History of Nestle

• 1866-1905

• In the 1860s Henri Nestlé, a pharmacist, developed a food for babies who were unable to breastfeed. His first success was a premature infant who could not tolerate his mother's milk or any of the usual substitutes. Sold in much of Europe.

• 1905-1918

• In 1905 Nestlé merged with the Anglo-Swiss Condensed Milk Company. By the early 1900s, the company was operating factories in the United States, Britain, Germany and Spain.

• 1918-1938

• After the war Government contracts dried up and consumers switched back to fresh milk. However, Nestlé's management responded quickly, streamlining operations and reducing debt. The 1920s saw Nestlé's first expansion into new products, with chocolate the Company's second most important activity

• 1938-1944

• Nestlé felt the effects of World War II immediately. Profits dropped from $20 million in 1938 to $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, which was a staple drink of the US military.

Nestlé's production and sales rose in the wartime economy. 1944-1981

• Nestlé's growth in the developing world partially offset a slowdown in the Company's traditional markets. Nestlé made its second venture outside the food industry by acquiring Alcon Laboratories Inc..

• 1981-1995

• Nestlé divested a number of businesses1980 / 1984. In 1984, Nestlé's improved bottom line allowed the Company to launch a new round of acquisitions, the most important being American food giant Carnation.

• 1996-2002

• The first half of the 1990s proved to be favorable for Nestlé: trade barriers crumbled and world markets developed into more or less integrated trading areas. Since 1996 there have been acquisitions including San Pellegrino (1997), Spillers Petfoods (1998) and Ralston Purina (2002). There were two major acquisitions in North America, both in 2002: in July, Nestlé merged its U.S. ice cream business into Dreyer's, and in August, a USD 2.6bn acquisition was announced of Chef America, Inc.

• 2007+s

• The year 2003 started well with the acquisition of Mövenpick Ice Cream, enhancing Nestlé's position as one of the world market leaders in this product category.  In 2006, Jenny Craig and Uncle Toby's were added to the Nestlé portfolio and 2007 saw Novartis Medical Nutrition, Gerber and Henniez join the Company.  

Strength: Socially responsible company. NML’sproducts enjoy strong brand image and market pull. Sales force as a major physical resource strength. Growing sales and profit. Quality product. Aggressive marketing. Solid financial position. Strong supply chain network. Qualified work force. Increase export sales.

Weaknesses: Selective investment due to uncertain economic and political situation. Lack of awareness among target market. There is a weak marketing of MILKPak as there is no advertisement of

MILKPak on official website. Revenue from confectionary decreased by 14%. Can’t launch expensive brand due to low income groups.

Opportunities : Pakistan as 7thlargest milk producing country with milk output of 200

billion liters. There are substantial growth opportunities. All companies contribute only 2% to processed milk market. Credit policy can be adopted to increase sales. Population density increased by 2.18% (per sq.km). Increase in consumer food industry by 14%.

Threats : Price fluctuation due to rupee devaluation as a raw material imported. Strong advertisement by major competitors. Taste of consumer has already developed which is hard to change. Legal and ethical issue. Inflation is getting higher and higher so the purchasing power of the

people is decrease day by day. Make segment growth attract new entrants. Economic slow down can reduce demand two new competitor Engro and

Shakergang for MILKPak especially Engro is growing fast.

IFE Internal Factor Evaluation Matrix:

Key Internal Factors Weight Rating Weighted Score

Strengths

Socially Responsible Company 0.03 3 0.09

Nestle products enjoy strong brand image 0.07 3 0.21

Sales force as a major physical resource strength 0.05 3 0.15

Quality product distribution networks in country 0.08 2 0.16

Net Profit increased by 94% in 2009. 0.20 4 0.80

Price earning ratio decreased from 38.9 to 18.8 0.05 3 0.15

Export Sales increased by 48% to PKR 3.3 billion 0.18 4 0.72

Weaknesses

Lack of awareness among target market 0.04 2 0.08

Nestle milk always stands at last because of low advertisement.

0.09 2 0.18

Revenue from confectionary decreased by 14% 0.08 2 0.16

Low credit sales and profit margin to retailers 0.05 2 0.10

Weak promotional activities through websites 0.05 3 0.15

Cant launch expensive brand due to low income groups 0.03 1 0.03

Total 1.00 2.99

EFE External Factor Evaluation Matrix:

Key External Factors Weight Rating Weighted Score

Opportunities

Few and weak competitors in the market 0.12 2 0.24

Disposable income increased by 3.6% 0.07 3 0.21

Consumer expenditure on food has increased by 3.6% 0.09 4 0.36

Population density increased by 2.18% (per sq.km) 0.05 3 0.15

Credit policy can be adopted to increase sales 0.03 3 0.09

Potential in cold dairy market 0.02 3 0.06

All companies contribute only 2% to processed milk market 0.12 4 0.48

Pakistan as 7thlargest milk producing country with milk output of 200 billion liters

0.12 3 0.36

Increase in consumer food industry by 14% 0.05 4 0.20

Threats

Engro and Shakarganj as major competitors 0.14 3 0.42

Market segment growth could attract new entrants 0.04 2 0.08

Taste of the consumer has already developed 0.02 2 0.04

Legal & ethical issues 0.01 2 0.02

Economic slow down can reduce demand 0.01 2 0.02

Effect of seasonality upon sales 0.05 3 0.15

Strong advertisement by major competitors 0.08 3 0.24

Total 1.00 3.02

IMPLEMENTATION STAGE:

Decision:

• This seemed to an important step where we had to choose either to go for a horizontal integration or more product development. The interesting fact was that from 2009-200 Nestle Pakistan introduced three new products into the market

• The major new product launches the year 2009

• Included: NESQUIK milk enhancer, NIDO BUN YAD, LACTOGEN GOLD, and CERELAC fruit cereals.

 

Our Recommendation:

Considering this fact now we recommended Nestle Pakistan to Acquire Shangrila foods and young’s food to excel as a market leader for the year 2012.