Marketing Strategies of Nestle and Unilever
CHAPTER – ONE
Conceptual framework and basic issues 1. 1 INTRODUCTION India is one of the largest economies in the world in terms of purchasing power and is among the fastest-growing, with a population of around 1. 12 billion people, with huge natural resources, and with costs that are at the very low end of the global average.
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All major consumer companies of India have sophisticated marketing and product development plans. Moreover, the multinationals that are operating in India have business models that are tailor-made to local markets and customs.
After the economic liberalization of 1991, many MNCs have entered India. Today, global companies having subsidiaries in India include Unilever, Nestle, BATA, Colgate Palmolive, Procter & Gamble, General Electric, General Motors, Ford, Pepsi and Coca-Cola. Historically, the main reason for the entry of MNCs into India was to jump the tariff wall. High import duties ruled out the option of exporting finished goods from the home country to India. On the other hand, once they entered the country and set up operations, the country’s high tariffs guaranteed adequate protection.
In some cases, the need to customize products necessitated a strong local presence. The multinational companies in India represent a diversified portfolio of companies from different countries. There are a number of reasons why the multinational companies are coming down to India. India has got a huge market. It has also got one of the fastest growing economies in the world. Besides, the policy of the government towards FDI has also played a major role in attracting the multinational companies in India.
While several MNC’s have entered India, However, even within a given industry, some MNCs seem to be doing better than the others. Consider the automobile industry. Here, Suzuki and Hyundai are way ahead of formidable rivals such as General Motors, Honda and Ford. Similarly in the FMCG sector, even after allowing for its relative late entry, Hindustan Unilever Limited and Nestle remains a big player in the Indian market. FMCG are products that have a quick shelf turnover, at relatively low cost and don’t require a lot of thought, time and financial nvestment to purchase. Three of the largest and best known examples of Fast Moving Consumer Goods companies in India are Nestle, Hindustan Unilever limited and Procter ; Gamble. The Indian FMCG sector is an important contributor to the country’s GDP. It is the fourth largest sector in the economy. It has a strong MNC presence and is characterized by a well established distribution network, intense competition between the organized and unorganized segments and low operational cost. The Indian FMCG sector is the fourth largest sector in the economy.
It has a strong MNC presence and is characterized by a well-established distribution network, intense competition between the organized and unorganized segments and low operational cost. Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India a competitive advantage. The FMCG sector consists of three product categories, each with its own hosts of products that have relatively quick turnover and low costs: * Household Care * Personal care * Food and Beverages Food and Beverages * Health beverages; soft drinks Staples/cereals * Beverages bakery products (biscuits, bread, cakes) * Snack food * Chocolates * Ice cream * Tea * Coffee * Soft drinks * Processed fruits, vegetables * Dairy products * Bottled water * Branded flour Household care * Fabric wash (laundry soaps and synthetic detergents) * Household cleaners(dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish and furniture polish) Personal Care * Oral care, hair care, skin care, personal wash (soaps) * Cosmetics and toiletries deodorants Perfumes * Feminine hygiene * Paper product 1 • Food & Beverage My project topic is on the study of Hindustan Unilever limited and Nestle India, which are major MNC’s (FMCG) in India. Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this category include all consumables (other than groceries/pulses) people buy at regular intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, and household accessories.
In India, companies like HUL, P& G and Nestle have been a dominant force in the FMCG sector . These companies were, therefore, able to charge a premium for their products. With the gradual opening up of the economy over the last decade, FMCG companies have been forced to fight for a market share. An average Indian spends around 40 per cent of the income on grocery and 8 per cent on personal care products. The large share of fast moving consumer goods (FMCG) in total individual spending along with the large population base is another factor that makes India one of the largest FMCG markets.
Source: KSA Technopak Consumer Outlook 2004. Figure:1. 1 Even on an international scale, total consumer expenditure on food in India at US$ 120 billion is amongst the largest in the emerging markets, next only to China. Figure 1. 2 TOP 10 Fmcg companies in India 1. Hindustan Unilever Ltd. 2. ITC (Indian Tobacco Company) 3. Nestle India 4. AMUL 5. Dabur India 6. Britannia 7. Cadbury India 8. Pepsico 9. Procter & Gamble Hygiene and Health Care 10. Marico Industries The FMCG sector has traditionally grown at a very fast rate and has generally outperformed the rest of the industry.
Given the large market and the requirement for continuous repurchase of these products, FMCG companies continue to do well . Moreover, most of the companies are concentrating on cost reduction and supply chain management and sustainable competitive advantage. FMCG must keep fine-tuning their strategy till they have a winning formula in place. It is FMCG’s which show both commitment and flexibility that are most likely to succeed in India 1. 2 Need of the study Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and chieve a sustainable competitive advantage. The need of the study of this project entitled ‘Comparative study on the marketing strategies of the HUL and Nestle in India’ is to understand whether the marketing strategies is suited to the Indian market because each markets in India follow different political and cultural environment, therefore different marketing practices are implemented to get the desired outcome, that is profit, so there is a need to study how these MNC’s adapt to Indian markets.1. 3 Objective of the study To identify and compare the marketing strategies of Hindustan Unilever Limited and Nestle India * To identify the SWOT analysis. * To identify the marketing mix of both the companies * To analyse the various strategies adopted by both the companies to gain competitive advantage CHAPTER – TWO 2. 1 Profile of Unilever Unilever is a British-Dutch multinational corporation that owns many of the world’s consumer product brands in foods, beverages, cleaning agents and personal care products and operates in around 100 countries. Unilever is a dual-listed company consisting of Unilever N.
V. in Rotterdam, The Netherlands and Unilever PLC in London, United Kingdom. Both Unilever companies have the same directors and effectively operate as a single business. The current non-executive Chairman of Unilever N. V. and PLC is Michael Treschow while Paul Polman is Group Chief 2. 1. 1 History of Unilever Unilever was created in 1930 by the amalgamation of the operations of British soap maker Lever Brothers and Dutch margarine producer Margarine Unie, a merger as palm oil was a major raw material for both margarines and soaps and could be imported more efficiently in larger quantities.
In the 1930s the Unilever business grew and new ventures were launched in Latin America. In 1972 Unilever purchased A;W Restaurants’ Canadian division but sold its shares through a management buyout to former A&W Food Services of Canada CEO Jefferson J. Mooney in July 1996. By 1980 soap and edible fats contributed just 40% of profits, compared with an original 90%. In 1984 the company bought the brand Brooke Bond (maker of PG Tips tea). In 1987 Unilever strengthened its position in the world skin care market by acquiring Chesebrough-Ponds, the maker of Ragu, Pond’s, Aqua-Net, Cutex Nail Polish, and Vaseline.
In 1989 Unilever bought Calvin Klein Cosmetics, Faberge, and Elizabeth Arden, but the latter was later sold (in 2000) to FFI Fragrances In 1996 Unilever purchased Helene Curtis Industries, giving the company “a powerful new presence in the United States shampoo and deodorant market”. The purchase brought Unilever the Suave and Finesse hair-care product brands and Degree deodorant brand. In 2000 the company absorbed the American business Best Foods, strengthening its presence in North America and extending its portfolio of foods brands. In April 2000 it bought both Ben ; Jerry’s and Slim Fast.
The company is multinational with operating companies and factories on every continent (except Antarctica) and research laboratories at Colworth and Port Sunlight in England; Vlaardingen in the Netherlands; Trumbull, Connecticut, and Englewood Cliffs, New Jersey in the United States; Bangalore in India and Shanghai in China. The US division carried the Lever Brothers name until the 1990s, when it adopted that of the parent company. The American unit has headquarters in New Jersey, and no longer maintains a presence at Lever House, the iconic skyscraper on Park Avenue in New York City.
The company is said to promote sustainability and started a sustainable agriculture programme in 1998. In May 2007 it became the first tea company to commit to sourcing all its tea in a sustainable manner, employing the Rainforest Alliance, an international environmental NGO, to certify its tea estates in East Africa, as well as third-party suppliers in Africa and other parts of the world. It declared its aim to have all Lipton Yellow Label and PG Tips tea bags sold in Western Europe certified by 2010, followed by all Lipton tea bags globally by 2015. In 2008 Unilever was honored at he 59th Annual Technology & Engineering Emmy Awards for “Outstanding Achievement in Advanced Media Technology for Creation and Distribution of Interactive Commercial Advertising Delivered through Digital Set Top Boxes” for its program Axe: Boost Your ESP On September 24, 2010, Unilever announced that it has entered into a definitive agreement to sell its consumer tomato products business in Brazil to Cargill and on September 27, 2010, Unilever purchased Alberto-Culver, the maker of personal care and household products such as VO5, Nexxus, TRESemme, and Mrs.
Dash for $US3. 7 billion. On September 28, 2010, Unilever and EVGA announced that they have signed an agreement under which Unilever will acquire EVGA’s ice cream brands (amongst others, Scandal, Variete and Karabola) and distribution network in Greece, for an undisclosed amount. 2. 1. 2 Mission Unilever’s mission is to add Vitality to life. We meet everyday needs for nutrition; hygiene and personal care with brands that help people feel good, look good and get more out of life. 2. 1. Vision We work to create a better future every day, help people feel good, look good and get more out of life with brands and services that are good for them and good for others and will inspire people to take small, everyday actions that can add up to a big difference for the world, develop new ways of doing business with the aim of doubling the size of our company while reducing our environmental impact and fully recognize that we will need to develop a new model for business growth.
We are embarking on a long-term programme of work with our employees, suppliers, customers and other partners to realize this goal. With our portfolio of strong brands, presence in emerging markets and long-standing commitment to shared value creation, we believe we are well placed to deliver on this ambition. 2. 1. 4 Brands * Food brands Becel, flora, Bertolli, Blue band Rama, Heartbrand, Hellmann’s, Amora, Knorr, Lipton, Slim-Fast * Homecare Brands Cif, Comfort, Domestos, Omo, Radiant, Sunlight, Surf * Personal Care brands
Axe, Dove, Lux, Lifebuoy, Ponds’, Rexona, Signal, Close-up, Sunsilk, Tigi, Vaseline 2. 1. 5 Purpose ; principles Our corporate purpose states that to succeed requires “the highest standards of corporate behaviour towards everyone we work with, the communities we touch, and the environment on which we have an impact. ” * Always working with integrity Conducting our operations with integrity and with respect for the many people, organizations and environments our business touch has always been at the heart of our corporate responsibility. Positive impact We aim to make a positive impact in many ways: through our brands, our commercial operations and relationships, through voluntary contributions, and through the various other ways in which we engage with society. * Continuous commitment We’re also committed to continuously improving the way we manage our environmental impacts and are working towards our longer-term goal of developing a sustainable business. * Setting out our aspirations Our corporate purpose sets out our aspirations in running our business.
It’s underpinned by our code of business Principles which describes the operational standards that everyone at Unilever follows, wherever they are in the world. The code also supports our approach to governance and corporate responsibility. * Working with others We want to work with suppliers who have values similar to our own and work to the same standards we do. Our Business partner code, aligned to our own Code of business principles, comprises ten principles covering business integrity and responsibilities relating to employees, consumers and the environment. . 1. 6 Management Our operating model is designed to deliver faster decisions. Learn more about our senior corporate officers and the Unilever Executive. The Executive directors are those members of the Unilever executive (UEX), including the group chief executive, who are also directors of Unilever. NAME | DESIGNATIONS| Paul Polman | Chief Executive Officer, Executive Director to the Boards of Unilever PLC and Unilever NV | Jean-Marc Huet | Chief Financial Officer. |
The Unilever executive (UEx) is responsible for managing profit and loss, and delivering growth across our regions, categories and functions NAME| DESIGNATION| Professor Genevieve Berger | Chief Research and Development Officer| Jean-Marc Huet| Chief financial officer| Pier Luigi Sigismondi| Chief Supply Chain Officer| Keith Weed | Chief Marketing and Communication Officer | Douglas Anderson Baillie Chief HR Officer| Chief HR Officer| Non-executive directors The non-executive directors are the independent element in Unilever’s governance. NAME| DESIGNATIONS|
Michael Treschow | Chairman Unilever N. V. and PLC, Member of Unilever’s Nomination and Remuneration Committees. | The Rt Hon Sir Malcolm Rifkind, MP| Chairman of the Corporate Responsibility and Reputation Committee| Hixonia Nyasulu | Member of Unilever’s Corporate Responsibility and Reputation Committee| Paul walsh| Member of Unilever’s Nomination and Remuneration Committees. | 2. 1. 7 Financials Items | Amounts | Revenue| €44,262 billion (2010)| Operating Income| €6,339 billion (2010)| Net Income | €4,598 billion (2010)| Source:-www. unilever. com 2. 2 HINDUSTAN UNILEVER LIMITED
Hindustan Unilever Limited (HUL) is India’s largest Fast Moving Consumer Goods Company with a heritage of over 75 years in India and touches the lives of two out of three Indians. HUL works to create a better future every day and helps people feel good, look good and get more out of life with brands and services that are good for them and good for others. With over 58 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers, the Company is a part of the everyday life of millions of consumers across India.
Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair ; Lovely, Pond’s, Vaseline, Lakme, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit. The Company has over 15,000 employees and has an annual turnover of Rs. 17,873. 44 crores (financial year 2009 – 2010). HUL is a subsidiary of Unilever, one of the world’s leading suppliers of fast moving consumer goods with strong local roots in more than 100 countries across the globe with annual sales of about €44. billion in 2010. Unilever has about 52% shareholding in HUL. 2. 2. 1 History of Hindustan Unilever limited In the summer of 1888, visitors to the Kolkata harbor noticed crates full of Sunlight soap bars, embossed with the words “Made in England by Lever Brothers”. With it began an era of marketing branded Fast Moving Consumer Goods (FMCG). Soon after Lifebuoy was launched in 1895 and other famous brands like Pears, Lux and Vim. Vanaspati was launched in 1918 and the famous Dalda brand came to the market in 1937.
In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three companies merged to form HUL in November 1956; HUL offered 10% of its equity to the Indian public, being the first among the foreign subsidiaries to do so. Unilever now holds 52. 10% equity in the company. The rest of the shareholding is distributed among about 360,675 individual shareholders and financial institutions. The erstwhile Brooke Bond’s presence in India dates back to 1900.
By 1903, the company had launched Red Label tea in the country. In 1912, Brooke Bond & Co. India Limited was formed. Brooke Bond joined the Unilever fold in 1984 through an international acquisition. The erstwhile Lipton’s links with India were forged in 1898. Unilever acquired Lipton in 1972 and in 1977 Lipton Tea (India) Limited was incorporated. Pond’s (India) Limited had been present in India since 1947. It joined the Unilever fold through an international acquisition of Chesebrough Pond’s USA in 1986.
Since the very early years, HUL has vigorously responded to the stimulus of economic growth. The growth process has been accompanied by judicious diversification, always in line with Indian opinions and aspirations. The liberalization of the Indian economy, started in 1991, clearly marked an inflexion in HUL’s and the Group’s growth curve. Removal of the regulatory framework allowed the company to explore every single product and opportunity segment, without any constraints on production capacity. Simultaneously, deregulation permitted alliances, acquisitions and mergers.
In one of the most visible and talked about events of India’s corporate history, the erstwhile Tata Oil Mills Company (TOMCO) merged with HUL, effective from April 1, 1993. In 1996, HUL and yet another Tata company, Lakme Limited, formed a 50:50 joint venture, Lakme Unilever Limited, to market Lakme’s market-leading cosmetics and other appropriate products of both the companies. Subsequently in 1998, Lakme Limited sold its brands to HUL and divested its 50% stake in the joint venture to the company. HUL formed a 50:50 Joint venture with the US-based Kimberly Clark Corporation in 1994, which markets Huggies Diapers and Kotex Sanitary Pads.
HUL has also set up a subsidiary in Nepal, Unilever Nepal Limited (UNL), and its factory represents the largest manufacturing investment in the Himalayan kingdom. The UNL factory manufactures HUL’s products like Soaps, Detergents and Personal Products both for the domestic market and exports to India. The 1990’s also witnessed a string of crucial mergers, acquisitions and alliances on the Foods and Beverages front. In 1992, the erstwhile Brooke Bond acquired Kothari General Foods, with significant interests in Instant Coffee. In 1993, it acquired the Kissan business from the UB Group and the Dollops Ice cream business from Cadbury India.
As a measure of backward integration, Tea Estates and Doom Dooma, two plantation companies of Unilever, were merged with Brooke Bond. Then in 1994, Brooke Bond India and Lipton India merged to form Brooke Bond Lipton India Limited (BBLIL), enabling greater focus and ensuring synergy in the traditional Beverages business. 1994 witnessed BBLIL launching the Wall’s range of Frozen Desserts. By the end of the year, the company entered into a strategic alliance with the Kwality Ice cream Group families and in 1995 the Milk food 100% Ice cream marketing and distribution rights too were acquired.
Finally, BBLIL merged with HUL, with effect from January 1, 1996. The internal restructuring culminated in the merger of Pond’s (India) Limited (PIL) with HUL in 1998. The two companies had significant overlaps in Personal Products, specialty Chemicals and Exports businesses, besides a common distribution system since 1993 for Personal Products. The two also had a common management pool and a technology base. The amalgamation was done to ensure for the Group, benefits from scale economies both in domestic and export markets and enable it to fund investments required for aggressively building new categories.
In January 2000, in a historic step, the government decided to award 74 per cent equity in Modern Foods to HUL, thereby beginning the divestment of government equity in public sector undertakings (PSU) to private sector partners. HUL’s entry into Bread is a strategic extension of the company’s wheat business. In 2002, HUL acquired the government’s remaining stake in Modern Foods. In 2003, HUL acquired the Cooked Shrimp and Pasteurized Crabmeat business of the Amalgam Group of Companies, a leader in value added Marine Products exports.
HUL launched a slew of new business initiatives in the early part of 2000. Project Shakti was started in 2001. It is a rural initiative that targets small villages populated by less than 5000 individuals. It is a unique win-win initiative that catalyses rural affluence even as it benefits business. Currently, there are over 45,000 Shakti entrepreneurs covering over 100,000 villages across 15 states and reaching to over 3 million homes. In 2002, HUL made its foray into Ayurvedic health ; beauty centre category with the Ayush product range and Ayush Therapy Centres.
Hindustan Unilever Network, Direct to home business was launched in 2003 and this was followed by the launch of ‘Pureit’ water purifier in 2004. In 2007, the Company name was formally changed to Hindustan Unilever Limited after receiving the approval of share holders during the 74th AGM on 18 May 2007. Brooke Bond and Surf Excel breached the Rs. 1,000 crore sales mark the same year followed by Wheel which crossed the Rs. 2,000 crore sales milestone in 2008 and on 17th October 2008, HUL completed 75 years of corporate existence in India. 2. 2. 2 Management
The fundamental principle determining the organization structure is to infuse speed and flexibility in decision-making and implementation, with empowered managers across the company’s nationwide operations. Management Committee The day-to-day management of affairs of the Company is vested with the Management Committee which is subjected to the overall superintendence and control of the Board. The Management Committee is headed by Mr. Nitin . Paranjpe and has functional heads as its members representing various functions of the Company and Management committee includes the members in the Executive directors
Executive directors The Executive directors are members of the HUL Management Committee as well as the Board of HUL. NAME| DESIGNATION| Nitin Paranjpe| CEO and Managing Director| R. Sridhar| Chief Financial Officer| Gopal Vittal| Executive Director, Home ; Personal Care| Pradeep Banerjee| Executive Director, Supply Chain| Shrijeet Mishra| Executive Director, Foods| Hemanth Bakshi| Executive Director| Ms. Leena Nair| Executive Director, HR| Dev Bajpai| Executive Director, Legal and company Secretary| Non-executive directors The non-executive directors are the independent directors in the HUL Board NAME| DESIGNATION|
Mr. Harish Manwani| Chairman of the Company| Mr. D. S. Parekh| Indepedent Director| Mr. A. Narayan| Independent Director| S. Ramadorai| Independent Director| Dr. R. A. Mashelkar| Independent Director| 2. 2. 3Financials of HUL Items | Amounts | Revenue| 17,873. 44 crore (2009-2010)| Net income| 2,202. 03 crore (2009-2010)| Source:-www. hul. co. in 2. 3 Profile of Nestle 2. 3. 1 History Nestle with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestle and is today the world’s biggest food and beverage company and the world’s leading Nutrition, Health and Wellness Company.
Our mission of “Good Food, Good Life” is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night. Today, the company operates in 86 countries around the world and employs nearly 280,000 people and has factories or operations in almost every country in the world. The Company’s strategy is guided by several fundamental principles. Nestle’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 The company dates to 1867, when two separate Swiss enterprises were founded that would later form the core of Nestle. In the succeeding decades the two competing enterprises aggressively expanded their businesses throughout Europe and the United States. In August 1867 Charles A and George Page, two brothers from Lee County, Illinois, USA established the Anglo-Swiss Condensed Milk Company in Cham.
Their first British operation was opened at Chippenham, Wiltshire in 1873 and In September 1867, in Vevey, Henri Nestle developed a milk-based baby food and soon began marketing it. The following year, 1868 saw Daniel Peter begin seven years of work perfecting his invention, the milk chocolate manufacturing process; M. Nestle’s was the crucial cooperation M. Peter needed to solve the problem of removing all the water from the milk added to his chocolate and thus preventing the product from developing mildew. Henri Nestle retired in 1875, but the company, under new ownership, retained his name as Farine Lactee Henri Nestle.
In 1877 Anglo-Swiss added milk-based baby foods to its products, and in the following year the Nestle Company added condensed milk, so that the firms became direct and fierce rivals. In 1905 the companies merged to become the Nestle and Anglo-Swiss Condensed Milk Company, retaining that name until 1947, when the name Nestle Alimentana SA was taken as a result of the acquisition of Fabrique de Produits Maggi SA (founded 1884) and its holding company, Alimentana SA of Kempttal, Switzerland. Maggi was a major manufacturer of soup mixes and related foodstuffs. The company’s current name was adopted in 1977.
By the early 1900s, the company was operating factories in the United States, United Kingdom, Germany and Spain. World War I created new demand for dairy products in the form of government contracts; by the end of the war, Nestle’s production had more than doubled. After the war, government contracts dried up and consumers switched back to fresh milk. However, Nestle’s management responded quickly, streamlining operations and reducing debt. The 1920s saw Nestle’s first expansion into new products, with chocolate the company’s second most important activity.
Nestle felt the effects of World War II immediately. Profits dropped from US$20 million in 1938 to US$6 million in 1939. Factories were established in developing countries, particularly Latin America. Ironically, the war helped with the introduction of the company’s newest product, Nescafe (“Nestle’s Coffee”), which was a staple drink of the US military. Nestle’s production and sales rose in the wartime economy. The end of World War II was the beginning of a dynamic phase for Nestle. Growth accelerated and companies were acquired.
In 1947 came the merger with Maggi seasonings and soups. Crosse & Blackwell followed in 1950, as did Findus (1963), Libby’s (1971) and Stouffer’s (1973). Diversification came with a shareholding in L’Oreal in 1974. In 1977, Nestle made its second venture outside the food industry by acquiring Alcon Laboratories Inc. In 1984, Nestle’s improved bottom line allowed the company to launch a new round of acquisitions, notably American food giant Carnation and the British confectionery company Rowntree Mackintosh in 1988, which brought the Willy
Wonka Brand to Nestle. The first half of the 1990s proved to be favorable for Nestle: trade barriers crumbled and world markets developed into more or less integrated trading areas. Since 1996 there has been acquisitions including San Pellegrino (1997), Spillers Pet foods (1998), and Ralston Purina (2002). There were two major acquisitions in North America, both in 2002: in June, Nestle merged its U. S. ice cream business into Dreyer’s, and in August a US$2. 6 billion acquisition was announced of Chef America, the creator of Hot Pockets.
In the same time frame, Nestle came close to purchasing the iconic American company Hershey’s, one of its fiercest confectionery competitors, though the deal fell through. Another recent purchase included the Jenny Craig weight loss program for US$600 million. In December of 2005, Nestle bought the Greek company Delta Ice Cream for €240 million. In January of 2006, it took full ownership of Dreyer’s, thus becoming the world’s biggest ice cream maker with a 17. 5% market share. In November of 2006, Nestle purchased the Medical Nutrition division of Novartis Pharmaceutical for $2. B, also acquiring in 2007 the milk flavoring product known as Oval tine. In April of 2007, returning to its roots, Nestle bought baby-food manufacturer Gerber for $5. 5 billion. In December of 2007, Nestle entered in a strategic partnership with a Belgian chocolate maker Pierre Marcolini. Nestle agreed to sell its controlling stake in Alcon to Novartis on 4 January, 2010. The sale was to form part of a broader US $39. 3 billion offer, by Novartis, for full acquisition of the world’s largest eye-care company 2. . 2 Mission Nestle strives to be a leader in nutrition, health and wellness, with the belief that good food is central to health and wellness. At the Nestle Research Center, nutrition research meets food innovation to bring consumers of all ages and stages of life, foods and beverages that contribute to health and wellness, while offering remarkable taste and convenience 2. 3. 3 Vision At Nestle, we believe that research can help us make better food so that people live a better life.
Good Food is the primary source of Good Health throughout life. We strive to bring consumers foods that are safe, of high quality and provide optimal nutrition to meet physiological needs. In addition to Nutrition, Health and Wellness, Nestle products bring consumers the vital ingredients of taste and pleasure. As consumers continue to make choices regarding foods and beverages they consume, Nestle helps provide selections for all individual taste and lifestyle preferences. Research is a key part of our heritage at Nestle and an essential element of our future.
We know there is still much to discover about health, wellness and the role of food in our lives, and we continue to search for answers to bring consumers Good Food for Good Life” 2. 3. 4 Business Principles The Nestle Corporate Business Principles are at the basis of our company’s culture, which has developed over the span of 140 years. Corporate Business Principles will continue to evolve and adapt to a changing world, our basic foundation is unchanged from the time of the origins of our Company, and reflects the basic ideas of fairness, honesty, and a general concern for people.
Nestle is committed to the following Business Principles in all countries, taking into account local legislation, cultural and religious practices: 1. Nutrition, Health and Wellness :-Our core aim is to enhance the quality of consumers lives every day, everywhere by offering tastier and healthier food and beverage choices and encouraging a healthy lifestyle. We express this via our corporate proposition Good Food, Good Life. 2. Quality Assurance and product safety everywhere in the world, the Nestle name represents a promise to the consumer that the product is safe and of high standard. . Consumer Communication :-We are committed to responsible, reliable consumer communication that empowers consumers to exercise their right to informed choice and promotes healthier diets. We respect consumer privacy. 4. Human rights in our business activities :-We fully support the United Nations Global Compact’s (UNGC) guiding principles on human rights and labor and aim to provide an example of good human rights’ and labor practices throughout our business activities. 5. Leadership and personal responsibility:- Our success is based on our people.
We treat each other with respect and dignity and expect everyone to promote a sense of personal responsibility. We recruit competent and motivated people who respect our values, provide equal opportunities for their development and advancement, protect their privacy and do not tolerate any form of harassment or discrimination. 6. Safety and health at work:- We are committed to preventing accidents, injuries and illness related to work, and to protect employees, contractors and others involved along the value chain. 7.
Supplier and customer relations:- We require our suppliers, agents, subcontractors and their employees to demonstrate honesty, integrity and fairness, and to adhere to our non-negotiable standards. In the same way, we are committed towards our own customers. 8. Agriculture and rural development :-We contribute to improvements in agricultural production, the social and economic status of farmers, rural communities and in production systems to make them more environmentally sustainable. 9. Environmental sustainability :-We commit ourselves to environmentally sustainable business practices.
At all stages of the product life cycle we strive to use natural resources efficiently, favor the use of sustainably-managed renewable resources, and target zero waste. 10. Water:-We are committed to the sustainable use of water and continuous improvement in water management. We recognize that the world faces a growing water challenge and that responsible management of the world’s resources by all water users is an absolute necessity. 2. 3. 5 Management Nestle has a Board of Directors, led by our Chairman Peter Brabeck-Letmathe, who was the former Nestle CEO.
There are 14 members of the Board of Directors. The day to day management of the Nestle business is taken care by the Executive Board members. The 13 designated Board Members manage diverse parts of the global business. Nestle Group is managed by geographies (Zones Europe, Americas and Asia/Oceania/Africa) for most of the food and beverage business, with the exceptions of Nestle Waters, Nestle Nutrition, Nestle Purina Pet care, Nespresso, Nestle Professional and Nestle Health Science which are managed on a global basis – these we call the Globally Managed Businesses.
We also have joint ventures such as Cereal Partners Worldwide and Beverage Partners Worldwide. NAME| DESIGNATIONS| Paul Bulcke | Chief Executive Officer, Nestle S. A. Member of Nestle Board of Directors: Chairman’s and Corporate Governance Committee | Werner J. Bauer | Executive Vice President Chief Technology Officer Head of Innovation, Technology, Research and Development | Frits van Dijk | Executive Vice President Zone Director for Asia, Oceania, Africa and Middle East | Jose Lopez| Executive Vice President operations| John J.
Harris| Executive Vice President Chairman and CEO of Nestle Waters| James Singh | Executive Vice President Finance and Control, Legal, IP, Tax, Treasury, Global Nestle Business Services | Laurent Freixe | Executive Vice President Zone Director for Europe| Petraea Heynike | Executive Vice President Responsible for the Strategic Business Units, Marketing, Sales and Nespresso | Chris Johnson| Executive Vice President Zone Director for United States of America, Canada, Latin America, Caribbean | Marc Caira | Deputy Executive Vice President CEO of Nestle Professional | Jean-Marc Duvoisin | Deputy Executive Vice President Head of Human Resources and Centre Administration | Nandu Nandkishore | Deputy Executive Vice President Head of Nestle Nutrition | David P. Frick | Senior Vice PresidentCorporate Governance, Compliance and Corporate Services | Committees : Committees : Committees :
Committees : 2. 3. 4 Financials Items | Amounts| Revenue| CHF 109. 72 billion (2010)| Operating Income| CHF 16. 19 billion (2010)| Profit | CHF 34. 23 billion (2010)| Source:-www. nestle. com 2. 4 Nestle India 2. 4. 1 History of Nestle India Nestle is one of the oldest food MNC operating in India, with a presence of over a century. For a long time, Nestle India’s operations were restricted to importing and trading of condensed milk and infant food. Over the years, the Company expanded its product range with new products in instant coffee, noodles, sauces, pickles, culinary aids, chocolates and confectionery, dairy products and mineral water.
Nestle’s relationship with India dates back to 1912, when it began trading as The Nestle Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished products in the Indian market. Nestle has been a partner in India’s growth for over nine decades now and has built a very special relationship of trust and commitment with the people of India. The Company’s activities in India have facilitated direct and indirect employment and provides livelihood to about one million people including farmers, suppliers of packaging materials, services and other goods. Nestle India Ltd, 51% subsidiary of Nestle SA of Switzerland, is among the leading branded food player in the country. It has a broad based presence in the foods sector with leading market shares in instant coffee, infant foods, milk products and noodles.
It has also strengthened its presence in chocolates, confectioneries and other semi processed food products during the last few years. With seven factories and a large number of co-packers, Nestle India is a vibrant company that provides consumers in India with products of global standards and is committed to long-term sustainable growth and shareholder satisfaction. The Company insists on honesty, integrity and fairness in all aspects of its business and expects the same in its relationships. This has earned it the trust and respect of every strata of society that it comes in contact with and is acknowledged amongst India’s ‘Most Respected Companies’ and amongst the ‘Top Wealth Creators of India’.
After nearly a century-old association with the country, today, Nestle India has presence across India with 7 manufacturing facilities and 4 branch offices spread across the region. Nestle India’s first production facility, set up in 1961 at Moga (Punjab), was followed soon after by its second plant, set up at Choladi (Tamil Nadu), in 1967. Consequently, Nestle India set up factories in Nanjangud (Karnataka), in 1989, and Samalkha (Haryana), in 1993. This was succeeded by the commissioning of two more factories – at Ponda and Bicholim, Goa, in 1995 and 1997 respectively. The seventh factory was set up at Pantnagar, Uttarakhand, in 2006. The 4 branch offices in the country help facilitate the sales and marketing of its products. They are in Delhi, Mumbai, Chennai and Kolkata.
The Nestle India Head office is located in Gurgaon, Haryana. The Company continuously focuses its efforts to better understand the changing lifestyles of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness through its product offerings. The culture of innovation and renovation within the Company and access to the Nestle Group’s proprietary technology/Brands expertise and the extensive centralized Research and Development facilities gives it a distinct advantage in these efforts. It helps the Company to create value that can be sustained over the long term by offering consumers a wide variety of high quality, safe food products at affordable prices.
Nestle India has products of truly international quality under internationally famous brand names such as NESCAFE, MAGGI, MILKYBAR, KIT KAT, BAR-ONE, MILKMAID and NESTEA and in recent years the Company has also introduced products of daily consumption and use such as NESTLE Milk, NESTLE SLIM Milk, NESTLE Fresh ‘n’ Natural Dahi and NESTLE Jeera Raita. Nestle India is a responsible organization and facilitates initiatives that help to improve the quality of life in the communities where it operates. 2. 4. 2 Management NAME| DESIGNATIONS| Antonio Helio Waszyk| Chairman and Managing DirectorMember of the the Shareholder / Investor Grievance Committee| Shobinder Duggal| Director – Finance & Control| Christian Schmid| Director – Technical| Michael W. O. Garrett| Non Executive DirectorMember of the Audit Committee| Dr. Rakesh Mohan| Non Executive Director|
Ravinder Narain| Non Executive DirectorMember of the Audit CommitteeChairman of the Shareholder / Investor Grievance Committee| Dr. Swati A. Piramal| Non-Executive Director| Richard Sykes| Alternate Director to Mr. Michael W. O GarrettGeneral Counsel of Asia, Oceania ,Africa, Middle East Region| 2. 4. 3 Financials Items| Amounts | Revenue| 590102 lakhs (2009-2010)| Net income| 81866 lakhs(2009-2010)| Source:-www. nestle. in/financial statements CHAPTER – THREE 3. 1 THEORITICAL BACKGROUND International marketing (IM) refers to marketing carried out by companies overseas or across national borderlines. This strategy uses an extension of the techniques used in the home country of a firm.
It refers to the firm-level marketing practices across the border including market identification and targeting, entry mode selection, marketing mix, and strategic decisions to compete in international markets. International marketing is more concerned with micro level of the market and uses the company as a unit of analysis. According to the American Marketing Association (AMA) “international marketing is the multinational process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. ” Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.
Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketing objective. Marketing strategy involves careful scanning of the internal and external environments which are summarized in a SWOT analysis . Internal environmental factors include the marketing mix, plus performance analysis and strategic constraints External environmental factors include customer analysis, competitor analysis, target market analysis, as well as evaluation of any elements of the technological, economic, cultural or political/legal environment likely to impact success. A key component of marketing strategy is often to keep marketing in line with a company’s overarching mission statement.
Combination of marketing elements used in the sale of a particular product. The marketing elements center around four distinct functions, sometimes called the Four Ps: Product, Price, Place (of distribution), and Promotion. All these functions are considered in planning a marketing strategy, and any one may be enhanced, deducted, or changed in some degree in order to create the strategy necessary to efficiently and effectively sell a product. The term marketing mix refers to the four major areas of decision making in the marketing process that are blended to obtain the results desired by the organization. The four elements of the marketing mix are sometimes referred to the four Ps of marketing.
The marketing mix shapes the role of marketing within all types of organizations, both profit and nonprofit. Each element in the marketing mix, product, price, promotion, and place consists of numerous sub elements. Marketing managers make numerous decisions based on the various sub elements of the marketing mix, all in an attempt to satisfy the needs and wants of consumers. FIGURE 1. 3 3. 2 Product The first element in the marketing mix is the product. A product is any combination of goods and services offered to satisfy the needs and wants of consumers. Thus, a product is anything tangible or intangible that can be offered for purchase or use by consumers.
A tangible product is one that consumers can actually touch, such as a computer. An intangible product is a service that cannot be touched, such as computer repair, income tax preparation, or an office call. Other examples of products also include places and ideas The strategies involved in the product mix includes:- 3. 2. 1 Product strategies in international market Although products in the international industrial market are more homogeneous than consumer products, there are more product variations internationally than domestically due to the greater number of international economic, cultural, and political/legal variables. 3. 3 Market segmentation
Is a Process of defining and sub-dividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment. Few firms are big enough to supply the needs of an entire market. The four basic market segmentation-strategies are based on (a) behavioural (b) demographic, (c) psychographic, and (d) geographical differences. 3. 3. 1 Market Segmentation Strategies. * Behavioural Segmentation: Behavioural segmentation is based on the customer’s needs and subsequent reaction to those needs or toward the purchase of intended products and/or services.
This study is conducted on all variables that are closely related to the product itself, like loyalty to a particular brand, cost effectiveness in terms of benefits and usage, circumstances responsible for the purchase, whether the customer is a regular, a first timer or and has the potential to become a customer, and whether the readiness to buy is linked to status. * Demographic Segmentation: Demographic segmentation refers to a wide study of the potential customers. While marketing a product many variables like age, gender, education, income, size of the family, occupation, socioeconomic status, culture and religion, language and nationality are taken into account. There are many instances where such a segmentation has worked very profitably, toys and clothes for every age group, certain food products that do well in certain counties and don’t in some, either due to cultural or religious reasons.
Demographic segmentation plays a vital role in determining whether a product can be mass marketed * Psychographic Segmentation: Segmenting people according to their lifestyles and values, and how they translate into consumption or purchases of products of services is what psychographic segmentation is all about. How one’s interest, opinions, values, attitude and the activities they perform, all affects how and why a group of people would lean towards one product more than others. A high status would translate into an expensive flying habit, while a thrift value will translate into an economy flight. * Geographical Segmentation: Geographical segmentation is done by dividing people (markets) into different geographical locations.
The country, state, or neighbourhood, the king of gentry, climate, and size of a place segmented into size of its age wise population, etc. all play a role in devising market strategies. This helps the producer and the marketers to understand what will sell and what won’t, For example, a market for winter wear would definitely not work in warm regions. 3. 3. 2 International market segmentation Segmentation, in marketing, is usually done at the customer level. However, in international marketing, it may sometimes be useful to see countries as segments. This allows the decision maker to focus on common aspects of countries and avoid information overload. 3. 4 Positioning
In marketing, positioning has come to mean the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. Although there are different definitions of Positioning, probably the most common is: identifying a market niche for a brand, product or service utilizing traditional marketing placement strategies (i. e. price, promotion, distribution, packaging, and competition). Also positioning is defined as the way by which the marketers creates impression in the customers mind. 3. 5 Targeting Targeting is the next step in the sequential process and involves a business making choices about segment on which resources are to be focused.
There are three major targeting strategies: undifferentiated, concentrated, and differentiated. During this process the business must balance its resources and capabilities against the attractiveness of different segments. Target Marketing involves breaking a market into segments and then concentrating the marketing efforts on one or a few key segments. Target marketing can be the key to a business’s success. 3. 6 Product standardization Product standardization means that a product originally designed for a local market is exported to other countries with virtually no change, except perhaps for translation of words and other changes. It is an efficient method to reduce costs and increase quality.
By minimizing the differences in your products, you are able to rapidly increase production, streamline distribution, decrease raw material costs and reinforce product branding. The best product standardization strategies allow you to balance the need for targeted adaptation with the cost savings of standardization. 3. 6. 1Benefits of product standardization in international marketing * Projecting a global product image. * Catering to customers globally . * Cost savings in terms of economies of scale in production. * Designing and monitoring various components of marketing mix economically 3. 7 Packaging strategy An important part of the product decision making process surrounds the packaging of the product.
An effective packaging strategy can contribute to the firm’s competitive advantage. Some points to consider when developing a packaging strategy include 1. Make sure the packaging is unique. 2. Make sure it performs the function required. 3. Make sure packaging promotes your product and brand. 4. Make sure packaging is identifiable and reinforces the brand. Although not a separate part of the marketing mix, having a good packaging strategy is an essential part of the marketing strategy of a firm. A good strategy will comprise of the packaging being unique, functional, promotes the brand, reinforces the brand and is easily identifiable by the consumer. 3. 8 Product adaptation
Marketing strategy whereby new products are based on modification or some improvement on existing or competing products, and not on pioneering innovations. It is the strategy of a follower. The need to develop an adaptation strategy can lead to changes in pricing, delivery and packaging 3. 8. 1 Benefits of product adaptation in international markets * Enable a firm to tap markets which are not accessible due to mandatory requirements * Helps in gaining a market share * Increase sales leading to economies of scale 3. 9 PRICE The second element in marketing mix is price. Price is simply the amount of money that consumers are willing to pay for a product or service.
In earlier times, the price was determined through a barter process between sellers and purchasers. In modern time Pricing new products and pricing existing products require the use of different strategies. For example, when pricing a new product, businesses can use either market-penetration pricing or a price-skimming strategy. A market-penetration pricing strategy involves establishing a low product price to attract a large number of customers. By contrast, a price-skimming strategy is used when a high price is established in order to recover the Cost of a new product development as quickly as possible. 3. 9. 1 Pricing strategy in international marketing
Although pricing practices appear to be no different internationally than nationally, in some respects there is wide divergence. These differences occur in the areas of transfer pricing, dumping, and governmental influence over price. 3. 9. 2Transfer Pricing Transfer prices are the prices placed on products as they are transferred between units belonging to the same company. Transfer prices can be used to mitigate the effects of government regulation. 3. 9. 3 Dumping. Dumping is disposing of goods in a foreign country at less than their full cost. Goods will sometimes be exported at prices that only cover direct costs to dispose of excess inventories.
Companies sell their excess inventories overseas to avoid disturbing their own national markets (e. g. , reducing prices or causing price wars at home. ) There are five price-adjustment strategies: * Discount pricing and allowances include cash discounts, functional discounts, seasonal discounts, trade-in allowances, and promotional allowances. * Discriminatory pricing occurs when companies sell products or services at two or more prices. These price differences may be based on variables such as age of the customer, location of sale, organization membership, time of day, or season. * Geographical pricing is based on the location of the customers.
Products may be priced differently in distinct regions of a target area because of demand differences. * Promotional pricing happens when a company temporarily prices products below the list price or below cost. Products priced below cost are sometimes called loss leaders. The goal of promotional pricing is to increase short-term sales. * Psychological pricing considers prices by looking at the psychological aspects of price. For example, consumers frequently perceive a relationship between product price and product quality. 3. 10 PROMOTION Promotion is the third element in the marketing mix. Promotion is a communication Process that takes place between a business and its various public.
Public are those individuals and organizations that have an interest in what the business produces and offers for sale. Thus, in order to be effective, businesses need to plan promotional activities with the communication process in mind. There are four basic promotion tools: Advertising, sales promotion, public relations, and personal selling. Each promotion tool has its own unique characteristics and function. 3. 10. 1Promotional strategy in international marketing In the international industrial market, the primary element of the promotional mix is personal selling, for only through personal selling can the coordination so essential to the industrial buyer-seller interface be effectively achieved.
Sales promotion in the form of trade fairs is playing an increasingly important role in international marketing because so many prospects can be contacted in one place and because they enable quick comparisons of products. Direct mail is also becoming popular, although mailing lists are usually difficult to obtain. The use of publicity, although growing in popularity, is limited due to language difficulties and media coverage. Advertising is given little attention in the international industrial market, perhaps because of the difficulties in determining media coverage and numerous, widely varying, governmental regulations. 3. 10. 2 Advertising
It is described as paid, non personal communication by an organization by using various media to reach its various publics. The purpose of advertising is to inform or persuade a targeted audience to purchase a product or service, visit a location, or adopt an idea. Advantages of advertising include the ability to reach a large group or audience at a relatively low cost per individual contacted. Further, advertising allows organizations to control the message, which means the message can be adapted to either a mass or a specific target audience. Disadvantages of advertising include difficulty in measuring results and the inability to close sales because there is no personal contact between the organization and consumers. 3. 10. 2. 1 Advertising media
There is a huge variety of media available through which a business can conduct an advertising campaign. * Advertising media includes * Newspapers * Magazines * Internet * Television * Radio * Cinema * Posters * Billboards 3. 10. 2. 2 Advertising appeals There are various appeals in advertising which aims aim to influence the way consumers view themselves and how buying certain products can prove to be beneficial for them. The most important types of advertising appeals include emotional and rational appeals. Emotional appeals are often effective for the youth while rational appeals work well for products directed towards the older generation. * Emotional Appeal
An emotional appeal is related to an individual’s psychological and social needs for purchasing certain products and services. Many consumers are emotionally motivated or driven to make certain purchases. Advertisers aim to cash in on the emotional appeal and this works particularly well where there is not much difference between multiple product brands and its offerings. Emotional appeal includes personal and social aspects. * Fear Appeal Fear is also an important factor that can have incredible influence on individuals. Fear is often used to good effect in advertising and marketing campaigns of beauty and health products including insurance.
Advertising experts indicate that using moderate levels of fear in advertising can prove to be effective. * Rational appeal Rational appeals as the name suggests aims to focus on the individual’s functional, utilitarian or practical needs for particular products and services. Such appeals emphasize the characteristics and features of the product and the service and how it would be beneficial to own or use the particular brand. Print media is particularly well suited for rational appeals and is often used with good success. It is also suited for business to business advertisers and for products that are complex and that need high degree of attention and involvement. * Endorsement appeal
Celebrities and well known personalities often endorse certain products and their pitching can help drive the sales. 3. 10. 3Sales promotion The second promotional tool is sales promotion. Sales promotions are short-term incentives used to encourage consumers to purchase a product or service. There are three basic categories of sales promotion: consumer, trade, and business. Consumer promotion tools include such items as free samples, coupons, rebates, price packs, premiums, patronage rewards, point-of-purchase coupons, contests, sweepstakes, and games. Trade-promotion tools include discounts and allowances directed at wholesalers and retailers. Business-promotion tools include conventions and trade shows.
Sales promotion has several advantages over other promotional tools in that it can produce a more immediate consumer response, attract more attention and create product awareness, measure the results, and increase short-term sales. 3. 10. 3. 1 Sales promotion in international marketing Sales promotion refers to any consumer or trade program of limited duration that adds tangible value to a product or brand. Sales promotion techniques in the international market consist of the following: promotional pricing tactics, contests, sweepstakes and games, premium and specialties, dealer loaders, merchandising materials, tie-ins and cross promotions, packaging, trade shows 3. 10. 4 Public relation
Public relation is the third promotional tool. An organization builds positive public relation with various groups by obtaining favourable publicity, establishing a good corporate image, and handling or heading off unfavourable rumours, stories, and events. Organizations have at their disposal a variety of tools, such as press releases, product Publicity, Official communications, lobbying, and counselling to develop image. Public relations tools are effective in developing a positive attitude toward the organization and enhance the credibility of a product. Public relations activities have the drawback that May not provide an accurate measure of their influence on sales. 3. 0. 4. 1 Public relation in international marketing A company’s public relations (PR) effort should-foster goodwill and understanding among constituents both inside and outside the company. The basic tools of PR include news releases, newsletters, press conferences, tours of plants and ether company facilities, articles in trade or professional journals, company publications and brochures, TV a
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