SWOT ANALYSIS

Nestle

Nestle’s Strengths
1. Largest Food Company

With a market capitalization of $330+ Billion, Nestle has been one of the largest food
companies in the world with the sales of its Hot Pockets, Stouffer’s, DiGiorno, and
Nespresso etc.

2. 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.

3. Brand valuation

Nestle is well positioned for growth. In 2021, Nestle ranked at #62 positions by
Interbrand – with a brand value of $10.6 billion, moved up 1 place compared with
2020.

Nestle is preceded by

● #28 – Pepsi (Brand value: $19.4 billion)

● #51 – Starbucks (Brand value: $13.0 billion)
● #65 – Danoe (Brand value: $9.8 billion)
● #72 – Kellogg’s (Brand value $8.6 billion)
4. Highly diversified portfolio

Nestle owns more than 2000 brands globally and renovated over 8000 products. It is
one of the worlds’ biggest companies with the broadest and diverse product portfolio.

Nestle divides its products into 7 different categories:

● Powdered and Liquid Beverages—this is the largest segment of Nestle and

represents about 28% of total revenue. This segment sells soluble coffee and
other beverages such as tea and chocolate powder. Signature brands include
 Nescafe, Nespresso, Starbucks coffee (license deal), Blue Bottle Coffee,
Milo, and Nestea.

● Petcare – second largest segment of Nestle and represents about 18% of total
revenue. This segment sells pet food & toy brands Purina, Lily’s Kitchen,
Tails, and Merrick.

● Nutrition and Health Science – represents about 15% of total revenue. This
segment sells products such as vitamins, minerals and supplements that help
to promote health and wellness. Signature brands include Illuma, Gerber,
Nestum, Cerelac, Beba, Lactogen, Garden of Life, Pure, and Vital Proteins.

● Prepared dishes and cooking aids – represents 14% of total revenue.

This segment sells frozen food, chilled prepared food, culinary and
cooking aids. Signature brands include Maggi, Original Waggner,
 Lean Cuisine, Chef, Sweet Earth and Freshly.

● Milk products and ice cream – represents 12% of total revenue. This
segment sells milk products and ice cream products under the brand
names of Nido, Nesvita, Carnation, Lattiere, Coffee Mate, Hagen
Dazs, and Movenpick.

● Confectionery – represents 9% of total revenue. This segment sells

chocolate, sugar, candies, snacks and biscuits. Signature brands
include KitKat, Cailler, and Garoto.

● Water products -represents 5% of total revenue. Signature brands

include Pure Life, S.Pellegrino, Vittel and Perrier.

5. Global presence

Nestle has a strong global presence, and its products are sold almost everywhere in
the world. Nestle sells its products in 186 countries. Instead of relying on a few
markets, it has captured a sizable market in a lot of developed and developing
countries to earn most of its revenue.

● Americas is Nestle’s largest market and represents about 44.9% of total sales.
The United States and Canada account for 70% of sales in this region, while
Latin America and the Caribbean account for the other 30%.
● Europe, Middle East & North Africa (EMENA) is the second largest market
and accounts for about 29.6% of total revenue. 64% of regional revenues are
from Western Europe, 18% are from Eastern and Central Europe, and 18%
are from the Middle East and North Africa.
● Asia, Oceania, and sub-Saharan Africa (AOA) represent the rest 25.5% of its
total revenue. ASEAN markets (The Association of Southeast Asian Nations)
account for 34% of regional sales, Oceania and Japan account for 15% of
regional sales, Other Asian markets account for 39% of regional sales, and
Sub-Saharan Africa accounts for 12% of regional sales.

Looking at individual countries, the United States is the largest market for Nestle and
represents about 30% of total revenue, followed by the Greater China Region (#2
largest market, representing about 6% of total revenue), France (#3 largest market,
represents about 4% of total revenue), United Kingdom (#4 largest market, represents
about 4% of total revenue), and Mexico (#5 largest market, representing about 3% of
total revenue).

6. World’s largest corporation

According to the Forbes Global 2000, Nestle is among the world’s largest
corporations and is ranked at 46th position in the 2022 list.

7. Health focused Breakfast

The world’s leading food conglomerate, Nestle, has reduced the amount of sugars (by
25%) used to produce its beloved Carnation Breakfast Essentials. Moreover, the
company is also incorporating a completely new and environment-friendly paper
packaging for the product line to enhance its sustainability. The company is
undoubtedly checking all the right boxes when it comes to things most important for
shoppers. Plus, it’s also a fact that a lot of these shoppers have grown up enjoying the
Carnation Breakfast Essentials line of products and want their kids to enjoy them too.

8. License deal with Starbucks & strong relationship with other brands

Nestle has entered into a perpetual license deal with Starbucks to market its products
globally. The deal strengthens Nestle’s coffee portfolio and provides Starbucks an
opportunity to use Nestle’s network for global expansion. In addition, Nestle has
well-established relationships with other trusted and powerful brands like Colgate
Palmolive, Coca Cola, General Mills, and L’Oréal.

9. 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 is one of its key competitive
advantages. There are more than 5000 employees involved in R&D operations.
Recently, Nestle expanded its operations in the Greater China region to 3 R&D
centers and 4 product innovation centers.

10. Environmental sustainability practices

Nestle puts substantial efforts in environmental sustainability practices and takes

innovative initiatives in improving its quality of products. It optimizes advanced
solutions to reduce waste, water usage, non-renewable energy use, and packaging
material usage. The company pledged to net zero greenhouse gas emissions by 2050.
Also, deforestation free supply chain and aims to cut virgin plastics by one-third (by
2025).

11. Large distribution system

Nestle owns an extensive and diversified distribution system that is not only
penetrated in urban areas but also rural regions. It has adapted local distribution
methods and decentralized approach to run the business efficiently in respective
countries. Nestle has strong relationships with suppliers, retailers, vendors, and
distributors.
Nestle’s Weaknesses
1. Increase in prices

Nestle has increased prices by 6.5% on a certain category of their consumer goods.
The price increase is due to an increase in raw material and transportation costs,
supply chain constraints, and an overall inflationary environment.

2. 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 a
large number of individual brands, which can often result in discord and conflict of
interest.

3. Water controversy

Nestle was accused of pumping millions of liters of water from the Canada reserve,
where residents are deprived of drinking water.

4. 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.

5. Maggi Noodles controversy

In 2017, Nestle failed to clear a laboratory test in India. This created a publicity hype
as people boycott 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. Racially Insensitive Product Names

Nestle has been criticized for perpetuating racism using racially insensitive names on
its products. In Australia, Nestle has been under pressure to stop advancing racism
with its sweets named RedSkins and Chicos and recently announced that it will
change the name of two confectionery products.
 7. Unhealthy Products

Nestle’s history consists of a long list of products that threatened consumers, such as
China Milk Scandal and tainted cookie dough. Consumers distrust companies that
have sold unhealthy products in the past.

Nestle’s Opportunities

1. 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.

2. 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.

3. Market penetration for breakfast cereals

Nestlé’s cereals and oats market have shown fast growth in recent years. Thus,
penetrating this market more would be highly lucrative for the company.

4. 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.

5. Partnerships

Strategic alliances with other food and beverage giants are also a great opportunity
for the company to increase its revenues and profits.

6. 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.

7. Expand through Acquisitions

In 2019, Nestle offloaded several low-performing brands like Herta Charcuterie and
is switching to acquisitions. The company has acquired gastrointestinal medication
brand Zenpep and the better health company recently. Expanding the portfolio with
high performing SMB acquisitions offers immense opportunities for Nestle to grow.

8. Refocus on Profitable Ventures

Having too many brands can stretch a company’s resources to the limit and
undermine overall performance. Nestle has been grappling under the weight of too
many unprofitable brands and is seeking to sell its North American water brands like
Pure Life and shift focus on strengthening the best and highly profitable brands in its
portfolio.

9. Nestle introduces “Vuna” a vegan substitute for Tuna

After being under fire for producing unhealthy foods, Nestle seems to be gravitating
towards healthier and plant based food categories targeting a more health and
environment-conscious target audience. Nestle claims that Vuna is the result of the
futuristic food technology the company is working on. After the successful launch of
Vuna, Nestle also stated that it will work on bringing more vegan-based food items,
especially in the protein sector. For example, Nestle will soon launch vegan
alternatives for dairy products such as eggs and other seafood items such as shrimps.

Nestle’s Threats
1. Price fluctuations by retail giants

Nestlé’s grocery sales are achieved majorly through huge retail giants like Walmart,
Tesco, Target and Kroger. Any reduction or increase in prices by these retailers can
affect Nestlé’s sales and its profitability.

2. Illegal rainforest destruction controversy

In 2017, Nestle was alleged of involvement in the illegal destruction of Sumatra’s last
tract of rainforest. It faced severe criticisms from NGOs and environmentalists in this
regard.

3. 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.

4. 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.

5. Government regulations

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.

6. Economic Uncertainty

Even so, Nestlé’s sales were not drastically impacted during the pandemic due to
panic buying catalyzed by recent events. The company’s revenue is still threatened by
economic uncertainty and recession in the global markets.

7. Haunting Dark Past

The US Supreme Court is reviewing whether to open human rights probe against
Nestle subsidiary for knowingly helping to perpetuate slavery in cocoa farms in the
African nation of Ivory Coast. Even though the events occurred over a century ago,
Nestlé’s racist past can haunt the company and affect its sales, profitability, and
growth for years to come.
 8. Under Fire for Printing Hindu God Image on Wrapper

In a flurry of heated emotions and complaints, Netizens accused Nestle India of

playing with citizens’ religious sentiments. The company came under fire after
printing the photograph of different Hindu gods on a wrapper. Citizens also stated
that the wrappers will ultimately be disposed off in trash cans, which is blatant and
utter disrespect of their gods. Nestle has since apologized for the controversy,
claiming that it was never their attention to disrespect the Hindu religion.
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