Wednesday, November 6, 2013

Good Food, Good Life

What do Coffee Mate, Purina One, and Jenny Craig have in common?  They are all Nestle brands.  Nestle sells the most food and drinks in the world.  They are the leading producer and seller of coffee.  Their diverse portfolio ranges from food delivery systems to baby formula.  It is more than likely that you consumed, or are consuming a Nestle product today.

So how did this chocolate maker from Switzerland become the leading producer of food products in the world?  Diversification and emerging markets are important factors.  With over 8,000 brands the company has worked to create a rich portfolio.  Part of their strategy is to customize products to fit local markets.  They often substitute ingredients with local variants to fit the taste of the target population.  For example, they could create a “Lean Pocket” in Chile that has lamb meat instead of pepperoni.  It’s still a Lean Pocket, but with a distinctive local flavor.

Emerging markets are an important strategic market for Nestle.  40% of its sales come from these markets, and the company predicts that will rise to 50% soon.  Its largest markets include the USA and Europe, but China and India’s markets are growing fast.  Part of their strategy is to shift their production capacity to Asia.  They opened their first research and development center in India.  It is located in Manesar, a town close to Delhi.  To meet demand for new coffee sales in China, they opened a Nescafé plant and processing center in Vietnam.

These moves are part of a larger corporate strategy.  Nestle has a “roadmap to good food, good life” which details their corporate priorities.  In it they talk about their Competitive advantages, Growth drivers, and Operational pillars.  A complete picture of this roadmap is detailed below:

As you can see, global consumer markets are at the center of many of these initiatives.  Emerging markets are listed as a growth driver.  “Whenever, wherever, however” is listed as an operational pillar.  “Unmatched geographic presence” is listed as a competitive advantage.  All of these strategic initiatives involve emerging markets and expanding their global footprint.

This strategy seems to be working for them.  Nestlé is the largest producer and seller of packaged food in the world.  With markets growing in Asia, they are refocusing their production and marketing to meet consumer demand.  Soon enough the whole world will be consuming nestle products everyday.


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