POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

SANTA MARIA, BULACAN CAMPUS

PULONG BUHANGIN, SANTA MARIA BULACAN

A Case Study of Nestlé

Submitted by:

Dela Cruz, Jamille G.

Domingo, Patricia Vianca C.

Geronimo, Camille N.

Palpalatoc, Armen C.

Ramos, Jacob Angelo M.

Reyes, Monica P.

Saberola, Justine Ellis A.

Saripada, Asralia S.

Sesaldo, Kia Mae S.

Trapago, Neil Francis D.

June 2021
I. NESTLÉ

II. VIEWPOINT

Nestlé Company was founded by a pharmacist named Henri Nestlé in 1866 in Switzerland.
It is where the company’s brand and logo came from. The word Nestlé means “little nest” which
symbolizes the company’s vision to provide a secure food center while sustaining nutritious
goods for every consumer around the world. As of now, Nestlé was globally known as the
world’s biggest food and beverage company and continues to innovate and discover more
products to introduce in the market.

To continue the founder’s legacy, the company is recently managed by the newly elected
Chief Executive Officer in 2017, Mark Schneider. He is a German/American businessman and a
former CEO of Fresenius Group, Bad Homburg, Germany back in 2003 up until 2016. Schneider
is tagged as the first “outsider” CEO of Nestlé in almost a century. And it’s been a deal making
kick for him to transform the large company into a healthy and nutritional empire considering
that the world is suffering from a worldwide pandemic. On the other hand, the former CEO and
today's chairman of Nestlé, Paul Bulcke appointed François-Xavier Roger as the new Chief
Finance Officer in 2015. Roger is trusted for his vast experience in the field of finance and
control and being the late CFO of Danone Asia, which is based in Paris and Millicom based in
Luxembourg.

Here is the list of Nestlé’s executive board members:

• Mark Schneider – CEO of Nestlé

 • Laurent Freixe – Executive Vice President/Chief Executive Officer Zone Americas
(United States of America, Canada, Latin America, Caribbean)
• Chris Johnson – Executive Vice President/Chief Executive Officer Zone Asia, Oceania
and sub-Saharan Africa (AOA)
• Marco Settembri – Executive Vice President/Chief Executive Officer Zone Europe,
Middle East and North Africa (EMENA)
• François-Xavier Roger – Executive Vice President/Chief Financial Officer
• Magdi Batato – Executive Vice President/Head of Operations
• Stefan Palzer – Executive Vice President/Chief Technology Officer
• Béatrice Guillaume-Grabisch – Executive Vice President/Global Head Human
Resources & Business Services
• Leanne Geale – Executive Vice President/General Counsel, Corporate Governance and
Compliance
• Bernard Meunier – Executive Vice President/Head of Strategic Business Units and
Marketing and Sales
• Greg Behar – Deputy Executive Vice President/Chief Executive Officer Nestlé Health
Science
• Sanjay Bahadur – Deputy Executive Vice President/Head of Group Strategy and
Business Development
• David Rennie – Deputy Executive Vice President/Head of Nestlé Coffee Brands
For more than 150 years of operation, the company continued to provide health products in
186 countries including the Philippines. Kais Marzouki, the CEO and chairman of Nestlé in the
Philippines started his very career in the company as an intern in the head office of Switzerland.
At first, they were just assigned to review the sales and marketing of Nestlé in different parts of
the world. And as the group enters the country, the Philippines become the top branches and
biggest market group which result in Marzouki’s appointment for the CEO role.

Today, Nestlé Philippines grow and fully established while fighting numerous competitors
in the industry. The company also faced the problem of continuing the operation as the lockdown
started in the country. Even the adjustment in the sources of supply and finding new suppliers
that needs to be secured.

III. TIME

In 2016, Nestlé experience their slower like for like sales growth for at least two decades
in the annual result at Swiss producer of baby milk and KitKat under the new chief executive
Mark Schneider. “Our 2016 organic growth was at the high end of the industry but at the lower
end of our expectations,” Mr. Schneider said. After only 3.2 percent organic growth in 2016, Mr.
Schneider promised to push up restructuring at the world's largest food and beverage group and
also expecting organic growth between 2 percent and 4 percent on 2017.
 In 2017, Nestlé's full-year results were disappointing, with net profit falling roughly 16
percent and organic sales growth falling short of expectations to 2.4 percent due to poor
performances in the United States and Brazil. Nestlé's net earnings fell to CHF 7.18 billion ($7.7
billion) in 2017, down from CHF 8.53 billion ($9.23 billion) in 2016. The company blames the
drop on troubles at its Nestlé Skin Health division. “Our 2017 organic sales growth was within
the guided range but below our expectations, in particular due to weak sales development
towards the end of the year. Sales growth in Europe and Asia was encouraging while North
America and Brazil continued to see a challenging environment” Mr. Schneider said. He also
said that the Organic sales growth is expected to improve in 2018 and we are firmly on track for
our 2020 margin improvement target.

In 2018, Nestlé's two major markets, the United States and China, aided organic growth.
Organic growth in the infant nutrition and confectionary industries also increased. Pet care,
coffee, and Nestlé Health Science all continued to grow at a rapid pace. The Group's organic
growth was 1.6 percent in developed countries and 4.9 percent in emerging markets. "We are
pleased with our progress in 2018. All financial performance metrics improved significantly and
we saw revived growth in our two largest markets, the United States and China, as well as in our
infant nutrition business. Nestlé keeps investing in future growth” Mr. Schneider said.

In 2019, Nestlé organic growth was 3.5 percent, which was in line with their expectations.
For the full year, RIG increased to 2.9 percent, the highest level in the prior six years. Innovation
and portfolio management, in particular, aided growth. In the fourth quarter, pricing increased by
0.6 percent and returned to positive territory. Nestlé divested Nestlé Skin Health this year and
announced the sale of its ice cream companies in the US to Froneri for USD4 billion (transaction
closed January 31, 2020). Nestlé has also agreed to sell Casa Tarradellas a 60 percent stake in its
Herta charcuterie (cold cuts and meat-based products) business. Portfolio rotation accounted for
12% of total 2017 sales over the previous three years.” This year, we made significant progress
in our portfolio transformation. We did what we said we would do and more. We are not done
yet. We will respond to rapid changes in the industry and fast-evolving consumer preferences to
position our portfolio for higher growth” Mr. Schneider said. They are expecting organic sales
growth to accelerate further in 2021/2022, resulting in sustainable mid-single-digit growth.

In 2020, Nestlé organic growth in this year was 3.6 percent, the highest in the prior five
years. RIG has increased to 3.2 percent. Pricing improved by 0.4 percent year over year, notably
in emerging countries. Strong momentum in the Americas and healthy sales drove the company's
growth. In developed markets, organic growth was solid at 3.8 percent. Emerging market growth
accelerated this year, reaching 3.4 percent. “The global pandemic did not slow us down. Our
nutrition expertise, digital capabilities, decentralized structure and innovation engine allowed us
to adapt quickly to changing consumer behaviors and trends. We advanced our portfolio
transformation, continued to build Nestlé Health Science into a nutrition powerhouse and
expanded our presence in direct-to-consumer businesses, looking to 2021; we expect continued
improvement in organic growth, profitability and capital efficiency in line with our value
creation model.” Mr. Schneider said.

Nestlé was unaffected by the Covid-19 epidemic. People bought more packaged items, not
just coffee and dairy items, but also pet items, as a result of the lockdowns, which enhanced the
company's revenue. Nestlé is having its best quarter in ten years in terms of sales growth.

IV. HISTORICAL BACKGROUND

"Thinking globally - acting locally". It all started when a pharmacist in the name of Henri
Nestlé produced and launched a nutritious thin porridge or gruel meant for children, Farine
Lactée Nestlé in Switzerland in the year 1867 aimed to combat the problem with infant mortality
because of malnutrition. It became popular to Europe later on. Together with his principles and
smart strategy of producing and maintaining long-term potential of his products, Nestlé family
continued to grow and is now considered as the world's biggest food and beverage company
having factories for over 86 countries all over the world making varieties of food products
including soups, coffee, frozen products, chocolates, yoghurts, cereals, and mineral water and it
continued to expand in the early 70's adding pet foods, cosmetics, and pharmaceutical products
to their product portfolio.

As part of a growing company, Nestlé products reached and became available in the
Philippines as far back as 1895 as a trading company and had its very first sales office in Calle
Renta, Binondo in the year 1911 after The Nestlé and Anglo Swiss Condensed Milk was
recognize officially in the country. During World War II, its operations were suspended but later
made a comeback after Liberation under a new name of Filipro Inc. that continued to import
Milo, Nido powder milk, Milkmaid and Nescafé products. Early 1950's, Philippine government
imposed import control, which made the company to become a distributor of peanut butter, fruit
preserves, napkins, and patis (fish sauce) to keep the operations going. In 1960, Nestlé S.A. and
San Miguel Corporation merged to have a partnership forming Nutritional Products, Inc.
(Nutripro) which started operations in Alabang Muntinlupa to manufacture Nescafé, year 1962.
It was year 1977 when Filipro Inc. and Nutripro Inc. partnered under the agreement name of
Filipro Inc. and eventually changed it into its present name as Nestlé Philippines Inc., 1986.

"Centralize what you must, decentralize what you can" summarizes the Nestlé's main
business principle for the company creating its framework that enables them to share value and
credit with the suppliers, customers, partners, and consumers all over the world dealing them
locally despite their global organizations. It became fundamental for the Nestlé company to bring
the most needed and relevant products to everyone wherever they are, throughout their lives.
This priority and principles made the company well-known and multinational enterprise. It
continued to grow its dedication in providing help and support for nutrition, health and wellness.
V. STATEMENT OF THE PROBLEM

In a world of business where competition is fierce, companies find themselves in trouble.

The fierce competition is results of diverse sets of environmental shifts. There is continuous
proliferation of globalization and outsourcing, advancement of technology, and change in
demographic landscape has become a threat. The nature, size, and scope of companies are
essential for the vital success of a company on how they will manage its operation. And leading
companies must find a way to create economic opportunities to satisfy the needs and wants of
growing population of the world.

"Good food, good life" is the motto of Nestlé a Swiss multinational company whose
known to its food and beverages products. The food market plays a pivotal role in our day to day
lives and is mostly affected by emerging trends. Nestlé as a food and beverages producing
company already proved its mighty and strength in terms of its flexibility in keeping up with the
market trends and strategizing to be a market trend setter. In 2020, the Nestlé Group generated
sales of about 84.34 billion CHF worldwide making the powdered and liquid beverages as
Nestlé’s top selling products. Sales of powdered and liquid beverages reached 22.57 billion
Swiss Francs followed by Nutrition and Health Science with the totalled sales of 12.16 billion
Swiss Francs. Water was Nestlé’s worst selling category with 6.4 billion Swiss Francs in sales in
that year. PetCare was Nestlé’s fast growing product category in 2019, with a rate of 7 per cent.
Nestlé was the leading FMCG (fast moving consumer goods) company worldwide in 2019, with
net sales of over 93 billion dollars. In terms of beverages, Nestlé was the second largest beverage
manufacturer in the world in 2019, behind only AB InBev.

Moreover, the overall purpose of this study is to have an in-depth investigation and
detailed-analysis of the company 'Nestlé' which can be useful to have a vast understanding of the
company and to add strength to the existing knowledge through previous research.

Objectives of the Study

The objective of this study is to know the following:

1. What are the problems (weaknesses and threats) that affect Nestlé’s pose in the market? And
how they will manage it?
VI. AREAS OF CONSIDERATION

Strengths

1. Strong Brand Recognition

By owning many household names, such as Nescafe, Milo, CoffeeMate, Nesquik, not to
mention other local favorites, Nestlé presents in more than 90% of household globally.
2. Manufacture facilities are widely spread out
Since Nestlé has about 400 factories in more than 190 countries worldwide, they can shift
their manufacturing processes from one factory to another if there is a problem in a certain
region without causing a large disruption in the supply chain.
3. Low leverage in the capital structure
Nestlé has less than 12% of debt over the total assets. This will keep the cost of
borrowing low and more borrowing sources available in case of needs. In addition during the
time of market crises, Nestlé is less likely to be forced into bankruptcy because it can sell some
of its assets to pay off debt without impairing the whole operation.
4. Fast Innovation
Application of science across all platforms and innovating through collaboration with the
local players allows Nestlé to innovate faster and according to local demands
Weaknesses

1. Being in a big global brand tends to encounter numerous controversies in different countries
by its operation cause issues.

Example of this is the water controversy which is one of the hardest issues for Nestlé,
since Nestlé was accused of illegally pumping millions of litres of water in 6 nations where
residents are deprived of drinking water. They also become a target of social criticisms wherein
Nestlé become a target of media attention many times. There was the claim of privatize water,
misleading labelling, selling contaminated food, a lawsuit for making chocolate using child and
slave labour, and using unethical practices that totally weaken its market reputation.

2. Problems in product marketing.

Nestlé faced again a massive backlash from people across the globe for not correctly
positioning and marketing their products. Example of this is the marketing of breastfeeding baby
formula to people in poorer nations. Uneducated mothers were using their product with
contaminated water, causing high cases of illness.

3. Need more investment in new technologies.

 The absence of technical and monetary resources which has actually restricted its ability
to grow its business domestically and globally is one of the weaknesses of Nestlé Company.
Given the scale of expansion they’re planning to expand into, Nestlé needs to put more money in
technology to integrate the process globally. Right now, the investment in technologies is quite
harder to achieve and be in line with the vision of the company.

4. Strong competition by other brands means limited market share growth for Nestlé.

Even though the product is a success in terms of sale but its positioning and unique
selling proposition is not clearly defined which can lead to the attacks in this segment from the
competitors.

5. High dependence on advertising.

Nestlé is majorly dependent on advertising to promote its product which increases their
marketing costs and consequently, there might be a high risk associated with the returns, so this
strategy will not sustain Nestlé in the long run.

6. Not having a direct outlet.

Nestlé's weakness of not having a direct outlet can be converted as an opportunity by

introduction of new direct outlets.

Opportunities

1. Brand popularity

Brands leave good things or bad things to remember. Nestlé stands from the beginning
and still standing up to this very moment to provide high-quality products for everyday use
across the globe.

2. Authentic labelling

Nestlé has already been criticized for giving misleading nutritional information on its
label and under fire for marketing claims on baby milk formulas. This experienced can be a
wakeup call to Nestlé to open an opportunity to be very cautious to the labels they put to their
products and to undergone to the multiple layers of research to make sure that everything that's
been written to the packaging is a trustworthy information.

3. Venturing small food start-ups

Nestlé has an opportunity to grow number of small food start-ups under its popular
brand name, through that Nestlé can collaborate with new start-ups to promote its brand name.

4. Online shopping
 In the midst of globalization and before this pandemic happens. Nestlé just like other
company has an online store for their customers to keep in touch to their products.

5. Unmatched research and development capability.

The company has the largest R&D centers’ network of any food or beverage company
in the world, with 34 R&D facilities and over 5000 people working in them.

Nestlé’s superiority in R&D against its rivals provides a sustainable competitive

advantage and long-term success

6. Environmental sustainability efforts

Nestlé prides itself on company’s sustainability efforts. The company’s environmental

initiatives have helped to reduce waste, packaging material usage and to keep the environment
cleaner.

Since 1991, the company has saved 500 million kg of packaging material by
redesigning its packages. Nestlé uses recycled materials and chooses materials from renewable
source whenever possible.

By 2016, 105 of Nestlé’s factories have reached zero waste in production, one of the
best results in the industry.

The AWS Standard is the first global water stewardship standard for measuring
responsible water stewardship across social, environmental and economic criteria. AWS provides
a globally-applicable framework that allows major water users to understand their water use and
impacts, and to work collaboratively and transparently towards sustainable water management.
The AWS Standard helps sites acquire best practices in order to address the shared water
challenges of a watershed and ensure responsible water stewardship actions for all stakeholders.

Threats

1. Poor quality water and its shortage. 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.

2. Increased rivalry in the refreshment and food ventures.

3. Increasing price of raw materials.

4. Fast growing international brand of its competitors who are now entering in the coffee market
and are capturing the curiosity of the consumers.

VII. ALTERNATIVE COURSES OF ACTION

 Company’s mission statement of good food and good life focuses on providing its
consumers with the most nutritious choices incorporating wide range of food and beverage
categories. Nestlé must focus on transforming its brand image and reputation to a health,
nutrition and wellness leader, by connecting to a network of experts who can help to invent the
present and upcoming products into more healthier.

After developing an appropriate strategy Nestlé has to look to ensure all its products maintain the
standard and provide better nutritional benefits. This involves:

• Bringing innovation in the company’s offerings. Invest in research and development.

Through research and development, they would come up with more innovative ways on
how to improve their products according to the needs and wants of their customers
• Produce more effective promotions. This marketing strategy will help Nestlé to outwit
their competitors and capture the heart of the consumers. Using of technology to market
and sell the products. Since the pandemic hindrances the consumers to go out their home,
a good way to market and sell the product is through online.
• Rehabilitation of facilities, factories and local farms of Nestlé. Local farms will help
produce more raw materials that will reduce the cost and improve profit. Install more
factories to cater customers on far places.

VII. CONCLUSION

Nestlé must ensure to maintain the standard and provide better nutritional benefits to the
customers. In addition, to achieve its mission statement which is “Good Food, Good Life”, the
company must immerse in possession of brand image and nutritional benefits. Included to these
action are introducing new products, expand innovation, improving internal and external factors
to give satisfaction to their customers. In addition on the alternative course of action provided,
investing in research and development will guide Nestlé to bring innovations and renovations of
product that will give them a competitive advantage. Any increase in the competitive
environment may have a negative effect in their business, growth and earnings. Through
competitive intelligence, it will give insights and ideas to come up with strategies and decisions
on how to compete with their rivals and to maintain their position as the number one producer of
food products.

VIII. RECOMMENDATION
  For Nestlé to have a clear vision of their market position and to help them to shape a
proper competition they have to monitor and evaluate their products and market
continuously and with that it will help them to take advantage over their competitors
and also to set up their brand image.
 Establishing their own retail outlets and ensuring the availability of products to the
hand reach of the customers can improve the profit margin of Nestlé.
 This past few years the cost of the raw materials has been on a rise which have caused
an increased in the production costs but if the local farms will produce their raw
materials it will reduce their cost and improve their profit.
 Invest for the new technology to grow its business domestically and globally.
 Launching new products with scientifically proven nutritional benefits.
 Improving its production and operational procedures.
 Using authentic raw material to avoid outcry from environmental and social activists.
 Improvement and right instructions and nutritional facts about the product to ensure
the health and wellness of the consumers. After all, Nestlé is well known for the
tagline “Good food, Good life”.

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