Nestle: India's success story

With an employee-strength of over 3000 and turnover of US$ 497 million in 2003, Nestle India is one of the leading companies in the FMCG space in India. The company is acknowledged amongst India’s ‘Most Respected Companies’ and amongst the ‘Top Wealth Creators of India’.

During the first half 2004, the company registered a total income of US$ 257.8 million and net profit of US$ 23.73 million. Nestle India is a 61.85 per cent subsidiary of Nestle S.A. Switzerland and was incorporated as a limited company in 1959. It produces a wide range of products including beverages, prepared dishes and cooking aids, milk products and nutrition, chocolate and confectionery.

Milk products and nutrition account for around 45 per cent of Nestle India’s total revenues. The company’s beverage products generate 22 per cent of the company’s total revenues, while prepared dishes and cooking aids generate 18 per cent, and chocolate and confectionery 15 per cent.

Major Player in processed foods:

Nestle India has over the years built strong brands like MAGGI, NESCAFE, CERELAC, LACTOGEN, KITKAT and POLO. Nestle is major player in many segments of the FMCG sector such as noodles and sauces [MAGGI], instant coffee [NESCAFE] and weaning foods. Nestle products are sold throughout India and are also exported to Russia, Hungary, Japan, USA and several other countries. These include certain international products like Nescafe and Lactogen, as well as select culinary products to meet the demand of the ethnic Indian population living abroad. For three years in succession [from 1999-2000 to 2001- 2002], Nestle India was recognized with the top Exporter Award for export of Instant Coffee, and for export of all coffees to Russia and CIS Countries.

Factors for success

The culture of innovation and renovation, continuous improvement and the thrust on value-for-money and affordability have helped the company to focus on adding value for the consumer. The company has continuously focused on operational efficiency; improving product availability and visibility and initiated efforts to make its products more relevant to the consumers. This has been supported by the distribution of smaller stock-keeping units (SKUs). There has been continuous focus on the seven value drivers, namely:

• Sales growth
• Profit margin
• Working capital intensity
• Fixed capital intensity
• Income tax rate
• Cost of capital
• Value growth duration

Promotion strategy for market expansion:

The following are some of the strategies used by Nestle for market expansion:

• Availability of NESCAFE enhanced through an expansion of the vending machine network.
• New consumption opportunities for chocolates and confectionery were identified and developed in areas like railway platforms, college canteens and major events.
• Nestle set up ‘Cafe Nescafe’ and ‘Coffee Corners’ across metros and mini-metros.

Thrust on supply chain:

During the past few years, Nestle India has continuously focused on improving the supply chain to reduce wastage, improve efficiencies and provide consumers with fresh stocks all the time.

• Reduction in the finished goods inventory pipeline to improve freshness of stocks and reduce working capital
• Control on distribution costs through innovative measures
• Sustained improvement in customer service levels to improve product availability across all geographies and channels
• Reduction in obsolescence of materials

Competence in research and development:

The company has access to the Nestle Group’s proprietary technology/brands, expertise and the extensive centralized research and development facilities. The culture of innovation and renovation and benchmarking of consumers’ tastes and products is facilitated in the company by the unique “Experimental Kitchen” and 2Sensory Laboratory” at the Head Office.

Leveraging the India Advantage:

• Outsourcing manufacturing

• Nestle India has six factories and a large number of co-packers who manufacture products to Nestle specifications.

• Outsourcing IT advantage

• The Nestle 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 Nestle Group to maintain its competitive advantage in the increasingly complex environments of the future.

• Leveraging the vast consumer base in India

• Nestle has an optimistic outlook on the Indian economy as the income of people is increasing and the lifestyles are changing. Nestle is keen on leveraging the vast consumer market of India.

Future plans:

• Nestle India’s objective 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.
• Nestle 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 company continuously focuses its efforts to better understand the changing lifestyles of modern India and anticipate consumer needs in order to provide convenience, taste, nutrition and wellness through its product offerings.