Nestlé: How an idea to make the daily routine better turned into a billion-dollar company

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Most of the products we use in our daily routine from early morning coffee- Nescafe to a cosmetic product like L’Oreal and whatnot. Nestlé has more than 2000 products in its portfolio which is consumed by billions of customers in their daily routine.

When anyone of us feels hunger, the first thing strikes in our head is? Yeah, you guessed it correctly. The hunger savior Maggie which never get cooked in two minutes lol 😛 jokes apart, it is also a Nestlé product.

In FMCG space the significant competitors of Nestlé, PepsiCo, Kraft Foods, Unilever, Cadbury, Danone and many other.

In this article, we will get know what makes Nestlé standout from the rest of companies

Nestlé is a Swiss-based multinational company into food and drinks processing conglomerate corporation headquartered in Vevey, Switzerland. Nestlé has created a brand name for its diversity, work ethics, food safety, and compliance. To lead a successful company, a successful leader is required. The successful business leader Paul Bulcke is the chairman and the former CEO of Nestlé, and Mark Schneider is the current CEO of Nestlé With an employee-strength of more than three lakhs across the world. Nestlé has 447 factories and running their operations successfully in 189 countries.

By satisfying multiple sets of the audience with the highest quality of products the company celebrates its 150 years as a company In 2016 with the mission of “Good Food, Good Life”

Swiss food giant Nestlé ranks #42 in Forbes Global 2000 for the year 2019 in the overall list and Anheuser-Busch topped in the world’s largest food companies list in 2018, followed by Nestlé and Pepsi in the third position. While In fortune global 500 lists Nestlé in at #76

 

History of Nestlé:

The history of Nestlé started In the year 1866 when US brothers Charles and George Page started Anglo-Swiss Condensed Milk Company and They started product under the Milkmaid brand marketed across Europe as safe and a long-life alternative to fresh milk which showed a positive sign from consumers.

Henri Nestlé a German-born pharmacist with a vision to reduce mortality rates and infants, who cannot breastfeed for their consumption. Henri launched ‘farine lactée’ (which means ‘flour with milk’) combines cow’s milk, wheat flour and sugar in Vevey, Switzerland in the year 1867 so that infants can get enough supplements.

In the year 1887, Nestlé and Anglo-Swiss both companies start selling rival versions of the other’s original products such as condensed milk and infant cereal which created cutthroat competition between them. Both companies slowly expanded their sales and production across the globe. Both companies rivaled to the downfall of each other company revenues and decide to merge and share the profits. 

By 1905 both the Anglo-Swiss and Nestlé merge to form the Nestlé & Anglo-Swiss Milk Company. The company has established two head offices, in Vevey and Cham. with merge, the Nestlé & Anglo-swiss milk company has more than 20 factories and established a successful sales network Africa, Asia, Latin America, and Australia. With the approach of world war, the army needed to get enough supplements so the demand for dairy products increased. As a result, the company has witnessed exponential growth in its revenue. so they termed this period of prosperity as the Belle Époque or ‘Beautiful Age’ and become a global dairy company but no time due to the outbreak of war in the year 1914 the firm has faced the shortage of raw materials so to met the increasing demand for condensed milk and chocolates in Europe as well as hostilities country because the condensed is long-lasting and easy to transport. 

So the company decided to acquire some of the processing factories in the US and Australia by the end of the war the company had 40 processing factories. As the years pass the company increased its range of products which include unsweetened condensed milk and sterilized milk. After the war, the demand for Nestlé & Anglo-Swiss products slowly declined, as a result, faced a major crisis in the year 1921 but within no time the company was back with centralized administration and a research laboratory in Vevey, Switzerland.

 

Expansion of Nestlé :

The firm which has survived the wartime faced the major crisis had acquired Norwegian dairy company Egron, which has patented a spray-drying process for producing milk powder In the year 1916. Thereafter the company buys Switzerland’s largest chocolate company Peter-Cailler-Kohler in 1929.

Nestlé & Anglo-Swiss with the great research team has launched malted chocolate drink and named it as Milo in 1934 and the company developed Pelargon, a baby and infant food which is a milk powder so that infants can get enough nutrition during the war period. later on, it was exported other parts which increased company sales with the rapid pace and The Chocolate became an integral part of the Nestlé & Anglo-Swiss business.

In 1938 Nestlé & Anglo-Swiss were into the next level by launching Nescafé as a ‘powdered extract of pure coffee’ that retains coffee’s natural flavor, but can be prepared by simply adding hot water. Nestea was launched in the late 1940s. Nestlé brands rapidly gain popularity among all nations army personnel.

During 1947 Nestlé & Anglo-Swiss merges with Swiss company Alimentana, which produces Maggi soups, bouillons and seasonings, and is renamed Nestlé Alimentana. Nestlé infant cereal has been available since 1948 as a powdered product, but it is now rebranded as Cerelac.

Nestlé grabbed every opportunity to capitalize on their growth. for example with increasing numbers of households items like freezer, the demand for ice cream increased. Nestlé acquired German producer Jopa and French manufacture Heudebert-Gervais, Swiss brand Frisco and adds UK canned foods company Crosse & Blackwell in its list.

The Nestlé in the process of expanding the company acquired diverse firms from frozen foods to mineral water.on several years company acquired French yogurt producer Chambourcy, Findus frozen food brand from Swedish manufacturer Marabou, buying a stake in French waters brand Vittel And the company tops the list in canned foods producer by buying McNeill & Libby in 1976.

 In 1974 For the first time, Nestlé diversifies beyond food and drink, becoming a minority the shareholder in global cosmetics company L’Oréal. The company continues its diversification strategy, buying US pharmaceutical and ophthalmic products manufacturer Alcon Laboratories followed by US-based Carnation Company for USD 3 billion, buys the Friskies brand which manufactures pet food.

Nestlé buys UK confectionery company, Rowntree Mackintosh, adding brands including KitKat, After Eight and Smarties to its portfolio. It also acquires Italian pasta, sauce and confectionery group Buitoni-Perugina, Wyeth Nutrition( Pfizer Nutrition)to strengthen its position in infant nutrition, Nestlé develops its position in mineral waters by acquiring France’s Perrier Group and many diverse products in its portfolio which made Nestlé one of the leading companies in the FMCG space with The wide range of products which include baby food, dairy products, breakfast cereals, frozen food, pet food, snacks, beverages like tea and coffee and mineral water. Some of the highest selling products of Nestlé are Nescafe, Kit Kat, Nesquik, Maggi, and Smarties.

The company has focused on research science-based nutritional products aimed at preventing and treating chronic medical conditions and established Nestlé Health Science and the Nestlé Institute of Health Sciences. Nestlé becomes the first food company to work with the Fair Labor Association (FLA), to help tackle child labor in the cocoa supply chain.

 

Financial key figures and details:

The company has identified five high-growth food and beverages categories with attractive growth rates: coffee, pet care, nutrition, water, and Nestlé Health Science. The market capitalization of Nestlé is 237M CHF and the company generates the revenue of 92.61M CHF the percent change of 2.5% and net income of 10.24M CHF. The company has 1148 investors and the board and management with a mix of different backgrounds skills and expertise to understand the business and seeking feedback and the intense engagement with shareholders which creates great value to the shareholders.

 

Role of Nestlé in processed foods:

Nestlé has won the trust of billions of people over the years and the company had built strong brands like MAGGI, NESCAFE, CERELAC, LACTOGEN, KITKAT, and POLO. Nestlé has become a lead player in many segments of the FMCG sector such as noodles and sauces, instant coffee and other foods. With the advancement of science and technology, Nestlé kept on updating on its productions and quality of products which created great demand for its products and consumed by more than 1 billion people every day across the world. and succeeded in meeting the consumer demand without compromising on its quality. Back in 2000 for three Nestlé was recognized with the top Exporter Award for export of Instant Coffee, and for export of all coffees to Russia and CIS Countries.

 

Factors that turned Nestlé into a successful company

For any company to climb the ladders of success depends upon the core values of the company and customer satisfaction. Nestlé is a global company with deep local roots, which gives a unique ability to understand local consumers and adapt fast to their preferences. 

The company realized the importance of cutting-edge science and technology and continue to invest in it to address evolving consumer expectations through new offerings and product reformulations. The continuous efforts of the firm in the innovation and renovation for the improvement of the products and the thrust on value-for-money and affordability have helped the company to focus on adding value for the consumer.

The company has all-round performance in operational efficiency; improving product availability and visibility and initiated efforts to make its products more relevant to the consumers. The seven successful core values which helped Nestlé to become a leading company in FMCG space. They are Growth in sales, Increase in Profit margin, Working capital intensity, Fixed capital intensity, Income tax rate, Cost of capital and Value growth duration.

 

Promotion strategy for its market expansion:

How great may be the product if the right marketing and promotions are done then it results in failure of the product, So right marketing and promotions are necessary for successful results. In the case of Nestlé, they set a unique promotions strategy which attracted billions of customers such as the setting of vending machine network and making Availability of NESCAFE. 

Nestlé made individual promotions strategy for a certain set of people who generated great revenue to the company. The company noticed the craze of coffee among the people and developed New consumption opportunities for chocolates and confectionery in areas like railway and airports, college cafeterias and major events. Nestlé set up ‘Cafe Nescafe’ and ‘Coffee Corners’ outlets in the different parts of the world. The company added value to its brands and products through meaningful differentiation and innovation depending upon local interest and the firm made continuously an effort to improve the taste, convenience and nutritional qualities of its products.

 

The development of the supply chain :

During the past few years, to reach the market demand it turns out to be a great challenge for companies to deliver the goods. a company can withstand in this cut-throat competition world by a smooth supply chain management. Around the world, Nestlé works with over 700 000 farmers directly, and with many others through our supply chain. Nestlé has continuously focused on improving the supply chain to reduce wastage, improve efficiencies and provide consumers with fresh stocks all the time. the company also gave equal priority in Reduction of the finished goods inventory pipeline so that it improves the freshness of stocks and reduce working capital. The company mainly focus on the 14 raw materials that are most important for production. With innovative measures, the company also focus on control on distribution costs. Sustained improvement in customer service levels to improve product availability across all geographies and channels Reduction in the obsolescence of materials.

 

Competence in research and development:

Every company journey begins with research and development. In this FMCG space, the company should understand that food is a source of nourishment and satisfaction, but also pleasure, health, happiness, and peace of mind for people. The journey of Nestlé would not be possible without its unmatched R&D capability. Nestlé company have the world’s largest private food and nutrition research organization, involving about 5000 people located in around 30 R&D facilities worldwide. 

In 2017, Nestlé has invested about CHF 1.7 billion in R&D. Switzerland was made central for its global research work. Behind every success of Nestlé’s products, there is a team of scientists, engineers, nutritionists, designers, regulatory specialists and consumer care representatives who had dedicated their quality time and to earn consumers trust. The culture of innovation and renovation and benchmarking of consumers’ tastes and products is facilitated in the company by the unique ”Experimental Kitchen” and “Sensory Laboratory” at the Head Office.

Nestlé actively executing several cost-saving initiatives to reduce non-consumer facing structural costs by between CHF 2.0 and 2.5 billion. These are primarily focused on the areas of administration, procurement, and manufacturing. In counties like India Nestlé has also started outsourcing manufactures currently, Nestlé India has six factories and a large number of co-packers who manufacture products to Nestlé specifications.

 

Future plans:

The main objective of the company is to manufacture and market the company’s products in such a way so as to create value that can be sustained over the long term for consumers, shareholders, employees and business partners and also Nestlé aims to create value for consumers that can be sustained over the long term by offering a wide variety of high quality, safe food products at affordable prices. 

The Nestlé Group is in the process of implementing the GLOBE project across its operations worldwide. GLOBE is a unique project and the largest of its kind and will enable the Nestlé Group to maintain its competitive advantage in the increasingly complex environments of the future. The company continuously focuses its efforts to better understand the changing lifestyles of the modern world and anticipate consumer needs in order to provide convenience, taste, nutrition, and wellness through its product offerings. 

The firm also recognized that acquisitions can provide access to new technologies, brands, categories, and geographies. Similarly, small to medium-sized acquisitions can offer a fast and cost-effective way to embrace new capabilities or business models.

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Alex is an MBA graduate who left his high-paid technical job in order to follow his dream for writing. Apart from working with TimesNext, Arun is also a dogsitter by profession. He can be easily spotted reading on the beachside in his home town Thiruvananthapuram.

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