A

PROJECT REPORT
ON
NESTLE

FOR THE PARTIAL FULLFILLMENT OF BACHELOR OF BUISNESS

ADMINISTRATION

GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY

SUBMITTED BY:
VIPUL
BBA (GEN)

SUBMITTED TO:
Mr. AMIT GUPTA
COURSE CORDINATOR OF BBA (GEN)

MAHARAJA AGRASEN INSTITUTE OF MANAGEMENT STUDIES

AFFILATED TO GURU GOBIND SINGH INDRPRASTHA
UNIVERSITY

1
 ACKNOWLEDGEMENT

I here with take the opportunity to express my profound sense of

gratitude and reverence to all those who have helped and
encouraged me towards the successful completion of the project
.It’s been a great experience working on NESTLE .It give me
complete insight about how an organization not only survives in
cutthroat completion but also maintain a killer instinct in the
competitive world.

I would like to thank my project guider Mr. AMIT GUPTA for his
immense guidance .A valuable help and provided me the
opportunity to complete the project under his guidance

I would like to thanks all the faculty members of MAHARAJA

AGRASEN INSTITUTE OF MANAGEMENT STUDIES for
guiding me and supporting me in the completion of this project
from time to time

Last but not least my greatest gratitude to the almighty and my

parents, without their support this dream would have remained
dream

CERTIFICATE

2
This is to certify that VIPUL study in our institute MAHARAJA AGRASEN
INSTITUTE OF MANAGEMENT STUDIES was allotted the project on
“NESTLE” by Guru Gobind Singh Inderprastha University has successfully
completed it under the guidance of Mr. AMIT GUPTA

DECLARATION

I here by declare that the project work entitled “ NESTLE” is an

authentic work carried out by me under the guidance of MR.

3
AMIT GUPTA (project coordinator) for a practical fulfillment of
the degree of BBA(GEN) and this has not been submitted
anywhere else for the award of any degree

Name of the student

VIPUL

4
 INDEX
CHAPTER 1
• OJECTIVE
• RESEARCH METHODOGY

CHAPTER 2
• INTRODUCTION
• COMPANY PROFILE

CHAPTER 3
• ANALYSIS OF DATA
• PRODUCTS

CHAPTER 4
• CONCLUSION
• LIMITATIONS

BIBLOGRAPHY
ANNEXURE

EXECUTIVE SUMMARY

5
The current millennium has unfolded new business rules most
the significant of them being that company has to constantly
look into minds of the customer. Customer loyalty plays a
significant role and today securing that loyalty requires quality
right price and of course last but not the least i.e. creating
awareness about their service. As a trainee, I was given
knowledge about the way and style of their working, their
routine and their environment. It was a great experience in
getting under such a reputed company, which has in it the
ability to retain customer.

6
 OBJECTIVE

 To identify the services and products offered by

NESTLE.
 To study and analyze the customer perception and
preference about NESTLE.
 Finally to draw the various conclusion and
recommendation on the on the basis of study
conducted.

7
 RESEARCH METHODOLOGY

Managers need information in order to introduce products and

services that create value in the mind of the customer. But the

perception of value is a subjective one, and what customer’s value

this year may be quite different from what they value next year. As

such, the attributes that create value cannot simply be deduced

from common knowledge. Rather, data (information) must be

collected and analyzed. The goal of Marketing Research

(analysis) is to provide the facts and direction that managers need

to make their more important marketing decisions.

The analysis involves the following steps:

 Define the problem.

 Determine research design.

 Identify data types and sources.

 Determine sample plan and size.

 Collect the data.

 Analyze and interpret the data.

 Prepare the research report.

8
For the purpose of study, data from the in-house survey

conducted by the marketing department (secondary data) has

been used and also for coming out with the recommendation. It

was also felt that mere secondary data would not provide in-depth

information for the analysis, hence it was decided that interactive

discussions with the managers and the head of every department

would help in an in-depth and true understanding of challenges

faced by the department.

The methodology adopted was to gather relevant information from

the appropriate department, correlate the information obtained

and to present the information in a logical and systematic manner.

9
 INTRODUCTION

Nestle India Ltd. is a part of the Nestle SA group which is one of the largest manufacturing
companies in the world. Henri Nestle founded the company (with its headquarters in Vevey,
Switzerland) in 1867. Nestle has two major divisions - Le Societe des Produits which
looks after the production and marketing and Nestec Ltd. which provides the technical
assistance to the group companies. Since its inception in 1867, the company has diversified
it product range from the infant weaning formula (which was its first product) to beverages,
confectionery, ice creams and pet foods among others. In a span of 130 years the company
has ranked 26th among the world’s largest corporations and boasts of a turnover of $
48932.5 million and employee strength of 221,144 people spread over 75 countries
worldwide (Annexure A).

Nestle has long been viewed as one of the most multinational

of the multinationals. This is because today only 2% of its
turnover comes from Switzerland. Out of the remaining 98%,
Europe contributes 43.5%, North and South America
contribute 36.5% and Africa and the Asia Pacific Regions
contribute 18%.

10
 Company Profile

Although Nestle has been associated with India since the

beginning of the century through the importing and trading of infant

food and condensed milk, manufacturing in India only began with the

setting up of the factory in Moga in 1962. The first product to be

manufactured was Milkmaid. In the last 35 years the company has

shown rapid progress and has increased its product range to 80

products as of October 1997. Nestle India Ltd. now ranks 22nd

amongst India’s most valuable companies (Annexure B) . Its gross

revenue has increased from Rs 1001.1 crores to Rs. 1213.8 crores in

1996. This remarkable growth has been achieved through -

• Rapidly creating greater manufacturing capacity, both at factories

as well as with co-packers.

• Taking measures to ensure availability and improved quality of key

raw materials - fresh milk in particular.

• Strengthening of the sales and distribution network (particularly in

smaller towns)

• Ambitious and cohesive manpower training and development

programs for the personnel of the company across all disciplines.

11
 The company’s exports also resulted in a very successful year in

this area as exports grew by 27% to Rs. 250.8 crores in 2003. The

main contributors to this increase were the export of tea and coffee to

USA, Japan, Russia, Hungary and Taiwan.

Nestle India Ltd. wants to further increase its operations in India

and has started construction of its sixth Factory at Bicholim, Goa for

the manufacture of culinary products (a key thrust area) for this

purpose.

12
 The Spirit of Nestle

“Organisational excellence is never achieved through a one time

effort; It is always a process of continuous improvement across a

number of areas of operation.”

A key factor for Nestle’s success has been its quest for

continuous improvement through ushering in greater productivity and

more efficiency in everyday operations. Despite the infrastructure

impediments in India, Nestle has set itself high standards of business

performance. This is reflected through the essence of the company - its

mission statement.

Nestle’s mission

“To be in every way the leading company in the Indian food

industry and a good corporate citizen by providing our consumers with

superior quality products, our shareholders with rapid growth & fair

returns and our employees with a challenging and satisfying work

environment.”

To translate this spirit into a planned and measurable process,

Nestle has set up key objectives across all divisions.

13
Key Objectives

Production

• To optimise production costs while enhancing product quality so as

to make Nestle products even more competitive in the market

place.

Sales and marketing

• To reach a sales turnover of 3000 crores by the year 2003

• To double the turnover every three years

People

• To help employees to retain a long term perspective and integrate

them fully with the company’s business goals

• To retain a broad perspective while addressing individual needs

• To view growth as a continuous process

• To concentrate on attitudinal changes by developing leadership

skills, an appreciation of interdependence between units and the

enhancement of a sense of belonging to Nestle.

14
Finance

• To maintain profit levels above the average for the food industry in

India.

The Business Excellence and Common Application (BECA) initiative

essentially translates the spirit of the Journey towards excellence into

an organised, systematic and measurable approach. The aim is to aid

the achievements of the company’s key objectives of rapid growth by

ensuring that all operations incorporate the spirit of meaningful

planning, effective cost control and efficient implementation. BECA is

about “ planned improvement in everything we do ”

Factories

Nestle has 6 factories in India. These are

1. Moga (punjab) : The Nestle factory in Moga has the pride of being

the first and most comprehensive factory of Nestle India. Set up in

1962, it represents the core competence of Nestle India in the

manufacture of milk products (Everyday, Milkmaid), beverages,

culinary products (Maggi sauces, noodles, soups etc.), weaning

cereals (Cerelac) and infant milk formulae.

2. Choladi ( Tamil Nadu): The factory in Choladi started production

in 1967. Situated about 60 miles from Calicut, the factory today has 81

15
employees and produces 1.5% of the total turnover of Nestle India. It is

a 100 percent export oriented unit which processes freshly picked tea

leaves into soluble instant tea.

3. Nanjagud (Karnataka): Production in this factory began in 1989

with the manufacture of Nestle instant coffee and Sunrise. Today in

addition to instant coffee the factory also manufactures health

beverages. The plant to manufacture MILO was also commissioned at

this factory. This factory employs 145 people and is cited as a model in

terms of environment protection for its installations to purify waste

water as well as for its provisions for recycling coffee wastes.

4.Samalakha (Haryana): This factory was set up in 1993. Located 70

kilometres from Delhi , it manufactures weaning cereals , culinary

products ,health beverages and milk products. Recently the expansion

of manufacturing capacity for Milkmaid Dessert Mixes was undertaken

at this factory as this new and unique product category is viewed to

have great potential in the future.

5.Ponda (Goa): This Kit-Kat factory was set up in Goa in 1995 at a

cost of Rs. 50 crores. It represented a major step by Nestle towards

becoming the Number 1 Chocolates and Confectionery Company in

India.

6.Bicholim (Goa)

16
 The construction work at this new factory is progressing with

speed. This factory will soon commence the manufacture of culinary

products, which is a key thrust area for the company and will include

latest technological improvements relating to this category of products.

As a part of Nestles efforts towards continuous improvement

and excellence in Manufacturing operation, a Moga Improvement team

(MIT) was put in place at the Moga factory. The team comprised of

international experts from Nestle Technical Services (NESTEC) and

the local staff. In 1996, it embarked on a program with the single

minded objective of optimizing production costs while enhancing the

product quality so as to make Nestle products even more competitive

in the market place. Drawing upon Nestle’s global experience and

manufacturing expertise in 75 countries the team identified the

following areas for detailed study -

• Process improvement to ensure the optimal usage of resources

• Improvement of operational efficiency

• Cost optimization

A series of small but critically important initiatives ranging from

redesigning laboratories to palletisation of raw materials and packaging

material utilization, manufacturing and filling loses and labour man

hours resulting in substantial savings and improved productivity and

17
machine utilization. In addition, several non tangible benefits in the

form of systems for sustainable improvement in areas like factory

maintenance planning tools , down time recording systems and

performance measurement tools were also realized .

This project was highly successful and the company is now

implementing its key learning’s of MIT in its other factories.

In a country as vast and diverse as India, supply chain

management is absolutely critical to rapid growth. Through BECA,

Nestle has concentrated heavily on streamlining and improving their

supply chain management in order to make it more dependable, more

cost effective and most importantly, more responsive to market needs.

For better supply chain integration the planning of key

operations - purchase, production, distribution and sales are

synchronised to ensure that everybody works towards a common

business plan. Monthly objectives are broken down into weekly and

(wherever necessary) into daily plans and monitored regularly to

ensure smooth implementation and quick corrective action when

needed . Major benefits accrued thus far include reduction in working

capital through lower inventories of finished goods and materials, better

stock availability and reduction in obsolescence of materials.

In addition to traditional performance indicators, quantifiable

performance measures have been identified and implemented in all

18
functional areas such as sales planning, production output, quality

assurance, material ordering transportation and warehouse

management. These measures are monitored regularly to gauge the

extent of improvement and identify root problems for taking corrective

actions.

Teams have been put in place at all factories and sales offices

to ensure the implementation is continuous and self-sustaining. Areas

of improvement are regularly identified and time bound action plans

established. For this purpose, standard tools such a Total Quality

Management(TQM), Kaizen, 5S and Small Group improvement activity

(SGIA) are being extensively used.

The efficacy of this hierarchical structure is seen in Nestle’s

performance over past few years of various products.

By 1989 the company had achieved a sales figure of

approximately Rs. 258 crores. 1989 was the year of launches. Seven

new product lines were launched in this year. This was also the year in

which the Nanjagud factory was set up. By the year 1992, this sales

figure was touching Rs 500 crores. In the 1995 the pace of launches

quickened and since the construction of the factory at Samalakha, 20

new products have been introduced. By 2003, Nestle had about 76

different products in its portfolio with various new products in the

pipeline as well. The sales figure now touched Rs. 1214 crores. Thus

sales grew by 450% over a period of one and a half decades.

19
Marketing Strategy

Nestle has adopted a four pronged growth strategy: -

1. Gunning the market with new products and brand extensions.

2. Expansion of the distribution network to small towns for extensive

availability.

3. Reduce prices and introduce smaller packages for products to

make them more affordable (a tool to enter price sensitive markets).

4. Focus on employ training and develop a positive attitude through

enhanced manpower development.

5. By year 2003 it expects chocolate & confectionery to account for

one in every third rupee in sale.

In the late 1996 fear of breading complacency by not having a

continuous improvement, gave birth to an international sales &

marketing improvement teams (SMIT).

SMIT maps the latest in helping towards the target of year.

2003. The SMIT exercise is a major global initiative of Nestle to

enhance sales & marketing productivity. Linked with the already

existing BECA project, which in turn emphasises on excellence by

20
improving the distribution set up , this gave rise to the following growth

objectives for the year 2003

• Ensure direct coverage of all urban towns in India.

• Expand distribution to reach 1 million retail outlets on a regular

basis.

• Work in partnership with the distributor for the achievement of these

objectives.

• Provide sustainable solution to optimize our secondary sales from

distributor to retailer.

21
NEW PRODUCT LAUNCHES

To put all the product launches into perspective, Nestle now has

80 products including various flavours and variants this awesome list of

80 products for most companies is an overfull palate. Nestle India Ltd.

Still have a variety of new products in the pipelines. It believes in slowly

colonizing as much territory as fast as it can, adapting to native

conditions and then work at “holding off the advancing herds”. Nestle

products can be broadly classified into 5 main ranges -

• Milk Products

• Chocolate and Confectionery

• Beverages

• Culinary

• Food service

Milk Products

22
 This category which comprises of condensed milk, baby milk

foods , milk powders , acidified infant food , and other milk products,

showed a slump in 1996 as sale of milk products fell from Rs 31.4

crores in 1995 to Rs 31.2 crores in the said year. Consumer offtake

remained depressed throughout this year as a consequence of high

price increases necessitated by substantial increases(+50%) in the

cost of basic raw materials( fresh milk ) , over the past two years .

However Nestle retained its leadership in the infant food market

with Cerelac, Lactogen and Nestum and even introduced a new flavour

of Cerelac - Cerelac Rice in 1996.

Chocolates and Confectionery

Nestle pursues the objective of accounting for one in every three

rupees in its sales figures through chocolates and confectionery. This

has thus been one of the thrust areas in Nestle. Nestle this year

widened its range of flavours in POLO, backed by its tremendous

success in the Indian Market by adding POLO Spearmint to its

Portfolio. This new flavour has also received an encouraging

response in the market according to market analysts.

Milkybar also retained its position as the number one white

chocolate brand in India, however it did not record a significant

increase in sales as a majority of Indian tastes still do not accept this

flavour.

23
 This year however, was a year of tremendous success for Kit

Kat .This internationally renowned brand gained a large increase in the

Market share in the past year and Nestle officials are hopeful that this

will further increase in the coming years. However this Brand along with

it success has brought with it its share of Controversy as the Union of

India has launched a Litigation against the Kit Kat family pack.

In 1997 Nestle added to its range of confectionery by introducing

SPLASH, “A soft hearted, hard boiled sweet ” this is being promoted as

a sweet unique to India and is positioned to a target audience in the

age group of 4 to 12 years and “anyone with a soft heart” is a potential

customer. Priced at Rs. 1 for a 7.5 gram candy splash has been

introduced selectively in the South and has been speculated to repeat

Polo’s performance. Nestle’s officials claim that this candy has the

potential to grab a quarter of the 700 crores confectionery market.

The most recent of Nestle affairs with the confectionery market

has been the introduction of Mithai Magic which is “a little Mithai , a

little magic “ .This new product was launched in September 1997 ,in

time for the Diwali purchases of sweets . This brand has been

positioned somewhere between chocolates and traditional sweets and

the company is employing a push strategy to promote this brand.

24
Beverages

This year has been very successful in the beverages market for

Nestle .The sales of beverages has increased from Rs 323.3 crores in

2002 to Rs 398.8 crores in 2003.

Nestles Flagship Nescafe which was pegged at Rupees 1040

per Kilogram before the launch of Tata Cafe, met with stiff competition

from Tata Cafe priced at Rupees 550 per Kg once it was introduced .

Tata cafe claimed to have garnered a market share of 17% by

December 1996. This forced Nestle to cut prices of Nescafe to Rupees

840 per Kg. However Nescafe still retains 83% market share in the Rs

177 Crores market for pure instant coffee.

Nestle Sunrise also showed an increase in sales and captured

20 % of the Rs 253 crores market in Mixed instant coffee.

This year Nestle also launched MILO, an internationally renowned

chocolate energy drink, and the response for this has been

encouraging.

Nestle has also introduced Tasters Choice tea bag pitched against Taj

mahal tea bags.

25
Culinary Products

The market in culinary products had witnessed a high growth

consequent to aggressive pricing decisions on existing products and

the introduction of a variety of new products to match the needs of the

Indian Housewife. Encouraged by this success Nestle launched Maggi

Macoroni Snack in three flavors - Chicken , Masala and Tomato. Nestle

officials’ say that this would consolidate Maggis position as the number

1 culinary brand in India. The product focuses on convenience and

innovation as its Unique Selling Proposition. This snack has opened a

new segment for the maggi brands. The brand is positioned as youthful

and is represented by the twists and curls of the macaroni snack. It is

speculated to be introduced in a phase manner nation-wide to be

placed in the 7.5 lakh outlets that Maggi noodles sells in .

In the spirit of catering to Indian tastes Maggi introduced maggi

pickles in five variants benchmarked to give the “ghar ka swad”. Maggi

Dosa Mix was also introduced to offer superior quality and added

convenience. Apart from this Milkmaid Kalakand Mix, a traditional north

Indian sweet of premium quality was added to the milkmaid dessert

mixes. Maggi soup also launched three new variants. Maggi Rassam in

particular was noticeable as yet another attempt to make traditional

Indian cooking a little bit easier.

26
Food Service

Food service items basically deal with the out of home

segments, which would include vending machines. Nestle’s food

service business is poised for rapid expansion to meet the growing

need for such a reliable, time saving and cost effective service in this

modern age .

Nestle wants to sell 500 million cups of tea and coffee through

its vending machines in the year 2003. It currently has 3500 vending

machines at assorted locations (both public and private). In 1995

Nestle food service did well to vend 40 million cups of Nescafe and

Tasters Choice tea. Its 2003 sales were placed at 59 million cups of

Nescafe and 36 million cups of tea, this figure was however way below

the expected sales for the year.

Distribution strategy

It is an indisputable fact that fundamentally all consumers

marketing must first assure availability of the product to the consumer.

In India, the urban population alone is of a whooping 250 million

consumers -an unbelievable potential for any FMCG . The potential

being spread across more than 4000 towns have to be very effectively

and efficiently tapped. Nestle till now was retailing in a limited number

of towns with only 200 towns accounting for 70 % of their business. For

27
Nestle to be a leader in the food industry, expanding the distribution

network for more retail outlets was a must.

To meet this challenge, Nestle is working towards an objective

of increasing the retail base to 1,000,000 outlets by the year 2003. This

network is feasible as Nestle has a triangular distribution structure thus

the span of control is still retained. The Distribution Network is

explained in figure 2.

In order to achieve these distribution objectives Nestle has

formulated an international sales and marketing improvement team

(SMIT). SMIT focuses on a single objective -provide sustainable

solutions to optimize the distributor and retailer sales through a step by

step approach starting with analysis of market followed by identification

of the probable retail outlets and finally selection of the same .The

team also focuses on proper implementation of resources and timely

follow ups for effective solutions.

Advertising Strategy

28
 Nestle, a cash rich company has plenty of marketing prowess.

This can be credited to a strong and sound advertising strategy.

Nestle in the year 2002 had an advertisement spending of Rs

43.3 crores (net) . Tracing Nestles advertising responses the ad

campaign by HTA of ‘Hot and Sweet’ was a runway success this ad

was actually meant to fend off a challenge from H.J Heinz. The Maggi

ranges of sauces were introduced in 1985 but sales didn’t catch up

until 1990 but till 2003 it got considerable market share. At this point

the popular and memorable campaign of Javed Jaffrey and Pankaj

Kapoor was launched by Producer Pralad Kakkar . This commercial

was an instant success. The volume of sales kept rising from an initial

growth of 13% to 20% in the next year. Today the sales figure for

Maggi Sauces is growing at a steady 6% per year.

Another noteworthy campaign was that of POLO (the mint with a

hole), devised by Mudra advertising agency. This campaign was

awarded 11 industry ad awards.

In 2002 the advertisement budget has been approximately Rs

56 crores where again innovation was the main focus. The new nation-

wide product launch of Maggi Macaroni Snack and Mithai Magic have

been designed by Mudra . The Macaroni ad with its use of “English “

and a catchy beat (which is the latest trend amongst the Indian

Advertisers) appeals well to the target audience and the Mithai Magic

commercial does keep the secret of the contents in the box , intact.

29
“Training is an integral and indispensable part of Nestle . I regard the

importance of training a highly as research and development .It is a

major investment in the Future of the company and imperative

because it is an investment in people ”

- Mr. Helmut Maucher

Chairman and CEO Nestle S A

Group

Nestle India Ltd. has an employee base of 3040 people and

aims to be in the top quartile of the FMCG companies .For this

purpose it follows a very stern and rigorous recruitment policy .

Recruitment Policy

Recruitment of fresh management trainees and sales officers is

done every April-May. These graduates are generally selected from the

best institutes in the country through a series of interviews. They are

then put through a probation period of 12-18 months. Although Nestle

does not offer some of the highest pay packets in the industry, it is

considered a growth oriented company.

Training and Development

Continuous development of skills and attitudes of employees is

critical to the achievement of excellence. At Nestle therefore training

30
and development of human resources is viewed as a long term

investment .

“ If you are planning for one year , Plant wheat;

If you are planning for ten years, plant a tree;

If you are planning for life, train people.”

- Old Chinese proverb

This proverb goes with the organizations most enduring beliefs

worldwide -

• That long term planning is the key to Nestles global success

• That Nestle’s most valuable assets are its people

• Nestle’s policy is to rely on a more decentralized form of

management by building in the habit to “ Think Nestle”.

At Nestle India training and development is an integral part of

the business plan and strategy in line with the objectives for the year

2003 and aims to -

31
• Help employees to retain long term perspective and integrate them

fully with the company’s business goals

• View the growth of both the personnel and the company as a

continuous process .

• Concentrate on attitudinal changes by developing leadership skills,

an appreciation of interdependence between units and the

enhancement of a sense of belonging to Nestle .

In 2003 Nestle India benefited greatly from the training program

offered at the Rive Reine International Training Center at Vevey,

Switzerland. This training program helped facilitate the transfer of

common Knowledge (technical, marketing, and finance) across the

Nestle Group and ensure interdisciplinary approach to learning and

uniform progress with a tailor-made approach for all.

Company Training needs -

• analysis of training needs of Managers

• self development programs for staff at HO

• programs for company orientation and information sharing

32
• programs aimed at computer training and computerization

• Establishment of contact with leading management institutes with a

view to use the same for meeting local training requirements

Nestle’s Corporate Culture

As we had discussed before, Nestle is one of the most

multinational of multinationals and is spread over 75 countries

worldwide. This implies that it has employees from diverse cultural

backgrounds. Nestle respects the distinctive culture, mentality and

traditions of every employee in every country. What Nestle aims at is to

incorporate its own culture into its employees without stifling the

individual employee’s culture and identity. When we went to Nestle we

could feel the existence of a distinctive work culture amongst the

management - the staff seemed highly motivated & cheerful and

everybody had pin up boards in front of their tables with reminders ,

motivational messages and even time logs (the Nestle people seemed

as if they availed of the benefits of time management) .

Nestle Apart
has a from
diverse
this,
product
Nestlerange
has aand
vastsodistribution
it also has network.
diversified
Inrisks
order

Thus Management on Information systems plays a vital role in Nestle

to provide information to the Sales and Marketing as well a the

finance department .The Electronic Data Processing Department

looks after Management Information Systems .

33
availability, aid quick decision-making and improve supply chain

integration.

34
Nestle India Ltd., is a part of the Nestle SA group, which

is one of the largest manufacturing companies in the

world. The company (with its headquarters in Vevey,

Switzerland) was founded by Henri Nestle in 1867.

Nestle has two major divisions-Le Societe des Produits

which looks after the production and marketing and

Nesstec Ltd. which provides the technical assistance to

the group companies. Since its inception in 1867, the

company has diversified it product range from the infant

weaning formula (which was its first product) to

beverages, confectionery, ice creams and pet foods

among others. In a span of 130 years the company has

ranked 26 th among the world's largest corporations and

boasts of a turnover of $48932.5 million and an

employee strength of 221,144 people spread over 75

countries worldwide (Annexure A).

Nestle has long been viewed as one of the most

multinational of the multinationals. This is because

35
today only 2% of its turnover comes from Switzerland.

Out of the remaining 98%, Europe contributes 43.5%,

North and South America contribute 36.5% and 18% is

contributed by Africa and Asia Pacific Regions.

OVERVIEW

Although Nestle has been associated with India since the

beginning of the century through the importing and

trading of infant food and condensed milk,

manufacturing in India only began with the setting up of

the factory in Moga in 1962. The first product to be

manufactured was Milkmaid. In the last 35 years the

company has shown rapid progress and has increased its

product range to 80 products as of October 1997. Nestle

India Ltd. now rank 22 nd amongst India's most valuable

companies (Annexure B). Its gross revenue has

increased from Rs. 1001.1 crores to Rs. 1213.8 crores in

1996. This remarkable growth has been achieved

through:

• Rapidly creating greater manufacturing capacity, both

at factories as well as with copackers.

36
• Taking measures to ensure availability and improved

quality of key raw materials-fresh milk in particular.

• Strengthening of the sales and distribution network

(particularly in smaller towns).

• Ambitious and cohesive manpower training and

development programs for the personnel of the

company across all disciplines.

The company's exports also resulted in a very

successful year in this area as exports grew by 27% to

Rs. 250.8 crores in 1996. The main contributors to this

increase were the export of tea and coffee to USA,

Japan, Russia, Hungary and Taiwan.

Nestle India Ltd. wants to further increase its operations

in India and has started construction of its sixth Factory

at Bicholim, Goa for the manufacture of culinary

products (a key thrust area) for this purpose.

37
The spirit of Nestle

"Organizational excellence is never achieved through a

one time efforts; It is always a process of continuous

improvement across a number of areas of operation."

A key factor for Nestle's success has been its quest for

continuous improvement through ushering in greater

productivity and more efficiency in everyday operations

Despite the infrastructure impediments in India, Nestle

has set itself high standards of business performance.

This is reflected through the essence of the company-its

mission statement.

Nestle's mission

"To be in every way the leading company in the Indian

food industry and a good corporate citizen by providing

our consumers with superior quality products, our

shareholders with rapid growth and fair returns and our

employees with a challenging and satisfying work

environment."

38
To translate this spirit into a planned and measurable

process, Nestle has set up key objectives across all

divisions.

39
 KEY OBJECTIVES

Production

• To optimize production costs while enhancing product

quality so as to make Nestle products even more

competitive in the market place.

Sales and Marketing

• To reach a sales turnover of 3000 crores by the year

2000.

• To double the turnover every years.

People

• To help employees to retain a long-term perspective

and integrate them fully with the company's business

goals.

• To retain a broad perspective while addressing

individual needs

40
• To view growth as a continuous process.

• To concentrate on attitudinal changes by developing

leadership skills, an appreciation of interdependence

between units and the enhancement of a sense of

belonging to Nestle.

Finance

• To maintain profit levels above the average for the

food industry in India.

Key Fact

This section offers a quick and simple overview of

NESTLE, making it an excellent place to begin learning

more about the World’s Largest Food Company. Here

introduction is given with some key facts and figures,

including 2001 Financial Information, Company

Profile, Historical Development and Main Brand.

41
SALES ANALYSIS

By Geographic Area

In Million of CHF 2006

(%)

Europe 25/706 36.7

North and South America 22/262 31.8

Africa, Asia and Oceania 13/493 19.3

Other Activities 8/537 12.2

69/998

Other
Activities
12.2%
Africa, Asia Europe
and Oceania 36.7%
19.3%

North and
South
Am erica
31.8%

By Main Product Group

42
In Million of CHF 2001(%)

Beverages 19/142 27.4

Milk Products, Nutrition and Ice 334 27.6

Cream

Prepared Dishes and Cooking Aids 17/660 25.2

Chocolate and Confectionery 10/663 15.2

Pharmaceuticals 3/1999 4.6

Chocolate Pharm aceutic

and als
Cofectionary 4.6% Beverages
15.2% 27.4%

Prepared
Dishes and
Cooking Aids Milk
25.2% Products,
Nutrition and
Ice Cream
27.6%

43
Breakdown of 2006 Trading Expenses (in %)

Percentage

Raw Materials 26.2

Packaging 8.8

Salaries and Welfare Expenses 16.6

Depreciation 4.1

Other Trading Expenses 34.5

Total Trading Expenses 90.2

Trading Profit 9.8

Go to Financial Guide for additional facts and figures.

Company Profile

Raw Materials
13.8%
Trading Profit
5.2% Packaging
4.6%

Salaries and
Welfare
Expenses
8.7%

Depreciation
2.2%

Total Trading
Other Trading
Expenses
Expenses
47.4%
18.1%

• Chairman of the Board: Helmut O. Maucher

44
• Chief Executive Officer: Peter Brabeck-Letmathe

• World’s leading food company

• Switzerland’s largest industrial company

• Worldwide operations

• 495 factories

• Group’s total work force: 225, 808 people.

Historical Development

1866 Company’s foundation

1905 Merger between Nestle and Anglo-Swiss Condensed

Milk Company

1929 Merger with Peter-Cailler-Kohler Chocolates

Suisses. S. A.

1947 Merger with Alimentana S.A. (Maggi)

1971 Merger with Ursina-Franck (Switzerland)

1985 Acquisition of Carnation (USA)

45
1990 Acquisition of Buitoni-Perugina (Italy)

1992 Acquisition of Rowntree (GB)

1994 Acquisition of Perrier (France)

1998 Acquisition of Spillers (GB)

2002 Divestiture of Findus brand and parts of Nestlé's

frozen food business in Europe.

Divestiture of Hills Bros, MJB and Chase & Sanborn

roast and ground coffee brands (USA).

2006 Acquisition of PowerBar.

Factories

Nestle has 6 factories in India. These are

1. Moga (punjab)

The Nestle factory in Moga has the pride of being the

first and most comprehensive factory of Nestle India.

Set up in 1962, it represents the core competence of

Nestle India in the manufacture of milk products

(Everyday, Milkmaid), beverages, culinary products

46
(Maggi sauces, noodles, soups etc.), weaning cereals

(Cerelac) and infant milk formulae.

2. Choladi ( Tamil Nadu)

The factory in Choladi started production in 1967.

Situated about 60 miles from Calicut, the factory today

has 81 employees and produces 1.5% of the total

turnover of Nestle India. It is a 100 percent export

oriented unit which processes freshly picked tea leaves

into soluble instant tea.

3. Nanjagud (Karnataka)

Production in this factory began in 1989 with the

manufacture of Nestle instant coffee and Sunrise. Today

in addition to instant coffee the factory also

manufactures health beverages. The plant to

manufacture MILO was also commissioned at this

factory. This factory employs 145 people and is cited as

a model in terms of environment protection for its

47
installations to purify waste water as well as for its

provisions for recycling coffee wastes.

4.Samalakha (Haryana)

This factory was set up in 1993. Located 70 kilometres

from Delhi , it manufactures weaning cereals , culinary

products ,health beverages and milk products. Recently

the expansion of manufacturing capacity for Milkmaid

Dessert Mixes was undertaken at this factory as this new

and unique product category is viewed to have great

potential in the future.

5.Ponda (Goa)

This Kit-Kat factory was set up in Goa in 1995 at a cost

of Rs. 50 crores. It represented a major step by Nestle

towards becoming the Number 1 Chocolates and

Confectionery Company in India.

6.Bicholim (Goa )

48
The construction work at this new factory is progressing

with speed. This factory will soon commence the

manufacture of culinary products, which is a key thrust

area for the company and will include latest

technological improvements relating to this category of

products.

As a part of Nestles efforts towards continuous

improvement and excellence in Manufacturing operation,

a Moga Improvement team (MIT) was put in place at the

Moga factory. The team comprised of international

experts from Nestle Technical Services (NESTEC) and

the local staff. In 1996, it embarked on a program with

the single minded objective of optimizing production

costs while enhancing the product quality so as to make

Nestle products even more competitive in the market

place. Drawing upon Nestle’s global experience and

manufacturing expertise in 75 countries the team

identified the following areas for detailed study -

• Process improvement to ensure the optimal usage of

resources

49
• Improvement of operational efficiency

• Cost optimization

A series of small but critically important initiatives

ranging from redesigning laboratories to palletisation of

raw materials and packaging material utilization,

manufacturing and filling loses and labour man hours

resulting in substantial savings and improved

productivity and machine utilization. In addition, several

non tangible benefits in the form of systems for

sustainable improvement in areas like factory

maintenance planning tools , down time recording

systems and performance measurement tools were also

realized .

This project was highly successful and the company is

now implementing its key learning’s of MIT in its other

factories.

In a country as vast and diverse as India, supply chain

management is absolutely critical to rapid growth.

50
Through BECA, Nestle has concentrated heavily on

streamlining and improving their supply chain

management in order to make it more dependable, more

cost effective and most importantly, more responsive to

market needs.

For better supply chain integration the planning of key

operations - purchase, production, distribution and sales

are synchronised to ensure that everybody works

towards a common business plan. Monthly objectives are

broken down into weekly and (wherever necessary) into

daily plans and monitored regularly to ensure smooth

implementation and quick corrective action when needed

. Major benefits accrued thus far include reduction in

working capital through lower inventories of finished

goods and materials, better stock availability and

reduction in obsolescence of materials.

In addition to traditional performance indicators,

quantifiable performance measures have been identified

and implemented in all functional areas such as sales

planning, production output, quality assurance, material

51
ordering transportation and warehouse management.

These measures are monitored regularly to gauge the

extent of improvement and identify root problems for

taking corrective actions.

Teams have been put in place at all factories and sales

offices to ensure the implementation is continuous and

self-sustaining. Areas of improvement are regularly

identified and timebound action plans established. For

this purpose, standard tools such a Total Quality

Management(TQM), Kaizen, 5S and Small Group

improvement activity (SGIA) are being extensively used.

The efficacy of this hierarchical structure is seen in

Nestle’s performance over past few years of various

products.

By 1989 the company had achieved a sales figure of

approximately Rs. 258 crores. 1989 was the year of

launches. Seven new product lines were launched in this

year. This was also the year in which the Nanjagud

factory was set up. By the year 1992, this sales figure

52
was touching Rs 500 crores. In the 1990’s the pace of

launches quickened and since the construction of the

factory at Samalakha, 20 new products have been

introduced. By 1996, Nestle had about 76 different

products in its portfolio with various new products in the

pipeline as well. The sales figure now touched Rs. 1214

crores. Thus sales grew by 450% over a period of one

and a half decades.

53
TODAY NESTLE IS PRESENT IN DIFFERENT

MARKETS WITH THE FOLLOWING MAIN BRANDS

Soluble coffee

Nescafe, Taster's Choice, Ricore, Ricoffy.

Roast and Ground Coffee

Hills Bros., MJB, Bonka, Zoegas, Loumidis

Mineral Water

Perrier, Contrex, Vittel, Valvert, Quezac, Arrowhead,

Poland Spring, Buxton, Vera, Blaue Quellen, Calistoga,

Santa Maria, San Pellegrino.

Other beverages

54
Nesquik, Nescau, Nestea, Milo, Carnation, Libby's Caro.

55
Dairy Product

Nido, Nespray, Carnation, Milkmaid/ La Lechera, Gloria,

Neslac, Barenmarke.

Breakfast Cereals

Nestle

Coffee Creamers

Coffee-mate

Infant Foods and Dietetic Products

Nestle, Nan, Lactogen, Cerelac, Nestum, Guigoz

Culinary Products (Bouillons, soups, seasonings,

prepared dishes, canned food, pasta, sauces)

Maggi, Crosse and Blackwell, Libby's, Thomy, Builtoni,

Contadina

56
Frozen Foods

Findus, Stouffer's Buitoni, Maggi

Ice Cream

Nestle, Frisco, Dairy Farm, Magnolia, Motta, Camy , ect.

Refrigerated Products (yogurts, desserts, pasta

sauces)

Nestle, Locatelli, Vismara, Buitoni, Contadina

Chocolate and Confectionery

Nestle, Crunch, Cailler, Frigor, Chokito, Sarotti,

Galak/Milkybar, Yes, Kit Kat, Quality Street, Smarties,

Baci, After Eight, Baby Ruth, Butterfinger, Lion, Nuts,

Rolo, Aero, Polo, etc.

57
Food Services and Professional Products

Chef, Davigel, Santa Rica

Pet Care

Friskies, Fancy Feast, Aplo, Mighty Dog, Gourmet.

Specialized products for the food industry

Food Ingredients Specialties (FIS)

Ophthalmological products

Alcon

Cosmetics

L'Oreal

58
 NEW PRODUCT LAUNCHES

To put all the product launches into perspective, Nestle

now has 80 products including various flavors and

variants this awesome list of 80 products for most

companies is an overfull palate. Nestle India Ltd. still

has a variety of new products in the pipelines. It

believes in slowly colonizing as much territory as fast as

it can, adapting to native conditions and then work at

'Holding off the advancing herds'. Nestle products can be

broadly classified into 5 main ranges:

• Milk Product

• Chocolate and Confectionery

• Beverages

• Culinary

• Food Service.

59
Milk Products

This category which comprises of condensed milk, baby

milk foods, milk powders, acidified infant food, and other

milk products, showed a slump in 1996 as sales of milk

products fell from Rs. 31.4 crores in 1995 to Rs. 31.2

crores in the said year. Consumer off take remained

depressed throughout this year as a consequence of high

price increases necessitated by substantial increases (+

50%) in the cost of basic raw materials (fresh milk),

over the past two year.

However Nestle retained its leadership in the infant food

market with Cerelac Lactogen and Nestum and even

introduced a new flavor of Cerelac-Cerelac Rice in 1996.

60
Chocolates and Confectionery

Nestle pursues the objective of accounting for one in

every three rupees in its sales figures through

chocolates and confectionery. This has thus been one of

the thrust areas in Nestle. Nestle this year widened its

range of flavors in POLO, backed by its tremendous

success in the Indian Market by adding POLO Spearmint

to its Portfolio. This new flavor has also received an

encouraging response in the market according to market

analysts.

Milkybar also retained its position as the number one

white chocolate brand in India, however it did not record

a significant increase in sales, as a majority of Indian

tastes still do not accept this flavor.

This year however, was a year of tremendous success

for Kit Kat. This internationally renowned brand gained a

large increase in the Market share in the past year and

Nestle officials are hopeful that this will further increase

in the coming years. However this brand along with its

61
success has brought with it its share of Controversy as

the Union of India has launched a Litigation against the

Kit Kat family pack.

In 1997 Nestle added to its range of confectionery by

introducing SPLASH, "A soft hearted, hard boiled sweet"

this is being promoted as a sweet unique to India and is

positioned to a target audience in the age group of 4 to

12 years and "anyone with a soft heart" is a potential

customer. Priced at Rs. 1 for a 7.5-gram candy Splash

has been introduced selectively in the South and has

been speculated to repeat Polo's performance. Nestle's

officials claim that this candy has the potential to grab a

quarter of the 700 crores confectionery market.

The most recent of Nestle affairs with the confectionery

market has been the introduction of Mithai Magic, which

is "a little Mithai, a little magic." This new product was

launched in September 1997, in time for the Diwali

purchases of sweets. This brand has been positioned

somewhere between chocolates and traditional sweets

62
and the company is employing a push strategy to

promote this brand.

The latest launch of Nestle in the Chocolate and

confectionery division is Charge.

Beverages

This year has been very successful in the beverages

market for Nestle. The sales of beverage have increased

from Rs. 323.3 crores in 1995 to Rs. 398.8 crores in

1996.

Nestles Flagship Nescafe, which was pegged at Rupees

1040 per kilogram before the launch of Tata Cafe, met

with stiff competition from Tata Cafe priced at Rupees

550 per Kg., once it was introduced. Tata cafe claimed

to have garnered a market share of 17% by December

1996. This forced Nestle to cut prices of Nescafe to

Rupees 840 per Kg. However Nescafe still retains 83%

market share in the Rs. 177 Crores market for pure

instant coffee.

63
Nestle Sunrise also showed an increase in sales and

captured 20% of the Rs. 253 crores market in Mixed

instant coffee.

This year Nestle also launched MILO, an internationally

renowned chocolate energy drink, and the response for

this has been encouraging.

Nestle has introduced Tasters Choice tea bag pitched

against Taj Mahal Tea bags.

Culinary Products

The market in culinary products had witnessed a high

growth consequent to aggressive pricing decisions on

existing products and the introduction of a variety of

new products to match the needs of the Indian

Housewife. Encouraged by this success Nestle launched

Maggi Macoroni Snack in three flavors-Chicken, Masala

and Tomato. Nestle official’s say that this would

consolidate Maggis position as the number 1 culinary

brand in India. The product focuses on convenience and

64
innovation as its Unique Selling Proposition. This snack

has opened a new segment for the maggi brands. The

brand is positioned as Youthful and is represented by the

twists and curls of the macaronic snack. It is speculated

to be introduced in a phase manner nationwide to be

place in the 7.5-lakh outlets that Maggi noodles sells in.

In the spirit of catering to Indian tastes Maggi

introduced maggi pickles in five variants benchmarked to

give the "ghar ka swad". Maggi Dosa Mix was also

introduced to offer superior quality and added

convenience. Apart from this Milkmaid Kalakand Mix, a

traditional north Indian sweet of premium quality was

added to the milkmaid dessert mixes. Maggi soup also

launched three new variants. Maggi Rassam in particular

was noticeable as yet another attempt to make

traditional Indian cooking a little bit easier.

65
Food Services

Food service items basically deal with the out of home

segments, which would include vending machines.

Nestle's food service business is poised for rapid

expansion to meet the growing need for such a reliable,

time saving and cost effective service in this modern

age.

Nestle wants to sell 500 million cups of tea and coffee

through its vending machines in the year 2000. It

currently has 3500 vending machines at assorted

locations (both public and private). In 1995 Nestle food

service did well to vend 40 million cups of Nescafe and

Tasters Choice tea. Its 1996 sales were placed at 59

million cups of Nescafe and 36 million cups of tea; this

figure was however way below the expected sales for the

year.

66
In 2001 and 2002 nestle has come with a number of

new products like it has come with many of the

diary products like milk. The milk is avaliable in

the market in the full cream , toned and double

toned milk. The nestle has also come with the

dahi, butter which is available in the market but at

very few shops .

NESTLE has also come with the products which will

target the children like FRUITIPS,MILKYBAR

CHOO,NESTLE CHINESE MAGGI NOODLES.

67
 BIBLIOGRAPHY

 www.nestle.com

 www.google.com

NEWSPAPER

MAGZINES

68
 ANNEXURE

Financial Results and Operation

2006(Rs. in millions) 1996(Rs. in millions)

Gross Revenue 12144 10011

Gross Profit (BIT) 1343 1183

Interest 506 315

Depreciation 227 165

Provision for Tax 68 171

Profit after taxation 542 532

Extraordinary tax 14 116

Payment

Profit after taxation and 528 416

extraordinary item

Profit brought forward 215 145

Reserves written back 49 130

Balance available for 792 691

appropriation

69
Interim dividends paid 353 321

Final Dividend proposed - 97

Transfer to debenture 42 2

redemption reserve

transfer to general 54 56

reserve

Surplus carried in Profit 343 215

and loss Account

Gross Revenue increased by 21% during the year, and crossed

the 1200 crores mark . Domestic sales grew by 19% and exports

(including sales to Nepal ) grew by 27 %. Net profit after tax grew by

27% - From Rs 41.6 crores to Rs 52.8 crores.

Throughout 2003, there was a marked lack of buoyancy in the

domestics market caused primarily by increased inflation and the

financial liquidity squeeze which affected all segments of the industry

and trade .

Interest costs rose substantially on account of higher funding

needs to service recently commissioned projects as well as to meet

increased exports for which materials often had to be purchased in

advance .

70
 Considering the recessionary market conditions, Nestles overall

sales and progression during 2003 can be considered satisfactory.

Financial Information

In millions of CHF 2006

Sales 81 422

EBITDA (a) 12 516

as % of sales 15.4%

EBITA (b) 9600

as % of sales 11.8%

71
Trading Profit 9 186

as % of sales 11.3%

Net Profit 5 763

as % of sales 7.1%

Capital expenditure 3305

Equity 29 904

Total Assets 65 524

Research and development costs 1 038

Market Capitalization, end December 146 864

(a) Mainly Pharmaceutical products and Water, managed

on a worldwide basis.

(b) Mainly corporate expenses, research and

development costs, amortisation of goodwill

72