Sheikh Humayoun Farid

Nestlé (Nestlé Pure life)

Nestlé is a multinational Swiss Company operating in Pakistan through its direct
subsidiary Nestlé Pakistan. It has a variety of products including confectionary, cereals,
dairy products, bottled water, and so on. Operating in 189 countries; today, Nestlé is one
of the world’s most leading company. It aims at enhancing quality of life and
contributing to a healthier future.
Operating since 1988, Nestlé Pakistan through a joint venture with MilkPak Ltd. later
took control over management in 1992. It is the leading Food and Beverages Company
in Pakistan mainly aiming at Nutrition, Health and Wellness. One of the major brands is
Nestlé Pure Life that provides safe and pure drinking water. It launched in 1998 being
successful globally. Today, it plays their role as a leading player in the bottled water
market globally as well as in Pakistan. Nestlé Pure Life is available in two basic
categories, PET and HOD (Home and Office Delivery), with the following formats:

The Company's priority is to bring the best and most relevant productsto people,
wherever they are, whatever their needs, throughout their lives.Taste of Nestlé in each of
the countries where Nestlé sell products. Nestlé is based on the principle of
decentralization, which means each country is responsible for the efficientrunning of its
business - including the recruitment of its staff

Mission Statement
Nestlé's business mission 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.
Motto of Nestlé is “Good Food, Good Life”.
Objectives
 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.

 Nestlé is conscious of the fact that the success of a corporation is a reflection of

the professionalism, conduct and the responsible attitude of its management and
employees. Therefore recruitment of the right people and ongoing training and
development are crucial.

 Nestlé continues to maintain its commitment to follow and respect all applicable
local laws in each of its markets.

SWOT ANALYSIS
Strengths
Global food producer, located in over 100 countries. Consistently one of the world’s
largest producers of food products, with sales in the USA in 2008 of $10 billion; sales
and earnings in 2008 were better than expected, even in a downturned economy.
Repeatedly ranked as the world’s largest bottled water company and have set up
facilities to operate water resources in a responsible manner.

Nestlé was named one of “America’s Most Admired Food Companies” in Fortune
magazine for the twelfth consecutive year.

Nestlé provides quality brands and products and line extensions that are well-known,
top-selling brands including:

Professional brands sold to restaurants, colleges, hotels, and food professionals

including Jenny Craig meals, Impact liquid meals for trauma patients, liquid meals for
diabetics, and OptiFast weight loss products.

Successful due in part to their unquestionable ability to keep major brands consistently
in the forefront of consumer’s minds (and in their shopping carts) by renovating existing
product lines, keeping major brands from slipping into saturation/decline and having
superior access to distribution channels.

Weaknesses
Their LC-1 division was not as successful as they thought it would be in France. In the
late 1980s, Dannon entered the market with a health-based yogurt, and become the top
selling brand of yogurt; Nestlé’s 1994 launch was behind the product life cycle curve in
an already mature market and could not compete against a strong, established brand.

Growth in their organic food sales division was flat in 2008, even though the industry
grew 8.9%.

Since 2004 the breakfast cereal industry has been under fire from the FDA and the
American Medical Association, both of which say that false claims of “heart healthy” and
“lower cholesterol” need to be removed from packaging and advertising. They have also
been forced to reduce the amount of sugar in their products, as parent’s advocates
groups claimed they were contributing to the diabetes epidemic among American
children.

General Mills is an experienced, established brand and are the market leader in the USA,
however, they have been lacking in innovation, have not cashed in on the booming
health food craze and have been behind in creating new, niche products, especially in
their yogurt division, where Yoplait is the only brand making a profit.
In 2008, although their products did not carry the recalled pistachios, several of their ice
cream brands, Dryer’s, Edy’s and Haagen-Dazs, were still plagued with bad PR and loss
of sales.

Opportunities
In today’s health conscious societies, they can introduce more health-based products,
and because they are a market leader, they would likely be more successful.

Provide allergen free food items, such as gluten free and peanut free.

They launched a new premium line of higher cacao content chocolates dubbed Nestlé
Treasures Gold, in order to cash in on the “recession economy” in which consumers cut
back on luxury goods, but regularly indulge in candy and chocolate. Americans want
luxury chocolates, and high-end chocolate is immune to the recession (so far), because
it is an inexpensive indulgence.

Opened Nestlé Café’s in major cities to feature Nestlé products.

Threats
Any contamination of the food supply, especially e-coli. Their Toll House brand cookie
dough was recalled in March of 2009 because of e-coli. Outbreaks were linked to 28
states and the product had to be recalled globally. Nestlé has yet to find out how this
happened, and is still investigating.

They were affected by the pet food recall in 2007, in which 95 different brands of dog
and cat food was recalled due to contamination with rat poison. Also in 2007, FDA
learned that certain pet foods were sickening and killing cats and dogs. FDA found
contaminants in vegetable proteins imported into the United States from China and
used as ingredients in pet food.

Raw chocolate ingredient prices are soaring; dairy costs alone rose 50% in 2008, this
cuts heavily into their profit margins and often gets passed on to consumers, by
shrinking the packaging in a way that is almost unnoticeable-therefore the consumer is
paying the same prices for less product.

They have major competitors, like Hershey’s, Cadbury-Schweppes (owned by Pepsi),

Lindt and Ghirardelli, Kellogg’s, Post, Starbucks, Beech-Nut, Quaker, Kraft Foods,
Dannon, Del-Monte, Iams, Earth’s Best, Heinz, Frito-Lay (owned by Pepsi).
 MARKETING MIX
Product is something that is offered to the market. NPL product strategy studies show
that they are positioning the product with respect to its attributes that NPL is safe, pure,
refreshing and healthy water. Nestlé also does product line expansion; recently it has
offered a 0.25 liter bottle of NPL in the market. It’s also using the company name with
its product name i.e. Nestlé Pure Life. NPL round shape and elegance of the bottle are
instantly recognizable. Quality is cornerstone of NPL success. Nestle people say:
“Quality is our more successful product and it is key to our success today and
tomorrow.”

Price:

Nestle has adopted the strategy of non-price competition. It is offering one price for
NPL to all cities of Pakistan. It also keeps the check on distributors to maintain single
price of NPL. It offers trade discounts to its distributors.

Placement:

Placement is the distribution of the product to its customers at right time, in right
quantity, at right price and at right place. To ensure this, channel adopted by the Nestlé
for distribution of NPL is as follows:

Producer  Wholesaler  Retailer  Consumer

NPL comes under the category of FMCG, so for this the timely supply is very important
that’s why Nestlé is following intensive distribution strategy.

Promotion:
Promotion is the very important and crucial element of marketing strategy as through it
the company establishes its image in the minds of the customers. NPL is promoted by
using different ways of promotion. Advertisement of NPL is done through TV, radio,
billboards, newspapers and magazines. Current advertising slogans are that NPL is
trust, hope and happiness and JIYO! Kay yahi hay Zindagi. Nestlé also conducts
the tradeshows, concerts, events, sponsorships, and discounts for sales promotion. For
establishing public relations, Nestlé distributes its newsletters, annual reports,
calendars and diaries, lobbying, donation for charitable and civic events. For the victims
of 8th October 2005 earthquake, Nestlé has donated 90 trucks, which were containing
different foods items, and NPL was one of them which is around Rs. 2 Billion. The
Nestle organized its teams to distribute products to the effected areas and all employees
contributed from top to bottm (MD himself was involved personally to distribute
products physically)

For each target market, management must design a Marketing strategy, which includes
the designing of the marketing mix. The Marketing Mix is the combination of multiple
aspects of the following four elements: a product, how it is distributed and promoted,
and its price. These four elements are intended to please the target market(s) and,
equally important organization marketing objectives.

The Company's strategy is guided by several fundamental principles. Nestlé's existing

products grow through innovation and renovation while maintaining a balance in
geographic activities and product lines. Long-term potential is never sacrificed for short-
term performance. The Company's priority is to bring the best and most relevant
products to people, wherever they are, whatever their needs, throughout their lives.

Nestlé is committed to the following Business objectives 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 continues to maintain its commitment to follow and respect all applicable
local laws in each of its markets.

To achieve these objectives the product, price, place and promotion strategies for Nestlé
Pure Life are as following:

MARKETING STRATEGY
Anything offered to a market for attention, acquisition, use, or consumption that might
satisfy a need or want.

Product is set of tangible and intangible attributes, including packaging,

color, price, manufacturing, prestige, retailing, services, etc. which the
buyer may accept as offering want is satisfied.
Nestlé is offering the products, which comes under the category of fast
moving consumer goods (FMCG).
Nestlé is committed to offering consumers high-quality food products that
are safe, tasty and affordable. The Nestlé Seal of Guarantee is a symbol of
this commitment.

To be successful in marketing, producers must need carefully planned strategies for

their products. Now the question is that how Nestlé has planned the product strategies
for NPL.
Positioning the Product In relation to the attribute

Nestlé is positioning its water as pure and safe water, which is essential to good health.
They say that Trust Nestlé Pure Life and also Nestlé pure life is Happiness, Hope and
Trust, this is the message which they are giving in their advertising campaign.

Nestle also claims that NPL is Pakistan’s favorite water and currently their slogan
is JIYO! kayyehi hay zindagi. On basis of these, it is said that Nestlé is positioning
in relation to the attribute and quality of the product.

Its basic foundation is unchanged from the time of the origins of Company, and reflects
the basic ideas of fairness, honesty, and a general concern for people.

Product Line Expansion

Product line expansion is accomplished by increasing the depth (variety of sizes, colors,
models) within the product line.

Nestlé is offering variety of sizes in NPL product line, which are as follows:

Retail line:

1.5 liters

0.5 liters

0.2 liters (Recently launched)

Home and Office Line:

It is also comes under Nestlé Bulk category.

3 Gallon
5 Gallon

The year 2005 saw the successful completion of yet another year of outstanding
business for NESTLÉ PURE LIFE both in retail with 0.5 and 1.5liter bottles with the
introduction of a new product i.e. 0.2 liter bottle and direct home and office delivery
with 19 liter bottles. The exceptional performance of the brand is the result of expanding
national distribution and an increasingly loyal customer bases. The brand has
revolutionized the Pakistani market by tapping the real consumer need for pure, safe
and healthy water and has successfully dominated a key strategic business in Pakistan.

Quantitative Analysis:
Product Units Value Rs 30/Unit

Nestle Waters 100000 30,000,00

Total RS.30 Lacs
Source: Fictitious data, for illustration purposes only
 Promotional Activities:
Item Quantity Month
Undergraduate
Posters,Stickers 100000 April,May,June
Billboards 500 April,May,June
Free Bottles 5000 April,May,June
Total Rs One Million
Source: Fictitious data, for illustration purposes only

Break Even Analysis

Product 1st Year 2nd Year 3rd year

Cost 10 Lacs 20 Lacs 30 lac

Sales 13.5 Lacs 27 lacs 40 lacs
Profit Margin 35 % 35 % 35 %

Total Rs. 13.5 Lacs Rs. 27 Lacs Rs. 40 Lacs

Source: Fictitious data, for illustration purposes only

Branding

A brand is a name and/or mark intended to identify the product of one seller or group of
sellers and differentiate the product from competing products. Branding reduces the
price competition.

Nestlé is using following branding strategies showed in this picture:

Conclusion
Nestle can earn greater return from its distinctive competencies, i.e. unique strengths
that allow a company to achieve superior efficiency, quality, innovation and customer
responsiveness. By applying those competencies, and the products they produce, to
foreign markets where indigenous competitors lack similar competencies and products,
Nestle can realize enormous returns.

Furthermore, Nestle can take advantage of location economies. Location economies

arise from performing a value creation activity in the optimal location for that activity,
anywhere in the world. The optimal location for a value creating activity lowers the costs
of value creation therefore helping the company achieve a low-cost position.
Nevertheless, Nestle must evaluate basic entry decisions before entering an emergent
market. The company has to make a choice among different foreign markets on the basis
of their long-run profit potential. Nestle has to balance the benefits, costs.