Nescafe

1. Introduction
The following report will be focusing on marketing strategy analysis of Nescafe. Nescafe
is a brand of instant coffee made by Nestle. Nestle is one of the successful companies
in the world and is well known for offering variety of products, one of them being
Nescafe (Wikipedia, 2016). The structure of the report will be introduction to the brand,
situation analysis of Nescafe, competitive analysis, Nescafes targeting strategy and
also marketing mix of Nescafe.

2. Situation Analysis
Situation Analysis will help us analyze the brands strength and weaknesses and the
opportunities which they can use and the threats which they can avoid. This section will
be divided into three sections, namely, internal environment, external environment and
SWOT analysis.

A. Internal Environment
In this section, strength and weakness of the Nescafe will be discussed.
Strength:

Strong brand name due to its Parent Company (Nestle).

Excellent advertising and visibility of its products (PESTLEanalysis Contributor,

2015)
Wide distribution channel (PESTLEanalysis Contributor, 2015).
Varieties of flavors available (PESTLEanalysis Contributor, 2015).

Weakness:

Health conscious people avoid coffee as it contains caffeine (Kendra Meeker,

2015).
Nestle invests a lot in marketing as it helps in shaping consumer opinion. This

can lead to high marketing costs and low ROI. (Kendra Meeker, 2015)
Import duties and taxes in some countries like New Zealand increases the price
of the product.

Nescafe

B. External Environment
External environment of the company comprises of the opportunities which lies in a
companys environment and threat which it face or can face in future.
Opportunities:

Busy lifestyles allows instant coffee to become convenient for people.

With growing ideas for healthy lifestyle, Nestle is introducing healthy alternatives

to the average cup of coffee. Example: Nescafe Green

Emerging international market for coffee (Kendra Meeker, 2015).
New Zealand is a coffee-mad nation.

Threats:

Competitors in the market. (Example: Starbucks, Muffin break, Altura in New

Zealand).
People continuing to avoid coffee because of the desire for a healthier lifestyle

(Kendra Meeker, 2015).

People preferring the social aspect of going out to get a coffee rather (Kendra

Meeker, 2015).
Ever changing demand for a coffee (Kendra Meeker, 2015).
People prefer barista made coffee than self-made.

C. SWOT Analysis:
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Nescafe

Strong brand name due

to its Parent Company
(Nestle).
Excellent advertising and
visibility of its products.
Wide distribution
channel.
Varieties of flavors
available.

Health conscious people

avoid coffee as it contains
caffeine.
Nestle invests a lot in
marketing as it helps in
shaping consumer opinion.
This can lead to high
marketing costs and low
ROI.
Import duties and indirect
taxes in some countries like
New Zealand increases the
price of the product.

Strength

Busy lifestyles allows

instant coffee to become
convenient for people.
With growing ideas for
healthy lifestyle, Nestle is
introducing healthy
alternatives to the
average cup of coffee.
Example: Nescafe Green
Emerging international
market for coffee.
New Zealand is a coffeemad nation.

Competitors in the
market. (Example:
Starbucks, Moccona,
Altura in New Zealand).
People continuing to
avoid coffee because of
the desire for a healthier
lifestyle.
Some people prefer
going out for a coffee
rather than making at
home.
Ever changing demand
for a coffee.
People prefer barista
made coffee than selfmade.

Opportunities

Weakness

Threats

Nescafe

3. Competitive Analysis:
Competitive Analysis will help us understand Nescafes competitors strengths and
weakness. It is the most important part of a marketing plan as it helps in getting better
understanding about our product. This section will be divided into three sub sections,
namely, direct competitors, indirect competitors and the competitive advantage which
Nescafe has over their competitors.

A. Direct Competitors:
Direct Competitors are the competition which a company faces directly to its brand. I
have taken two main competitors Starbucks and Moccona. Starbuck is a global brand
(RankInsider, 2014) and whereas Moccona is also a global brand but it is only available
in few countries and is one of the popular coffee brand in New Zealand. This section will
help us understand their major strength and weaknesses.

1. Starbucks
Strength:
Quality and profitability: Though Starbucks is present all around the world like other
food chains, they have established themselves as premium coffee chain. Their products
are of excellent quality, seemingly environmentally friendly, and relatively consistent
between locations. As a result, they can afford to charge customers high prices, which
most people are willing to pay. Not only does this mean large profits, but also has them
globally recognized as one of the best coffee shop chains.
Employee treatment: Starbucks is known for treating its hundreds of thousands of
employees very well, and has previously been listed as one of Fortunes Top 100 Places
to Work For.
Weakness:
High price point: While their high price point was a strength in the previous paragraph,
it is also a weakness. The hefty price tags on some of their products (starting even with

Nescafe

their most basic coffee options) deviate plenty of customers who might otherwise make
Starbucks a part of their daily lives.
A lack of overly unique products: While Starbucks might be known for their
frappuccinos, coffee, and big chocolate chip cookies, they dont have varieties in their
product range as compared to Nescafe.

2. Moccona
Strength
Creamy Coffee: According to their customers review, it is found that Mocconas
customers prefer the brand due to their thick and creamy coffee (Social Bakers, 2013).
Good Social Media presence: Moccona is a professional at coffee and also at
socializing with their customers, according to Socialbakers. Moccona is also one of the
socially devoted brand with response rate of 83% (Social Bakers, 2013).
Weakness
Cost of Packaging: As compared to other brands, the packaging is more on the
premium side and gives the feeling of having a premium coffee. (Social Bakers, 2013)
Low Market Share: According to a research carried out in Australia, Moccona has less
market share as compared to Nescafe. It is the second most preferred brand by grocery
shoppers in Australia. As there is vast difference in population of Australia and New
Zealand, I am assuming that there is also a vast difference in market share between
Nescafe and Moccona in New Zealand (Roy Morgan, 2016)

Nescafe

B. Indirect Competition
Companies, which are not offering the same product but a different product which can
satisfy similar needs of the consumer, are known as indirect competitors. For instant
coffee, there are quite a few indirect competitors in the market. Companies like
FRUCOR, Coca-Cola offer variety of products right from juice to energy drink to soft
drinks. These categories of beverages can be termed as indirect competition for instant
coffee. Also, green tea or milk tea can be termed as indirect competitor for instant
coffee.

C. Competitive Advantage
Nescafe, as a coffee brand has variety of flavours available which can be made
instantly. I guess that their biggest competitive strength over their competitors as none
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Nescafe

of them offers these many varieties. They also have their premium brand, called,
Nescafe Gold, which is their premium coffee for premium buyers. Just like this, they
have instant coffee to satisfy all types of consumers.
The second advantage which they have is, the advertisement which they carry out and
their product shelving. Their advertisement are really interesting as compared to their
competitors and their shelving in supermarkets is at the eye level and also they place
their products towards the wings of the aisle as it grabs maximum attention.

4. Targeting Strategy:
The selection of potential customers whom a business wishes to sell their product.
Targeting strategy involves segmenting the market, choosing which segments of the
market are appropriate for the product and determining the product to be offered in each
segment. A business may offer a single product or multiple product. So it depends on
the company to decide whether each segment should receive customized product or a
generic one. Nestle is leading the instant coffee market in all the countries wherever
they are present. This is because of their brilliant targeting strategy. In this section, I will
try to recognize Nescafes targeting strategy and will cover demographics,
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Nescafe

psychographics and behavioral variables, selecting a targeting strategy and positioning

the product in the minds of the customers.

A. Segmentation Variables:
There are four types of segmentation variables. But only three types of segmentation
variable will be discussed in this section. They are demographic, psychographic and
behavioral.

1. Demographics
Demographics is one of the most common variable used for segmentation of the
market. The variables used help us to divide the large population into smaller market
and help us design the strategy more accurately. (Wikipedia, 2016) Below given are
demographics variables which I have taken to understand Nescafes segmentation
(MERVEGULNAZERDEM).
Age: 15-18, 19-30, 31-45, 46-60 and 60-above
Gender: Male and Female
Income: Middle and High
Occupation: Students, Service Class, Professionals, Homemakers
Education: High School, Undergraduates, Post Graduates, Advanced Degree
Generation: Baby Boomers, Generation X, Generation Y, Millennial

2. Psychographic
Psychographic segmentation is one which uses peoples lifestyle, their activities,
interests as well as opinions to define a market segment. Psychographic segmentation
is quite similar to behavioral segmentation. But psychographic segmentation also takes
the psychological aspects of consumer buying behavior into accounts. I have taken
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Nescafe

social

class,

lifestyle

and

personality

to

define

the

Nescafes

consumer

(MERVEGULNAZERDEM).
Social Class: Middle Class, Upper Middle Class, Lower Upper Class, Upper Upper
Class
Lifestyle: Hard-working, Sophisticated, Busy
Personality: Ambitious, Outgoing and Inspired.

3. Behavioural
Behavioural segmentation divides a population based on the occasion of using the
product, their behavior, benefits the customer gets when they purchase the products,
the usage rate, brand image and loyalty. I have taken few of the variables and tried to
segment Nescafe on the basis of behavioural.(MERVEGULNAZERDEM)
Occasion: Regular, Seasonal
Benefits: Convenience, Quality, Speed, Economy
Usage Rate: Light, Medium and Heavy User
Loyalty: Medium and Strong

B. Targeting
Nescafe, has differentiated marketing strategy. It helps in targeting the different
segments in the market. As Nestle has variety of products, each segment receives a
customized product such as Nescafe Classic, Nescafe Gold Collection, Nescafe
Cappuccino, Nescafe Espresso etc. We can even differentiate the target market in
terms of packaging. For example, Nescafe small packet will target students who needs
coffee at any-time of the day whereas larger packet will target a family with size of 4.
Nescafe, also uses niche marketing as their strategy. This strategy is used by Nescafe
Green Blend and it aims to target potential customers who are health conscious. This
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Nescafe

products ensures that it contains natural ingredients and unroasted green coffee beans
for healthy living. (MERVEGULNAZERDEM)

C. Positioning
Nescafe

uses product

differentiation and image

differentiation in

order

to

gain

competitive advantage over their competitors. There is no doubt that Nescafe has the
biggest market share in instant coffee. This is because of the position which they have
built in the mind of their customers with their products. Also, using advertisement, they
try to convey the superior value of their product compared to competitors, quality and
the satisfaction which they receive after having Nescafe. Nescafe is selling its products
at the same prices with market average like its competitors but at the same time
presents its customers high level of satisfaction with respect to quality of coffee.
(MERVEGULNAZERDEM)

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Nescafe

Perceptual Mapping
High
Qualit
y
Nesca
fe
Moccon
a

Starbuck
s
High
Price

Low
Price

Low
Qualit
y

5. Marketing Mix
To market the product, every company needs to have the best marketing mix. The
marketing mix comprises of having the best product selling at the best price, available
easily to the consumers and the information reaches the consumer in an effective way.
Nescafe, is the market leader in almost all the countries as they have a brilliant
marketing mix. In this section we will go through the 4 Ps of marketing mix i.e. Product,
Place, Price and Promotion.

A. Product:

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Nescafe

Nescafe offers varieties in coffees and in each country, the range is specified as per the
needs of consumers. Whether its New Zealand or any other country, Nescaf is the
market leader through its diversified range of products.
If we apply the BCG matrix concept to Nescafe, it falls under the category of Star with
high market share and high market growth. If we compare it to the global market still it
could be considered as the Star brand for Nestle with high market and growth rate. Its
products are at the initial stages of maturity (Vevey, 2014).
If we apply the product layers, then core the product is satisfying the urge of having
fresh coffee and also the taste. Actual product which the consumers gets is the Brands
name and the best quality coffee made out of best quality coffee beans and augmented
product would the sales and service which Nescafe offers on their website.

B. Pricing:
Nescafe focuses on being the cost leader by offering all range of products for people
from various social economic classes but in New Zealand due to taxes, it is affordable
by middle and upper class of the society. A good number of products are available for
the people from younger age group to senior age group.
I think when they enter a new market with their product, they use price skimming
because then at that time they target the upper class customers. Then after certain
amount of time they reduce their prices and target the middle class.
They also use product mix strategy as they have different types of product for different
consumers.

C. Place:
Nescafe has its products in 55 countries of the world. In all the countries, Nescaf is the
market leader with massive distribution network and sales team so that the products are
available to everyone at every retail outlet, hypermarket and store (Marketing 91, 2014).
In New Zealand, we can find Nescafe at every supermarket such as New World, Pak n
Save, Countdown etc. and also at the petrol pump station. In India, along with these
places, we even get pop up stores of Nescafe at various places. They use indirect
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Nescafe

channels to distribute their product i.e. they have their regional distributors to supply
their products to various supermarket chains and stores.

D. Promotion:
Promotions are designed depending on the target market and positioning. In New
Zealand, the focus in on connections and in India, the advertisements emphasis on
taste and connection. Also, they try to emphasize that good things happens with a
coffee and so you should start your day with Nescafe. When I first saw their New
Zealands website i.e. nescafe.co.nz, the way they have portrayed it, it makes me feel
like having a cup of coffee and being a coffee mad person, I love their website.
All these things are done using combination of all the promotional mix. To advertise,
they use slice of life appeal where in a real person is shown having a cup of coffee
and tells us that start your day with Nescafe. They also use mass media advertising
through TV, internet, magazines and outdoor. Now talking about effectiveness, by
looking at their market share and their customer base, the ads are effective.

6. Conclusion
Below is the short summary of all the sections.
The situational analysis says that it still has few threats in the market and few
weaknesses but Nescafe is still doing great. One weakness which would have affected
them i.e. people who are avoiding coffee due to health issues. So now Nescafe has
launched Nescafe Green Extract for these consumers.
In the competitive analysis section, I tried to identify the key competitors for Nescafe. I
selected Starbucks as a Global competitor for them and Moccona as a competitor in
New Zealand. I came to a conclusion that though these company are competing directly
with Nescafe, there is a huge difference in their market share. Nescafe totally dominates

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Nescafe

wherever they go. Also along with this, I tried to identify indirect competitors and gave a
brief about how they can affect Nescafes sale.
The next section was determining the targeting strategy for Nescafe using segmenting,
targeting and positioning. I got to know that in New Zealand, due to high duty and
indirect taxes, Nescafe could be purchased by middle and high income group for regular
consumption. The detailed outline is given in the section 4.
The last section was the marketing mix i.e. the 4 Ps of marketing. Nescafe offers
diversified range of products to all types of consumer right from young generation to old
ones. They also have specialised product called Nescafe Green extract for health
conscious customers.
Pricing is a bit high as compared to other local brands in the respective country. In India,
too its a bit on a higher side but Nescafe offers pure coffee whereas other local brand
or cheaper brands offers mixture of coffee and chicory.
Nescafe has a wide distribution channel with excellent sales team. Products are readily
available at almost all places with extensive footfalls.
Promotion is what, I think, they spend on. Their marketing and positioning of the product
is so good that it actually helps a person to think about having a coffee. Whenever
coffee comes in my mind, I relate it with Nescafe. They try to emphasize on building
connection with the consumers and also the taste with their advertising, which I will say,
its definitely working.
After complete analysis of Nescafes marketing, I would like to conclude that it is a big
brand not only due to its parent company Nestle but also because of consumers
preference and the way they have positioned their product in the minds of the
consumers. They dominate the market in all the countries they are present.

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Nescafe

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