Ankur Agnihotri [2021IMG-008]

Harikishan Yadav [2021IMG-025]

Prateek Goyal [2021IMG-041]
Priyanshu Katiyar [2021IMG-042]
Rachit Morya [2021IMG-045]

Under the supervision of :- Dr Arun Kumar

Introduction:-

Today we live in the most plentiful time known to mankind. Whereas our ancestors had
to spend most of their waking hours tirelessly working for their food, today we are just
one click away from an endless slew of delicious goodness. It might seem strange, then,
to discover that today, when the choice of brands couldn’t be higher, the companies
behind the food industry have never been so few.

That’s why we’ll be looking to the world’s largest food company Nestlé S.A.

Food Industry:-
The Food and Beverage Industry includes all companies transforming raw agricultural
goods into consumer food products. The overall industry supply chain includes food
processing, packaging, and distribution. It does not cover raw food production, which falls
into the closely related agriculture industry. This industry includes fresh food, packaged
food, and beverages (both alcoholic and non-alcoholic). From food sold at the grocery
store to cooked meals served at restaurants, institutions, and events, this industry serves
a huge variety of retail outlets.
Some examples of food processing are:-
 Turning fresh milk from anything from dehydrated powder to cheese.
 Adding chemicals and preservatives to the food to increase its shelf life and reduce
spoilage.
 Nutrition fortification.

Business challenges that the food and beverage industry faces:-

 Time-sensitive supply chain.

 Unique demands for hygiene and safe food handling.
 Highly regulated industry.
 Price-sensitive industry.

The world’s largest food and beverage companies of 2022 are:-

1. Nestle S.A.
2. PepsiCo, Inc.
3. Anheuser-Busch InBev SA
4. Coca-Cola Co.

In this year’s edition of the Forbes Global 2000 list of the world’s largest public companies,
Nestle has retained the title of the world’s largest food company, with total sales of more
than $93 billion.

Nestle’s gross profit last year hits $49 billion, an increase of 3%.
Nestle S.A:-

As a member of 14 children family, Henri Nestle was aware of the high mortality rate of
children in Europe. To solve the problem Henri spent several years developing a healthy
breast milk substitute by combining cow’s milk, grains and sugar. From 1867 onwards
henry Farine Lactee Nestlé became indispensable and by 1871 this formula spread to
entire Europe. His factory produced around 1000 cans a day.

In the year 1905 after the death of Henri Nestle the director of Nestle merged up with
Anglo-Swiss condensed milk co. This newly created company Nestle and Anglo-Swiss
condensed milk co. had a total of 20 factories. During World War 1 Nestle earned a lot of
profit because the military knew what is the value of canned milk but later Nestle realised
how difficult for them it is to supply this demand due to raw material shortages and
international embargos. World War I taught Nestle a valuable lesson: never keep all your
eggs in one basket. So Nestle started buying factories in other nations such as the US, by
1917 Nestle’s capacity had doubled to around 40 factories and by 1921 it had doubled to
80 factories.

From 1930 to 1940 Nestle opened factories in Asia and other Latin American countries so
that if the next war breaks out they would be ready to supply the world. Quincy denting
this decentralisation kept Nestle safe from the Great Depression and allowed them to
develop their famous Nescafe. In 1958 Nescafe became the most popular coffee brand
in the US.

During World War II, the demands grew rapidly but the sheer scale of the global
destruction left Nestle with a huge supply shortage. Nestle’s Nescafé became the staple
of the Armed Forces and the government contracts propelled Nestle to record profit. The
profit was so high that immediately after the war Nestle started buying up the smaller
European companies that weren’t so lucky. The best purchase by far came in 1947, Maggi,
the manufacturer of various soups and seasonings. During the next decade, Nestle
expanded through M&A. in 1974 they acquired a 30% stake in French cosmetic firm
L’Oréal. Nestle’s expansion continues till the 1980s through M&A.

In 1992 Nestle decided to go all in mineral water production. It became the world’s largest
bottled water company in the world in 2007.

Today Nestle has become the world’s largest FMCG company. It operates in 180+
countries and employs over 300 thousand employees and it has shown a record 7.5% of
organic growth. It’s safe to say that this company will grow in the coming future.

S.W.O.T Analysis:-

Strength:-

 Largest food brand in the world:- Its market capitalization is $289.11 billion and it
is the largest food company in terms of market capitalization.
  Brand value:- Nestlé holds the top spot as the most valuable brand in this world.
Its brand value is $20.8 billion.
 Highly Diversified portfolio:- Nestlé owed more than 2000 brands across the globe
and has more than 8000 products. It also holds the title of the world’s broadest
portfolio.
 Global presence:- Nestlé has a strong global presence and its products are sold in
over 186 countries across the world. They have captured a sizable market in many
developed and developing countries.
 Strong relations with strong brands such as Starbucks and L’Oréal.
 Effective R&D system:- Nestlé has a key advantage over its competitors and it is in
the R&D sector. They spend $1.678 billion on R&D, it’s about 1.89% of their
revenue.

Weaknesses:-

 Increase in prices:- Due to some global events the supply of the raw material has
been affected, and due to this Nestlé has to raise prices by 6.5% this year. But
Nestlé has said they are not going the prices in India because some of their
products are still in the penetrating fazes.
 Water controversy:- Peter Brabeck-Letmathe Nestlé’s previous CEO has always
been in controversy because of his suggestion that water is not a human right.
 Round the globe criticism:- Over the years Nestlé has been involved in many false
practices like funding the farms that supported child labour and human
trafficking.

Opportunities:-

 Venturing into small start-ups:- Nestlé can collaborate with these start-ups to
promote their brand name.
 Online shopping:- Nestlé has a great opportunity to grow through e-commerce
services although they have worked toward this aspect during the Covid period
but is not that significant.
 Market penetration in breakfast cereals.
 Refocus on profitable ventures:- Nestle has been grappling under the weight of
too many unprofitable brands and is seeking to sell its North American water
brands like Pure Life and shift focus on strengthening the best and highly
profitable brands in its portfolio.
 Nestle introduces “Vuna” a vegan substitute for Tuna:- After the success of “vuna”
Nestlé should launch more vegan-based food items.

Threats:-
  Price fluctuations by retail giants:- A large number of Nestlé’s sales are made by
Walmart and other retail players and any fluctuations by these players can affect
Nestlé’s overall sales.
 Water scarcity:- Nestlé’s products use a lot of water for their production and
finding a cheap and good source of water is very difficult for many reasons.
 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 substitute products are easily accessible.
 Government regulations:- 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.

 Economic Uncertainty:- Even though, Nestlé’s sales were not drastically impacted
during the pandemic due to panic buying catalysed by recent events. The
company’s revenue is still threatened by economic uncertainty and recession in
the global markets.

 Haunting Dark Past:- The US Supreme Court is reviewing whether to open human
rights probe against Nestle subsidiary for knowingly helping to perpetuate slavery
in cocoa farms in the African nation of Ivory Coast. Even though the events
occurred over a century ago, Nestlé’s racist past can haunt the company and affect
its sales, profitability, and growth for years to come.

Financial analysis:-
Growth in the Indian market
Nestle India's market capitalization is 1,96,932 Cr as compared to its major competitors
Britannia Industries and Adani Wilmar, which have 91,632 Cr and 88,969 Cr, respectively.
Nestle reported revenues of Rs 14,709 Cr in FY21, an increase of 9.9% from Rs 13,350 Cr
reported in FY20. Over the past 5 years, the revenue of Nestle has grown at CAGR of
10.3%.
Operating income over the past five years increased by 10.2% on a year-on-year basis.
Nestle is leading with a five-year average operating profit margin of 22.6% against 16.1%
of Britannia.
The company has a net profit of 2144 Cr compared with Britannia Industries' 1863 Cr in
FY21.
Net Profit margin during the year declined from 15.6% in FY20 to 14.6% in FY21. Inflation
in edible oil and milk is the main reason.
The company’s current liabilities increased by 4.4% to Rs 26 billion in FY21 from Rs 25
billion in FY20. The increment is due to an increase in accounts payable.
There was a 35% decline in current assets, which stood at Rs 27 billion, while a 47% rise
in fixed assets, which stood at Rs 54 billion in FY21. The decline in current assets is due to
a decrease in cash and short-term investments. And the rise in fixed assets is due to an
increase in Net PPE and in other long-Term Assets.
Cash flow from operations decreased in FY21. It stood at Rs 2,271 Cr as compared to Rs
2,454 Cr in FY20. It is due to fewer business activities during the lockdown in FY21.
Cash flow from investments increased in FY21 and stood at Rs -1,957 Cr as compared to
Rs -3,21 Cr in FY20. It is due to the increment of capital expenditure and long-term
investment.
Cash flow from financial activity decreased in FY21 and stood at Rs -2,018 Cr as compared
to Rs -1,955 Cr in FY20. It is due to an increment in the Total cash dividend.
Nestle India’s liquidity ratios have been decreasing over the past five years. In FY21, the
current ratio was 1.05, which indicates that in the given year, current assets were not
much greater than current liabilities. A current ratio of 2:1 is satisfactory in the industry.
ROE declined to 102.9% during FY21, from 103.1% during FY20. ROE measures the ability
of a firm to generate profits from its shareholders' capital in the company.
The ROA of the company improved and stood at 28.7% during FY21, from 28.5% during
FY20. The ROA measures how efficiently the company uses its assets to generate
earnings.
The debt-equity ratio of Nestle India increased and stood at 0.10 during FY21, from 0.09
during FY20. this shows that the company’s shareholder’s equity is in excess and it does
not need to tap its debts to finance its operations and business.

Growth in the global market

In this year’s edition of the Forbes Global 2000 list of the world’s largest public companies,
Nestle SA retained the title of the world’s largest food company, holding onto the top seat
in the industry, with the market capitalization ($298,409 million) followed by PepsiCo Inc.
($240,241 million).
The company reported revenue of $95,282 million for FY21, an increase of 3.25% over
FY20 While PepsiCo Inc. reported revenue of $79,470 million for FY21, an increase of
12.93%over FY20.
Total reported sales increased by 3.3% to $93 billion in FY21.
In FY21, Organic growth reached 7.5%, with real internal growth of 5.5%.
Growth was supported by continued momentum in retail sales, steady recovery of out-
of-home channels increased pricing and market share gains.

Digital marketing:
Nestle India has designed its Facebook and Instagram profiles to be the same. It
maintains separate pages for its brands such as Maggi, Kit Kat, Nescafe, Koko Krunch,
etc. which also have an insane amount of followers on both Instagram and Facebook.
MARKETING CAMPAIGNS OF NESTLE:
Nestle has rolled out several campaigns all these years but here are the few marketing
campaigns that have left a lasting impression on the Indian audience.
#We Miss You Too-Maggi Campaign
#Celebrate the breakers – A
campaign by KitKat #Good morning
world – The Nescafe campaign

Search Engine Optimization (SEO)

Search Engine Optimization helps us rank better on google search. It also showcases
to us how well a website is in terms of customer experience.
ASK NESTLE CAMPAIGN
Ask Nestle’s NINA was dubbed as India's first artificially intelligent assistant that allows
you to find nutritional information for children. The tool uses artificial intelligence to
provide real-time nutritional information on the foods we eat. This helped Indian
parents to create a nutritious custom meal plan for their children below 12 years of age.

APPEAL TO EVERY CONSUMER WITH MULTIPLE PRICE STRATEGIES.

With an aim to be affordable for the masses, Nestle's marketing strategy incorporates
multiple pricing tactics. With set market prices, you generate high sales with low
earning margins. However, with premium products, you get high returns, but the low
sales risk stays attached.
HAVING A MULTIFARIOUS PORTFOLIO LOWERS RISK
For instance, on the detection of a harmful ingredient, Maggie was banned in India.
Nestle chose to go for a diversification spree; they revamped Maggie and added several
more products to its portfolio. The company smartly introduces horizontal product
diversification whenever it hits a wall. With a diverse portfolio, you can lower risks and
enhance revenues.

PRODUCT MIX STRATEGY ATTRACTS COST-CONSCIOUS PROSPECTS

Nestle benefits from its large product line by employing a product mix strategy. Bundle
deals are perfect for introducing a product or marketing unpopular items. A product mix
strategy allows you to increase the visibility of your low-growth products and make the
premium ones appear affordable. It also helps you sell low-demand stock.

SET CONSISTENT GOALS

With a clear vision, Nestle has been able to create a special space for itself. The
company doesn't deviate from its original mission– Good Food, Food Life. Being
consistent in your message while solving the grievances of the people can help you gain
brand loyalty.
TRY PRODUCT-DRIVEN ADVERTISING WHEN YOU HAVE A LARGE PRODUCT LINE
Nestle's KitKat advertisements are not limited to any age group. The brand presents
the product as a light snack and rarely uses demographics to personalize the
advertisements. Brands belonging to the FMCG industry must opt for product-driven
advertising to increase the visibility of diverse product lines.

LOCALISE YOUR PRODUCTS

Nestle efficiently adapts its products to the local market. For instance, in Japan, the
company markets coffee-flavoured candies. Since Japan is traditionally a tea-drinking
nation, Nestle introduced these candies so that kids could develop a taste for coffee.
Later it introduced Nescafe and KitKat, and they were widely accepted. Today, Japan
has 300+ KitKat flavours. Localization is a crucial part of business strategy that ensures
the satisfaction of a wider customer base.
MAINTAIN BRAND EQUITY WITH CONSISTENT BRAND IMAGE
The more recognizable the name of a brand, the higher your brand value. Nestle has
exceptionally strong brand equity as it focuses on its product quality and consistent
brand image in its packaging. Brand equity helps you earn customer loyalty and
creates your unique identity, giving you a competitive advantage.

CO-BRANDING COMES WITH PROFIT

Nestle collaborated with Google and launched an operating system named Android
KitKat. The brand was facing a pet product scandal, and this move overshadowed the
crisis. Recently, Nestle joined hands with Starbucks and entered the new product
development phase. Together they launched Starbucks Nespresso Capsules.
PROMOTE SUSTAINABILITY TO CREATE A MARK
The Nestle marketing strategy constitutes special efforts for sustainability and
reducing its carbon footprint. Nestle announced its aim to use food-grade recycled
plastics and invest over 700 million in Nescafe's sustainable coffee production. It also
took the initiative to fight against
deforestation. Sustainability imprints a positive impact on your brand.
Operations:-

Operations include procedures for converting raw materials into a finished product or
service. It includes both manufacturing and service operations. Some examples of
operational activities are machining, packing, assembling and testing the products. A
company like Nestle has many subsidiaries companies and they produce products in
more than one category so they have to follow more than one operation. Every operation
has different procedures so it becomes very important for companies that all the
procedures are followed properly. By using proper operations company can increase
productivity, the increased productivity can help the company to achieve consistent
economic growth, increase profitability and set a powerful basis for competitive
advantage.

The human resource management system of Nestle

Nestle is a people-inspired company. It is people, their strengths, talents, and energy that
are most valuable. Presently, the company employs approximately 328,000 employees
and sells products and services to 191 countries.

Recruitment process: The Company recruits young and appropriately qualified people as
Trainees under a variety of Trainee schemes in order to meet future talent demands.
Selected trainees undergo a predefined period of training. On successful completion of
the training, and depending on the availability of positions, they are absorbed as regular
employees into the Company at an appropriate grade and position.

Career Development: At Nestle employees have the support and encouragement to

achieve true fulfilment, by growing professionally and personally, and collaborating with
colleagues and partners diverse in both culture and ways of thinking.

Talent Assessment and success planning: Succession Planning is the way in which
Nestle plans career development and fills middle and senior-level jobs. Nothing is left to
chance. Nestle’s succession plans cover all the key jobs at Nestlé and include a list of
forecast potential successors for those roles.

Performance management: Nestle has a high-performance work culture, and

employees are clearly informed of how their work impacts Nestle's overall
performance. Responsibility for performance management is shared among employees
and line managers with the aim of ensuring that high performance and clear goals are
formulated. Performance is effectively evaluated throughout the performance period.
Management rewards high performers, while low performers are encouraged to
improve. Some of the significant performance tools Nestle is emphasizing include the
Performance Evaluation Process, Progress and Development Guide and 3600
assessments.

Rewards Management: Nestle offers an attractive total rewards package that comprises
a competitive salary and performance-oriented variable pay in return for employees'
contribution to their success. Training and development, as well as a willingness to learn,
are essential conditions to be employed by Nestle. First and foremost, training is done on
the job. Managers are responsible for guiding and coaching their people, and it is
essential that they succeed in their position. Formal training programs are generally
purpose-oriented and designed to improve relevant skills and competencies. Therefore,
they are proposed in the framework of individual development programs and not as a
reward.