Nestle Distribution Channel

Prepared by: Dina Albitar

ID: 17110003
Course Name: Distribution Management
Course Code: LOG452
Submitted to: Dr. Hamad Alkaabi

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 Table of content

Cover page 1
Table of contents 2
Introduction 3
History 4
Nestle’s Distribution Channel 5
Nestle Business strategy and network 6
Financial performance 7
Future of Nestle 8
Conclusion 9
Resources 10

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 Introduction
This report will be based on the worldwide company Nestle, nestle has dominated the food
market, it is now known as the largest food company is the world, they manufacture and produce
a wide list of products. The purpose of this report is to describe how nestle distributes its
products worldwide, the strategies they use and how they operate. This report will also
emphasize on the future of nestle and how it will be in five years, while providing a brief history
on when and how they started. The aim of tis report is to analyze and evaluate nestle distribution
channel and understand how they operate.

About Nestle
Nestlé is a Swiss multinational food and drink processing multinational corporation
headquartered in Vevey, Vaud, Switzerland. It is the largest food company in the world,
measured by revenues and other metrics, since 2014. Nestlé's products include baby food,
medical food, bottled water, breakfast cereals, coffee and tea, confectionery, dairy products, ice
cream, frozen food, pet foods, and snacks. Nestlé was formed in 1905 by the merger of the
Anglo-Swiss Milk Company, established in 1866 by brothers George and Charles Page, and
Farine Lactée Henri Nestlé, founded in 1866 by Henri Nestlé. The company grew significantly
during the First World War and again following the Second World War, expanding its offerings
beyond its early condensed milk and infant formula products.

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 History of Nestle

Nestle’s history begins in 1866, with the foundation of the Anglo-Swiss Condensed Milk
Company. Henri Nestlé develops a breakthrough infant food in 1867, and in 1905 the company
he founded merges with Anglo-Swiss, to form what is now known as the Nestlé Group. During
this period cities grow and railways and steamships bring down commodity costs, encouraging
international trade in consumer goods.
 1866: US brothers Charles and George Page help establish Anglo-Swiss Condensed Milk
Company. Using abundant supplies of fresh milk in Switzerland. They start supplying
Europe’s industrial towns with the product under the Milkmaid brand, marketing it as a safe,
long-life alternative to fresh milk.
 1867: Nestlé’s founder, German-born pharmacist Henri Nestlé, launches his ‘farine lactée’ in
Vevey, Switzerland. Around this time, he starts using the now iconic ‘Nest’ logo.
 1875: Henri Nestlé sells his company and factory in Vevey to three local businessmen. They
employ chemists and skilled workers to help expand production and sales.
 1878: Fierce competition develops between Nestlé and Anglo-Swiss, when both companies
start selling rival versions of the other’s original products. Both firms expand sales and
production abroad.
 1882- 1902: In 1882 Anglo-Swiss expands into the US. In 1902 it sells its US-based
operations, which paves the way for an eventual merger with Nestlé.
 1904: Nestlé begins selling chocolate for the first time when it takes over export sales for
Peter & Kohler.
 2000s- Present: Nestle further expanded their product line, collaborating with many other
businesses and producing new products. Throughout the years Nestle has also encountered
international growth, expanding their operations and distributing worldwide.

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 Nestle’s Distribution Channel

Nestle started its activities around 100years and stated their own manufacturing unit. Today
Nestle has 8 Manufacturing plants in UK with two head offices in Croydon and Dublin. Nestle
adopted a strategy that their products should be made available in all the parts of UK and that
they should not be falling behind for the supply, basically called the whenever, wherever and
however strategy of distribution.

Distribution System
Nestle has its own distribution network equipped with all necessary transportation facilities. They
transport their products at major regional sales offices. Which are situated at different cities in different
countries. Their sales offices (distribution centers) have their own vans with sales people who sell and
transport goods to retailer.
Nestle’s inbound logistics

Cardbored/
Raw Materials Processing Packaging material
manufacturer

Nestle’s outbound logistics

Grocery
Packaging Tranportantion Wholesaler Customer
Store

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 Nestle’s Channel strategy and network

Nestle’s network

Warehouse

Carriage and Forwarding Agent

Distributor Super stockist

Retailer Wholesaler Re-distributor

End Customer Retailer

Products are sent to the carriage and forwarding agents of the company from tis
manufacturing units. Later It flows form the manufacturing unit to distributor and stockist.
Stockist refer to an entity who buys stocks from company and then sells these stocks to retailers,
they are the only nod in the change between company and retailer. A super stockist would have
several sub stockists under them.
The distributer is responsible to manage the availability of products in his area. Super-stockist
supplies the goods to the redistributor who is in charge of managing the availability outside the
region of the distributor. The distributor and redistributor, then supplies the products to
wholesaler and retail in their respective region or area.

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Nestle channel strategy
 Increasing growth: through innovation, differentiation and by offering relevant products
and solutions to their consumers. They are committed to reach a sustainable mid-single-
digit level of organic growth.
 Improving operational efficiency with the goal to increase their underlying trading
operating profit margin to between 17.5% and 18.5% in 2020 (from 16.0% in 2016).
 Allocating their resources and capital with discipline and clear priorities, including
through acquisitions and divestitures.

Nestle’s Financial Performance

Nestle’s financial performance of 2019-2020

 Nestle’s has organic growth of 3.5%, with real internal growth of 2.9% and pricing of 0.6%.
Growth was supported by strong momentum in the United States and Purina Pet Care
globally.
 Total reported sales increased by 1.2% to CHF 92.6 billion. Net acquisitions had a negative
impact of 0.8% and foreign exchange reduced sales by 1.5%.
 One year ahead of Nestlé's medium-term plan, the company reached its 2020 profitability
target range.
 Underlying earnings per share increased by 11.1% in constant currency and by 9.8% on a
reported basis to CHF 4.41. Earnings per share increased by 28.0% to CHF 4.30 on a
reported basis.
 Free cash flow increased by 10.9% to CHF 11.9 billion.
 2020 Outlook: continued increase in organic sales growth, expecting further acceleration in
2021/2022 towards sustainable mid-single-digit growth. Underlying trading operating profit
margin with continued improvement. Underlying earnings per share in constant currency and
capital efficiency expected to increase. It is too early to quantify the financial impact of the
coronavirus outbreak at this time.
Nestle’s revenue
Nestle current revenue is 91.43 billion CHF It ranked No. 64 on the Fortune Global 500 in 2017
and No. 33 on the 2016 edition of the Forbes Global 2000 list of largest public companies.

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Nestle in the future

Nestle in five years

As a worldwide company nestle is always looking for ways to improve by assuring a bright
future for their company and customers, here are some plans nestle is working on for the future.
 Food science and technology: technology is a vital part in nestle, that is why they are
planning to enhance their food through innovative science, creating food, beverages and
food equipment for their customer to use. They want to further develop their process
through technology and introduce new concepts.
 Environmental sustainability: Nestle is looking to become more environmentally
cautious.  longstanding research program in plant science is designed to find ways to
improve the quality of plants and materials derived from plants, to improve the
sustainability of their production and the stability of their supply
 Improve Nutrition: Nestle has promised to start providing more nutritional and healthy
range of products, to help their customers to maintain a healthier and more balanced
lifestyle. Nestle has also been experimenting with plant-based products to target the
vegetarian/vegan community

Future challenges
 Increase in competition, nestle has a big competitive advantage in the
market, however more recent new comers with innovative products are
entering the market and grabbing customers attention, Nestle will
eventually have to compete in this market more fierce fully.
 Through out the years nestle has faced a lot of backlash from customers
and from environmental activists, even though nestle has been promising
a more sustainable environment they will be forced to take actions in the
near future about how they produce and plant their products.

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 Conclusion

In conclusion I was able to evaluate and analyze Nestle’s distribution channel,

since nestle operates worldwide they have a very complex distribution strategy.
They were able to construct a distribution channel that satisfies their end customers
and keep up with demand. I was able to understand Nestle’s main aim for its
distribution channel, which is to ensure a consistent availability of products to their
customers whenever, wherever and however. They made sure that all their
processes is aligned with providing the product to their end customer in an efficient
way to ensure quality.
I was also able to acknowledge new terminology throughout my research. I have
learned how a worldwide company can keep up with demand through constructing
an efficient distribution channel.

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Resources

Link#1: https://www.nestle.com/
Link#2: https://www.slideshare.net/selvakani/01-nestle-final
Link#3: https://en.wikipedia.org/wiki/Nestl%C3%A9
Link#4: https://phdessay.com/nestle-distribution-channel/

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