ACKNOWLEDGEMENT

We are greatly thankful to our Mrs. Preeti Rajpal Singh, our

Marketing professor, who introduced us to the nuances of
marketing. We are also grateful for her constant guidance
and support during the making of the project.
Our efforts would not have culminated successfully
without the kind cooperation of Mr Sanjay Dhaneja, Mr raj
Sexsena at the Nestle India Head office at Gurgaon who
responded to all our queries and satisfied all our requests
regarding the company’s functioning.
The project provided a great learning
experience- not only about the company, Nestle but also about
how the Marketing theories are actually applied in the Industry.

INTRODUCTION

Henri Nestlé was born in Frankfurt in 1814, and moved to

Vevey in his twenties, a merchant and small-scale inventor.
He slowly gravitated towards foods and foodstuffs,
experimenting with various recipes for baby-food to help
mothers who were unable to breastfeed, and eventually
came up with a concoction he called farine lactée, based, as
he put it, on “wholesome Swiss milk and a cereal component
baked by a special process of my invention”. In 1867, he fed
this to a premature baby boy whose mother was dangerously
ill herself; the boy survived, and Nestlé’s reputation
skyrocketed. The following year he opened an office in
London to cope with the quantity of orders, and within five
years was exporting to South America and Australia. In 1874
he sold his company for a million francs. Nestlé bought out
Anglo-Swiss Condensed Milk in 1905, and chocolatemakers
Peter, Cailler and Kohler – pioneers in making milk chocolate
– in 1929; although it had always concentrated on milk alone,
it started to diversify. Benefiting from massive surpluses of
coffee beans in the 1930s, Nestlé launched the world’s first
instant coffee – Nescafé – in 1938. More takeovers followed,
of processed-food manufacturer Maggi in 1947, Crosse &
Blackwell in 1950, and frozen-food giant Findus in 1963,
broadening the range even further. By the mid-1960s, Nestlé
was Switzerland‘s biggest company, a huge multinational
incorporating over 200 factories around the world, with
global management still based in Vevey.

Today, having swallowed up cosmetic company L’Oréal in

1974 and British confectioner Rowntree’s in 1991, Nestlé
employs almost a quarter of a million people, and buys up
more than ten percent of the world’s entire crop of coffee
and cacao beans. However, its most controversial product is,
strangely, its original one: baby formula. With a marketing
policy in developing-world countries that has been deemed
by many to be aggressively profit driven at the expense of
consumer health, Nestlé has been riding a storm of anger in
recent years from children’s organizations and health
watchdogs in both the developed and the developing world.
Many of these groups continue to lobby for boycotts of Nestlé
products unless the company takes a role in helping educate
mothers in developing-world countries to breastfeed
whenever possible, and to buy formula only as a last resort.
The company maintains its ads don’t dissuade mothers from
breastfeeding, and are merely offering them a choice. The
dispute shows few signs of resolution and, frankly, little
chance of toppling such a mighty global industrial entity as
Nestlé.

BACKGROUND

Nestle was promoted by Nestle Alimentana, Switzerland, a

wholly owned subsidiary of Nestle Holdings Ltd., Nassau,
Bahama Islands

NESTLE-WORLDWIDE

Nestle S A Switzerland, is one of the leading companies in

the global foods industry. The principal activities of the
group encompass beverages (with Nescafe as the flagship
brand), milk products, processed foods, cooking aids, bakery
products, chocolates, confectioneries, pharmaceutical
products (ophthalmic, surgical instruments etc).
Nestle has a presence in 83 countries worldwide. It has a
total number of 509 factories out of which 220 are located in
Europe, 153 in America and 136 in Africa, Asia and Oceania
 Nestle headquarter , Switzerland

NESTLE INDIA
Nestle was incorporated as a limited company in 1959. In 1978,
the Company issued shares to the Indian public to reduce its
foreign holdings to 40%. Its name was changed from Foods
Specialties Ltd. to the current name in 1981.The parent held 51%
stake in the company as at 2003 end. It has FIPB approval to hike
stake by 10% and has been gradually acquiring shares from the
open market. Parent stake in the company as at 2003 end stood
at 53.8%. The parent plans to continue hiking stake through open
market purchases.
. Nestle is one of the oldest food MNC operating in India, with a
presence of over a century. For a long time, Nestle India's
operations were restricted to importing and trading of condensed
milk and infant food. Over the years, the Company expanded its
product range with new products in instant coffee, noodles,
sauces, pickles, culinary aids, chocolates and confectionery, dairy
products and mineral water

PLANT LOCATIONS
 Nestle started its manufacturing operations with Milkmaid in
1962 at Moga factory. Manufacturing of Nescafe started in 1964
at the same factory.
 Cherambadi in Tamil Nadu, for manufacture of infant foods,
coffee etc.
 Nanjangad (Karnataka) factory in 1989
 Samlakha (Haryana) factory in 1992.
 The Ponda (Goa) factory started operations in 1995.
 Bicholim in Goa started operations in 1997

MOGA Factory, Punjab

 NESTLÉ PHILOSOPHY
GOOD FOOD, GOOD LIFE is the philosophy that underpins
the activities of Nestlé. This is evident in the Nestlé product
range from the nourishment of our infant and milk products
to the pleasure and fun of our confectionery and ice cream
brands.

The Company remains committed to delivering good food

for good living.

Performance and Nutrition

As we move towards the future, Nestlé will create more

performance foods. These are foods that positively
contribute to our ability to perform physically and mentally.

To best understand the nutritional needs for superior

performance, Nestlé is working in collaboration with the
Australian Institute of Sport (AIS) nutrition department.

Today, Nestlé is one of the largest investors in food

technology, research and development, ensuring that all
our products are of the highest quality and offer great
taste, pleasure and convenience.

From our humble beginnings more than 130 years ago as a

Swiss milk processing company, Nestlé has grown into the
world's leading food and beverage producer with such
favourite brands as MAGGI, NESCAFÉ, MILO and KIT KAT.

Nestlé commitment to quality

Quality, the cornerstone of our success, is based on our

image and a reputation for high standards built up over
many years. Every product, service and consumer contact
 PRODUCT PROFILE
With brands like Kit Kat, Nescafé and Maggi, Nestlé has
created leading edge technology in food processing and the
resultant quality of these products makes them world
favourites today. Nestlé India has successfully transferred its
international brand image to the Indian market. The
company has given India it most modern and sophisticated
food processing plants, and a range of brands that holds a
large share of the premium foods market. Nestlé India is a
premier employer in the Indian market and is currently in a
major growth phase which has seen the introduction of Kit
Kat, Polo and Bonus, among their international brands and
several products based on Indian tastes, under the Milkmaid
and Maggi brands. The company employs some of the most
high profile professionals in all functional areas and has a
top order compensation structure to match.

NESTLE HAS AROUND 5 PRODUCT LINES

 Baby Foods
 Dairy Product
 Chocolate & Confectionery
 Beverages
 Culinary Products

BEVERAGES

Beverages like coffee, tea and health drinks contribute to

about 33% of Nestlé’s turnover. Beverage sales have
registered a 15% growth during 2003. While about 14% of
sales come from domestic market, exports contribute to
about 16% of sales.

Nestlé's Nescafe dominates the premium instant coffee

segment. Nestlé’s other coffee brand Sunrise has also been
relaunched under the Nescafe franchise to leverage on the
existing equity of the brand. Nestle has focused on
expanding the domestic market through price cuts and
product repositioning. However it has been losing share in
the domestic market, where it has a 30% market share. Milo,
a brown-malted beverage was launched in 1996. It has an
estimated volume share of about 3% in the malted food

drink segment.

Nestle is one of the largest coffee exporter in the country.

Key export market is Russia, besides Hungary, Poland and
Taiwan. growth. Nescafe sales to Russia accounts for 80%
(Rs2.5bn) of Nestle’s Rs3bn export turnover.

For the export market, there has been a decline in sales

value as there is a movement from retail packs to bulk
packs. This has resulted in price declines in the coffee export
segment

INFANT FOOD/ MILK PRODUCTS

Milk based products and baby food contributes to 24%of

Nestle's turnover. For ensuring regular procurement of good
quality milk, Nestle has developed a network around its
Moga factory for collection of fresh milk everyday from the
farmers. Nestle has a dominating market share in the baby
weaning foods with its Cerelac and Nestum brands. Infant
milk powder is sold under the Lactogen and Nestogen
brands. Brand loyalties are very high in categories such as
infant food and weaning cereals, enabling the company to
command a price premium.

Other milk products include dairy whiteners (21% market

share) sold under the EveryDay and Tea Mate brands,
sweetened condensed milk and ready to cook mixes for
traditional Indian sweets sold under the Milkmaid brand. The
Milkmaid umbrella brand is being extended to a tube format
as a sweet, flavoured spread for breads, rotis, biscuits and so
on. Being marketed as Milkmaid Squeezy, the product has
been soft-launched in select towns of Tamil Nadu and
Andhra Pradesh The company also markets ghee (6% market
share) under the EveryDay brand. Nestle has expanded its
milk product portfolio with the launch of new dairy products
such as UHT milk, Curd and Butter. Huge investments are
being made in building a diversified dairy business and the
distribution infrastructure for the same.

The company recorded very low sales growth of 3.7 per cent
last quarter as sales were by a non-recurring factor of
insufficient availability of milk solids, which restricted
production. Due to high prices of solid milk, the use of the
milk was allocated to the most profitable business in its
product. Also sales to canteen store departments (army
sales) and ghee sales were stopped during the period,
impacting sales growth. This shortage has now been
resolved and is unlikely to recur in 2Q, the company said.
The company has also been affected by a rise in raw
material prices. The milk and nutrition segment recorded a
stronger volume growth (+8.4 per cent) in spite of the
advertising ban on infant nutrition, which came into force in
January 2004. Raw material prices peaked during the year,
putting pressure on margins.

CHOCOLATES & CONFECTIONERY

Nestle forayed into chocolates & confectionery in 1990 and

has cornered a fourth share of the chocolate market in the
country. The category contributes 14% to Nestle ‘s turnover.
It has expanded its products range to all segments of the
market The Kitkat brand is the largest selling chocolate
brand in the world. Other brands include Milky Bar, Marbles,
Crunch, Nestle Rich Dark, Bar-One, Munch etc. The sugar
confectionery portfolio consists of Polo, Soothers, Frootos
and Milkybar Eclairs. All sugar confectionery products are
sold under the umbrella brand Allen's. Nestle also markets
some of its imported brands like Quality Street, Lions and
After Eight. Nestle has seen volume growth in chocolates
slow down after the worm infestation controversy around
Cadbury surfaced this year . Nestle India's current market
share within chocolates is 32 % .
30 per cent confectionery products are planned purchases,
37 per cent are semi-impulse purchases, and 33 per cent are
pure impulse buys.Nestle India has already indicated that it

intends to foray into the biscuits market soon.

Nestle India is the fastest growing company in chocolates in
India

CULINARY PRODUCTS

Ready to cook food/ cooking aides are sold under the

umbrella brand name Maggi. Culinary products account for
about 14% of Nestlé’s turnover. Maggi is the market leader
in the noodles (45% market share) and the ketchup (43%
market share) categories. Other products, sold under the
umbrella brand Maggie, are ready-to -cook gravy/sauces,
soups, seasonings, as well as traditional Indian foods such as
pickles and instant snack mixes. New taste variants are
continuously launched to add variety to the product
offerings.

Nestle has realized that unless it continuously innovates in

an endeavour to provide value-for-money to consumers, the
company's bottomline may be impacted in the long run.

Over a period of time, Nestle has restructured its brand

portfolio to phase out several products with slow offtake,
including Maggi pickles and jam, Milkmaid dessert mixes,
 while completely abandoning its packaged water business
through launch of smaller SKU’s, thus enabling affordability
to a wide section of the population.

PRICING STRATEGY
The pricing strategy depends upon various factors like-
 Seasonal variations
 Input cost
 Situational factors
 Govt. policies

THE PRICING STRATEGY IS NOT ONE PARTICULAR STRATEGY

BUT IT IS A COMBINATION OF DIFFERENT SUPPORTIVE
STRATEGIES THAT INFLUENCES THE PRICES OF PRODUCTS

SEASONAL VARIATIONS
Demand of chocolates is largely influenced by the different
seasons.
During Diwali, Raksha Bandhan, Christmas demand for
chocolates is more for presenting it as gift. During the same
period, the company introduced economy packs and Attractive
Gift packs.
Similarly during winters the demand for coffee is more, so it
can cash on this demand by increasing prices.
INPUT COST-
The prices of raw materials are very crucial for considering the
prices of finished goods. The availability of raw – materials is
very important for co. pricing strategy of finished goods.

For e.g :
These days the prices of raw materials like sugar , cocoa, oils
are increasing. Therefore the price of chocolate bar should be
up.
This affects the pricing strategy of company.

SITUATIONAL FACTORS
They are the most important ingredients of the pricing policy.
For e.g.-
Nestle has a dominant market share (around 42%) in ketchup’s
(maggi ketchup).
Recently Heinz reduced its price and increased its market share
to around 3%.
Nestle is adopting a wait and watch policy right now.

While milkmaid is priced at Rs 44 for a 400-gm tin, Gujarat co-

operative milk marketing federation's MithaiMate brand, is
priced at Rs 38 for the same tin size. It was GCMMF's pricing
strategy that led market leader Nestle to reduce the prices of
its Milkmaid brand.

GOVERNMENT POLICIES
The government policies are a critical component in deciding
the Pricing Strategies of the company. Imports of goods leads
to the expansion of product-range in the market. So if govt.
 policies regarding custom duties, & other expenses are liberal
then co. can better access products to the consumers.
For e.g.
Nestle India ltd. Imports various varieties of goods to expand
the range of goods like FOX’S
This is how various factors affect the pricing strategy of Nestle.

VOLUME v/s PROFIT

In NESTLE the various product lines have different motives

DEPENDING upon their market position and brand loyalty

SALES MOTIVE PROFIT MOTIVE

CHOCOLATES BABY FOOD

CONFECTIONARIES KETCHUP
MILK PRODUCTS NOODLES

REASONS REASONS
Tough Competition Strong Market
Large Number Share
Of Competitors High Brand
Loyalty

NESTLE prices have not increased for the last four years in
general, taking into account Nescafe, condensed milk, tomato
ketchup and noodles. They have more or less been stable.

However Nestle is an expensive company that tries to give

the best quality. For e.g. it was difficult for a consumer to
spend Rs 96 for a bottle of ketchup, that's why it introduced
the Rs 2 sachet.

But sometimes Nestle has to suffer because of its high price.

Nestlé’s Pure Life is priced at Rs 12 for 1 litre, which is Rs 2
more than the price of Parle’s Bisleri and Coke’s Kinley, the
market leaders in the bottled water drinking market.The
consumer trades functionality for quality. So they prefer to
pay Rs 10, rather than Rs 12 for Pure Life. As a result Nestle is
still struggling in its mineral water business.

Nestle is extending Maggi into new product categories, it has

decided to push the smaller pack of Maggi 2-minute noodles
aggressively, just like it had used for Nescafe coffee, by
launching Nescafe Redimix in Re 1 and Rs 10 packs
 PLACE
Place refers to the process through which goods are made
available to the final consumer. The process may include
various intermediaries in the form of wholesalers, retailers,
agents, etc.

NESTLE’S DISTRIBUTION CHANNEL

Nestle implements different strategies for different product

lines :

MOTIVE BASED DISTRIBUTION CHANNEL:

1. Product Lines having Sales motive: The objective here
is to increase the Sales volume across the market.
Therefore they have a large number of intermediaries,
even as they sacrifice margins. Chocolates,
Confectionary fall in this category

2. Product Lines having Profit motive: in contrast to sales

motive the objective is to increase profit margin.
Therefore the company tries to marginalize
intermediaries. The gap between producers and final
consumers is minimized.
e.g. in case of BABY FOODS,KETCHUP’S and NOODLES

GEOGRAPHICAL BASED DISTRIBUTION STRATEGY

 The distribution strategy may also depend on proximity

of the market to the manufacturer.
 For e.g. in case of northern India the entire
manufacturing comes from plant in MOGA (PUNJAB).
 Therefore in adjoining areas of Punjab the distribution
channel is very small i.e.
 MANUFACTURERSWHOLESALERSRETAILERSCONS
UMERS.
  Sometimes If retailers ARE OPERATING ON A LARGE
SCALE THEN EVEN WHOLESALERS are removed from
this chain
 Whereas in case of HARYANA, DELHI the distribution
channel is very long i.e.
 MANUFACTURERAGENTSWHOLESALERSRETAILER
SCONSUMERS
 So the farther-off the market the more are the number
of intermediaries required

DISTRIBUTION STRATEGY BASED ON NATURE OF

PRODUCTS

In Nestle, products can be classified as

 Basic – Less degree of Perishability – In these cases,

Nestle sources close to the producer. Examples of such
goods include Maggi noodles, Baby food, etc.
 Processed - High degree of Perishablity – Here nestle
sources closer to the markets where the products are to
be sold. Example includes chocolates, etc.

GENERAL DISTRIBUTION CHANNEL AT NESTLE

MANUFACTURING

WAREHOUSING DISTRIBUTOR AGENT

BUYER

SOURCE AGENT IN
DESTINATION

WHOLESALER IN
 DESTINATION

RETAILER

CONSUMER

NESTLÉ’S SUPPLY CHAIN POLICY

In India, as elsewhere, sourcing is mainly done locally for

milk, packaging and so on. The supply chain in Nestlé is
defined as “From the vendor to the customer.” True to this
definition, Nestlé goes right down to the vendors of all kinds
– the milk, the truckers, the cold chain, and the packaging.
Nestle want to monitor entire chain to ensure quality
throughout so that they can trace the path of materials from
manufacture to sales. That is what it meant by traceability in
Nestlé – where from and where to.
 PROMOTIONAL MIX
At Nestle, the entire promotional activities are first of all
divided into

A. NATIONAL B. LOCAL
PROMOTION PROMOTION

NATIONAL PROMOTION Products that have a nationwide

appeal like chocolates are promoted on national basis.

For example,

NESTLE India has signed Rani Mukherjee as brand

ambassador for its chocolate brand Nestle Munch. Nestle
Munch at Rs 5 is already the largest selling SKU in the
chocolate and wafers category with sales in metros as well
as smaller town. Rani Mukherjee as the brand ambassador
complements the popularity of the Munch brand. Like the
brand, her star appeal cuts across age, town and class .

Preity Zinta endorses Nestle Maggi

To create awareness for its new Rs 5 Maggi 2-minute
noodles pack, Nestle India has signed on Bollywood actress
Preity Zinta . In recent years, nestle has introduced Maggi
noodles in smaller packs at the Rs 5 price point to make it
more easily available and affordable. The objective of this
endorsment is to increase awareness about this Maggi
Chota pack.

LOCAL PROMOTION
Under local promotion local themes and languages are used
to promote the brand. The pro motional efforts are
undertaken in consultation with local distributors,wholesalers
and retailers.
For e.g during summer season there is less demand for
coffee.
Therefore instead of promoting it nationwide it is promoted
only in selected region.

Under national and local promotion there is further

subdivison

PRICE PROMOTION NON PRICE

PROMOTION

PRICE DISCOUNTS
 FOLLOWED in big cities like Delhi, Bombay

 Attractive packing is provided at reasonable cost

 E.g economy pack of chocolates

NON PRICE DISCOUNTS

 Mostly used in small cities like Rohtak,Hapur etc

 It includes coupons, samples, gifts

 Wholesalers and retailers work together in designing

these promotional strategies

 Nestle does not directly participate but keep an eagle

eye on all these promotional campaigns.

 Another form is by offering placement incentives to

superbazars or supermarkets for providing ‘shelf space’

RECENT DEVELOPMENTS
The company has started marketing its infant nutrition
products directly to doctors to counter restrictions on
advertising. Nestle is also planning to hire medical
representatives to undertake direct marketing of infant
nutrition products to paediatricians

The company has added 15 regional sales offices in its sales

and distribution structure from Januray 2004 to drive product
reach into the smaller towns and cities across the country
The Punjab Government is considering a joint prospect with
Nestle India to improve milk yielding potential of the state’s
cattle population by adopting the latest technological
packages. This is to secure the maximum value for Punjab
milk producers through induction of world-class private
sector marketing and processing expertise represented by
Nestle

This will help in in further developing and expanding Nestlé’s

milk processing capacity in the state.
 THE HURDLE RACE
Considering the level of penetration of distribution of
Products, Nestle India also tried to pinpoint the hurdles in
implementing the Distribution Plans.

Inadequate support of Effective Wholesalers is the

major obstacle. Notably, it is the non-availability of Support
rather than non-availability of good Wholesalers or Agent
buyers, that is the main impediment. It is imperative for
Distribution solution vendors to create a credible and
broadbase network to overcome this problem.

The other hindrance is the amount of money

involvd in the setting up of the Distribution system for
specific locations. This is especially true for small distributors
or wholesalers who are unable to drive Economies of Scale
on Distribution Investment.

The other hindrance is the unsuitable locations

for specific business needs. It is difficult to find the accurate
Target Market. So company can be wrong in finding the
markets or locations for its products.

Lack of understanding of Retailers among the

Wholesalers is the critical hurdle. It takes a lot of time to
create a friendly environment for full understanding between
the Retailers and Wholesalers.

The last Problem area mentioned is the lack of

awareness among the users. It affects the sales of products
and finally affects the distribution of products.

BIBLIOGRAPHY

INTERNET
o www.nestle.com
o www.economictimes.com
o www.indiainfoline.com
o www.google.com
o www.hindubusinessonline.com

MAGAZINES

o BusinessWorld
o Business Today