Company: Nestle AG
CEO: Ulf Mark Schneider
Year founded: 1905
Headquarter: Vevey, Switzerland
Number of Employees (Dec 2018): 308,000
Public or Private: Public
Ticker Symbol: NESN | NSRGY
Market Cap (2018): $259.6 Billion
Annual Revenue (2018): $ 90.12 B
Profit |Net income (2018): $ 7.1 B
Products & Services: Ambient Dairy | Chilled Dairy | Coffee | Bottled Water | Juices | Culinary and Foods | Confectionary | Baby Food | Breakfast Cereals
Competitors: Mars | Mondelez | Hershey | Ferrero | Godiva | Pepsi co | Lindt | Kelloggs
Did you know that Nestle is one of the largest food companies in the world that sells its product in 190 countries ?
An Overview of Nestle
Founded in 1905 as a result of a merger of Anglo-Swiss Milk Company, Nestle was first formed by Henri Nestlé in 1866. Nestle became the worlds’ largest Swiss packaged food company in a short span of time. With more than 150 years of stability in the market, Nestle has marked its strong position as top nutrition, health, and Wellness Company. Ulf Mark Schneider currently holds the position of CEO at Nestle.
Whether its dairy products, chocolates or juices, Nestle is always there in our everyday purchases. It’s “Good Food, Good Life” slogan has served it right, touching millions of people worldwide, both physically and literally.
It makes more than $1.1 billion of revenues a single day. Now you can imagine how big this company really is!
Find out more interesting facts about Nestle in this article and get some insights about the company through its SWOT analysis.
SWOT Analysis of Nestle
The following is the SWOT analysis of Nestle:
- 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.
- Globally recognized brand – Through its effective advertising and branding strategies, it has created significant awareness and developed a successful brand image around the world. According to the Fortune Global 500, Nestle is among the world’s largest corporations and is ranked at 69th position in 2018 list.
- Highly diversified company – Nestle sells its products in 189 countries Instead of relying on a few markets, it has captured the sizeable market in a lot of developed and developing countries to earn most of its revenue. Its leading markets include the US, China, France, and Brazil. In 2017, It generated CHF 26.7 billion from the US market alone.
- World’s most valuable brand – According to 2018 Forbes Global, Nestle is among the top as the world’s most valuable company in regards to highest revenue, profits, assets, and market value.
- Extensive product portfolio – Nestle owns more than 2000 brands globally and renovated over 8000 products for nutrition and health considerations, according to its Annual Review 2017. It is one of the worlds’ biggest companies with the broadest product portfolio.
- Well-established relationships and popular brands– Nestle has some of the world’s most recognized brands under its name such as Nescafe, Kit Kat, Gerber, Milo, and Maggi. Besides, it has well-established relationships with other trusted and powerful brands like Colgate Palmolive, Coca Cola, General Mills, and L’Oréal.
- 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. It spent nearly 1.72 billion Swiss Franc on R&D in 2017.
- Environmental sustainability practices – Nestle puts substantial efforts in environmental sustainability practices and take 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. In 2017, 253 of Nestle factories reached zero waste production. To communicate sustainability benefits with its customers and keeping the environment clean, Nestle launched a free mobile app that helps people to recycle waste packaging material correctly.
- 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.
- Price fluctuations by retail giants – Nestlé’s grocery sales are achieved majorly through huge retail giants like Walmart, Tesco, and Kroger. Any reduction or increase in prices by these retailers can affect Nestlé’s sales.
- 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 the large Administrating such a large number of individual brands can often result in discord and conflict of interest.
- Water controversy – Recently, Nestle was accused of illegally pumping millions of liters of water in 6 nations where residents are deprived of drinking water.
- 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.
- Maggi Noodles controversy – In 2017, Nestle failed to clear a laboratory test in India. This created a publicity hype as people boycotted 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.
- 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.
- 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.
- 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.
- 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.
- Partnerships – Strategic alliances with other food and beverage giants are also a great opportunity for the company to increase its revenues and profits.
- 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.
- Illegal rainforest destruction controversy – In 2017, Nestle was alleged of involvement in the destruction of Sumatra’s last tract of rainforest. It faced severe criticisms from NGOs and environmentalists in this regard.
- 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.
- 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.
- Government regulations and prices – 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.
Nestle is quite successful in the CPG market. However, there are still some areas where it can improve to strengthen its market standing.
Some recommendations are:
- Bringing innovation in the company’s offerings.
- Growing the number of start-ups in the food and beverage industry.
- Upgrading its online services to create a unique competitive advantage in the CPG
- Improving its production and operational procedures.
- Using authentic raw material to avoid outcry from environmental and social activists.
- Settling the media scandals and controversies to stand by with a positive reputation.
- Participating in CSR activities and upholding its sustainability practices.
Acknowledgement: We gratefully acknowledge the Business Strategy Hub organization for their efforts in sharing information about strategic management and corporate analyses. Thank you Business Strategy Hub team.