BANKING ACADEMY OF VIETNAM

CITYU-2C

STRATEGY PLANNING PROCESS

OF NESCAFE IN VIETNAM

Lecturer: Tran Hai Van

Group 1: Nguyen Quynh Anh
Pham Nguyet Minh Anh
Du Thanh Huyen
Nguyen Thanh Tam
Bui Thi Minh Tham
Phung Thanh Phuong
Hanoi, 16th June

1|Page
 Abstract

Coffee is one of the most popular beverages in Vietnam. According

to tuoitre.vn, in Vietnam, a person consume on average 1.15 kg,
take the forth place in Asia. Nescafe is the most well-known brand
in Vietnam and the world. In addition, Nescafe is a famous brand
chosen by a plethora of people. The great achievements of Nescafe
inspire us to do a research deeply about their success to apply in
our future career. This paper, based on secondary research,
analyzes the strategy planning of Nescafe in Vietnam.

2|Page
 Table of Contents
Abstract.....................................................................................................................ii

1. Introduction...........................................................................................................1

1.1. History of nestle..............................................................................................1

1.2. History of Nescafe..........................................................................................1

2. Theorical framework.............................................................................................2

3. Current state...........................................................................................................2

3.1. Mission, vision and objectives........................................................................2

3.2. External environment......................................................................................4

3.2.1. Macro environment...................................................................................4

3.2.2. Micro environment...................................................................................6

3.3. Internal environment.......................................................................................8

3.4. SWOT analysis...............................................................................................9

3.5. Strategy implementation...............................................................................12

4. Conclusion...........................................................................................................14

REFERENCES........................................................................................................15

3|Page
1. Introduction

1.1. History of nestle

Nestle is a Swiss multinational food and beverage company headquartered in
Vevey, Switzerland
Nestl was formed in 1905 by the merger of the Anglo-Swiss Milk Company,
established in 1866 by brothers George Page and Charles Page, and Farine Lacte
Henri Nestl, founded in 1866 by Henri Nestl
Nestls products include baby food, bottled water, breakfast cereals, coffee and
tea, confectionery, dairy products, ice cream, frozen food, pet foods, and snacks.
Twenty-nine of Nestls brands have annual sales of over CHF1 billion (about
US$1.1 billion), including Nespresso, Nescaf, Kit Kat, Smarties, Nesquik,
Stouffers, Vittel, and Maggi.

1.2. History of Nescafe

Nestl began developing an instant coffee brand in 1930, at the initiative of the
Brazilian government, to help to preserve the substantial surplus of the annual
Brazilian coffee harvest. Max Morgenthaler led the development project. Nestl
introduced the new product under the brand name "Nescaf" on April 1, 1938. In
1965, Nestl introduced a freeze-dried coffee brand called "Nescaf Gold" in
Europe.
Instant coffee processing was not a new idea; it was invented by a Japanese
chemist in 1901 and had been marketed and sold by other companies without
success. Nestle revolutionized the way instant coffee was made. Nestle developed
a new process for dehydrating the concentrated coffee which vastly improved the
quality. In entailed spraying a fine mist of the solution into a heated tower where
the droplets turned to powder almost instantly. Nescaf was soon exported to
France, Great Britain and the USA. Its popularity grew rapidly through the rest of
the decade. It was so popular that the entire production of its US plant was
reserved for military use.
Nescafe was introduced the first time in Vietnam in 1998 when Nestle launched the
first factory in Vietnam.
Products
Nescafe classic, Nescafe 3in1, Nescafe latte, Nescafe espresso.

1|Page
Nescafe is the most well-known brand in Vietnam and the world with 33% of value
sales according to Euromonitor (October 2014). In addition, Nescafe is a famous
brand chosen by a plethora of people. The great achievements of Nescafe inspire us
to do a research deeply about their success to apply in our future career.

2. Theorical framework
This paper follows the framework of Bateman and Snells textbook Management
Leading& Collaborating in a Competitive World (7th edition) in Strategy
Planning: Strategy formulation process including 4 steps
Step 1: Establishment of Vision, Mission and goal
Step 2: Analysis of External Opportunities and Threats
Step 3: Analysis of Internal Strength and Weaknesses
Step 4: SWOT analysis and Strategy Formulation

3. Current state

3.1. Mission, vision and objectives

Mission Statement
Nescafes dedicated to making great tasting coffees for you to enjoy everyday. We
look forward to being part of a very rich and diverse coffee loving community
(Nescafe.com)
Vision statement
Since Nescafe is a member of Nestle family, Nescafe has the same vision as
Nestle.
to be the leading Food and Beverage Company, providing our customers with
high quality products and services with added value at competitive prices,
simultaneously ensuring the long term viability and profitability of the
organization.
(Nestle.com/aboutus)
Slogan: Its all start with a Nescafe
(Nescafe.com)

2|Page
Nescafe Objectives
Nescafe takes the first place in development strategy of Nestle in order to dominate
the Vietnamese instant coffee market. To gain this achievement, Nescafe need to
achieve several objectives given by the board of directors:
Economic objective
Revenue remains the increasing growth rate at 15% per cent.
In the period from 2011 to 2020, Nescafe will be the leader in instant coffee
business.
Nescafe products will be reached 60/40+ recipe.
Quality of available products will be enhanced including Nescafe classic, Nescafe
3in1, Nescafe latte, Nescafe espresso, Nescafe Viet.
The most important is improving packaging designs in order to attract consumers.
Social Objective
Make a good impression to public by the full implementation of the obligations
towards the State and charitable activities.
Support caf grower for intensive farming technique, storage caf after harvested
in order to enhance the quality of caf to produce or export. It will help them earn
stable income.

Evaluate objectives:
Economic Social Objectives
Objectives
Specific X X
Measurable X O
Attainable X X
Result-Oriented X X
Time frame X O

3|Page
3.2. External environment

3.2.1. Macro environment

Strategic analysis of a organization usually start with an external environment
analysis. The object is to identify the possible opportunities and threats to the
whole industry. PEST analysis is one of the macro environment analyses that
investigate the external environment in political, economic. socio-cultural and
technological aspects.
Political
The legal and political security system of Vietnam is quite stable and it has
been now perfect, enabling enterprises to develop.
The Government focus on promoting economic integration, economic
exchange with countries in the region, signing trade agreements such as: Vietnam
US Trade Agreements, commercial organization...
The Government also issued many policies to support enterprises and
investment incentives in Vietnam as preferential policies on land, tax incentives.
Corporate income tax decreased from 32% in 1997 to 25% in 2009, and at present
only 20%.
Economics
Vietnam is a country which has rapid economic growth.

Since 1998-2007 the growth rate increased rapidly, especially in 2007, the growth
rate reached 8.5%. But then dropped sharply and ramained stable by the Financial
Crisis in 2007-2010. In 2009, the growth rate fell significantly by 3.3%, and in
2012 was 5.03%. Inflation in this period also get involved rising at 10-20%, in

4|Page
2008 inflation reached 23.1% and stood at 6.81% in 2012.

According to the General Statistics Office, exports of coffee account in our country
increased rapidly over the years. In 1998, Vietnam was ranked as the 3rd coffee
exporting country in the world after Colombia and Brazil. By 2000, Vietnam has
took the win of Colombia then rose to 2nd position in exporting coffee in the world
and maintained that position until now.

The Vietnamese coffee market grew strongly in recent years, averaging 7.9% per
year in the period 2008-2013, according to a survey by the Market Research Firm
Euromonitor.
Social
Vietnam is a country with huge population and hybrid abundant resources.
The growth rate of per capita income is unstable.
65% of consumers in Vietnam drink coffee daily as a habit, especially men.
Vietnamese people like dark and bitter coffee, which has smell of almond and soil.
They have been inspired by the products made from clean raw material.
Technology
The technology is increasingly developed and widely used in manufacturing. The
government also issued a number of policies to encourage technology transfer,
mainly machinery and equipment. Policy of importing new technology, high
technology to Vietnam.
Technology transfer policy is implemented through the external relations.

5|Page
3.2.2. Micro environment
Porter's 5 forces model
Porter's Five Forces Model is a very important tool to analyze the industrial
parameters and to develop business strategy. Here are five factors would be
discussed to highlight the attractiveness and productivity of a market.
Competitive Rivalry within the Industry: High
Vinacafe is the biggest rival of Nescafe to enter Vietnam's coffee industry. Vinacafe
was found in 1979, majors in exporting coffee. When Vietnam turns to market
mechanism, Vinacafe focused on producing instant coffee to serve home industry.
With 3000 tons per year input, Vinacafe became a leading company with
experience and producing technique.
Vinacafe is an inland company so they understand the consumer. Mr. Pham Quang
Vu, deputy manager of Vinacafe Bien Hoa revealed: "Vinacafe got steps that other
competitor can't predict". Mr. Pham Thanh Tung, department manager of this
company said: "We don't promote widely, we has the coffee type that no others can
have".
-> Nescafe need a specific strategy to maintain their position in Vietnam coffee
industry.
Instant coffee is a potential market in Vietnam. Therefore, it attracts competitive
rivalry.
* Trung Nguyen coffee
Right after the appearance of Nescafe, Trung Nguyen also wants instant coffee.
The result is, on November 23rd 2003, Trung Nguyen released an instant coffee
product - G7. In 2004, Mr. Dang Le Nguyen Vu, deputy manager of Trung Nguyen
coffee company revealed: "We're about to start a "war" with a leading foreign
country who subverts Vietnam sound coffee market. An overhand competition.."
The way G7 compete to Nescafe is appealing "Vietnamese support Vietnam
products". Trung Nguyen promotes agricultural and Vietnam's branch in series,
make consumer supporting G7.
Trung Nguyen headquarter located in Buon Ma Thuot, metropolis of Vietnam
coffee market, is easy to transport with low cost -> advantage in price for G7.

6|Page
According a survey in Vietnam's high quality products in 2005, it revealed that G7
got success in the very first year.
=> After 2 years, G7 became a big competitive rivalry of Nescafe. The pressure
from G7 makes Nescafe changing the price, slogan, advertisement... to maintain
their position in market.
Thread of new entrants: Low
Instant coffee is a potential market in Vietnam. Therefore, it attracts competitive
rivalry.
The food processing industry is very large and competitive. It is not uncommon for
firms within the industry to do quite well. As a result, many companies enter into
the market every year in an attempt to gain a portion of a profitable market.
Threat of Substitute Goods: Low
There are not many substitute goods in coffee industry.
+ Coffee filter: senior coffee drinkers prefers coffee filter than instant coffee.
+ Ground coffee: this product need machine, inconvenient for home users.
Bargaining Power of Supplier: High
According to local exporters and traders, coffee cultivated area continues to expand
in the major coffee growing areas in Vietnam. Based on estimates from MARD,
Provincial Departments of Agriculture and Rural Development, and local coffee
industry, Vietnams coffee area is estimated at 653 thousand hectare in 2014 (See
Graph 2, Table 2), about a 3 percent rise from 636 tha in 2013. Dak Lak, Gia Lai,
and Lam Dong provinces continue to expand coffee area (mainly Robusta coffee).
In 2014, Arabica cultivation, mainly in Lam Dong, Son La, Quang Tri provinces is
estimated at about 45000 ha, accounting for about 7 percent of total coffee area.
In addition, Vietnam is the second-largest Robusta coffee exporter in the world.

7|Page
 Bargaining Power of Customers: High
Almost Vietnamese, especially old people prefer tea than coffee. People who
drinks coffee, or addicted in drinking coffee have their own favorite flavor so they
just use those familiar ones. It's hard to change these people's habit.

3.3. Internal environment

Brand
Nestl was established in 1866 and it becomes a top nutritional company. Nestle
has over 100 year experience and 500 factories around the world.
Nescafe is the first instant coffee brand and it is world leading cafe brand. Nescafe
officially appeared the first time in market in 1938 it quickly became the worlds
second drink only after Pepsi and Cocacola with 5500 drinking cups were
consumed per second
Nescafe was founded the first time in Vietnam in 1996, over the decades passed,
productions of Nestle have become familiar to generations of Vietnameses
consumers
Strength of brand contributes to the confidence of consumers for a new product
Distribution systems
Nearly 100 years of operation in Vietnam, Nestle has built a strong distribution
network markets with high density.
8|Page
Dealers also feel much more convenient to sell many productions of the same
brand
Productions
Nescafe has diversified product system with 20 different products all over the
world under the same name, taste and models are aimed to achieve the target at
segments of different markets
A trademark of the leading nutritional corporation, productions of Nescafe always
pay attention to the nutritional value- one of the factors leading the concerns of
consumers
Nescafe has experience in the dominated market in the world and modern
technology, productions of Nescafe bring to consumers the charming attractive
feeling and full of lobby pleasure
Finance and human resource
Nescafe is the brand of the leading international nutritional company, it has
powerful financial resources
=> Nescafe always pays very heavily for communicated activities, marketing, sale
and R&D
- Nescafe has a professional employment with high productivity

3.4. SWOT analysis

Strength:
- Strong Nestle brand name:
In this assignment, we apply the valuation methods learnt in class to assess the
value of the NESCAF brand in financial terms. Our team combined primary
information (from our quantitative and qualitative research in previous
assignments) and secondary information to calculate our brand value as accurately
and realistically as possible.
-> Overall Brand Strength: 63.5
- Excellent advertising and visibility:
Nescaf has teamed with ITV to launch a series of reactive and live ads for its
Original range as part of the brand's Big Start campaign.

9|Page
Viewers will be encouraged to wish friends and family a #BigStart on Twitter via
the ads, produced by ITN Productions, when they air during ITV's Good Morning
Britain for the whole of February.
Nescaf will use social software platform Spredfast to aggregate the on-air tweets
and one tweet will be chosen for each of the three daily slots during the program
on Mondays, Wednesdays and Fridays. The campaign marks the first time the
technology has been used during ITV Breakfast airtime.
Olivia Lumley, Nescaf Original marketing manager, commented: Big Start is an
exciting new campaign for Nescaf Original and a great way to start the year. The
nations favourite coffee brand is helping consumers to have a great start to their
day, by delivering many big messages of encouragement in the morning
throughout Britain."
- Good product distribution and vailability
- Lots of flavors and varieties available
Weaknesses:
Besides these advantages, Nescafe products also contain weaknesses when
penetrating Vietnam market.
- Nescafe is a Nestl product, the product was imported into Vietnam. National
spirit is always be a very dangerous weapon. If price and quality convince
consumers that emotional factors contribute greatly to the decision to buy the
goods.
- Nescafe totally cosmopolitan. It means that its products are "standardized" and
must follow a certain formula. This means that the characteristic coffee flavor of
each region is nonexistent.
- Besides, the taste of Vietnamese coffee is much stronger than the foreigners.
Because Nescafe made with internationalization flavor so it is quite lighter than the
taste of Vietnam's people.
Opportunities:
Strong growth forecast in Asia-Pacific Euromonitor International forecasts that
Asia-Pacific will be the fastest growing market for hot drinks over the period from
2007 to 2012. As Nestl's largest regional market, Asia-Pacific therefore presents
significant opportunities for the company in spite of poor conditions in major
Western European markets.
10 | P a g e
The premium trend while the mass-market positioning of Nescaf is an obstacle,
the growing demand for premium coffee products is creating opportunities for the
company to generate growth in mature markets through the development of brands
and extensions, such as Nescafe espresso and Nescaf Dolce Gusto.
The health trend while coffee has not received the positive health-related
publicity of tea, its image became less resolutely unhealthy in recent years, with
suggestions that it can help to prevent various conditions, including Parkinson's
disease. Moreover, the company's repositioning and substantial research and
development infrastructure place it in a strong position to develop health-orientated
new products.
Ethical consumerism fair trade products are growing strongly in hot drinks
markets such as the UK, offering a potentially important way to counter maturity in
developed regions.
Cross-branding Nestl's diversified packaged food and beverage portfolio offers
it the opportunity to develop brands from other categories in hot drinks. Notably, it
could further develop its confectionery brands in other hot drinks along the lines of
existing products such as Aero Hot Chocolate.
Threats:
Sluggish prospects in developed markets market maturity and aggressive
competition amongst retailers are set to constrain hot drinks growth severely in
major developed markets during the forecast period.
Coffee machine competition Nestl's efforts to attract younger consumers and tap
into the growing demand for premium coffee in developed markets with the
introduction of the Nescafe espresso and Nescaf Dolce Gusto coffee systems
could come under threat from the development of rival cheaper models.
Rising costs increasing transport and raw material costs, mainly relating to rising
bean, oil and packaging prices, are placing significant pressure on margins in the
company's beverage operations.
Competition from beyond hot drinks the expansion and diversification of soft
drinks, which are effectively targeting trends towards health and convenience, pose
a notable threat to Nestl's hot drinks products.

3.5. Strategy implementation

To achieve economic objectives:

11 | P a g e
 Product planning strategy

From the beginning, Nescaf has created a series of line up matching the taste and
emotional mood of people

Each of Nescaf products, whether they are children or sub-brand are great
combination between three factors: TASTE, CULTURE AND CREATION

Nescafe brand has sold more than 20 different products all over the world under
the same company. Strategy of company was successful, although each product has
its own character, but it has contributed to increasing the value of Nescafe brand.

Pricing Strategy

Nescafe launched several product lines aimed at the large and diverse segment of
drink instant coffee market. Each segment product lines with reasonable prices and
can accepted and ensuring high quality. Moreover, Nescafe knows that there is
always able to solve the problem of revenue and expenses by a flexible pricing
strategy. Nescafe pricing strategy which aims to sum up as: "Good Cafe is not
expensive".

For the youth: Nescafe hit this segment with product lines Latte is the new relative
prices.

For the class of high-income consumers and customers care about quality head line
Nescafe Gold, Premium prices and high quality than other generic products.

For class average income: Nescafe extensive targeting segments Blend this with 43
large, Mild Roast, Espresso products ... Consumers user receives the economic
benefits as well as product quality.

Also the strategy of Nescafe when distributed for sale Retail is "increased discount
for large purchases." For example, in the North, Vietnam today, if retailers buy 4
million of Nescafe products will receive 400,000 VND, equivalent to a discount of
10%, 2-2.5 fold times the opponent (G7 Trung Nguyen, Vinacafe). Purchasing
power of many retailers for instant coffee may not reach 4 million. Thus, in order
to enjoy this attractive discount instead of buying row of many brands of Nescafe
will accrue to purchase. This was not the retailers to purchase 10 Nescafe will
receive 1 product.
12 | P a g e
 Communication

The location is a multinational company ranked 3rd in the world of beverage, (just
after Coca-Cola and Pepsi), Nescafe use budget resources to spend on
communications sector. Including the media:

- Television commercial

- Newspaper & Magazine

- Community Events

- Online advertising

- Social Networking

- Sponsor such as the reality show Vietnamese men

To achieve social objectives

Make a good impression to the public:

The remarkable point is two programs: buy Nescafe get Vitara car, allow people to
drink Nescafe free at the wholesale markets, supermarket and give each
households. At the beginning of March 2005, Nescafe changed the familiar
message Starting your new day by the message 100% caf Viet Nam, as well
as establish the media campaigns Flavor of Vietnam, simultaneously launched 3
new types of coffee.

The war aroused nationalist spirits continue to be harsh when Nestle launched a
new product is Nescafe- Caf Viet, besides Nescafe 3 in 1 in 2008. Although it is
not much different than Nescafe-Redcup which is famous globalization of Nestle,
yet new name Nescafe- Caf Viet with the slogan Do you have enough powerful
to try? that creates a profound impression with the natives.

That Nescafe lauched Nescafe- Caf Viet only for Vietnam market is an
unprecedented event in the history of development of Nescafe. This is the first time
Nescafe has to create a unique product in order to meet the demands of consumers
and compete with local brands.

13 | P a g e
Nescafe came on the northern market the product 3 in 1 to celebrate 1000 years
of Thang Long Ha Noi, also with nationalistic messages about Vietnam history
is printed on the packaging.

Provide farmers with Nescafe Plan

Vietnam is the second largest exporter of coffee in the world as well as the number
one producer of robusta coffee. Through the NESCAF Plan, the Rainforest
Alliances experienced agricultural specialists are working alongside Nestl
agronomists to give Vietnamese farmers new skills and techniques.

The training provided to farmers by experts from the Rainforest Alliance and
Nestl covers sustainable farming practices such as waste management, water
conservation and wildlife protection, as well techniques to help them improve their
yields, such as better harvesting, pruning and soil management.

4. Conclusion
The above analysis has shown how the macro environment affects micro
environment of coffee industry. Then, internal environment of Nescafe was
analyzed in term of the Industry environment, followed by SWOT analysis.
Nescafes strategy implementation was given to provide how Nescafe do to
achieve their objective. Undoubtedly, Nescafe has a great strategy planning
process.

REFERENCES
The Nestle company history, Nestle, viewed 18th May 2015.

http://www.nestle.com/aboutus/history/nestle-company-history

History of Nescafe, History of Business, viewed 18th May 2015.

http://historyofbusiness.blogspot.com/2008/09/history-of-nescafe.html

Euromonitor, Coffee in Vietnam, October 2014, viewed 18th May.

http://www.euromonitor.com/coffee-in-vietnam/report

14 | P a g e
Bateman, T & Snell, S 2007, Management Leading& Collaborating in a
Competitive World, 7th edn, McGraw-Hill, Irwin.
Our Vision, Nestle, viewed 18th May 2015.

http://www.nestle.com/randd/ourvision

Ward, M & Nguyen, H 2014, Vietnam Coffee Annual May 2014, GAIN Report.

http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Coffee
%20Annual_Hanoi_Vietnam_5-23-2014.pdf

GENERAL STATISTICS OFFICE of VIET NAM, 2015, Annual report.

Brands Vietnam, 2010, Th trng c ph ha tan: Nng tng cen-ti-met

http://www.brandsvietnam.com/379-Thi-truong-ca-phe-hoa-tan-Nong-tung-
centimet

Dang, D 2004, Ti chin u vi thng hi u Vi t, Tuoitre.vn, 27 July.

http://tuoitre.vn/tin/nhip-song-tre/20040727/toi-chien-dau-vi-thuong-hieu-
viet/43158.html

Departments of Agriculture and Rural Development, 2013, Vietnams coffee areas

by provinces, MARD.

Media, Nestle. https://www.nestle.com.vn/media

15 | P a g e