are flour confectionery
chocolate confectionery,
sugar confectionery.
Flour confectionery covers products that are made from the flour and are baked.
Chocolate confectionery are made of chocolate. Sugar confectionery covers the rest of the
confectionery.
Sugar confectionery becomes to be an international industry. they have a long
shelf-life and does not need controlled temperature storage, in general, the important
concepts in sugar confectionery are water activity, colligative properties, solubility, and
the need to use a mixture of the sugars.
Human's desire for something sweet to eat goes back to primitive times and has
grown into a very big confectionery industry in the whole world. The industry produces a
universal food product using ingredients from many parts of the whole world From the
cacao tree plantations of tropical climates, to the cane and beet sugar field, to the cornfields
of the Middle West, to the fruit and trees in many parts of the world, to the roots and herbs
area, to the dairy lands in most countries, candy strongly affects
agricultural producers and their markets, Modem machines, skilled workers, and
executive, scientific and distributive techniques combine to meet the great demand for
confectionery products.
The great period for the development of the confectionery industry was after world
war I, during this period the production of candy has given strength to the industry. Almost
every candy-making process, from the preparation of raw materials to the packaging of the
final product, was transformed to continuous operation. Candy became a nationally
recognized food, and its evolution from a mere delicacy to a world commodity was
complete. World War II also fostered many improvements in the candy industry.
(Wikipedia, n.d.)
6.3. Major Products of Confectionery
In today’s market there are 100s of brands and goods in confectionery market but here we
will see some of the basic confectionery item of which companies are producing different
variations of it with different names.
Toffees
It is made by boiling sugar

with butter together.
It is also mixed with nuts or
raisins sometimes when the
Toffee is being prepared.
Starch gels
are prepared by heating and

then cooling a solution of
partially hydrolyzed starch in
an appropriate buffer
Gelatin gels
It is a mixture of peptides and

proteins. It is produced by
partial hydrolysis of collagen
extracted from the skin, bones,
and connective tissues of
animals such as domesticated
cattle, chicken, pigs, and fish.
Protein gels
They consist of a glassy matrix

with occasional flavors / colors
and air inclusions. In these
proteins the gel is developed by
aggregation into clumps, which
attach to each other to form a
three- dimensional network.
Panned sweets and

coatings
Panning involves building up a
layer of closely knit sugar
crystals around the outside of a
preformed center and coatings
is made with alginate.
Chocolate flavored
couvertures
These are often used to coat

nuts or other products, and an
important characteristic to
these coatings is their viscosity,
which is controlled by the fat
contend and by the state of the
non-fat components in the
coatings.
Candies
A rich sweet confection made

with sugar and often flavored or
combined with fruits or nuts.
Flour
Confectionaries
means any cooked foodstuff

ready for consumption without
further preparation (other than
reheating) having as its
characteristic ingredients
ground cereal and sweeteners
and other ingredients.
Chocolate
Confectionaries
Chocolate is a preparation of
roasted and ground cacao seeds
that is made in the form of a
liquid, paste, or in a block,
which may also be used as a
flavoring ingredient in other
foods.
6.4. CURRENT STATISTICS IN CONFECTIONERY BUSINESS LOCALLY
AND INTERNATIONALLY
6.4.1. Confectionery Business position in Pakistan
As per a study conducted in 2014 Candyland has the major market share in the
Pakistan’s Confectionery industry and after Candyland Hilal is having the major market
share, and the third place is of Cadbury, Cadbury is growing very fast, it is expected that
they will soon become the market leader. Other mall players are BP, Mayfair, micelles and
Kidco.
Here is the chart which was developed by different industry players. this chart
shows us the percentage market share in terms of revenue.
Figure 6.5.1. Source: Average of primary data collected by different industry
players
Here is the chart which was developed by getting primary data for the study by the
research team, this chart shows us the percentage market share in terms of output.
Figure 6.5.2. Source: Data gathered from primary sources
6.4.1.1. DEMAND CONDITIONS
Most demanded products by company
Candyland Chilli Milli

Hilal Ding Dong and Freshup
B.P Spacer Toffee
Cadbury Dairymilk
Mayfair Creamers
Confectionery items comprise 10% of total sales

Chocolates 77%
Toffees 4%
Chewing Gum 9%
Jellies 5%
Lollipops 2%
Candies 3%
Pakistan's confectionery industry has experienced an upward trend in the recent

past. According to Pakistan Biscuit & Confectionery Manufacturers Association,
Pakistan's Bakery and Confectionery Industry has grown with an average annual rate of
6.5% to 7.5% during 2002-2010.This indicates that Pakistan is a very lucrative market for
the confectionery industry and local, foreign and imported brands are successfully
targeting different segments of the population to tap this potential. According to Ian
Buchan, General Manager of world's biggest snacking company, Mondelez International,
"Pakistan is among the top 5 future growth markets for Mondelez”, and adding that the
country's confectionery market is worth approximately $100 million and growing
strongly."
The multinational snack and confectionery giant have gained strong positions in a
(Baloch, 2013) number of categories, specifically in the snacking business that includes its
Cadbury and tang portfolio. This can be attributed to the rise in the demand for chocolates,
jellies and snacks due to the large amounts of investments in these products whereas the
demand for lollipops and candies has experienced falling demand. It is observed that for
many consumers’ chocolates and jellies despite having high price points, offers more
utility in comparison to candies and gums. (Baloch, 2013) (Nasik Zia, 2014)
6.4.2. Confectionery Current Business Statistics Globally
As per the revenue in the Confectionery segment amounts to US$826,130m in
2020. The market is expected to grow annually by 4.3%. over the next coming time period
the confectionery revenue is going to increase but recently due to covid-19 the situation
went to opposite to the growth of this industry. instead of covid-19 the most of the revenue
capture by the market globally us is on top position.
6.4.2.1. Impact of the Pandemic on Confectionery Industry
The COVID-19 outbreak has affected all regions under consideration in this report.
The greatest impact, however, is anticipated to be borne by Europe, where the market size
stood at USD 76.12 billion in 2019 and the region dominated the confectionery market
share at 39%. This is expected because the number of COVID-19 cases is skyrocketing in
Europe, with the largest brunt being taken by the strongest economies in the region,
namely, the UK, Italy, France, Germany, Spain, and the Netherlands. These countries are
also home to some of the largest premium chocolate makers in the world and the region is,
therefore, is bound to be gravely affected by the coronavirus pandemic as demand for such
items steadily falls. Besides Europe, the market in North America and Asia-Pacific, two of
the biggest confectionery products consuming regions in the world, is also likely to be
impacted on account of the unceasing rise of cases in these regions.

Growth rate gets Down due to Corona in 2020(https://www.statista.com/)
Revenue in present and Future (https://www.statista.com/)

Leading companies in the world be net sales. Report 2019
(https://www.statista.com/)
6.5. EXAMPLE OF LEADING COMPANIES WORKING IN THE INDUSTRY
6.5.1. Intranational Companies
Here, we will be talking about the big major players who are the leaders of the
confectionery industry internationally. The companies are as follows…
1. Mars Inc
An American company, established in 1911
2. Mondelez International
An American multinational company Mondelez, established in 2012,
3. Nestlé
A Swiss food and beverage company founded in 1866
4. Ferrero Group
An Italy based company, have been founded in 1946.
5. Meiji Co.
Japanese confectioner Meiji, established in 1916.
6. Hershey Co.
An American Company was created in 1894.

7. Lindt & Sprugli
Swiss chocolate company which was formed in 1845.
8. Perfetti Van Melle
This Italian confectioner was formed in 2001.
9. Haribo
A German sweet company created in 1920,
10. Grupo Arcor
An Argentinian food company Established in 1951.
(Walker, 2019)
6.5.2. Local Companies
Here are some of the major players in Pakistan who are doing confectionery
business…
a. Candyland Pakistan
They having the maximum market share of the confectionery industry in Pakistan.
Establish in 1988 and producing about 40 different brands including chocolates,
candies, jelly’s, marshmallows, chewing gums, etc. the most famous product of
Candyland is “Chilli milli” (candyland, n.d.)
b. Hilal Foods Pakistan
It is the second largest confectionery company in Pakistan as per the market share,
it is established in 1957, and exporting their products to more the 20 countries in
the world Ding Dong and Fresh up bubble is the most favorite products of Hilal
(Hilal Foods, 2014)
c. Cadbury Pakistan
It is the fastest growing company in the Pakistan’s confectionery industry. They
are producing chocolates for upper class and economy class. Cadbury efficiently
fulfilling the confectionery needs of the Pakistani people, Cadbury is now known
as Kraft Foods as it has been taken over by the Lakson group when it formed an
Alliance with Mondelez Pakistan, a parent company having many fast growing
brands of the world such as Oreo, Tang, LU and now Cadbury. (Scribd, 2013)
There are some other companies which are also doing very well such as BP, Mayfair,
Mitchell’s and KIDCO.

6.6. PROCUREMENT PRACTICES USED BY THE COMPANIES
Here we will be discussing the procurement practice of some of the above-mentioned
company. As our research is mostly based on the secondary data, so we have selected two
companies of which we have found data from online source and to discuss their
procurement practices.
The company which we have chosen for the research are
And Nestle
Mars Inc.
6.6.1. Nestle
Nestle is a Swiss food and beverage company founded in 1866, best known
for products like Kit Kat, Nesquik, Nespresso, and Maggi. It is the largest food
company in the world measured by revenue, and it is popular worldwide, always
try to acquire big businesses and make its mark in every possible sector.
6.6.1.1. Nestle Procurement Policy:
The Nestle Procurement Policy is a set of principles to enable all who is
working in Nestle’s procurement department to understand the fundamentals of the
procurement properly. And this policy is helping the company a lot to be successful
in food industry. Each Nestle’s Business unit is responsible for reviewing and
developing their own Procurement policy and procedures to ensure consistency
with external environment.

6.6.1.2. Application
The Nestle Procurement Policy applies to any person who is performing
and procurement activity related with nestle, directly or indirectly, with the Nestle
Procurement function. It means that these policies also apply on the vendors who
is contracting with nestle
Following are the Nestle’s major Procurement activities.
Strategic sourcing
Supplier selection and management
Contract creation and approval
Purchase requisition creation and approval
Purchase order creation and approval
Goods receipt.
6.6.1.3. Nestle’s Procurement Vision:
Procurement will be a strategic Business partner delivering a competitive
advantage and sustainable value to all Nestle spend; working with the Business for
the Business.
6.6.1.4. Nestle’s Procurement Mission:
Procurement will deliver sustainable value to the Business through a focus
on, service, total cost advantage and innovation. This value will be delivered
through the right people working and behaving as ONE team, applying the
Procurement best practices.

6.6.1.5. Nestle’s Aggregation of Spend
By aggregation they keep record of the company’s expenses and try to align
the supplier, market, and delivery to the customer by proper aggregation of the
company spend and with applying best procurement practices. They ensure that
they are focused and try to avoid duplication of resources. The aggregation has
always been checked by the procurement team on different intervals.
6.6.1.6. Early Involvement of Procurement:
They always involve Procurement at the beginning of any new product
development process. Procurement involvement from the beginning of any
sourcing process will ensure greatest value can be achieved during the ideation,
concept, product development and product industrialization phases. Early
involvement helps them to identify risks at early stages and will help them to
mitigate those risks before its triggers. Early involvement of procurement helps to
ensure good relationship and commination with the supplier, and to avoid
ambiguities and delays.
6.6.1.7. 7 Step Strategic Sourcing Process:
To maintain timely delivery of the material and to get competitive positions
in the industry Nestle is following 7 Rules by which they are sourcing. Such as
Rule.1 Ensure an effective Governance model
Rule.2 Align the Procurement Organization
Rule.3 Develop Spend Category Expertise
Rule.4 Procurement Ownership of Sourcing
Rule.5 Drive Business Connectivity

Rule.6 Ensure Compliance of Policies and Specifications
Rule.7 Adhere to KPI Framework
These rules help Nestle in the following manner
Forming of spend strategies for both sides, demand form the Nestle and
the availability from the supplier.
Formulate supplier strategies to manage the supplier utilization effectively.
As per the risk involved the formulate the most appropriate strategies for
both the categories
Help then to align all the strategies with the Business objectives, to the
both current and future developments.
Helps them to select a supplier by using of an appropriate evaluation
criterion used to choose the best fit supplier for Nestle.
6.6.1.8. 7 Selection of Vendor Process of Nestle’s
They using following rules to evaluate and select a vendor selecting a vendor.
Competitive Bidding:
All significant purchases will undergo a competitive bidding process to ensure that
Nestle is consistently obtaining competitive cost, service and quality from its
suppliers.
Procurement Information:
Procurement will provide timely and accurate information to the business regarding
forecasted pricing and supply market trends and outlooks.

Business Partner:
Procurement will be a strategic Business partner at all levels of the Nestle
organization. To facilitate this, Procurement Business partners will be nominated
for each Business. They will take the responsibility to work closely with the
Business units to transform Business needs into Procurement strategies and actions
and to ensure alignment between Procurement activities and Business objectives.
Vendor Pre-Qualification:
Pre-qualification of vendors will be undertaken to create a supplier short list. This
ensures that there is an early understanding of a potential supplier’s capability,
readiness and commitment to comply with Nestle’s requirements.
Only the short-listed suppliers will be invited to participate in the quotation process
or request for proposal.
Supplier Selection:
After having provided their proposals, the short-listed suppliers will be analyzed
against a pre-determined set of evaluation criteria to determine if they meet all
requirements in relation to the goods or services that Nestle requires. The
evaluation criteria will contain, at a minimum.
Specification
Price Conditions
Service Conditions
Food / Packaging Safety and Quality
Technical, R&D and Innovation Capabilities
Responsible Sourcing
Financial Stability.
Potential suppliers will be chosen based on an objective analysis against the
evaluation criteria. All relevant information regarding a supplier’s proposal and
any risks associated with the supplier or the delivery of materials will be shared
between Procurement and the Business to ensure that informed decisions are made
that take account of all-important details.
Vendor Assessment:
Potential suppliers will be further assessed to ensure the compliance of each of their
supplying sites to the Nestle Supplier Code and to guarantee the quality of the
goods and services they provide. The key focus areas of the vendor assessment are:
Food/Packaging Safety and Quality;
Responsible Sourcing.
This assessment will result in an approval decision as to whether the supplier can
or cannot ultimately be used to supply goods or services to Nestle.
Responsible Sourcing:
Nestle is having specific nonnegotiable Codes which are the minimum standards
with which suppliers must comply when delivering to Nestle. It applies to all
suppliers and contract manufacturers. It matches the Nestle Corporate Business
Principles by highlighting the most relevant requirements for the suppliers.
Supplier Performance Management:
Supplier performance management will be continuously undertaken to measure the
overall performance of suppliers against clearly defined and agreed criteria, not just
pricing. Feedback will be shared regularly with suppliers to identify and remedy
potential issues and define improvement opportunities. Regular interaction with
suppliers will be planned and undertaken to ensure effective supplier performance
management
Supplier Development:
Supplier development will be undertaken to improve or expand our suppliers’
capabilities which is necessary for Nestle to continuously meet competitive
challenges. It will be performed based on the specific and most appropriate supplier
strategy.
Approval of Procurement Agreements and Transactions:
Procurement agreements and transactions will be approved by duly authorized
people within the Nestle organization and the suppliers’ organization. A formal
approval process will be documented that includes approval levels, roles and
responsibilities of all participants and will include provision for above Market
approvals where relevant.
Procurement Data:
The availability of accurate and consistent procurement data supports effective and
faster decision making. It also leads to increased efficiency in day to day
procurement activities and the elimination of waste within procurement processes.
Procurement master data will be carefully managed to ensure the integrity of the
data. Procurement transactions will be processed with close attention paid to the
data and information that is entered to ensure the completeness and reliability of
the data captured.
Stakeholder Satisfaction
On an annual basis, nestle measure the satisfaction of our stakeholders with the
support they receive from the Procurement team. This is to ensure that we are
delivering value to the Business. The results will give base for continuously
improving the value delivered by Procurement at both a Market and above Market
level.
Conclusion
As a Procurement function, nestle evaluate their performance on a regular basis.
And benchmark their selves internally and externally and strive for continuous
improvement. (nestle, n.d.)

6.6.2. Mars Wrigley or Mars Inc.
It is an American company, established in 1911, Mars has gone from
strength to strength. Its manufacturers some of the most famous confections in the
world, including M&Ms, Galaxy, Snickers, Skittles, and of course Mars bars. It is
the sixth largest privately-held company in America, and the best-known company
in its sector globally.
6.6.2.1. Mars Wrigley Procurement Policy
It is Mars philosophy that they work only with suppliers who have the
ability to consistently meet our standards and specifications and are committed to
values of conduct that are compatible with our own. This commitment to Supreme
quality is the foundation of their “Mutuality” Principle where “A mutual benefit is
a shared benefit, and a shared benefit will be sustained
Mars procurement guidelines and expectations with respect to key areas of
responsible sourcing, ensures that mars uphold the Principle of Mutuality and
provides consistent excellence for their consumers and stakeholders.
This policy and their responsible sourcing program apply to all of their
direct and indirect suppliers in all categories. Direct suppliers are those that
contribute directly to the production of finished goods, primarily raw materials and
packaging. This includes the suppliers of agricultural goods, farmers and sub-
contractors.
Indirect suppliers are those that provide goods and services outside of those
used in the production of finished goods. This includes the services and items
purchased to construct and run our factories, the transport and warehousing of our
products and the marketing services we use to promote our brands and products.
6.6.2.2. Expectations for suppliers:
Supplier confirms that it fulfils all the legal requirements and standards of
mars, and maintains accurate books and records demonstrating fulfilment with such
legal requirements and standards, to the extent permitted by law. The supplier shall
quickly notify Mars if they are involved in any legal issue. Or if they cannot fulfill
some compliance. They shall inform Mars about the situation and explain how it
expects to operate in a responsible manner.
Mars is also developing position statements on key raw material
commodities that may be presented alongside this document as a further
requirement for suppliers in high risk categories.
6.6.2.3. SUB-Contracting:
Supplier does not use subcontractors or assign to any other party its
contractual obligations to Mars, without prior written approval by Mars or its
subsidiaries. Prior written acceptance of this policy by the approved subcontractor
or assignee is required before production begins.
6.6.2.4. Communication:
Suppliers must inform workers about the expectations contained. This
might include prominently posting in the workplace in an area accessible to
workers, conducting group or individual meetings to review and explain,
distributing explanatory pamphlets to workers, or communicating through on-line
channels.
6.6.2.5. Assignment of Responsibility:
Supplier shall immediately advise Mars of any relevant issues that are
inconsistent. Supplier informs Mars of any violations of including new terms, if
Supplier so chooses, of violations reported via a confidential whistleblowing
hotline. Such programs shall protect worker whistleblower confidentiality and
prohibit retaliation. Suppliers are responsible for prompt reporting of actual or
suspected violations of law and any contractual relationship with Mars. This also
includes violations by any employee or agent acting on behalf of either the supplier
or Mars.
6.6.2.6. Compliance Monitoring:
According to their procurement process they measure Supplier’s
compliance with, Mars reserves the right to conduct announced and unannounced
on-site independent third-party audits of Supplier’s facilities, Supplier-provided
housing, operations, books, and records and conduct confidential worker
interviews in connection with such audits. Upon receipt of any unsatisfactory audit
results and Supplier’s failure to implement recommended corrective actions, Mars,
in its sole discretion, reserves the right to suspend any purchases from Supplier
until corrective actions are implemented, or to terminate its relationship with
Supplier. Suppliers are responsible for educating and monitoring their vendors,
subcontractors and independent contractors
6.6.2.7. Transparency in procurement:
Supplier adopts a transparent approach to working with Mars, including the
disclosure of relevant policies and procedures. If requested, supplier discloses the

geographical location of facilities producing raw materials for Mars, as well as the
origin of raw materials within the suppliers own direct supply chain. Supplier will
take responsibility to implement the requirements of this policy and with those in
its own direct supply chain.
6.6.2.8. Standard Procurement Terms of Mars
Application:
The terms and conditions contained in the Mars Contractor’s Handbook
apply to every Purchase Order and, together with the Purchase Order, constitute a
contract between the supplier and Mars. No terms and conditions of the supplier
which vary or are in any way inconsistent with the Contract will be incorporated
into the Contract. The acceptance of, or payment for, Goods or Services by Mars
shall not establish acknowledgement or acceptance of the supplier’s terms and
conditions.
Goods – Delivery:
Goods must be properly packed by the supplier or otherwise prepared for
transportation in such a way as to avoid damage to the Goods. If recycling is a
requirement under the law of the country in which the Goods are to be delivered or
used by MARS, the supplier warrants that the protective packaging is recyclable or
re-useable outside the public waste disposal system. At the request of MARS, the
supplier must collect this packaging from MARS free of charge and recover or
recycle the packaging if and as required by any applicable law.

Delays:
If the supplier does not supply the Goods or perform the Services at the time
or times specified in the Contract then, without bias to any rights Mars may
terminate the Contract immediately by giving written notice to the supplier.
Anyhow any other provision of the Contract, the supplier must give reasonable
notice to Mars in writing if, for any reason, the supplier expects that the
performance of all or any of its duties under the Contract may or will be delayed
beyond any date specified in the Contract or as otherwise agreed between the
parties. The supplier acknowledges and agrees that if it fails to so notify MARS,
MARS may terminate the Contract immediately by giving written notice to the
supplier.
Prices and Terms of Payment:
The price for the Goods or Services will be as stated in the Purchase Order
and include GST. The supplier must give a tax invoice to MARS for the Goods or
Services and, unless otherwise agreed by the parties, the price stated on the tax
invoice includes all additional costs associated with supplying the Goods or
performing the Services including, without limitation, the cost of labor and
materials, delivery and packaging costs, insurance costs and all applicable fees,
taxes, duties including, without limitation, any import or export duties or both and
charges. No additional charges will be paid unless agreed by MARS in writing in
advance.
If alternative payment terms are not specified in the Purchase Order, and
provided the invoice is not in clash, payment will be made by MARS 120 days
from date of the supplier's valid tax invoice.

Work, Health and Safety Obligation:
The company all times exercise all necessary precautions to ensure the
health and safety of all persons including the supplier parties, the MARS parties
and others who may be affected by the performance of the Services or supply of
Goods.
For company the products must be,
Ensure that the Goods are without risk to health and safety.
Comply with all relevant work health and safety laws and codes of practice,
and relevant New Zealand health Standards.
Carry out or arrange for the carrying out of any calculations, testing or
examination of the Goods that is necessary to ensure compliance with
clause above, without cost to MARS.
Ensure that the Goods are clearly and durably labelled in a manner that
identifies the Goods.
If the Goods are electrical equipment, then the it is responsibility of safety
team to the initial electrical safety of the new equipment and the Goods
must be provided tagged as tested.
General Obligation:
The supplier has to train his self with Mars rules and regulations and at all
times see and comply with:
The provisions of the Mars Contractor's Handbook.
At all times act in an honest and ethical manner and in accordance with the
highest professional principles and standards.
The Goods or perform the Services in a timely manner and within the
agreed timeframes.
All permits, licenses, consents and authorizations required or necessary to
enter and observe.
Confidentiality:
Each party must not disclose any Confidential Information of the other
party to any other person (save that MARS may disclose such information to the
MARS PARTIES) or otherwise use such Confidential Information except with the
consent of the other party and for the purpose of or in connection with the
performance of the first party’s obligations under the Contract.
Dispute Resolution:
If a dispute arises under the Contract other than in circumstances where
MARS wishes to seek urgent solution of the Dispute, a party may not commence
any court or negotiation proceedings relating to the Dispute unless it has first
conformed with the requirements of this clause. A party claiming that a Dispute
has arisen must give written notice to the other party specifying the nature of the
dispute. Within five Business Days or as agreed between the two parties. after a
Notice is given, the parties must use all reasonable actions to resolve the Dispute.
Conclusion:
In procurement Mars applied management skill to grow their company with
a keen understanding of good management practices, this how it becomes one of
the most popular places to work in Europe. (mars, n.d.)

6.7. SENSITIVITY ANALYSIS AND COMPERISON OF NESTLE AND MARS
US headquarters
Rosslyn McLean
Ever since Frank Mars started
Founded in the 19th century as
making candy out of his
a condensed-milk outfit, it now
Quick history Tacoma, Washington, kitchen
has 48,000 employees in the US
in 1911, the company has been
alone.
owned by the same family.
2018 global sales More than $90 billion. $35 billion.
Häagen-Dazs ice cream, M&M’s, Skittles, Snickers,

Key treats Nesquik chocolate milk, Nestlé Twix, 3 Musketeers, Milky
Toll House cookies. Way.
Gerber baby food, Perrier water,

Lean Cuisine frozen dinners, Pedigree dog food, Combos,
What else they make Purina dog food, and lots of Wrigley gum, Uncle Ben’s
other stuff in your local rice.
supermarket.
Founded 1866, 154 years ago 1911, 109 years ago
Milo, Rolo, Smartties, Tex,

Mars bars, Milky bars, Milky
Milkybar, Peppermint Crisp,
Confectionery products ways bars, M&M’s, Skittles,
Crunch, KitKat, Quality Street,
Snickers and Twix
Aero, Chocolate Log, BarOne
In 2007, Mars UK decided to

Nestlé’s Poland Spring water is
start using an enzyme from
currently facing a class-action
calf stomachs in its candy.
Odd controversy lawsuit claiming that its H2O is
Vegetarians were furious, and
fraudulent because it doesn’t
the decision was quickly
come from a spring.
reversed.
6.7.1 MARS
Mars is an American company who are producing confectionery, Petcare,
drinks and other foods products. They are producing wide range of popular
products as well as the nutrition products. It’s a private owned company who is
operating in more than 78 countries in the world.
6.7.1.1 Strength of Mars
Presence:
Mars has a strong geographic presence with operations in over 78 countries
globally. Mars Chocolate is present in over 21 countries whereas Mars Petcare in
over 50 countries. Mars is also expanding its operations in emerging markets which
helps reduce its business risks
Sustainability initiatives
They have set goals to eliminate the Greenhouse gases from Mars by 2040.
They are also focusing to reducing waste and save water. These kinds of acts help
them to set sustainable long-term goals including reducing operation costs.
Strong Product portfolio
They have big market share by providing Long portfolio of products such
as waste variety in chocolates, pet cares products. for example, in the Petcare
industry pedigree, Royal Canin, Whiskas etc. and in the chocolate, industry Mars,
Galaxy, and Snickers etc. With strong product portfolio in different segments, Mars
has a wide range of customers to target and also increase its market penetration.
6.7.1.2 Weaknesses of Mars
Hamper image (Product Recalls)
Company has had its share of controversies regarding its products. There
have been several recent instances where Mars has had to recall products, for
example; In June 2016, Mars had to recalls me of its chocolate products in North
America. Such instances especially in the consumer product category affects the
image and business of the company.
Opposition for using animal rennet
Mars has had its share of protests for using animal rennet in its products
which create a bad image of the company especially the vegetarians who opposed
using animal rennet in Mars’ products.
6.7.1.3 Opportunities of Mars
Growth in confectionery
The confectionery market has shown positive growth globally in the recent
years and is expected to grow at a fast rate in the future. Mars is set to be benefitted
by the growth in the confectionery industry.

Improving Lifestyle in emerging markets
With improving lifestyle in emerging markets, the Petcare, as well as the
confectionery industry, is expected to grow rapidly in these markets especially in
India and china. Mars is well equipped to tap the demand created in the emerging
nations
Combining Mars and Wrigley businesses:
In October 2016, Mars announced merging its business operations with
Wrigley, to form Mars-Wrigley Confectionery. This will help the company to
increase penetration as well as offer more products and increase bottom-line.
6.7.1.4 Threats of Mars:
Intense competition across categories:
Mars is subjected to competition across its product categories. In Petcare
category, it faces competition from PetSmart which has various products in the
category. In confectionery, it faces competition from the likes of Mondelez, Nestle
and Hershey’s etc. Such competition limits market share and induces price wars
which affect revenue.
Increasing Health consciousness
There is an increasing awareness toward health across the globe especially
in the developed markets. Although, Mars has focused on decreasing calorific
content in its products the increasing awareness may divert the focus of the
consumers to other products and hence it is still a threat. (Bhasin, 2019)

6.7.2 NESTLE
Nestle was Founded in 1905 as aby merging of Anglo-Swiss Milk
Company, nestle was first formed by Henri Nestle in 1866. Nestle became the
world largest company in very short time. Which is operating in from 150 years in
the food market. operating in 189 countries worldwide.
6.7.2.1 Nestle’s Strengths
World most Reputed brand name
Nestle is the most renowned brand in the world. It has developed a
respected reputation in the food and beverages sector offering high-quality
products for everyday use across the globe.
Globally recognized brand
Through its effective advertising and branding strategies, it has created
significant awareness and developed a successful brand image around the world.
That is why Nestle is among the world’s largest corporations and is ranked
at 69th position in 2018 list.
Highly diversified company
Nestle sells its products in 189 countries Instead of relying on a few
markets, it has captured the sizeable market in a lot of developed and developing
countries to earn most of its revenue. Its leading markets include the US, China,
France, and Brazil.

World’s most valuable brand
According to 2018 Forbes Global, Nestle is among the top as the world’s
most valuable company in regards to highest revenue, profits, assets, and market
value.
Extensive product portfolio
Nestle owns more than 2000 brands globally and renovated over 8000
products for nutrition and health considerations, according to its Annual Review
2017. It is one of the worlds’ biggest companies with the broadest product portfolio.
Well-established relationships and popular brands
Nestle has some of the world’s most recognized brands under its name such
as Nescafe, Kit Kat, Gerber, Milo, and Maggi. Besides, it has well-established
relationships with other trusted and powerful brands like Colgate Palmolive, Coca
Cola, General Mills, and L’Oréal.
Efficient R&D system
Nestle has the world’s largest food and nutrition research organization with
21 R&D centers, its research and development capability are one of its key
competitive advantages. There are more than 5000 employees involved in R&D
operations. It spent nearly 1.72 billion Swiss Franc on R&D in 2017.

Environmental sustainability practices
Nestle makes significant strides in environmental sustainability practices
and takes innovative steps to improve the quality of its products. It optimizes
innovative solutions to reduce waste, water use, renewable energy use, and
packaging materials. In 2017, 253 of Nestle factories produced zero waste. To
communicate the benefits of sustainability to its customers and keep the
environment clean, Nestle has launched a free mobile app that helps people recycle
waste packaging materials properly.
Large distribution system
Nestle has a wide and diverse distribution system that extends not only to
urban areas but also to rural areas. It has adopted local distribution methods and
decentralized methods to run businesses efficiently in the respective countries.
Nestle has strong relationships with suppliers, retailers, retailers and distributors.
6.7.2.2 Nestle’s Weaknesses
Price fluctuations by retail giants
Nestlé’s grocery sales are achieved majorly through huge retail giants
like Walmart, Tesco, and Kroger. Any reduction or increase in prices by these
retailers can affect Nestlé’s sales.

Span of control and organizational structure
Nestlé is organized in a matrix structure. That means a large number of
brands are under the same umbrella group which makes it somewhat challenging
to manage the large Administrating such a large number of individual brands can
often result in discord and conflict of interest.
Water controversy
Recently, Nestle was accused of illegally pumping millions of liters of
water in 6 nations where residents are deprived of drinking water.
Social criticisms
Nestle has become a target of media attention many times. The claim to
privatize water, misleading labeling, and a lawsuit for chocolate making
using child and slave labor are some of the examples that have to weaken its market
reputation.
Maggi Noodles controversy
In 2017, Nestle failed to clear a laboratory test in India. This created a
publicity hype as people boycotted Nestle, leading to the loss of 80% of market
share in the country. Nestle claimed ‘No added MSG’ in the Noodles packets.
However, 1000 times more lead was found in the product after testing.
6.7.2.3 Nestle’s Opportunities
Venturing small food start-ups
Nestle has a fantastic opportunity to grow the number of small food start-
ups under its popular brand name. Nestle can also collaborate with the new start-
ups to promote its brand name.
Online shopping
Nestle has a remarkable opportunity to boost its e-commerce sites and
online shopping platform. A very few CPGs are offering online services to make
the shopping experience more comfortable and pleasant. Although Nestle has its
online stores in a few countries, expanding its online services to more areas will
prove a rewarding decision for the company.
Market penetration for breakfast cereals
Nestle’s cereals and oats market have shown fast growth in recent years.
Thus, penetrating this market more would be highly lucrative for the company.
Expanding ready-to-drink tea and coffee market
The demand for tea and coffee is continuously on the rise, rendering a
profitable opportunity for Nestle to groom this market more.
Partnerships
Strategic alliances with other food and beverage giants are also a great
opportunity for the company to increase its revenues and profits.

Authentic labeling
Nestle has already been criticized for giving misleading nutritional
information on its labels. So, there’s an opportunity to improve its practices by
giving trustworthy information and accurately labeling its products.
6.7.2.4 Nestle’s Threats
Illegal rainforest destruction controversy
In 2017, Nestle was alleged of involvement in the destruction of Sumatra’s
last tract of rainforest. It faced severe criticisms from NGOs and environmentalists
in this regard.
Water scarcity
Nestlé’s production is highly dependent on water usage. Accessing the
clean water through less costly sources has become difficult for the company due
to many reasons. These include increasing population, climate change, growing
demand for food and water, increasing pollution, water wastage, and
overexploitation of resources.
Rising competition
Many CPG companies like Mondelez and Unilever offer similar food and
beverage products. It is hard for Nestle to compete in such a situation where
the substitute products are easily accessible.

Government regulations and prices
Government regulations can affect the business operations of Nestle.
Additionally, the increasing prices of commodities force the company to increase
the prices of its products. It will lead to sales reduction as consumers can switch to
other brands which are available at low costs. (Parker, 2019)
6.7.3 Sensitivity Analysis Conclusion
As we all know that sensitivity analysis is a mathematical procedure by
which we see and financial performance of an organization by their prices and
growth fluctuation in present and in the future which we can say the forecasting of
the financial performance.
So, because of the unavailability of the correct mathematical about both the
companies, instead of using mathematical data we did SWOT Analysis of both
companies and took help from there history. So, we have come the conclusion that
although nestle has been always in controversies are having few threats but still,
they are in strong position in present. But as they are already operating in 189
countries and having wide range of products, compare to Mars who are operating
in about 80 countries, they are heaving less product ranges and operating in less
countries. I think they are having more chances of growth in the future financially.
If we come to the procurement practices of both the companies, I think
Nestle’s procurement practices are more flexible and facilitating. They have just 7
rules of the vendors selection which they have to follow during procurement there
main motive is to provide the material on time, one the right place, with the right
quality and quantity and to the right place, they doesn’t care about the vendor’s
location, or from where the vendor is sourcing the material.

on the other hand Mars rules are very strict the are bounding the vendor on
every stage, they have confidentially agreements, conflicts agreements, and
transparency agreements and so on, with the vendor, which somehow I think will
make the vendor very frustrated and will be bound a lot, more feels like
employment or slavery. But I think its somehow good for them, as they are growing
very fast and increasing there market share by increasing there operation in more
countries so having such strict rules is good for the company, confidentiality is
good for anyone who want to get competitive position in any industry, which they
are doing.
6.8. RISKS FACED BY THE INDUSTRY LOCALLY AND INTERNATIONALLY
6.8.1. Health Risk
Sweetness is the essential ingredient in any confectionery goods. And This is the
major risk confectionery business is facing these days. People are getting awareness about
the side effects of the refined sugar. Consuming White refined sugar is very harmful for
human health and could cause different disease like obesity and diabetes in human body,
if it comes to confectionery industry, they go one step ahead, they use different other cheap
chemicals along with the white sugar to make the goods sweeten with less cost. There
artificial sweeteners are even more harmful for the human health. The example of these
harmful chemicals is fructose corn or
Another problem with today’s confectionery items is that they are using some
chemicals to add artificial flavors to the product and add artificial colors to make them
more pleasant to the consumers, all these kinds of acts are harmful for human health and
is the biggest risk to the confectionery industry.
fructose corn syrup Glucose syrup

6.8.2. Low quality Off brand products
We are facing this problem in local market. This is a big problem for confectionery
business in today’s market, especially in Pakistan. dozens of local manufacturers are
coming to the industry and offering fake products with a known brand name or little bit
similar to a famous brand name. they offer bad quality products with less price. Which
makes the human life at risk. This kind of local manufactures are great risk to the industry
and to the brands of which they are using the name.
Low Quality Off Brand Products

6.8.3. Sustainability issue
It is a big risk related with the confectionery industry that that most of companies
use such packaging material which are not recyclable and renewable, and also not
decompose easily, which could cause the environment dirtier and make unsafe for human
health. There is a possibility that government could make some rules and regulations to
stop using such material for packaging, which could cause problem for a business in such
uncertain situation. Or there is a chance that the consumer demands to use sustainable
material otherwise they could stop consuming such products. (Vaswani, 2019)
6.8.4. Fluctuation in Prices:
Every year the price fluctuates up to 30%, and as the raw ingredient such as wheat
and sugar prices has increase then the finish good price needs to be increased, which have
negative impact on the sale. And specially for the bakery items it will affect the profit
margin of the business as most of items are crafted. And they don’t do bulk production.
6.8.5. Competitions in Business:
It happens a lot the powerful competitors specially in bakery business come in to
action and buyout some else’s business and stealing their market share by a specific
product. Which is a big threat for new commers to the confectionery business.
6.8.6. TAX related Risks:
Confectionery may be affected by changes in tax legislation and tax authorities and
applications of such legislation may be subject to additional taxes and possibly connected
with future tax audits or proceedings. Our company may also have written down to its
deferred tax assets. This may affect the confectionery business directly to financial
condition and result of operations of company.

6.9. RECOMMENDATIONS TO OVERCOME RISKS
6.9.1. Using of Healthy Ingredients
Instead of using refined sugar they should use unrefined sugar for sweetness. these
unrefined sweeteners didn’t go through refining process and was totally gotten from the
nature. Natural Honey, maple syrup, coconut sugar, dates are the natural source of
sweeteners.
The industry has to stop adding artificial flavors or artificial colors to reduce this
risk, and if they could do this and could use natural organic ingredients then it could be a
great strength for the business and for the industry ultimately.
6.9.2. Using of Sustainable packaging material
The industry could use such methodologies to improve sustainability, they could
use such material for packaging which could be recycled or could convert to compose
easily. This act will help to keep clean the environment and make it safe for human health.
And also, it will create good image in the eyes of consumers and will encourage them to
buy such company’s products who use sustainable material. (Vaswani, 2019)
6.9.3. Quality Control authority
Dozens of confectionery products are entering every day in the local market. They
are playing with human health by providing bad quality products with less prices. these
companies are providing fake products with a famous brand name committing Froud. I
think There should be some rules and regulations from the authorities to maintain the
quality of the food. There should be some auditing firms who audit or inspect the food on
proper intervals, if the manufacturer is not following the required standards their license
has to be cancel or should ban their products to enter in the market.
6.9.4. Solution to the Risk of Prices Fluctuation
To avoid the risk of price fluctuation in confectionery business is to negotiate
contracts so that we buy all of the raw materials in bulk and at fixed wholesale prices. This
will definitely allow us to budget for the future and also to be able to accurately and
consistently forecast our costs and profit margins for the future.
6.9.5. Solution to the Risk of Competitors taking over our business
With a viable strategy we can use to grow your own bakery business is to make
artisan baked goods that people won’t easily be able to find elsewhere and having a menu
that caters to special diets among our consumers. This act will give us combative position
in the industry and no one will be able to copy or recipes or to get market share.
(LaMarco, 2019)
6.10. FUTURE OF THE INDUSTRY IN NEXT 5 YEARS LOCALLY AND
INTERNATIONALLY
6.10.1. Locally/in Pakistan
Confectionery is the Pakistan’s one of the oldest and completive industry. With brand
preferences & brand names evolving & going into oblivion, the Pakistan confectionery
market has seen the brands form AB to Candyland, Hilal, B.P. Mayfair, Sweet Hill, City
Boy, Kashmiri Gold, & KIDCO. As happened yesterday's leaders have been taken over
today's innovators. Only the company would be the leader, who innovate their items on
regular interval.
As per the available information and the competition, the growth rate looks like of 15%,
each year and in 5 years the overall industry growth could be 125%. But the companies
will have at least one strong brand in each category that they can use as cash cow.
Because of the highest price’s fluctuations, the imported brand could may not that grow in
the future. (DESK, 2006)

6.10.2. Globally
The confectionery industry globally market size was estimated 190.77 Billion US dollars
in 2018. and the expected growth expected to 245.26 Billion USD by 2026.
Main reasons for the estimated growth are
• People are shifting to organic confectionery products and the trend is increasing
day by day.
• people just want to buy and eat as they walk. That is why the trend of on go snacks
is increasing day by day,
• The market share of super markets are increasing day by day. And people normally
prefer to shop form these markets because of one window shopping and the
convenience.
• Growing demand of sugar free confectionaries
• Sugar and gum confectionery are gaining huge attraction and growing very fast and
candy and snack bars. (ortunebusinessinsights, n.d.)

6.11. GLOBALIZATION IN CONFECTIONERY INDUSTRY
The Confectionery industry is also a big industry though we can also here take an
example like Dairy Milk which is really a big industry so when companies like these are
coming into a globalization then they have big opportunity to get a heavy margin from the
globalization. Therefore, to enter into globalization we have to understand a lot of different
factors which becomes the milestone when we enter into the globalization business
because it is very different in respect to Local business. When we come to do business with
other so we need to deeply understand other countries norms, languages and different other
factors.
Therefore, regional market analysis is developed to build up the foundation for the
market selection. The evaluation of globalization drivers shows that the confectionery
industry is characterized by strong industry conditions for globalization like common
customer need and high product development cost. An analysis of the international
confectionery market situation further shows that opportunities exist in several different
regions of the markets.
6.11.1. Confectionery Industry Drivers for Globalization
When we are discussing about the globalization drivers in confectionery industry
then we have to deeply understand the factors like market, cost, government regulation,
and competitive in the globalization market. These kinds of conditions are also called
industry globalization drivers. Therefore, the confectionery business is characterized as
having strong globalization potential. The further examination of individual drivers will
show key sources of globalization.

6.11.2. Major market drivers to get a business Globalized
Common customer needs.
Global customers and communication channels.
Transferable Marketing.
Cost Drivers
Global scale economies.
Product development cost
Government Drivers.
Compatible Technical Standards
Marketing Regulations.
Competitive drivers.
Globalized Competitors.
6.12. RISKS ASSOCIATED WITH CONFECTIONERY BUSINESS DUE TO
GLOBALIZATION
The risks of globalization are now a days becomes more and more facing the world
right know the main reason behind is the uncontrolled cases of corona virus that is
spreading more and more and nobody knows when does all this ends. However, when we
are doing business in the globalization there are some factors that not only confectionery
business but also every industry faces these risks. So, we will explain these factors these
are
Political risk
Property risk
Liability loss risk
Employee’s injury
Contract languages.
6.12.1. Political Risk:
Strong government plays an important role. Because they know the business, they
help us create better opportunities in the business world. They also provide rules and
regulations for doing business. In addition, there are further risks of removal, currency
devaluation and rejection of bids. In addition, there is a risk of personal injury or
kidnapping for company employees, and there is a risk of extortion attempts.
6.12.2. Property Loss
Natural disasters such as storms, hurricanes, earthquakes and floods are the most
important in globalization. this refers to the business loss that a company incurs as a result
of an incident that occurred at the convenience of its vendors and customers. It is necessary
to have classification information or the availability of insurance, and insurance limits will
need to be carefully monitored in a large inflationary environment.
6.12.3. Liability Loss
Automobile liability is highly regulated in different countries and insurance must
be purchased from approved local insurance companies. In addition, many countries have
civil law and criminal law to the extent that they are not accustomed to it. Business
managers were going to jail for violating unpaid business responsibilities and employment
laws. Companies need to analyze properly every single detail about the corporate insurance
with the home-purchased insurance.
6.12.4. Employee Injury
In different countries, the insurance of employee injury is reserved to state
institutions, and cannot be given by private insurers. Industry would be bound to provide
these requirements.
6.12.5. Contract Language
When we are doing business globally the Flows of liabilities and in fact the
business deal itself, are occur between the parties of the contract. So, it is necessary to care
should be taken in studying contract law of the countries where one will be doing business.
so, it is necessary that we negotiate in a proper manner but to negotiate in a proper manner
we should be able to understand other parties’ languages. If someone misunderstood the
thing than later it will cause a big problem for both the parties.
6.13. Conclusion
After studying all of the above we have learned that how difficult for a
company to sustained in the industry, we have learned about Nestle which is one of
the oldest companies in the world operating in about 190 countries, having thousands
of brands but still they are surviving for market share. They are losing their market
share due to the Mars and other big giants in the confectionery industry.
Companies like Mars are having one of the strictest rules, terms and conditions
related to the procurement Management which gives them the advantage in getting
more market share, and increasing their revenue, decreasing wastage, to generates
more profits. They do information transparency and data confidentiality agreements
with their suppliers or whoever is linked with the organization to stay competitive in
the industry. Which proves that how a good procurement strategy could value and
beneficial for any organization.
We should do proper planning and identify risks related with the procurement
or with the other processes of the business, such as Legal authorities, R&D, Marketing,
finance, etc. by that way we can overcome many risks before it triggers. we can
overcome many of the risks associated with our business, either it is during operations
or during the globalization process. We have to know about every single detail about
a country where we want to expend our operations, we should know about there rules,
there political conditions, exchange rates, import duties, labor rules, taxation,
insurance policies etc. if we do such analyses then we can avoid different risks
associated with our project before we started our operations globally.
Ok That’s it, I hope this paper finds you informative and helpful to know
about Confectionery industry, all the data is so much relevant to the topic and I am
sure that it will be helpful in your studies…….(((((Thank You)))))

Bibliography
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https://www.marketing91.com/swot-analysis-mars/
candyland. (n.d.). homepage. Retrieved from candyland.com.pk:
https://candyland.com.pk/our-story/
D, A. (n.d.). What is a Business? - Definition, Characteristics & Examples. Retrieved from
tudy.com: https://study.com/academy/lesson/what-is-a-business-definition-
characteristics-examples.html
DESK, N. (2006, MAY 26). Confectionery industry in Pakistan. Retrieved from
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UNIVERSITY OF MANAGEMENT AND TECHNOLOGY,

Subject_PM-455: Project Risk and Procurement Management

Submission Date: June 27, 2020

2. What is meant by Sector in Business..................................................................02

2.1. Types of Sectors in Business…………………………...……….….02

3.1. Types of Industries…………………………………….………..….03

4.1. Steps in Procurement…………………………………..…………...04

4.2. Importance of Procurement for Business……………….….……….05

4.3.1. Placing an Order…………………………….…………..05

4.3.2. Communication with the supplier……………...…….…05

4.3.3. Receiving and goods and services from the supplier…...06

4.3.4. Preparing and invoice receipt…………………………...06

4.3.5. Payment to the supplier…………………….…………...06

4.4. Measuring the procurement Effectiveness………………………….06

6. Confectionery Industry ………………………………………………………...08

6.3. Major Products of Confectionery…………………………………...14

6.4. Current Statistics in Business Locally and Internationally…………17

6.4.1. Confectionery Business Statics n Pakistan ...…………..17

6.4.1.1. Demand Conditions ……………….……18

6.4.2. Confectionery Business Statistics Globally …….….…..19

6.4.2.1. Impact of the pandemic…..……….…….18

6.5. Example of Leading Companies working in the in the industry...….23

6.5.1. International Companies……………………………..….23

6.5.2. Local Companies ……………………………………….25

6.6. Procurement Practices use by the Companies………………………26

6.6.1. Nestle .……………………….………………………….26

6.6.1.1. Nestle Procurement Policy ….……….…..26

6.6.1.2. Applications ……………………………..27

6.6.1.3. Nestle’s Procurement Vision ……………27

6.6.1.4. Nestle’s Procurement Mission …………..27

6.6.1.5. Nestle’s Aggregation of Spend ………….28

6.6.1.6. Early Involvement of Procurement ……...28

6.6.1.7. Step Strategic Sourcing Process ………...28

6.6.1.8. Nestle’s 7 Vendor Selection Rues ………29

6.6.2. Mars ……………………………………………..……..34

6.6.2.1. Mars Procurement Policy ………………34

6.6.2.2. Expectations for Suppliers …….……….35

6.6.2.3. Sub-Contracting ………………………..35

6.6.2.4. Communication ………………………..35

6.6.2.5. Assignment of Responsibility ……...….36

6.6.2.6. Compliance Monitoring ……………….36

6.6.2.7. Transparency in Procurement ……..…..36

6.6.2.8. Standard Procurement Terms ………….37

6.7. Sensitivity analysis of Nestle and Mars …………… …..…….……41

6.7.1. Mars ……………………………………………………42

6.7.1.2. Weaknesses …………………………….43

6.7.1.3. Opportunities …………………………...43

6.7.1.4. Threats ………………………………….44

6.7.2.2. Weaknesses …………………………….47

6.7.2.3. Opportunities …………………………...49

6.7.2.4. Threats ………………………………….50

6.7.3. Sensitivity Analysis Conclusion ….………………….…51

6.8. Risks faced by the industry locally and Globally …..…….………...53

6.8.1. Health Risk………………………………..…………….53

6.8.2. Low Quality Off Brand Products………...………….….54

6.8.3. Sustainability Issue………………………….....……….55

6.8.4. Fluctuation in Prices………………………..…………..55

6.8.5. Competition in Business………………………………..55

6.8.6. Tax Related Risks……………………………….……...55

6.9. Recommendations to overcome risks…………………..………….56

6.9.1. Using of Healthy Ingredients…………………………..56

6.9.2. Using of Sustainable packaging material……...….……56

6.9.3. Quality Control authority…………………..…………...56

6.9.4. Solution to the Risk of Prices Fluctuation..…………….57