Nestlé India: A Comprehensive Analysis - Prof. Kumar, Study Guides, Projects, Research of Applied Mathematics

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Document Analysis on NESTLE

NESTLE INDIA

Introduction:

Nestlé, a global food and beverage leader, has established a significant presence in India, a key market for its diverse portfolio of products. Since its inception in the country over a century ago, Nestlé India has grown to become a household name, renowned for its commitment to quality and innovation. The company operates with the vision of enhancing the quality of life and contributing to a healthier future, aligning its strategies with the unique demands and preferences of the Indian market. Nestlé India’s journey began in 1912, when it first started trading in the Indian subcontinent. The company set up its first manufacturing facility in Moga, Punjab, in 1961, marking the beginning of its extensive production network across the country. Today, Nestlé India boasts a diverse product range, including dairy products, nutrition, beverages, and prepared dishes, with iconic brands such as Maggi, Nescafé, and KitKat leading the market. The Indian market presents unique opportunities and challenges, characterized by its vast and diverse consumer base, evolving food habits, and regulatory landscape. Nestlé India has navigated these complexities by localizing its products, investing in rural development, and adopting sustainable practices. The company's strategic initiatives focus on innovation, sustainability, and community engagement, ensuring long-term growth and positive social impact. In this document analysis, we will delve into various aspects of Nestlé India’s operations, examining key documents such as annual reports, strategic plans, and sustainability reports. The analysis aims to provide insights into the company's market strategies, financial performance, and corporate social responsibility initiatives, offering a comprehensive understanding of Nestlé's role and impact in India.

History:

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. People quickly recognized the value of the new product, after Nestlé's new formula saved the child's life, and soon, Farine Lactée Henri Nestlé was being sold in much of Europe. Henri Nestlé endowed his company with the symbol derived from his name. His family coat of arms, the nest with a mother bird protecting her young, became the Company's logo and a symbol of the Company's care and attitude to life-long nutrition. The Nestlé nest represents the nourishment,security and sense of family that are so essential to life.

Company Mission and Vision

Nestlé’s mission, in the words of our founder Henri Nestlé, is to: “...positively influence the social environment in which we operate as responsible corporate citizens, with due regard for those environmental standards and societal aspirations which improve quality of life.” -- Henri Nestlé, 1857. Lead a dynamic, passionate and professional workforce – proud of our heritage and positive about the future. Meet the nutrition needs of consumers of all ages – from infancy to old age, from nutrition to pleasure, through an innovative portfolio of branded food and beverage products of the highest quality. Deliver shareholder value through profitable long-term growth, while continuing to play a significant and responsible role in the social, economic, and environmental sectors of Pakistan.

Hierarchical details of Marketing Department

Nestle is a big name and it is one of the best brand of the country having the largest market share in milk industry in Pakistan. It is not only one person who is marketing the milk pack everyone who is part of Nestle is marketing it. If we make the hierarchy of the marketing of Nestle Milk pack we will find out that there is a brand manager who is responsible for all activities that will take place in the marketing department under him is sub brand manager who is responsible in the absence of the brand manager. They are the top management and mostly decide what to do and how to do. What steps should be taken to do the marketing. Under them there is a whole marketing team who work according to the instructions which they have got from the top management. This team is further divided into sub teams. All the decision regarding the T.V commercials, radio, news paper and billboards are decided by the brand manager on the advice and on the bases of statistical calculations. For example for placing a bill board all calculations are made that what size of billboard will be suitable, where should be it place so that is well seen, how much should be spend on it either it is in our budget or not. All these things are taken in account and a lot of thinking is done before applying the idea.

Business Portfolio

Nestlé is committed to the following Business Principles in all countries, taking

into account local legislation, cultural and religious practices:

1. Ambient dairy

 Milk pack

 Nido

 Every day

2. Chilled dairy

 Nestle plain yogurt

 Nestle Dahi

 Nestle zeera raita

 Nestle podina raita

3. Bottled water

 Nestle pure life mineral water

4. Culinary and food

 Maggi

5. Baby food

 Cerelac

6. Breakfast cereal

 Nestle koko crunch

 Nestle milo

 Nestle corn flakes

 Nestle fitness

7. Coffee

 Nescafe classic

 Nescafe gold

8. Confectionery

 Nestle crunch

 Nestle kitkat

Customer driven Marketing strategy:

Nestle is an organization working globally. As the operations of the organization are extended in almost all countries, it is not doubtless at all the competitive focus must be at the heart of the company’s international strategy. Nestle's competitive strategies are closely affected with foreign direct investment (FDI) in milk, dairy, beverages and other food businesses. Nestle has an objective to balance sales obtained from low risk and low growth countries of the developed world with high risk and potentially high growth markets of underdeveloped or developing countries i.e. Africa and Latin America. Nestle identifies the potential profits from these high-risk countries, but doesn’t take unnecessary risks just for the sake of growth. This strategy and process of circumventing keeps growth steady while maximizing shareholders‟ value.

Product development:

Product development is used when there is a new product which has to be introduced in an existing market. Nestle Nesvita launched recently in the past couple of years needs to be implied upon the product development strategy. This may be done because the company’s products are not selling anymore or that the company has identified new segments which it had missed before and wants to introduce new product to increase product sales. There are majorly three tactics which the company can use for Product development.

1. The company can develop new features for the product.
2. The company can develop different product quality levels.
3. The company can improve the product’s technology.

Market development:

The market development strategy is used when the product is an existing product but the market is new.. A company might decide to increase its territorial reach and therefore enter a new market. The new market may have tough competitors, or it may happen that the new company may be received very positively. Nestle mineral water an existing product requires the implementation of the market development strategy. A major way to increase market share would be to create the awareness that pure is necessary for a healthy life, convincing people to prefer bottled water in comparison to tapped water.

Diversification:

Diversification strategy is used when a company enters new markets with new products. In such a scenario, the demands of the new market might be different from the current markets where the company exists. Thus, the company has to bring new products in new markets and hence the complication rises. Nestle crunch is identified as the diversification product of the company.

External and internal factors affecting the brand:

External factors: Some of the major external factors affecting the brand are:  Political  Economical  Social  Technological  Legal factors

Political factors:

Political factors or how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labor law, environmental law, trade restrictions, tariffs, and political stability. Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods) The company policies are affected and its budget is also affected. Nestle pays15% sales tax and 18%excise duty when they import chillers from other countries.

Internal factors:

An organization's internal environment is composed of the elements within the organization, including current employees, management, and especially corporate culture, which defines employee behavior. employee behavior directly affects the brands performance.

Mission statement:

An organization's mission statement describes what the organization stands for and why it exists. It explains the overall purpose of the organization and includes the attributes that distinguish it from other organizations of its type. A mission statement should be more than words on a piece of paper; it should reveal a company's philosophy, as well as its purpose.

Organizational culture:

The organizational culture is an organization's personality. Just as each person has a distinct personality, so does each organization. The culture of an organization distinguishes it from others and shapes the actions of its members.

Formal structure:

The formal structure of an organization is the hierarchical arrangement of tasks and people. This structure determines how information flows within the organization, which departments are responsible for which activities, and where the decision‐making power rests.

DOCUMENT ANALYSIS

ANNUAL REPORT

Non-current Liabilities:  Financial Debt: Increased by CHF 2,405 million.  Derivative Liabilities: Decreased by CHF 231 million.  Employee Benefits Liabilities: Decreased by CHF 166 million.  Provisions: Increased by CHF 190 million.  Deferred Tax Liabilities: Decreased by CHF 785 million.  Other Payables: Decreased significantly by CHF 748 million.

Equity

 Total Equity: Decreased by CHF 6,405 million.  Share Capital: Decreased by CHF 8 million.  Treasury Shares: Increased (less negative) by CHF 4,148 million.  Translation Reserve: Increased (more negative) by CHF 4,022 million.  Other Reserves: Increased (less negative) by CHF 13 million.  Retained Earnings: Decreased by CHF 6,371 million.  Non-controlling Interests: Decreased by CHF 165 million.

Analysis

1. Reduction in Total Assets: Total assets decreased by CHF 8,632 million, primarily due to significant decreases in inventories, goodwill, and intangible assets.
2. Reduction in Total Liabilities: Total liabilities decreased by CHF 2,227 million, driven by reductions in current financial debt and trade payables, offset by an increase in non-current financial debt.
3. Decrease in Equity: Total equity decreased by CHF 6,405 million, mainly due to lower retained earnings and higher translation reserve losses.

The provided consolidated cash flow statement for Nestlé for the year ended December 31, 2023, compared with 2022, details the cash flows from operating, investing, and financing activities. Here's an explanation of the key elements:

Operating Activities

 Operating Profit: Increased from CHF 12,326 million in 2022 to CHF 14,063 million in 2023.  Depreciation and Amortization: Slight increase from CHF 3,541 million in 2022 to CHF 3, million in 2023.  Impairment: Significant decrease from CHF 2,726 million in 2022 to CHF 647 million in 2023.  Net Result on Disposal of Businesses: Increased from CHF 79 million in 2022 to CHF 221 million in 2023.

 Dividends Paid to Shareholders of the Parent: Increased from CHF (7,618) million in 2022 to CHF (7,829) million in 2023.  Dividends Paid to Non-controlling Interests: Increased from CHF (284) million in 2022 to CHF (323) million in 2023.  Acquisition of Non-controlling Interests: Increased slightly from CHF (25) million in 2022 to CHF (52) million in 2023.  Purchase of Treasury Shares: Decreased from CHF (10,679) million in 2022 to CHF (5,234) million in 2023.  Inflows from Bonds and Other Long-term Financial Debt: Decreased from CHF 10,936 million in 2022 to CHF 9,806 million in 2023.  Outflows from Bonds, Lease Liabilities, and Other Long-term Financial Debt: Increased from CHF (3,283) million in 2022 to CHF (3,589) million in 2023.  Inflows/(Outflows) from Short-term Financial Debt: Decreased from CHF 148 million in 2022 to CHF (2,537) million in 2023. Financing Cash Flow: Improved from CHF (11,385) million in 2022 to CHF (9,758) million in

Overall Cash Flow

 Currency Retranslations: Increased from CHF (100) million in 2022 to CHF (682) million in 2023.  Increase/(Decrease) in Cash and Cash Equivalents: Improved from CHF (1,481) million in 2022 to CHF (695) million in 2023.  Cash and Cash Equivalents at Beginning of Year: Decreased from CHF 7,392 million in 2022 to CHF 5,511 million in 2023.  Cash and Cash Equivalents at End of Year: Decreased from CHF 5,511 million in 2022 to CHF 4,816 million in 2023.

The consolidated income statement for the year ended December 31, 2023, reports the following key figures and changes from the previous year:

Key Figures for 2023 (in millions of CHF)

 Sales: 92,998 (down from 94,424 in 2022)  Other revenue: 353 (down slightly from 356)  Cost of goods sold: (50,328) (reduced from 51,745)  Distribution expenses: (7,765) (down from 8,386)  Marketing and administration expenses: (17,549) (increased from 16,850)  Research and development costs: (1,656) (down slightly from 1,696)  Other trading income: 132 (up from 107)  Other trading expenses: (1,665) (down significantly from 3,015)

SUMMARY

BALANCE SHEET

Nestle experienced a substantial decrease in both total assets and total liabilities, with a notable reduction in equity. The decreases in goodwill and intangible assets suggest possible impairments or disposals, while the reduction in inventories indicates efficient inventory management or reduced production. The increase in non-current financial debt and decrease in current financial debt suggest a shift towards long-term financing. Overall, Nestlé's balance sheet shows a trend of asset and liability reduction, with a significant impact on shareholder equity. CASH FLOW This analysis indicates that while Nestlé has improved its operational efficiency and cash flow from operations, it has also increased its investment activities and managed its financing activities more effectively, resulting in a relatively stable cash position despite significant financial maneuvers. INCOME STATEMENT The company experienced a slight decline in sales but managed to improve its trading operating profit and net profit due to reductions in costs and expenses in certain areas. The profit attributable to shareholders increased significantly, and both basic and diluted earnings per share saw notable improvements

Corporate Social Responsibility

Nestle's Corporate Social Responsibility (CSR) focuses on environmental sustainability, social responsibility, and ethical business practices. The company aims to achieve net-zero greenhouse gas emissions by 2050, promote water stewardship, and ensure sustainable sourcing of raw materials. In the social realm, Nestle emphasizes nutrition and health through product innovation and education programs, supports community development by creating economic opportunities, and ensures workplace diversity and employee welfare. Ethically, Nestle is committed to transparency, upholding labor rights, and eliminating child labor in its supply chain. These initiatives reflect Nestle's dedication to creating positive impacts on society and the environment while maintaining high standards of corporate governance and ethical conduct.

Conclusion

Summing it all up, Nestlé has consistently been a pioneering force in the food and beverage industry, especially within the dairy sector in Pakistan. Since its inception, Nestlé has revolutionized the market, setting high standards for quality and innovation. While the competitive landscape has become increasingly challenging with new and strong competitors entering the market, Nestlé continues to maintain its leading position. The company holds a significant market share and is recognized as a leader among multinational companies in the food and beverage sector. Operating in all major cities of Pakistan, Nestlé is dedicated to expanding its reach to smaller towns and cities, ensuring widespread availability of its products. To retain its market leadership, Nestlé must continue to innovate and strive for excellence, adapting to market dynamics and consumer needs. Nestlé's commitment to quality, sustainability, and community development underpins its success, and these values will be crucial as the company navigates future challenges and opportunities. By maintaining its focus on these core principles, Nestlé is well-positioned to continue its legacy of leadership in the industry.