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SWOT Analysis of Nestle

Strength: BRAND IMAGE Marketing strategies established by the company are innovative and lure customers. Financial, marketing and sales strategies are formulated by gauging the Periodic research carried out to judge market trends. It is a large scale organization, with abundant funds and has the capability of acquiring weaker firms by throwing them out of competition. example for this strength of the company. Multinational. Growing Sales and profits. Major shareholder in the food industry of Pakistan. Aggressive Marketing. Efficient Distribution networks through out the country. Quality Products. Environment Friendly. Skilled labor. Educated staff. Large number of offerings. Pre purchase virtual display. Good background of the company. Easy to approach outlets. Solid Financial position Strong supply chain network Focus on research and development Estimations of UHT Milk Production Consumption up to 2008 09 Year Annual Production (million liters) Annual Consumption (million liters)2008-09 => 648.43 353.71 2009-10 => 753.89 372.05

Weaknesses : The target market of Nestle MilkPak is upper middle and high class because lower middle and poor class cannot afford to buy UHT milk due to its premium price. It is a main weakness of MilkPak that there are different companies of milk but the name of nestle MilkPak is always stand in the last because of low advertising and marketing.

Opportunities : There are substantial growth opportunities considering the average yield of Pakistani animals at only 1,100 liters/annum as compared to 6,000 liters/annum for animals in Europe and USA. There are nearly 20 million milk producing animals in the country, mostly in Punjab (80%). The overall milk market in Pakistan is 20 billion liters, out of which processed milk contributes only 3 million liters. Nestl MilkPak along with other processed milk businesses contribute only 2% to this large market. Nestl MilkPak has expanded its product range by entering the cold dairy market recently by launching Nestl plain yogurt and now fruit yogurt is also added to it. To expand the cold dairy products range, Nestl fruit yogurt is the latest addition to this group. The cold dairy market offers many opportunities for the company which can capitalize these products by banking on its superior quality milk. The coffee brand also offers many opportunities for the company to expand by tuning the taste of the masses towards coffee. Credit policy can be adopted to increase sales

Threats : Price fluctuations due to rupee devaluation as raw material are imported. The uncertainty of economic conditions poses a great threat as the major funds invested in the country come from outside Pakistan. The present economic crisis in the world, led to the withdrawal of foreign management from the company and the investment has come to a halt. Competition with Nestls owns smuggled brands. Effect of Seasonalitys upon sales. Imported raw material, in some of the companys products. Major player may enter target market Legal and ethical issues.

Market segment growth could attract new entrants. Economic slow down can reduce demand. Two main competitors Haleeb and Olpers are main threat for MilkPak especially the Olpers is growing very fast. Inflation is getting higher and higher so the purchasing power of the people is decreasing day by day. There is no entry barrier for new entrants as the Olpers has come in the market.

Taste of consumer has already developed which is hard to change. Current market situation

Strengths, Weaknesses, Opportunities and Threats (SWOT)


Location of Factor Favorable TYPE OF FACTOR Unfavorable

Internal

Strengths

Weaknesses

Ability to leverage strong brand name to generate sales Ability to customize products to the local market conditions Strong global operations with diversified revenue base Research and development capabilities

Increasing instances of product recalls hampering brand equity

External

Opportunities

Threats

Transition to a 'nutrition and well-being' company Focus on developing and emerging Economies Booming out of home

Compliance issue resulting in penalty payments Macro economic factors Allegations of unethical business

eating market

activities

Nestles LC1 division has many strengths. Their first is that they have a great CEO, Peter Brabeck. Brabeck emphasizes internal growth, meaning he wants to achieve higher volumes by renovating existing products, and innovating new products. His explanation of renovation is that to just keep pace in the industry, you need to change at least as fast as consumer expectations.(Hitt, 2005) And his explanation of innovation is to maintain a leadership position, you also need to leapfrog, to move faster and go beyond what consumers will tell you. Brabeck has led Nestle into a position to better achieve the internal growth targets with his. Another strength that Nestle has is that they are low cost operators. This allows them to not only beat the competition by producing low cost products, but by also edging ahead with low operating costs. The main weakness of the LC-1 division of Nestle is that they were not as successful as they thought they would be in France. The launch in France was in 1994, but since the late 1980s, Danone had already entered the market with a health-based yogurt. The second weakness is that LC-1 was positioned as too scientific, and consumers didnt quite understand that LC-1 was a food and not a drug. Nestle also has multiple critical resources. They have a great research and development team. James Gallagher and Andrea Pfeifer were the masterminds behind the research on the La-1 cultures in the LC-1 yogurt. They were also the two that decided on selling LC-1 as a functional food. This enabled Nestle to position the product in a way that differentiated it among the other products in the market. They also have four pillars that Brabeck, Nestles CEO has identified he believes will help their internal growth worldwide. These are operating excellence, innovation and renovation, product availability, and communication. One opportunity that Nestle has is that healthbased products are becoming more popular in the world, including in the United States. Consumers are becoming more health conscious, and realize that living longer isnt only by luck and genetics. LC1 has not been introduced in the United States yet. Nestle also has an opportunity of being even a larger market leader in Germany with LC-1. Within two years of launching the product in Germany, they had captured 60% of the market. This was due to the fact that they differentiated

the product, and Germans simply preferred the taste. Another opportunity of LC1 is that, because they are a market leader, they can introduce more health-based products in Germany. A threat to Nestle is the fact that some markets they are entering are already mature. Danone had an established leadership position in the yogurt market in France. Since Danone was the first to arrive in the market, they have always been the market leader there. Also consumers in France liked the taste of LC-1, but researchers believe they did not repurchase the yogurt because they preferred the taste of Danone products better. Another threat to Nestle is that there is intense competition in the United States yogurt market. General Mills Yoplait division is the leader in the yogurt market in the United States. Yoplait has been the leader for years and is constantly innovating new health products. General Mills has been a strong competitor of Nestle and they are not short of experience and strength. One strength that they have is their brand recognition. One of their main goals has been to deliver brands that consumers trust and value and they have succeeded. Another strength they have is their distribution. Yoplait is distributed to more stores in the United States than any other brand of yogurt. This is one of the reasons why they have been the market leader in yogurt for so long. Another strength that General Mills has is the fact that consumers simply know Yoplait is healthy. Yoplait is the only leading brand of yogurt to offer vitamin D and this vitamin is especially important for adult women.(Yoplait.com) It is not just a coincidence that Yoplait has vitamin D, but they have purposely added this vitamin to target female consumers. General Mills also has some weaknesses. They fact that they are the market leader in the United States may be hindering them from innovation. They have been producing Yoplait yogurt for many years, and have offered a series of new products in the past few years in the nutrition department. Most of these products however, are very common, and are widely offered in the United States. The health food industry in the United States has been booming and General Mills does not offer enough products in the smaller niche markets. They have not entered into many unknown areas because of their success in the yogurt market. An opportunity General Mills has is that its Yoplait division is so successful. Yoplait is the only division of General Mills that is currently earning a profit. They have a large market share over their main competitors in the yogurt market. Another opportunity that they share with Nestle is that the health-based and nutritional food market is booming. They are continually releasing and marketing new products in these markets and they will continue to do so while the market continues to yield profits. The main threat that challenges General Mills is that there is intense competition amongst the top players in the yogurt and related markets. Nutrition and health is becoming more and more important to consumers in the United States, and worldwide. Along with this comes increased competition to gain market share. Simple supply and demand theories are prevalent in these markets. Another threat General Mills has is that smaller companies are producing similar products with the same or added nutritional benefits.

Strengths

Global food producer, located in over 100 countries. Consistently one of the world's largest producers of food products, with sales in the USA in 2008 of $10 billion; sales and earnings in 2008 were better than expected, even in a downturned economy. Global sales in 2008 topped $101 billion. Repeatedly ranked as the world's largest bottled water company and have set up facilities to operate water resources in a responsible manner. In 2008, Nestl was named one of "America's Most Admired Food Companies" in Fortune magazine for the twelfth consecutive year. Nestl provides quality brands and products and line extensions that are well-known, top-selling brands including: Lean Cuisine, Yoplait, Maggi, Dryer's/Edy's, Haagen-Dazs, Stouffer's, Boost, Dibs, Hot Pockets. Chocolate and Candy: Kit Kat, Toll House, Butterfinger, Baby Ruth, Crunch Bar, the Willy Wonka Candy line.

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Pet Products: Purina, Alpo, Cat Chow, Fancy Feast, Friskies, Tidy Cat. Drinks: Carnation, Perrier, Nesquik, S. Pellegrino, Nescafe, CoffeeMate, Taster's Choice, Juicy Juice. General Mills: subsidiary which makes Betty Crocker, Bisquick, Hamburger Helper, Pillsbury, Old El Paso, cereals, fruit snacks, frozen pizza, canned soups, frozen vegetables, ready-made frozen meals. Gerber: baby formula, prepared baby foods, baby cereals, water, juice, yogurt, foods for infants, toddlers and preschoolers. Professional brands sold to restaurants, colleges, hotels, and food professionals including Jenny Craig meals, Impact liquid meals for trauma patients, liquid meals for diabetics, and OptiFast weight loss products. Successful due in part to their unquestionable ability to keep major brands consistently in the forefront of consumer's minds (and in their shopping carts) by renovating existing product lines, keeping major brands from slipping into saturation/decline and having superior access to distribution channels.