A

PROJECT REPORT
ON
NESTLE

FOR THE PARTIAL FULLFILLMENT OF BACHELOR OF BUISNESS

ADMINISTRATION

Dr. Bhimrao Ambedkar University

SUBMITTED BY:
MUDIT SHARMA
BBA (5TH SEM)

ACKNOWLEDGEMENT
I here with take the opportunity to express my profound sense of gratitude and reverence to all those
who have helped and encouraged me towards the successful completion of the project .It’s been a great
experience working on NESTLE .It give me complete insight about how an organization not only
survives in cutthroat completion but also maintain a killer instinct in the competitive world.

Last but not least my greatest gratitude to the almighty and my parents, without their support this dream
would have remained dream

1
 CERTIFICATE

This is to certify that Mudit study in our institute and was allotted the project
on “NESTLE” by Dr Bhimrao Ambedkar University has successfully
completed.

INDEX

CHAPTER 1
 OJECTIVE

2
  RESEARCH METHODOGY

CHAPTER 2
 INTRODUCTION
 COMPANY PROFILE

CHAPTER 3
 ANALYSIS OF DATA
 PRODUCTS

CHAPTER 4
 CONCLUSION
 LIMITATIONS

BIBLOGRAPHY
ANNEXURE

EXECUTIVE SUMMARY

The current millennium has unfolded new business rules most the significant of them being that
company has to constantly look into minds of the customer. Customer loyalty plays a significant role and
today securing that loyalty requires quality right price and of course last but not the least i.e. creating
awareness about their service. As a trainee, I was given knowledge about the way and style of their
working, their routine and their environment. It was a great experience in getting under such a reputed
company, which has in it the ability to retain customer.

3
 OBJECTIVE

 To identify the services and products offered by NESTLE.

 To study and analyze the customer perception and preference about NESTLE.
 Finally to draw the various conclusion and recommendation on the on the basis of study
conducted.

4
 RESEARCH METHODOLOGY

Managers need information in order to introduce products and services that create value in the mind of

the customer. But the perception of value is a subjective one, and what customer’s value this year may

be quite different from what they value next year. As such, the attributes that create value cannot simply

be deduced from common knowledge. Rather, data (information) must be collected and analyzed. The

goal of Marketing Research (analysis) is to provide the facts and direction that managers need to make

their more important marketing decisions.

The analysis involves the following steps:

 Define the problem.

 Determine research design.

 Identify data types and sources.

 Determine sample plan and size.

 Collect the data.

 Analyze and interpret the data.

 Prepare the research report.

For the purpose of study, data from the in-house survey conducted by the marketing department

(secondary data) has been used and also for coming out with the recommendation. It was also felt that

mere secondary data would not provide in-depth information for the analysis, hence it was decided that

interactive discussions with the managers and the head of every department would help in an in-depth

and true understanding of challenges faced by the department.

The methodology adopted was to gather relevant information from the appropriate department, correlate

the information obtained and to present the information in a logical and systematic manner.

5
 INTRODUCTION

Nestle India Ltd. is a part of the Nestle SA group which is one of the largest manufacturing companies in the world. Henri Nestle founded the company

(with its headquarters in Vevey, Switzerland) in 1867. Nestle has two major divisions - Le Societe des Produits which looks after the production and

marketing and Nestec Ltd. which provides the technical assistance to the group companies. Since its inception in 1867, the company has diversified it

product range from the infant weaning formula (which was its first product) to beverages, confectionery, ice creams and pet foods among others. In a span

of 130 years the company has ranked 26th among the world’s largest corporations and boasts of a turnover of $ 48932.5 million and employee strength of

221,144 people spread over 75 countries worldwide (Annexure A).

Nestle has long been viewed as one of the most multinational of the multinationals. This is because

today only 2% of its turnover comes from Switzerland. Out of the remaining 98%, Europe contributes

43.5%, North and South America contribute 36.5% and Africa and the Asia Pacific Regions contribute

18%.

6
 Company Profile

Although Nestle has been associated with India since the beginning of the century through the

importing and trading of infant food and condensed milk, manufacturing in India only began with the

setting up of the factory in Moga in 1962. The first product to be manufactured was Milkmaid. In the

last 35 years the company has shown rapid progress and has increased its product range to 80 products

as of October 1997. Nestle India Ltd. now ranks 22nd amongst India’s most valuable companies

(Annexure B) . Its gross revenue has increased from Rs 1001.1 crores to Rs. 1213.8 crores in 1996. This

remarkable growth has been achieved through -

 Rapidly creating greater manufacturing capacity, both at factories as well as with co-packers.

 Taking measures to ensure availability and improved quality of key raw materials - fresh milk in

particular.

 Strengthening of the sales and distribution network (particularly in smaller towns)

 Ambitious and cohesive manpower training and development programs for the personnel of the

company across all disciplines.

The company’s exports also resulted in a very successful year in this area as exports grew by

27% to Rs. 250.8 crores in 2003. The main contributors to this increase were the export of tea and

coffee to USA, Japan, Russia, Hungary and Taiwan.

Nestle India Ltd. wants to further increase its operations in India and has started construction

of its sixth Factory at Bicholim, Goa for the manufacture of culinary products (a key thrust area) for this

purpose.

7
 The Spirit of Nestle

“Organisational excellence is never achieved through a one time effort; It is always a

process of continuous improvement across a number of areas of operation.”

A key factor for Nestle’s success has been its quest for continuous improvement through

ushering in greater productivity and more efficiency in everyday operations. Despite the infrastructure

impediments in India, Nestle has set itself high standards of business performance. This is reflected

through the essence of the company - its mission statement.

Nestle’s mission

“To be in every way the leading company in the Indian food industry and a good corporate

citizen by providing our consumers with superior quality products, our shareholders with rapid growth

& fair returns and our employees with a challenging and satisfying work environment.”

To translate this spirit into a planned and measurable process, Nestle has set up key objectives

across all divisions.

Key Objectives

Production

 To optimise production costs while enhancing product quality so as to make Nestle products even

more competitive in the market place.

Sales and marketing

 To reach a sales turnover of 3000 crores by the year 2003

8
 To double the turnover every three years

People

 To help employees to retain a long term perspective and integrate them fully with the company’s

business goals

 To retain a broad perspective while addressing individual needs

 To view growth as a continuous process

 To concentrate on attitudinal changes by developing leadership skills, an appreciation of

interdependence between units and the enhancement of a sense of belonging to Nestle.

Finance

 To maintain profit levels above the average for the food industry in India.

The Business Excellence and Common Application (BECA) initiative essentially translates the spirit of

the Journey towards excellence into an organised, systematic and measurable approach. The aim is to

aid the achievements of the company’s key objectives of rapid growth by ensuring that all operations

incorporate the spirit of meaningful planning, effective cost control and efficient implementation. BECA

is about “ planned improvement in everything we do ”

Factories

Nestle has 6 factories in India. These are

1. Moga (punjab) : The Nestle factory in Moga has the pride of being the first and most comprehensive

factory of Nestle India. Set up in 1962, it represents the core competence of Nestle India in the

9
manufacture of milk products (Everyday, Milkmaid), beverages, culinary products (Maggi sauces,

noodles, soups etc.), weaning cereals (Cerelac) and infant milk formulae.

2. Choladi ( Tamil Nadu): The factory in Choladi started production in 1967. Situated about 60 miles

from Calicut, the factory today has 81 employees and produces 1.5% of the total turnover of Nestle

India. It is a 100 percent export oriented unit which processes freshly picked tea leaves into soluble

instant tea.

3. Nanjagud (Karnataka): Production in this factory began in 1989 with the manufacture of Nestle

instant coffee and Sunrise. Today in addition to instant coffee the factory also manufactures health

beverages. The plant to manufacture MILO was also commissioned at this factory. This factory employs

145 people and is cited as a model in terms of environment protection for its installations to purify

waste water as well as for its provisions for recycling coffee wastes.

4.Samalakha (Haryana): This factory was set up in 1993. Located 70 kilometres from Delhi , it

manufactures weaning cereals , culinary products ,health beverages and milk products. Recently the

expansion of manufacturing capacity for Milkmaid Dessert Mixes was undertaken at this factory as this

new and unique product category is viewed to have great potential in the future.

5.Ponda (Goa): This Kit-Kat factory was set up in Goa in 1995 at a cost of Rs. 50 crores. It represented

a major step by Nestle towards becoming the Number 1 Chocolates and Confectionery Company in

India.

6.Bicholim (Goa)

The construction work at this new factory is progressing with speed. This factory will soon

commence the manufacture of culinary products, which is a key thrust area for the company and will

include latest technological improvements relating to this category of products.

As a part of Nestles efforts towards continuous improvement and excellence in Manufacturing

operation, a Moga Improvement team (MIT) was put in place at the Moga factory. The team comprised

of international experts from Nestle Technical Services (NESTEC) and the local staff. In 1996, it

10
embarked on a program with the single minded objective of optimizing production costs while

enhancing the product quality so as to make Nestle products even more competitive in the market place.

Drawing upon Nestle’s global experience and manufacturing expertise in 75 countries the team

identified the following areas for detailed study -

 Process improvement to ensure the optimal usage of resources

 Improvement of operational efficiency

 Cost optimization

A series of small but critically important initiatives ranging from redesigning laboratories to

palletisation of raw materials and packaging material utilization, manufacturing and filling loses and

labour man hours resulting in substantial savings and improved productivity and machine utilization. In

addition, several non tangible benefits in the form of systems for sustainable improvement in areas like

factory maintenance planning tools , down time recording systems and performance measurement tools

were also realized .

This project was highly successful and the company is now implementing its key learning’s of

MIT in its other factories.

In a country as vast and diverse as India, supply chain management is absolutely critical to

rapid growth. Through BECA, Nestle has concentrated heavily on streamlining and improving their

supply chain management in order to make it more dependable, more cost effective and most

importantly, more responsive to market needs.

For better supply chain integration the planning of key operations - purchase, production,

distribution and sales are synchronised to ensure that everybody works towards a common business

plan. Monthly objectives are broken down into weekly and (wherever necessary) into daily plans and

monitored regularly to ensure smooth implementation and quick corrective action when needed . Major

benefits accrued thus far include reduction in working capital through lower inventories of finished

goods and materials, better stock availability and reduction in obsolescence of materials.

11
 In addition to traditional performance indicators, quantifiable performance measures have

been identified and implemented in all functional areas such as sales planning, production output,

quality assurance, material ordering transportation and warehouse management. These measures are

monitored regularly to gauge the extent of improvement and identify root problems for taking corrective

actions.

Teams have been put in place at all factories and sales offices to ensure the implementation is

continuous and self-sustaining. Areas of improvement are regularly identified and time bound action

plans established. For this purpose, standard tools such a Total Quality Management(TQM), Kaizen, 5S

and Small Group improvement activity (SGIA) are being extensively used.

The efficacy of this hierarchical structure is seen in Nestle’s performance over past few years

of various products.

By 1989 the company had achieved a sales figure of approximately Rs. 258 crores. 1989 was

the year of launches. Seven new product lines were launched in this year. This was also the year in

which the Nanjagud factory was set up. By the year 1992, this sales figure was touching Rs 500 crores.

In the 1995 the pace of launches quickened and since the construction of the factory at Samalakha, 20

new products have been introduced. By 2003, Nestle had about 76 different products in its portfolio

with various new products in the pipeline as well. The sales figure now touched Rs. 1214 crores. Thus

sales grew by 450% over a period of one and a half decades.

Marketing Strategy

Nestle has adopted a four pronged growth strategy: -

1. Gunning the market with new products and brand extensions.

2. Expansion of the distribution network to small towns for extensive availability.

12
3. Reduce prices and introduce smaller packages for products to make them more affordable (a tool to

enter price sensitive markets).

4. Focus on employ training and develop a positive attitude through enhanced manpower

development.

5. By year 2003 it expects chocolate & confectionery to account for one in every third rupee in sale.

In the late 1996 fear of breading complacency by not having a continuous improvement, gave

birth to an international sales & marketing improvement teams (SMIT).

SMIT maps the latest in helping towards the target of year. 2003. The SMIT exercise is a

major global initiative of Nestle to enhance sales & marketing productivity. Linked with the already

existing BECA project, which in turn emphasises on excellence by improving the distribution set up ,

this gave rise to the following growth objectives for the year 2003

 Ensure direct coverage of all urban towns in India.

 Expand distribution to reach 1 million retail outlets on a regular basis.

 Work in partnership with the distributor for the achievement of these objectives.

 Provide sustainable solution to optimize our secondary sales from distributor to retailer.

13
NEW PRODUCT LAUNCHES

To put all the product launches into perspective, Nestle now has 80 products including various

flavours and variants this awesome list of 80 products for most companies is an overfull palate. Nestle

India Ltd. Still have a variety of new products in the pipelines. It believes in slowly colonizing as much

territory as fast as it can, adapting to native conditions and then work at “holding off the advancing

herds”. Nestle products can be broadly classified into 5 main ranges -

 Milk Products

 Chocolate and Confectionery

 Beverages

 Culinary

 Food service

Milk Products

This category which comprises of condensed milk, baby milk foods , milk powders , acidified

infant food , and other milk products, showed a slump in 1996 as sale of milk products fell from Rs

31.4 crores in 1995 to Rs 31.2 crores in the said year. Consumer offtake remained depressed throughout

this year as a consequence of high price increases necessitated by substantial increases(+50%) in the

cost of basic raw materials( fresh milk ) , over the past two years .

14
 However Nestle retained its leadership in the infant food market with Cerelac, Lactogen and

Nestum and even introduced a new flavour of Cerelac - Cerelac Rice in 1996.

Chocolates and Confectionery

Nestle pursues the objective of accounting for one in every three rupees in its sales figures

through chocolates and confectionery. This has thus been one of the thrust areas in Nestle. Nestle this

year widened its range of flavours in POLO, backed by its tremendous success in the Indian Market by

adding POLO Spearmint to its Portfolio. This new flavour has also received an encouraging

response in the market according to market analysts.

Milkybar also retained its position as the number one white chocolate brand in India, however

it did not record a significant increase in sales as a majority of Indian tastes still do not accept this

flavour.

This year however, was a year of tremendous success for Kit Kat .This internationally

renowned brand gained a large increase in the Market share in the past year and Nestle officials are

hopeful that this will further increase in the coming years. However this Brand along with it success has

brought with it its share of Controversy as the Union of India has launched a Litigation against the Kit

Kat family pack.

In 1997 Nestle added to its range of confectionery by introducing SPLASH, “A soft hearted,

hard boiled sweet ” this is being promoted as a sweet unique to India and is positioned to a target

audience in the age group of 4 to 12 years and “anyone with a soft heart” is a potential customer.

Priced at Rs. 1 for a 7.5 gram candy splash has been introduced selectively in the South and has been

speculated to repeat Polo’s performance. Nestle’s officials claim that this candy has the potential to grab

a quarter of the 700 crores confectionery market.

The most recent of Nestle affairs with the confectionery market has been the introduction of

Mithai Magic which is “a little Mithai , a little magic “ .This new product was launched in September

15
1997 ,in time for the Diwali purchases of sweets . This brand has been positioned somewhere between

chocolates and traditional sweets and the company is employing a push strategy to promote this brand.

16
Beverages

This year has been very successful in the beverages market for Nestle .The sales of beverages

has increased from Rs 323.3 crores in 2002 to Rs 398.8 crores in 2003.

Nestles Flagship Nescafe which was pegged at Rupees 1040 per Kilogram before the launch

of Tata Cafe, met with stiff competition from Tata Cafe priced at Rupees 550 per Kg once it was

introduced . Tata cafe claimed to have garnered a market share of 17% by December 1996. This forced

Nestle to cut prices of Nescafe to Rupees 840 per Kg. However Nescafe still retains 83% market share

in the Rs 177 Crores market for pure instant coffee.

Nestle Sunrise also showed an increase in sales and captured 20 % of the Rs 253 crores

market in Mixed instant coffee.

This year Nestle also launched MILO, an internationally renowned chocolate energy drink, and the

response for this has been encouraging.

Nestle has also introduced Tasters Choice tea bag pitched against Taj mahal tea bags.

17
Culinary Products

The market in culinary products had witnessed a high growth consequent to aggressive pricing

decisions on existing products and the introduction of a variety of new products to match the needs of

the Indian Housewife. Encouraged by this success Nestle launched Maggi Macoroni Snack in three

flavors - Chicken , Masala and Tomato. Nestle officials’ say that this would consolidate Maggis position

as the number 1 culinary brand in India. The product focuses on convenience and innovation as its

Unique Selling Proposition. This snack has opened a new segment for the maggi brands. The brand is

positioned as youthful and is represented by the twists and curls of the macaroni snack. It is speculated

to be introduced in a phase manner nation-wide to be placed in the 7.5 lakh outlets that Maggi noodles

sells in .

In the spirit of catering to Indian tastes Maggi introduced maggi pickles in five variants

benchmarked to give the “ghar ka swad”. Maggi Dosa Mix was also introduced to offer superior quality

and added convenience. Apart from this Milkmaid Kalakand Mix, a traditional north Indian sweet of

premium quality was added to the milkmaid dessert mixes. Maggi soup also launched three new

variants. Maggi Rassam in particular was noticeable as yet another attempt to make traditional Indian

cooking a little bit easier.

18
Food Service

Food service items basically deal with the out of home segments, which would include

vending machines. Nestle’s food service business is poised for rapid expansion to meet the growing

need for such a reliable, time saving and cost effective service in this modern age .

Nestle wants to sell 500 million cups of tea and coffee through its vending machines in the

year 2003. It currently has 3500 vending machines at assorted locations (both public and private). In

1995 Nestle food service did well to vend 40 million cups of Nescafe and Tasters Choice tea. Its 2003

sales were placed at 59 million cups of Nescafe and 36 million cups of tea, this figure was however way

below the expected sales for the year.

Distribution strategy

It is an indisputable fact that fundamentally all consumers marketing must first assure

availability of the product to the consumer. In India, the urban population alone is of a whooping 250

million consumers -an unbelievable potential for any FMCG . The potential being spread across more

than 4000 towns have to be very effectively and efficiently tapped. Nestle till now was retailing in a

limited number of towns with only 200 towns accounting for 70 % of their business. For Nestle to be a

leader in the food industry, expanding the distribution network for more retail outlets was a must.

To meet this challenge, Nestle is working towards an objective of increasing the retail base to

1,000,000 outlets by the year 2003. This network is feasible as Nestle has a triangular distribution

structure thus the span of control is still retained. The Distribution Network is explained in figure 2.

In order to achieve these distribution objectives Nestle has formulated an international sales

and marketing improvement team (SMIT). SMIT focuses on a single objective -provide sustainable

solutions to optimize the distributor and retailer sales through a step by step approach starting with

analysis of market followed by identification of the probable retail outlets and finally selection of the

same .The team also focuses on proper implementation of resources and timely follow ups for effective

solutions.

19
Advertising Strategy

Nestle, a cash rich company has plenty of marketing prowess. This can be credited to a strong

and sound advertising strategy.

Nestle in the year 2002 had an advertisement spending of Rs 43.3 crores (net) . Tracing

Nestles advertising responses the ad campaign by HTA of ‘Hot and Sweet’ was a runway success this

ad was actually meant to fend off a challenge from H.J Heinz. The Maggi ranges of sauces were

introduced in 1985 but sales didn’t catch up until 1990 but till 2003 it got considerable market share.

At this point the popular and memorable campaign of Javed Jaffrey and Pankaj Kapoor was launched by

Producer Pralad Kakkar . This commercial was an instant success. The volume of sales kept rising from

an initial growth of 13% to 20% in the next year. Today the sales figure for Maggi Sauces is growing at

a steady 6% per year.

Another noteworthy campaign was that of POLO (the mint with a hole), devised by Mudra

advertising agency. This campaign was awarded 11 industry ad awards.

In 2002 the advertisement budget has been approximately Rs 56 crores where again

innovation was the main focus. The new nation-wide product launch of Maggi Macaroni Snack and

Mithai Magic have been designed by Mudra . The Macaroni ad with its use of “English “ and a catchy

beat (which is the latest trend amongst the Indian Advertisers) appeals well to the target audience and

the Mithai Magic commercial does keep the secret of the contents in the box , intact.

20
“Training is an integral and indispensable part of Nestle . I regard the importance of training a highly

as research and development .It is a major investment in the Future of the company and imperative

because it is an investment in people ”

- Mr. Helmut Maucher

Chairman and CEO Nestle S A Group

Nestle India Ltd. has an employee base of 3040 people and aims to be in the top quartile of

the FMCG companies .For this purpose it follows a very stern and rigorous recruitment policy .

Recruitment Policy

Recruitment of fresh management trainees and sales officers is done every April-May. These

graduates are generally selected from the best institutes in the country through a series of interviews.

They are then put through a probation period of 12-18 months. Although Nestle does not offer some of

the highest pay packets in the industry, it is considered a growth oriented company.

Training and Development

Continuous development of skills and attitudes of employees is critical to the achievement of

excellence. At Nestle therefore training and development of human resources is viewed as a long term

investment .

“ If you are planning for one year , Plant wheat;

If you are planning for ten years, plant a tree;

If you are planning for life, train people.”

- Old Chinese proverb

This proverb goes with the organizations most enduring beliefs worldwide -

21
 That long term planning is the key to Nestles global success

 That Nestle’s most valuable assets are its people

 Nestle’s policy is to rely on a more decentralized form of management by building in the habit to “

Think Nestle”.

At Nestle India training and development is an integral part of the business plan and strategy

in line with the objectives for the year 2003 and aims to -

 Help employees to retain long term perspective and integrate them fully with the company’s

business goals

 View the growth of both the personnel and the company as a continuous process .

 Concentrate on attitudinal changes by developing leadership skills, an appreciation of

interdependence between units and the enhancement of a sense of belonging to Nestle .

In 2003 Nestle India benefited greatly from the training program offered at the Rive Reine

International Training Center at Vevey, Switzerland. This training program helped facilitate the transfer

of common Knowledge (technical, marketing, and finance) across the Nestle Group and ensure

interdisciplinary approach to learning and uniform progress with a tailor-made approach for all.

Company Training needs -

 analysis of training needs of Managers

 self development programs for staff at HO

22
 programs for company orientation and information sharing

 programs aimed at computer training and computerization

 Establishment of contact with leading management institutes with a view to use the same for

meeting local training requirements

Nestle’s Corporate Culture

As we had discussed before, Nestle is one of the most multinational of multinationals and is

spread over 75 countries worldwide. This implies that it has employees from diverse cultural

backgrounds. Nestle respects the distinctive culture, mentality and traditions of every employee in every

country. What Nestle aims at is to incorporate its own culture into its employees without stifling the

individual employee’s culture and identity. When we went to Nestle we could feel the existence of a

distinctive work culture amongst the management - the staff seemed highly motivated & cheerful and

everybody had pin up boards in front of their tables with reminders , motivational messages and even

time logs (the Nestle people seemed as if they availed of the benefits of time management) .

Nestle has a diverse product range and so it also has diversified risks Thus Management on Apart

Information systems plays a vital role in Nestle to provide information to the Sales and from this,

Marketing as well a the finance department .The Electronic Data Processing Department Nestle has

looks after Management Information Systems . a vast

distribution network. In order to support the BECA process, an integrated computer system has been put

in place across the company to link all functional areas and locations. This common linked system will

improve information availability, aid quick decision-making and improve supply chain integration.

23
Nestle India Ltd., is a part of the Nestle SA group, which is one of the largest

manufacturing companies in the world. The company (with its headquarters in Vevey,

Switzerland) was founded by Henri Nestle in 1867. Nestle has two major divisions- Le

Societe des Produits which looks after the production and marketing and Nesstec Ltd.

which provides the technical assistance to the group companies. Since its inception in

1867, the company has diversified it product range from the infant weaning formula

(which was its first product) to beverages, confectionery, ice creams and pet foods among

others. In a span of 130 years the company has ranked 26 th among the world's largest

corporations and boasts of a turnover of $48932.5 million and an employee strength of

221,144 people spread over 75 countries worldwide (Annexure A).

Nestle has long been viewed as one of the most multinational of the multinationals. This

is because today only 2% of its turnover comes from Switzerland. Out of the remaining

98%, Europe contributes 43.5%, North and South America contribute 36.5% and 18% is

contributed by Africa and Asia Pacific Regions.

OVERVIEW

Although Nestle has been associated with India since the beginning of the century

through the importing and trading of infant food and condensed milk, manufacturing in

India only began with the setting up of the factory in Moga in 1962. The first product to

be manufactured was Milkmaid. In the last 35 years the company has shown rapid

progress and has increased its product range to 80 products as of October 1997. Nestle

India Ltd. now rank 22 n d amongst India's most valuable companies (Annexure B). Its

gross revenue has increased from Rs. 1001.1 crores to Rs. 1213.8 crores in 1996. This

remarkable growth has been achieved through:

24
 Rapidly creating greater manufacturing capacity, both at factories as well as with

copackers.

 Taking measures to ensure availability and improved quality of key raw materials-

fresh milk in particular.

 Strengthening of the sales and distribution network (particularly in smaller towns).

 Ambitious and cohesive manpower training and development programs for the

personnel of the company across all disciplines.

The company's exports also resulted in a very successful year in this area as exports

grew by 27% to Rs. 250.8 crores in 1996. The main contributors to this increase were the

export of tea and coffee to USA, Japan, Russia, Hungary and Taiwan.

Nestle India Ltd. wants to further increase its operations in India and has started

construction of its sixth Factory at Bicholim, Goa for the manufacture of culinary

products (a key thrust area) for this purpose.

25
The spirit of Nestle

"Organizational excellence is never achieved through a one time efforts; It is always a

process of continuous improvement across a number of areas of operation."

A key factor for Nestle's success has been its quest for continuous improvement through

ushering in greater productivity and more efficiency in everyday operations Despite the

infrastructure impediments in India, Nestle has set itself high standards of business

performance. This is reflected through the essence of the company-its mission statement.

Nestle's mission

"To be in every way the leading company in the Indian food industry and a good corporate

citizen by providing our consumers with superior quality products, our shareholders with

rapid growth and fair returns and our employees with a challenging and satisfying work

environment."

To translate this spirit into a planned and measurable process, Nestle has set up key

objectives across all divisions.

26
 KEY OBJECTIVES

Production

 To optimize production costs while enhancing product quality so as to make Nestle

products even more competitive in the market place.

Sales and Marketing

 To reach a sales turnover of 3000 crores by the year 2000.

 To double the turnover every years.

People

 To help employees to retain a long-term perspective and integrate them fully with

the company's business goals.

27
 To retain a broad perspective while addressing individual needs

 To view growth as a continuous process.

 To concentrate on attitudinal changes by developing leadership skills, an

appreciation of interdependence between units and the enhancement of a sense of

belonging to Nestle.

Finance

 To maintain profit levels above the average for the food industry in India.

Key Fact

This section offers a quick and simple overview of NESTLE, making it an excellent place

to begin learning more about the World’s Largest Food Company. Here introduction is

given with some key facts and figures, including 2001 Financial Information, Company

Profile, Historical Development and Main Brand .

28
SALES ANALYSIS

By Geographic Area

In Million of CHF 2006 (%)

Europe 25/706 36.7

North and South America 22/262 31.8

Africa, Asia and Oceania 13/493 19.3

Other Activities 8/537 12.2

69/998

By Main Product Group

Other
Activities
12.2%
Africa, Asia Europe
and Oceania 36.7%
19.3%

North and
South
Am erica
31.8%

In Million of CHF 2001(%)

Beverages 19/142 27.4

Milk Products, Nutrition and Ice Cream 334 27.6

29
Prepared Dishes and Cooking Aids 17/660 25.2

Chocolate and Confectionery 10/663 15.2

Pharmaceuticals 3/1999 4.6

Chocolate Pharm aceutic

and als
Cofectionary 4.6% Beverages
15.2% 27.4%

Prepared
Dishes and
Cooking Aids Milk
25.2% Products,
Nutrition and
Ice Cream
27.6%

30
Breakdown of 2006 Trading Expenses (in %)

Percentage

Raw Materials 26.2

Packaging 8.8

Salaries and Welfare Expenses 16.6

Depreciation 4.1

Other Trading Expenses 34.5

Total Trading Expenses 90.2

Trading Profit 9.8

Go to Financial Guide for additional facts and figures.

Company Profile

Raw Materials
13.8%
Trading Profit
5.2% Packaging
4.6%

Salaries and
Welfare
Expenses
8.7%

Depreciation
2.2%

Total Trading
Other Trading
Expenses
Expenses
47.4%
18.1%

 Chairman of the Board: Helmut O. Maucher

 Chief Executive Officer: Peter Brabeck-Letmathe

31
 World’s leading food company

 Switzerland’s largest industrial company

 Worldwide operations

 495 factories

 Group’s total work force: 225, 808 people.

Historical Development

1866 Company’s foundation

1905 Merger between Nestle and Anglo-Swiss Condensed Milk Company

1929 Merger with Peter-Cailler-Kohler Chocolates Suisses. S. A.

1947 Merger with Alimentana S.A. (Maggi)

1971 Merger with Ursina-Franck (Switzerland)

1985 Acquisition of Carnation (USA)

1990 Acquisition of Buitoni-Perugina (Italy)

1992 Acquisition of Rowntree (GB)

1994 Acquisition of Perrier (France)

1998 Acquisition of Spillers (GB)

2002 Divestiture of Findus brand and parts of Nestlé's frozen food business in Europe.

Divestiture of Hills Bros, MJB and Chase & Sanborn roast and ground coffee

brands (USA).

2006 Acquisition of PowerBar.

32
 Factories

Nestle has 6 factories in India. These are

1. Moga (punjab)

The Nestle factory in Moga has the pride of being the first and most comprehensive

factory of Nestle India. Set up in 1962, it represents the core competence of Nestle India

in the manufacture of milk products (Everyday, Milkmaid), beverages, culinary products

(Maggi sauces, noodles, soups etc.), weaning cereals (Cerelac) and infant milk formulae.

2. Choladi ( Tamil Nadu)

The factory in Choladi started production in 1967. Situated about 60 miles from Calicut,

the factory today has 81 employees and produces 1.5% of the total turnover of Nestle

India. It is a 100 percent export oriented unit which processes freshly picked tea leaves

into soluble instant tea.

3. Nanjagud (Karnataka)

Production in this factory began in 1989 with the manufacture of Nestle instant coffee

and Sunrise. Today in addition to instant coffee the factory also manufactures health

beverages. The plant to manufacture MILO was also commissioned at this factory. This

factory employs 145 people and is cited as a model in terms of environment protection for

its installations to purify waste water as well as for its provisions for recycling coffee

wastes.

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4.Samalakha (Haryana)

This factory was set up in 1993. Located 70 kilometres from Delhi , it manufactures

weaning cereals , culinary products ,health beverages and milk products. Recently the

expansion of manufacturing capacity for Milkmaid Dessert Mixes was undertaken at this

factory as this new and unique product category is viewed to have great potential in the

future.

5.Ponda (Goa)

This Kit-Kat factory was set up in Goa in 1995 at a cost of Rs. 50 crores. It represented a

major step by Nestle towards becoming the Number 1 Chocolates and Confectionery

Company in India.

6.Bicholim (Goa )

The construction work at this new factory is progressing with speed. This factory will

soon commence the manufacture of culinary products, which is a key thrust area for the

company and will include latest technological improvements relating to this category of

products.

As a part of Nestles efforts towards continuous improvement and excellence in

Manufacturing operation, a Moga Improvement team (MIT) was put in place at the Moga

factory. The team comprised of international experts from Nestle Technical Services

(NESTEC) and the local staff. In 1996, it embarked on a program with the single minded

objective of optimizing production costs while enhancing the product quality so as to

make Nestle products even more competitive in the market place. Drawing upon Nestle’s

global experience and manufacturing expertise in 75 countries the team identified the

following areas for detailed study -

34
 Process improvement to ensure the optimal usage of resources

 Improvement of operational efficiency

 Cost optimization

A series of small but critically important initiatives ranging from redesigning laboratories

to palletisation of raw materials and packaging material utilization, manufacturing and

filling loses and labour man hours resulting in substantial savings and improved

productivity and machine utilization. In addition, several non tangible benefits in the

form of systems for sustainable improvement in areas like factory maintenance planning

tools , down time recording systems and performance measurement tools were also

realized .

This project was highly successful and the company is now implementing its key

learning’s of MIT in its other factories.

In a country as vast and diverse as India, supply chain management is absolutely critical

to rapid growth. Through BECA, Nestle has concentrated heavily on streamlining and

improving their supply chain management in order to make it more dependable, more cost

effective and most importantly, more responsive to market needs.

For better supply chain integration the planning of key operations - purchase, production,

distribution and sales are synchronised to ensure that everybody works towards a common

business plan. Monthly objectives are broken down into weekly and (wherever necessary)

into daily plans and monitored regularly to ensure smooth implementation and quick

corrective action when needed . Major benefits accrued thus far include reduction in

working capital through lower inventories of finished goods and materials, better stock

availability and reduction in obsolescence of materials.

35
In addition to traditional performance indicators, quantifiable performance measures have

been identified and implemented in all functional areas such as sales planning,

production output, quality assurance, material ordering transportation and warehouse

management. These measures are monitored regularly to gauge the extent of improvement

and identify root problems for taking corrective actions.

Teams have been put in place at all factories and sales offices to ensure the

implementation is continuous and self-sustaining. Areas of improvement are regularly

identified and timebound action plans established. For this purpose, standard tools such a

Total Quality Management(TQM), Kaizen, 5S and Small Group improvement activity

(SGIA) are being extensively used.

The efficacy of this hierarchical structure is seen in Nestle’s performance over past few

years of various products.

By 1989 the company had achieved a sales figure of approximately Rs. 258 crores. 1989

was the year of launches. Seven new product lines were launched in this year. This was

also the year in which the Nanjagud factory was set up. By the year 1992, this sales

figure was touching Rs 500 crores. In the 1990’s the pace of launches quickened and

since the construction of the factory at Samalakha, 20 new products have been

introduced. By 1996, Nestle had about 76 different products in its portfolio with various

new products in the pipeline as well. The sales figure now touched Rs. 1214 crores. Thus

sales grew by 450% over a period of one and a half decades.

36
TODAY NESTLE IS PRESENT IN DIFFERENT MARKETS WITH THE

FOLLOWING MAIN BRANDS

Soluble coffee

Nescafe, Taster's Choice, Ricore, Ricoffy.

Roast and Ground Coffee

Hills Bros., MJB, Bonka, Zoegas, Loumidis

Mineral Water

Perrier, Contrex, Vittel, Valvert, Quezac, Arrowhead, Poland Spring, Buxton, Vera, Blaue

Quellen, Calistoga, Santa Maria, San Pellegrino.

Other beverages

Nesquik, Nescau, Nestea, Milo, Carnation, Libby's Caro.

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Dairy Product

Nido, Nespray, Carnation, Milkmaid/ La Lechera, Gloria, Neslac, Barenmarke.

Breakfast Cereals

Nestle

Coffee Creamers

Coffee-mate

Infant Foods and Dietetic Products

Nestle, Nan, Lactogen, Cerelac, Nestum, Guigoz

Culinary Products (Bouillons, soups, seasonings, prepared dishes, canned food,

pasta, sauces)

Maggi, Crosse and Blackwell, Libby's, Thomy, Builtoni, Contadina

Frozen Foods

Findus, Stouffer's Buitoni, Maggi

Ice Cream

Nestle, Frisco, Dairy Farm, Magnolia, Motta, Camy , ect.

38
Refrigerated Products (yogurts, desserts, pasta sauces)

Nestle, Locatelli, Vismara, Buitoni, Contadina

Chocolate and Confectionery

Nestle, Crunch, Cailler, Frigor, Chokito, Sarotti, Galak/Milkybar, Yes, Kit Kat, Quality

Street, Smarties, Baci, After Eight, Baby Ruth, Butterfinger, Lion, Nuts, Rolo, Aero,

Polo, etc.

39
Food Services and Professional Products

Chef, Davigel, Santa Rica

Pet Care

Friskies, Fancy Feast, Aplo, Mighty Dog, Gourmet.

Specialized products for the food industry

Food Ingredients Specialties (FIS)

Ophthalmological products

Alcon

Cosmetics

L'Oreal

40
 NEW PRODUCT LAUNCHES

To put all the product launches into perspective, Nestle now has 80 products including

various flavors and variants this awesome list of 80 products for most companies is an

overfull palate. Nestle India Ltd. still has a variety of new products in the pipelines. It

believes in slowly colonizing as much territory as fast as it can, adapting to native

conditions and then work at 'Holding off the advancing herds'. Nestle products can be

broadly classified into 5 main ranges:

 Milk Product

 Chocolate and Confectionery

 Beverages

 Culinary

 Food Service.

41
Milk Products

This category which comprises of condensed milk, baby milk foods, milk powders,

acidified infant food, and other milk products, showed a slump in 1996 as sales of milk

products fell from Rs. 31.4 crores in 1995 to Rs. 31.2 crores in the said year. Consumer

off take remained depressed throughout this year as a consequence of high price increases

necessitated by substantial increases (+ 50%) in the cost of basic raw materials (fresh

milk), over the past two year.

However Nestle retained its leadership in the infant food market with Cerelac Lactogen

and Nestum and even introduced a new flavor of Cerelac-Cerelac Rice in 1996.

42
Chocolates and Confectionery

Nestle pursues the objective of accounting for one in every three rupees in its sales

figures through chocolates and confectionery. This has thus been one of the thrust areas

in Nestle. Nestle this year widened its range of flavors in POLO, backed by its

tremendous success in the Indian Market by adding POLO Spearmint to its Portfolio. This

new flavor has also received an encouraging response in the market according to market

analysts.

Milkybar also retained its position as the number one white chocolate brand in India,

however it did not record a significant increase in sales, as a majority of Indian tastes

still do not accept this flavor.

This year however, was a year of tremendous success for Kit Kat. This internationally

renowned brand gained a large increase in the Market share in the past year and Nestle

officials are hopeful that this will further increase in the coming years. However this

brand along with its success has brought with it its share of Controversy as the Union of

India has launched a Litigation against the Kit Kat family pack.

In 1997 Nestle added to its range of confectionery by introducing SPLASH, "A soft

hearted, hard boiled sweet" this is being promoted as a sweet unique to India and is

positioned to a target audience in the age group of 4 to 12 years and "anyone with a soft

heart" is a potential customer. Priced at Rs. 1 for a 7.5-gram candy Splash has been

introduced selectively in the South and has been speculated to repeat Polo's performance.

Nestle's officials claim that this candy has the potential to grab a quarter of the 700

crores confectionery market.

The most recent of Nestle affairs with the confectionery market has been the introduction

of Mithai Magic, which is "a little Mithai, a little magic." This new product was

43
launched in September 1997, in time for the Diwali purchases of sweets. This brand has

been positioned somewhere between chocolates and traditional sweets and the company is

employing a push strategy to promote this brand.

The latest launch of Nestle in the Chocolate and confectionery division is Charge.

Beverages

This year has been very successful in the beverages market for Nestle. The sales of

beverage have increased from Rs. 323.3 crores in 1995 to Rs. 398.8 crores in 1996.

Nestles Flagship Nescafe, which was pegged at Rupees 1040 per kilogram before the

launch of Tata Cafe, met with stiff competition from Tata Cafe priced at Rupees 550 per

Kg., once it was introduced. Tata cafe claimed to have garnered a market share of 17% by

December 1996. This forced Nestle to cut prices of Nescafe to Rupees 840 per Kg.

However Nescafe still retains 83% market share in the Rs. 177 Crores market for pure

instant coffee.

Nestle Sunrise also showed an increase in sales and captured 20% of the Rs. 253 crores

market in Mixed instant coffee.

This year Nestle also launched MILO, an internationally renowned chocolate energy

drink, and the response for this has been encouraging.

Nestle has introduced Tasters Choice tea bag pitched against Taj Mahal Tea bags.

Culinary Products

44
The market in culinary products had witnessed a high growth consequent to aggressive

pricing decisions on existing products and the introduction of a variety of new products

to match the needs of the Indian Housewife. Encouraged by this success Nestle launched

Maggi Macoroni Snack in three flavors-Chicken, Masala and Tomato. Nestle official’s say

that this would consolidate Maggis position as the number 1 culinary brand in India. The

product focuses on convenience and innovation as its Unique Selling Proposition. This

snack has opened a new segment for the maggi brands. The brand is positioned as

Youthful and is represented by the twists and curls of the macaronic snack. It is

speculated to be introduced in a phase manner nationwide to be place in the 7.5-lakh

outlets that Maggi noodles sells in.

In the spirit of catering to Indian tastes Maggi introduced maggi pickles in five variants

benchmarked to give the "ghar ka swad". Maggi Dosa Mix was also introduced to offer

superior quality and added convenience. Apart from this Milkmaid Kalakand Mix, a

traditional north Indian sweet of premium quality was added to the milkmaid dessert

mixes. Maggi soup also launched three new variants. Maggi Rassam in particular was

noticeable as yet another attempt to make traditional Indian cooking a little bit easier.

Food Services

Food service items basically deal with the out of home segments, which would include

vending machines. Nestle's food service business is poised for rapid expansion to meet

the growing need for such a reliable, time saving and cost effective service in this

modern age.

45
Nestle wants to sell 500 million cups of tea and coffee through its vending machines in

the year 2000. It currently has 3500 vending machines at assorted locations (both public

and private). In 1995 Nestle food service did well to vend 40 million cups of Nescafe and

Tasters Choice tea. Its 1996 sales were placed at 59 million cups of Nescafe and 36

million cups of tea; this figure was however way below the expected sales for the year.

In 2001 and 2002 nestle has come with a number of new products like it has come with

many of the diary products like milk. The milk is avaliable in the market in the

full cream , toned and double toned milk. The nestle has also come with the

dahi, butter which is available in the market but at very few shops .

NESTLE has also come with the products which will target the children like

FRUITIPS,MILKYBAR CHOO,NESTLE CHINESE MAGGI NOODLES.

46
 BIBLIOGRAPHY

 www.nestle.com

 www.google.com

NEWSPAPER

MAGZINES

47
 ANNEXURE

Financial Results and Operation

2006(Rs. in millions) 1996(Rs. in millions)

Gross Revenue 12144 10011

Gross Profit (BIT) 1343 1183

Interest 506 315

Depreciation 227 165

Provision for Tax 68 171

Profit after taxation 542 532

Extraordinary tax Payment 14 116

Profit after taxation and 528 416

extraordinary item

Profit brought forward 215 145

Reserves written back 49 130

Balance available for appropriation 792 691

Interim dividends paid 353 321

Final Dividend proposed - 97

Transfer to debenture redemption 42 2

reserve

48
transfer to general reserve 54 56

Surplus carried in Profit and loss 343 215

Account

Gross Revenue increased by 21% during the year, and crossed the 1200 crores mark .

Domestic sales grew by 19% and exports (including sales to Nepal ) grew by 27 %. Net profit after tax

grew by 27% - From Rs 41.6 crores to Rs 52.8 crores.

Throughout 2003, there was a marked lack of buoyancy in the domestics market caused

primarily by increased inflation and the financial liquidity squeeze which affected all segments of the

industry and trade .

Interest costs rose substantially on account of higher funding needs to service recently

commissioned projects as well as to meet increased exports for which materials often had to be

purchased in advance .

Considering the recessionary market conditions, Nestles overall sales and progression during

2003 can be considered satisfactory.

49
Financial Information

In millions of CHF 2006

Sales 81 422

EBITDA (a) 12 516

as % of sales 15.4%

EBITA (b) 9600

as % of sales 11.8%

Trading Profit 9 186

as % of sales 11.3%

Net Profit 5 763

as % of sales 7.1%

Capital expenditure 3305

Equity 29 904

Total Assets 65 524

Research and development costs 1 038

Market Capitalization, end December 146 864

(a) Mainly Pharmaceutical products and Water, managed on a worldwide basis.

(b) Mainly corporate expenses, research and development costs, amortisation of goodwill

50