Strategic Management Plan

for

Nestl Philippines
[ www.nestle.com.ph ]

December 10, 2013

I. A. Company history and background

Over a hundred years after it first started operations in the country, Nestl Philippines, Inc. (NPI) today is a robust and stable organization, proud of its role in bringing the best food and beverage throughout the stages of the Filipino consumers lives. The Company employs 3,700 men and women all over the country, and is among the Philippines top corporations. Its products are No. 1 or strong No. 2 brands in their respective categories.

The Early Years. Although Nestl products were already available in the Philippines as far back as 1895, it was not until 1911 when The Nestl and Anglo Swiss Condensed Milk Company was established in the country, with its first sales office in Calle Renta, Binondo.

The Company was forced to suspend its operations during World War II, but soon made a comeback after Liberation, under a new name: Filipro, Inc. It continued to import products such as MILO, NIDO powder milk, MILKMAID and NESCAF from other countries. In the early 1950s, Filipro encountered difficulties when the Philippine government imposed import control. Due to lack of imported products to sell, it was forced to become a distributor of peanut butter, napkins, fruit preserves, and patis (fish sauce) just to keep its operations going. Local Production. In 1960, Nestl S.A.and San Miguel Corporation entered into a partnership resulting in the formation of Nutritional Products, Inc. (Nutripro). In 1962, Nutripros first factory started operations in Alabang, Muntinlupa to manufacture NESCAF. In 1977, Filipro, Inc. and Nutripro Inc. merged under the name Filipro, Inc. In 1986, Filipro, Inc. changed to its present name as Nestl Philippines, Inc. Nestl now has manufacturing facilities in Cabuyao (Laguna), Cagayan de Oro, Lipa (Batangas), Pulilan (Bulacan) and Tanauan (Batangas) to meet the growing demand for Nestl products in the country. Growth and Diversification. In 1991, Nestl pioneered the AIJV (ASEAN Industrial Joint Venture), a regional complementation program. The Company participated in this program with the production of breakfast cereals at the Nestl Lipa Factory, for export to ASEAN markets. Today, three of the

Nestl factories in the Philippines Lipa, Cabuyao, and Cagayan de Oro -- serve as ASEAN Supply Centers to meet the requirements of Nestl markets in the region. In late 1998, Nestl Philippines became a wholly owned subsidiary of Nestl S.A., following the latters purchase of all of San Miguel Corporations equity shareholding in the Company. Driven by its mission to nurture generations of Filipino families, Nestl today produces and markets products under some of the countrys well known brands such as NESCAF, NIDO, MILO, NESTEA, MAGGI, BEAR BRAND, NESTL, and PURINA, among others. Its product range has expanded to include coffee, milk, beverages, non-dairy creamer, food, infant nutrition, ice cream and chilled dairy, breakfast cereals, confectionery, and pet-care.

B. Products and/or Services of the Company

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Beverages Milo / Milo 3in1 Milo contains the malt extract protomalt, a mixture of different types of carbohydrates, that provide energy and nutrients that the body need. Nestea It has different flavors which are Lemon, Calamansi, Four Seasons with Lychee, Apple and Honey Lemon. Breakfast Cereals Clusters ( Almond, Banana Nut) Breakfast cereal that us made up of whole grain. Cookie Crisp - The fun and just for kids cereal that looks and tastes like little chocolate chip cookies but is light and crunchy cereal made up of grain. Corn Flakes - Breakfast Cereal is modern nutrition with pure and wholesome corn, fortified with vitamins and minerals. Fitness (Original, Fruit, Honey and Almonds) - The breakfast cereal that partners with women to help them look good for themselves. Honey Stars - Its the fun-to-eat crunchy star-shaped cereal pieces blasted with golden honey that no one can resist. Koko Crunch - Ultimate chocolate experience combining the pleasure of chocolate with the wholesome friendliness of grain. Milo - Only cereal that gives children the Milo taste they love and the Milo nutrition they need to take on the day. Snow Flakes - Allows kids to gain control through fantasy with the support of a fearless friend who helps kids accomplish extraordinary things. Chilled Dairy Nestl Fruits Selection Yogurt / with Jelly - Comes in a variety of fruit flavors with real fruit bits

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 Nestl Premium Dairy - Pasteurized, not ultra-heated, making it thicker, richer, and smoother for a creamier milk experience. iv. Coffee and Creamer Creations Nescaf ( Cappuccino, Frapp, Chocolate, Creamy Latte, Brown N Creamy, Original, Classic, Decaf, Gold) comes from 100% pure, high quality coffee beans. Coffee-Mate It has rich creamy taste that is lactose- and cholesterol-free with zero grams trans fat. Confectionery Baby Ruth - A candy bar bursting with peanuts, rich caramel and chewy nougat. Butterfinger - one of a kind candy bar with the crispety- crunchety, peanutbuttery taste people love Foxs - Crystal clear candies with unique shape that come in mint and fruit flavors. KitKat - Has become a favorite chocolate treat. Made of layers of creme-filled wafer covered in smooth milk chocolate. Polo - The Mint with the hole. Dairy Health and Nutrition Solutions Bear Brand ( Original, Choco, Lusog Busog) -An affordable range of beverage solutions that highlight the resistance building nutrients of Iron, Zinc and Vitamin C. Nesvita (NESVITA Pro-Bone Protection and NESVITA Pro-Heart ) Contains Calciclock and Acticol. Nido (NIDO 3+ PRE-SCHOOL MILK POWDER, NIDO 5+ SCHOOL AGE MILK POWDER and NIDO FORTIFIED FULL CREAM MILK POWDER ) Has a high level of Calcium, plus Protein and Zinc. Essential nutrients that help your kids grow taller! Its also fortified with vitamins and minerals to help support the 10 Signs of Good Nutrition. Food Maggi Magic Sarap - Its the most magical and delightful way to enhance homecooked meals. Maggi Magic Sinigang With fruity-asim ng sampaloc and magical taste of granules. Maggi Oyster Sauce Makes your ulam richer and tastier. Maggi Magic Meals A technology that safely cooks the meat in its ownjuices, and in the right doneness. Maggi Savor It has 5 exciting flavors Original, Garlic, Calamansi, Chili and Chilimansi that can brighten up any dish. Maggi Magic Sabaw - A granulated flavour enhancer for meat soup dishes that comes in Chicken, Pork and Beef flavors.

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Healthcare Nutrition Isocal - High calorie nutrition with less sodium content, suitable for people with sodium restrictions. Nutren ( Diabetes, Fibre, Junior, Optimum) - Complete nutrition designed for diabetic people, adults challenged with illness, malnutrition and advancing age and children ages 3-10 suffering to malnutrition. Peptamen - Whey peptide diet to provide optimal tolerance to critically-ill patients. Ice Cream Chuckie Wacky Duo -Has its two cool layers of chocolate ice lolly in fun twin sticks. Fun Chocolate Indulgences ( Crunch, BabyRuth and KitKat Bites ) Heaven Cookie Dough Pleasure - Dreamy indulgence of rich, creamy, cake batter ice cream, all churned with precious cookie dough pieces and fine dark chocolate chips. Kimy Crazy Banana - Yummy vanilla ice cream stick covered with grapeflavored peelable jelly, which you can peel just like a real banana. Nestl Drumstick - Available in a crisp wafer cone and creamy flavors. Nestl Drumstick Loaded - Best selling Drumstick variant, Choco Almond Vanilla now in tubs Nestl Ice Cream ( Coffee Crumble and Double Cheese ) Nestl Ice Cream Butterfinger - Rich in chocolate ice cream sprinkled with real Butterfinger pieces, and generously drizzled with peanut butter ripple Nestl Ice Cream Temptations / Nestl Ice Cream Temptations Limited Edition The best-selling ice cream flavors are made even better with the best and choicest ingredients. Nestl Ice Cream Zero Fat - Ice cream without having to worry about fat. Nestl Pops - Bite-sized vanilla ice cream coated in chocolate. Nestl Sorbetes - Pinoys favorite ice cream flavors in affordable price. Infant Nutrition Cerelac A nutrient-dense food ideal for your childs small tummy. It also contains Protect Plus. It is a spoon-fed solid food suitable for the complementary feeding of babies 6 months onwards. Gerber A perfect introduction to the taste of fruits and vegetables. It contains fruit or vegetable ingredient and extra smooth in texture. Liquid Beverages and Dairy Culinary Nestl Non-Fat Milk - It offers the goodness of milk but minus the fat, making it an easy addition to your balanced diet. Bear Brand Fruit Flavored Milk Drink - Further enhanced with Ginseng and another with Ginkgo Biloba. Nestl Fresh and Low Fat - 100% fresh cows milk and with 50% less fat. Nescaf Ready to Drink - A cold and delicious NESCAF in a can that comes in 3 flavors: Espresso Roast, Latte and Mocha to suit your taste.

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 Nestl Cream - Extra rich premium cream that makes your every dessert creation delightfully perfect. Milo Ready to Drink - Helps energize your body and mind in school. Nestl Chuckie - The coolest, most fun to drink beverage brand among Filipino kids today. It is a sterilized recombined and homogenized high grade chocolate flavored milk fortified with Calci-N, for stronger bones. Bear Brand Sterilized xii. Nestl Professional Buitoni - Helps the food service professional conveniently deliver consistent and authentic Italian flavor in delightful and creative food preparations. Maggi Puree ala minute -Quick and easy solutions - like stocks, soup mixes and seasonings, to help food service professionals conveniently and profitably deliver consistent and authentic flavors in delightful and creative food preparations. Milo Cold - Being offered cold through an EZ Care dispense beverage system enabling food service operators in Education channel deliver the best cold MILO cup. Nescaf Vending Machines ( Automated Vending Machines and Tabletops ) Offer a wide variety of basic and specialty selections from hot coffees to hot chocolate by Nescafe and Milo. Nestea in a Dispense Beverage System - A must on any beverage menu in any food service outlet especially in restaurant and fast food establishments. Pet Care Alpo - The leading premium dry dog food brand in the Philippines that provide the delicious taste, variety and nutrition consumers are seeking for their dogs. Beggin - Bite sized bacony fun dog treats that is specially made for small and toy dogs. Fancy Feast - New exquisite gourmet flavors to satisfy the indulgent needs of cats and their devoted owners. Friskies - The complete proposition cat food, fulfilling the desire for both great taste and 100% nutrition with a range of flavors available in both dry and wet variants. Proplan - A super premium pet specialty pet food brand that protects the optimal health of pets by offering innovative solutions that strengthen the pets own natural protective systems.

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Provided with the information above, we can notice that Nestl products are more on foods and beverages that promote healthy living and good diet. Other products have different variants that target every segment like kids, teens, young adults and adults. Each product contains nutritional benefits that a person can obtain. Moreover, there are specific products that exactly identify a certain advantage which customers are looking for. Nestl also got into a professional business by providing vending machines that facilitate ready-to-drink products like Nestea, Nescafe and Milo. It also took the courage to target pet lovers and owners by offering high-quality foodstuffs for breed or non-breed dogs as well as for cats.

C. The companys competitive situation First and foremost, according to mbaskool.com, Nestl ranked top 1 out of 10 FMCG or Fast Moving Consumer Goods companies in the world for the year 2013. It has a market value of $233.5 billion. Contributing for being in top 1 is that Nestl built virtual shopping centers in United Kingdom, United States, France and Spain. These virtual shopping centers allow their retail customers to recognize how the people act when shopping and using Nestl products at their homes. With that, they could know how to increase their sales. In addition, this is an important factor to target specific product categories that are needed for growth. Nestl has its leading brand which is Nescaf. Nescaf is, in fact, the only one brand within the Nestl family where quality goes well beyond the product itself. Throughout the world and across Nestl brands, were involved in a broad range of social and environmental initiatives that together make quite a difference. According to a very reliable source, Nescaf become its leading brand because it obtained China, which has the largest population and is known as the homeland of tea. China is also a rapidly growing consumer market and more and more companies throughout the world are looking for ways to develop marketing, branding and communication that is relevant to Chinese consumers. Nestl was the first multinational to establish a coffee processing plant in China. Furthermore, Nescaf brand is a long-running favorite in the instant coffee sector in China and it has now become a generic name for coffee. To be particular, Nestl Philippines had its full year result for 2012 and this was: Nestls reported sales were up CHF 8.6 billion, or 10.2%, to CHF 92.2 billion. Organic growth was 5.9%, building on the strong growth of recent years, and was composed of 3.1% real internal growth and 2.8% pricing. After years of adverse impact, foreign exchange added 1.7% to sales, and acquisitions, net of divestitures, a further 2.6%.

The Groups trading operating profit was CHF 14.0 billion, up CHF 1.5 billion or 11.8%. The trading operating profit margin was 15.2%, up 20 basis points, +10 basis points in constant currencies. The cost of goods sold fell by 30 basis points and distribution costs were down 20 basis points. Nestl Continuous Excellence delivered efficiencies of over CHF 1.5 billion, building on savings in previous years. We increased the marketing support behind our brands bringing total marketing costs up by 30 basis points. Consumer facing spend rose about 8% in constant currencies. Administrative costs were up by 20 basis points, following last years drop of 80 basis points caused by the restructuring of pension plans in 2011. Net profit was up CHF 1.1 billion to CHF 10.6 billion, and earnings per share were up 12.2% reported to CHF 3.33. Underlying earnings per share in constant currencies were up 7.5%. We increased operating cash flow by CHF 5.6 billion to CHF 15.8 billion, reflecting primarily a substantial improvement in our working capital.

Sources: (2013). TOP 10 FMCG COMPANIES IN THE WORLD 2013. Retrieved from http://www.mbaskool.com/fun-corner/top-brand-lists/7769-top-10-fmcg-companies-in-theworld-2013.html?start=9. (2011). Nestls virtual shopping centres deliver real competitive advantage. Retrieved from http://www.nestle.com/media/newsandfeatures/nestles-virtual-shopping-centres-deliver-realcompetitive-advantage Retrieved from http://www.nestle.com.ph/ Coffee brews a future in China. Retrieved from http://www.marketresearchworld.net/content/view/1127/77/ The Coffee Market in China. Retrieved from http://marketingtochina.com/the-coffee-market-inchina/ New Nescaf recipe to meet Chinese consumers changing tastes. Retrieved from http://www.nestle.com/media/newsandfeatures/nestle-nescafe-china Retrieved from http://www.nescafe.com.ph/our_ambition_en_com.axcms?ActiveID=1253