Nestle: A marketing analysis

Nestle: A marketing analysis Nestlà © is the worlds leading Nutrition, Health and Wellness company (Nestlà © SA, 2010). As the worlds leading food company, Nestlà © is dedicated to provide the best nourishment to people throughout their lives by understanding consumer needs and meeting those needs through its global resources. Nestlà © has grown to become the worlds largest food company providing more than 8,500 brands and 10,000 products. Nestlà © has more than 456 factories spread over 80 countries with its headquarters in Vevey, Switzerland and employs more than 283,000 people. The founder for Nestlà © Group was a Swiss chemist known as Henri Nestlà ©. It started when there was a high infant mortality in Europe due to malnutrition, where Henri began experimenting with nutritious food supplements to overcome the situation. During 1867, Henris first success was the development of milk food supplement which had helped a premature infant who was unable to accept his mothers milk or other conventional substitute. The product was then marketed throughout Europe which was known as Farine Lactà ©e Nestlà ©. Henri Nestlà © adopted his own coat of arms as a trademark in 1867 known as Nestlà © which means little nest translated from German, and the now-famous symbol is universally understood as it represents nurturing, caring, security, nourishment and family bonding. These attributes are still the guiding legacy for the company as it fulfills its commitment to Good Food, Good Life. During 1905, Nestlà © Company merged with the Anglo-Swiss Condensed Milk Compan y, the first condensed milk factory which opened in Switzerland during 1866. In 1904, Nestlà © entered into milk chocolate business when Peter Kohler Swiss General Chocolate Company produced milk chocolate under Nestlà ©s trademark and the company then joined Nestlà © Group in 1929. Nestlà © grew and diversified its range of products, through acquisition and mergers with well known brands. Nestlà © started in Malaysia during 1912 as the Anglo-Swiss Condensed Milk Company in Penang. The growth and expansion made a move to Kuala Lumpur during 1939 and with its first factory located in Petaling Jaya in 1962. Now, Nestlà © Malaysia manufactures its product in 7 factories and operates from its head office in Mutiara Damansara with six other sales offices nationwide. The company was public listed on KLSE during 13 December 1989. Today, the company employs 5000 people and markets more than 300 Halal products in Malaysia such as Milo, Nescafe, Maggi, Kit-Kat, Nesvita and etc. Nestlà © Company still adheres to its founders beliefs and principles providing the best products for every individual. (Source: nestle.com.my) SITUATION ANALYSIS Market Summary The soft drink industry consists of establishments primarily engaged in manufacturing non-alcoholic beverages in the form of carbonated and non-carbonated. These drinks are normally consumed while it is cold. Carbonated drinks are drinks that contain gassy and fizzy feeling while drinking such as soda, cola and many more where as non-carbonated are drinks which do not contain gases such as fruit juices, yogurt drink, cordial, and etc. In the Malaysia market, soft drink industry has been growing continuously for 5 consecutive years since 2002 (Loh, 2009). In fact, there are a certain amount of consumers who really enjoys soft drinks as they are cold and refreshing for a hot climate country. Most consumers are normally children and young adults due to their active lifestyle. According to the report entitled Soft Drinks in Malaysia to 2012 by Research and Markets, it states that the market for soft drinks had increased from 2002 to 2007 with a growing annual average rate of 5.7% (Asia Food Journal, 2009). However, there has been a decline in the sales of carbonates, functional drinks, concentrates and ready-to-drink (RTD) teas where this trend can be deduced from the growing health awareness which encourages a stronger demand for healthier beverages (Loh, 2009). The consumer market has not changed their main taste in carbonates. However, seeking for alternative and healthier choices is getting popular. In the forecast from 2008 to 2012, there will be a continuing but slower progress in the soft drinks industry in terms of quantitative and qualitative sales where the trend is inclining towards healthier drinks that include low-calories and low-sugar products in natural and healthier form such as fruit or vegetable juice (Loh, 2009). Furthermore, the consumption of soft drinks is also a fairly high consumable product in the market as Malaysia is an Islamic country and therefore the consumption of alcohol per capita is low as Muslims do not consume alcohol (Malaysia Food Drink Report Q3, 2008). Target Market The target market for Nestlà ©s soft drink products focuses more to a healthier drink and a target group that ranges from children to adults depending on the type of drinks. For instance, Yoco Cultured Drink targets more to the children segment, RTD Milo in UHT targets more on children to young adults segment, RTD Milo canned and RTD Nescafe targets more on young adults segment and Nestlà © Bliss Yogurt Drink are more to young adults to adults segment. In addition, target customers who purchase these products often prefer convenience as these drinks are ready to be consumed straight away. Market Attractiveness Global uncertainties had brought an impact to Nestlà © performance. Although with the tough economic environment that Nestlà © Malaysia faces, the Nestlà ©s management group took actions to help ensure the company delivers a strong performance reaching a double digit growth of 13.5% together with a total sales turnover of RM3.9 billion in 2008 (Nestlà © Corporate Report, 2008). Nestlà © has also made a move towards the expansion of Popular Positioned Product (PPP) which offers Malaysians nutritionally balanced products at affordable prices (Nestlà © Creating Shared Value Report, 2008). Still, there is also strong competition in the soft drinks industry that has contributed to challenges in terms of price due to economic factors. Furthermore, strong companies like FN Sdn Bhd and Pemanis Sdn Bhd have higher awareness in this industry as they focuses mainly on soft drinks. In fact, this industry is seemingly non-attractive for new entrants as there are many companies plus strong existing companies in this segment. However, Nestlà © only focuses on drinks which benefits health and wellness of the people and has a competitive differentiation as consumers nowadays are seeking for healthier alternatives. In terms of political factor, Nestlà © shares the concern of the Ministry of Health on the state of the nations health such as supporting the efforts of the National Plan of Action for Nutrition Malaysia II (NPANM II) to address health issues related to nutrition affecting Malaysians (Nestlà © Creating Shared Value Report, 2008). Nestlà © also focused on the Centre of Excellence for Halal in Malaysia that offers Halal products which has gained even more ground and importance not only in the local market but also the export market (Nestlà © Creating Shared Value Report, 2008). According to The Star, Nestlà © Malaysia expects its out-of-home food and beverage market to double to RM7.84bil in five years as Malaysians spend more money eating out which is known to be a social trend. The companys out-of-home market was 35% from the current share of RM11.2bil due to increasing number of partnerships the company had and an increasing amount of people eating out (The Star, 2009). Besides that, Nestlà © Malaysia also placed an importance and is committed towards environmental issues by practicing to preserve natural resources and minimise waste (Nestlà © Creating Shared Value Report, 2008) where Nestlà © has come up with Nestlà © Environmental Management System (NEMS) which is to improve management cycle and manages the companys environmental performance in alignment with the requirements of international standard ISO14001:2004. Positioning In response to the current consumers need for health, nutrition, convenience and well-being, Nestlà © had positioned its products by providing a full range of clarified nutritional balanced products that are trusted brands among the Malaysians. Differential Advantage Nestlà © Malaysia has a certain differential advantage especially in terms of providing healthier and trusted brands as it has existed for a long period of time in the Malaysia market. For instance, Nestlà © received a positive feedback from consumers by offering full range of drinks product with No Artificial Colouring in conjunction with Some Things are Best Left Natural campaign (Nestlà © Corporate Report, 2008). Nestlà © Malaysias credibility and positioning as the Centre of Excellence for Halal within the Nestlà © group has gained importance by successfully launching wide range of Halal products as these products are not only being marketed locally but also to the export market (Nestlà © Corporate Report, 2008). Besides, these products have gained trust and confidence among the Muslim consumers (Nestlà © Creating Shared Value Report, 2008). Due to increasing out-of-home food and beverage market, Nestlà © has also evolved the Food Services Business Unit into Nestlà © Pro fessional to manage business globally for independent business that caters for the needs of out-of-home operators which ranges from five-star hotels to mamak stalls (The Star, 2009) where the company focuses on consistency in the market. This will also be an added advantage for the companys long-term, profitable growth as it aims to be an inspiring growth partner by delivering creative and branded solution that will enable operators to operate and create customer satisfaction. Furthermore, Nestlà © has also launched a range of products known as Popularly Positioned Products (PPP) in 2008 by providing products at an affordable price range to consumers (Nestlà © Creating Shared Value Report, 2008) to be price competitive in the market and at the same time providing quality products to consumers. The Microenvironment Competitors The soft drink industry in the Malaysia market faces many competition and challenges. Among the few soft drink manufacturers in Malaysia are FN Sdn Bhd, Pemanis Sdn Bhd, Yeo Hiap Seng (M) Bhd, Malaysia Milk Sdn Bhd, Lam Soon (M) Sdn Bhd, Pokka Ace Sdn Bhd, Dutch Lady Milk Industries Bhd and etc. One of the leading soft drink manufacturers in Malaysia is FN Sdn Bhd (Asia Food Journal, 2009) where the main product for FN Sdn Bhd in Malaysia is Coca-Cola which is known to be the leading soft drink brand around the world and ranked first in the Best Global Brand 2000-2009 (Interbrand, 2010). Furthermore, FN Sdn Bhd also produces the main selling isotonic drink which is 100Plus. However, the direct competitions faced by Nestlà © Malaysia are as stated in the table where these competitors are known to have product which have similarity in relation to Nestlà ©s beverage product. Product Nestlà ©s product Competitors Competitors product Chocolate malt drink Milo Maestro Swiss Corporation (M) Sdn Bhd Vico RTD coffee Nescafe (canned) Pokka Ace Sdn Bhd Pokka (canned) Yogurt drink Nestlà © Bliss Dutch Lady Milk Industries Bhd Dutch Lady Yogurt Drink Cultured drink Yoco Malaysia Milk Sdn Bhd MDD (M) Sdn Bhd Vitagen Nutrigen Soya bean milk Nestiva FN Sdn Bhd Yeo Hiap Seng (M) Bhd Lam Soon (M) Bhd Seasons Yeos Drinho (Source: Malaysia Food and Beverage Directory Online) Distributors Nestlà © distributes its product through its National Distribution Centre to its wholesalers and retailers like Giant, Tesco, Carrefour, Jusco, KK Supermarket, 7-Eleven, 99-Speedmart and many more which will then be sold to end users. (Source: Nestlà © Report, 2008; Giant Hypermarket Shah Alam; Tesco Hypermarket Shah Alam; Carrefour Subang Jaya; Jusco Bukit Tinggi, Klang; KK Supermarket Section 9, Shah Alam; 7-Eleven Section 9, Shan Alam; 99-Speedmart Section 25, Shah Alam) Suppliers In order for Nestlà © to produce its product, materials such as packaging and ingredients are obtained through trustworthy suppliers. Furthermore, it is very challenging for Nestlà © Malaysia to ensure a steady supply of material at competitive cost. Nestlà © Malaysia currently has about a total of 150 suppliers which include 40 that are local companies and these 40 local companies supply and contribute only 10% of its raw materials and ingredients to Nestlà © Malaysia (hdcglobal.com, 2009). SWOT Analysis (Source: Malaysia Food Drinks Report Q3 2008) Strengths One of the strongest and well known brand names in the market An immensely dominant parent company in Malaysia as it is one of the most important Asian markets to ensure the subsidiary continues to receive investment funds Acts as an important regional hub in Malaysia and as such production facilities remain revolutionary Weaknesses Price-sensitive Malaysian consumers limit strong growth opportunities at the ultra-premium end of the market Consumer preference for fresh foods brings a large challenge towards the processed product portfolio Opportunities Having Malaysia established as its Global Centre for Halal Excellence where it is on the edge to capitalise on growth in this global industry as Halal foods have contributed particularly strongly in Nestlà © Malaysia export growth Regional health and hygiene scares have led to increased interest in processed foods, especially from an established and recognised manufacturer Healthier option of instant food exploit consumer interest in the fields of convenience and healthy-living Threats Continue to feel its margins pressurized by increasing commodity expenditure and a desire to maintain consumer loyalty by keeping prices low Marketing Mix Product Canned Drinks Milo Grab N Go (Original, Mocha, Hi-Cal) Nescafe (Black Roast, Original, Mocha, Latte, Ice) UHT(Tetra Pak) Milo Nesvita Soya Bean Milk (Original, Calcium, Honey, Aloe Vera, Gula Melaka) Cultured Drinks Nestlà © Yoco (Strawberry, Orange, Blackcurrant, Mixed Fruits) Yogurt Drinks Nestlà © Bliss (Orange, Strawberry, Kiwi, Guava, Blackcurrant, Mango, Tropical Fruit, Passion Fruit Orange, Apple Kiwi, Lime Cucumber) (Source: nestle.com.my) Price Product Price Milo Grab N Go (canned) RM1.40 (Original 240mL), RM1.61(Hi-Cal 240mL), RM1.69 (Mocha 240mL) Milo (UHT) RM4.29 (1.0L), RM7.29 (6 x 250mL), RM3.73 (4 x 125mL) Nescafe (canned) RM1.69 (240mL), RM9.39 (6 x 240mL) Nestiva (UHT) RM5.89 (6 x 250mL) Nestlà © Yoco RM3.49 (5 x 120g) Nestlà © Bliss RM4.19 (750g), RM1.99 (300g), RM4.19 (5 x 125g) (Source: Tesco Hypermarket Shah Alam) Place Nestlà © produces its products in 7 factories and will then distribute its product through its National Distribution Centre to its retailers like hypermarket and supermarket such as Giant, Tesco, Carrefour, Jusco, KK Supermarket and convenience stores such as 7-Eleven, 99-Speedmart and many more which will then be sold to consumers which is available throughout the whole nationwide of Malaysia. (Source: Nestlà © Report 2008; Giant Hypermarket Shah Alam; Tesco Hypermarket Shah Alam; Carrefour Subang Jaya; Jusco Bukit Tinggi, Klang; KK Supermarket Section 9, Shah Alam; 7-Eleven Section 9, Shan Alam; 99-Speedmart Section 25, Shah Alam) Promotion Nestlà © Malaysia has done all sorts of promotions in order to promote their products such as by holding events, sampling, consumer contests, advertising, offering lower prices for their products and many more to attract customers into purchasing their brand. (Source: Nestlà © Creating Shared Value Report 2008; Nestlà © Corporate Report 2008) People Since 1912, Nestlà © has built the trust among Malaysian consumers through its variety of products which are now well-known household brands. According to the Corporate Brand Monitor Study conducted by Nestle during 2008, the first company that came into mind was Nestlà © when being asked to think about food and beverage companies (Nestlà © Creating Shared Value Report, 2008). In 2008, there was a significant increase towards the awareness of Nestlà © among the consumers in the Nestlà © database. A majority of those surveyed have a good impression of the company (Nestlà © Creating Shared Value Report, 2008). In Nestlà © Malaysia, it is important for employees to contribute towards their corporate vision which is the leading reference company in Nutrition, Health and Wellness. Nestlà © believes that a healthy workforce can contribute to happy employees and improve productivity (Nestlà © Creating Shared Value Report, 2008). According to the Organisational Climate survey conducted by Nestlà © during 2007, the company is known to be the preferred benchmark against other High Performing Global Companies with a participation rate of 91% (Nestlà © Creating Shared Value Report, 2008). Process Consumers can easily purchase Nestlà © drinks products from Nestlà © distributors such as hypermarkets, convenience stores and etc to obtain the products. Physical evidence The beverages size ranges are as stated below: Product Size Milo Grab N Go (canned) 240mL Milo (UHT) 125mL, 250mL, 1.0L Nescafe (canned) 240mL Nesvita (UHT) 250mL Nestlà © Yoco 120g Nestlà © Bliss 125g, 300g, 750g (Source: As printed on the packet of the drinks) (Source: product images taken from nestle.com.my) MARKETING STRATEGY Objective To create brand awareness for new and current product To create satisfied customers towards product and services To increase extra sales profit for the company Ansoff Matrix Existing Product New Product Existing Market Market Penetration Price making price affordable for this product Promotion having free samples and creating added value for customers Place making product available and accessible Product Development Product creating an addition new product for the drinks segment New Market Market Development People creating a wider target market Diversification Product Development (creating a new beverage product for Nestlà ©) Product: A new product will be created as an addition to Nestlà © drinks segment in the existing market. This product created will be a fruit drink called NesFruits which is a healthier alternative of fruit drink that will be available in the market as it contains less sugar and also no artificial colouring and flavouring is added into the drink. Creating a healthier alternative drink will help boost up company sales as consumer are more health conscious nowadays and want more choices and options while they seek healthier alternative in drinks due to the increasing numbers of illnesses that is arising with unhealthy lifestyle. Market Penetration (penetrating to competitors market) Price: This new drink will be priced at an affordable price and placed in the market under the Popularly Positioned Product (PPP) by the company in conjunction with available ongoing promotions where customers always like their products with quality and within an affordable range for them to purchase. Promotion: This drink will be placed under promotion by giving out free sampling with every purchase of Nestlà © product, holding consumer contest and events when it is newly launch. Furthermore, offering a lower price promotion or giving out some freebies with every purchase of the product can help to penetrate competitors market. By doing so, it can help to create an added value and satisfaction within customers when purchasing the product as customers love great value for money and offers. Place: This product will also be made available and accessible for everyone where it can be easily obtainable nationwide. It will not only be made available in hypermarkets and supermarkets but can also be easily purchased through vending machines, convenience stores, fast food outlets and petrol kiosks when the consumer has a sudden desire of having the drink. Market Development (creating a wider target market) People: This new drink should be able to have a wider segment since it is meant for everyone as it is a healthy drink. However, this drink is not just targeting people who are health conscious but also for people who desires and enjoys having fruit juices all the time. Furthermore, having a wider market can help boost extra sales and profit. Target Market The target market for NesFruits would be more for consumers who are health conscious especially the baby-boomers generation. This product is created in such a way where it is less sweet with no added artificial flavouring and colouring. In addition, this product will also be targeting people who want convenience and enjoy drinking pure fruit juice. Positioning This product will be positioned as a healthier choice of fruit juice which contains less sugar and no artificial colouring and flavouring is added into the drink. Furthermore, this fruit juice also contains high vitamin C as it is made from real fruits. The purpose of having this product to be less sweet is due to increasing numbers of diabetics in Malaysia (The Star, 2010). As people are aware of the risk of consuming too much sugar, this will lead them to purchase healthier alternative drinks. Besides that, artificial content is also unimportant in Nestlà © products with the supporting campaign theme of Some Things are Best Left Natural. In fact, colouring and flavouring does not play an important obsession to adults as they know that artificial content is a chemical which will harm the body if consumed on a long term basis (Heather, 2007). On top of this, it is not the colour of the drink that matters but the original quality content of the drink which is more important such as t he purity and freshness of the juice with a combination of fruity good taste. In addition, this drink is also more refreshing and thirst quenching because there is less sugar added as sugar will tend to make a person thirstier after consumption. This drink also helps bring convenience for fruit juice lovers where they do not need to go through the process of blending fruits to get the juices as this product really taste like juice out from the blender. Moreover, this product can be consumed on a daily basis as it is made from natural fruits with less sugar and no added artificial content and therefore suitable for everyone. Competitive Advantage These new juices are high in vitamin C as they are extracted from real fruits. Furthermore, this drink also contains less sugar compared to other fruit juices that is available in the Malaysia market. In addition, artificial content is also not added into the drink with supporting campaign theme Some Things are Best Left Natural. Competitive Target The direct competitive target for this new product will be FN Sdn Bhd Fruit Tree and Malaysia Milk Sdn Bhd Marigold Peel Fresh (food-beverage.com.my). This is because both of these brands are the main key players in the fruit drink segment. Furthermore, they are also competitive challenging in terms of price as this new product will be priced higher compared to them in the market. However, with the excellent quality and the benefit of the new drink, it will somehow attract consumers that is seeking healthy drinks in the market as this new drink is something different compared to the fruit juices that competitors are having. Strategies Product NesFruits is a new fruit juice product from Nestlà © that will be an addition to the drink segment for the company. This product comes in an assorted range of flavours which includes orange, apple, grape, mango and tropical mix. It will also be packed in various pack sizes which include handy pack size of 250mL for convenience and large pack size of 1.2L and 2.0L for bulk consumption. Price The price for NesFruits will be slightly more expensive than other brand of fruit juices that is available in the market as it is made purely from fruits in comparison with the quality at an affordable price. The price will be range from RM6.99 to RM10.99. The 250mL pack of 6 will be price for RM8.99, RM6.99 for the 1.2L and RM10.99 for the 2.0L. Place NesFruits will go through channel integration which will be sold through intermediaries using conventional marketing channels such as supermarkets, hypermarkets, convenience stores and vending machines. This product will be easily available at all supermarkets and hypermarkets such as Giant, Tesco, and Carrefour plus easily accessible through convenience stores such as 7-Eleven, petrol kiosks and Nestlà © vending machines. Promotion In order to promote NesFruits in Malaysia, these are the following ways that the promotion should be done: Event NesFruits will be introduced and launched through an event by the Malaysia Health Ministry and Malaysia Natural Resources and Environment Ministry. The purpose of this event is not only to introduce a healthy fruit juice in the market but also to create awareness that Nestlà © Malaysia is a sustainable company towards the environment where the fruit waste from the product will be further used to make enzyme that can be use for household cleaning During this time, free samples will be done to let the people try out the new product and to collect feedback about the new drink. This product will also be placed under promotional sale for customers to purchase. In addition, this event will definitely have good publicity as it will be advertised through the media since it is supported by the Ministry of Malaysia. Product brochure NesFruits can also be introduced using Dear Nestlà © Programme by sending product brochures to introduce this new product to Dear Nestlà © members. On top of this, a coupon card for a free NesFruits 250mL and discount voucher will also be given for the members to prompt them in trying this new product which is easily obtainable at participating retailers. Sampling A coupon card for 2 free sample of NesFruits 250ml (customer gets to choose any 2 flavours) will be given out with every purchase of RM20 and above on Nestlà © products at participating retailers to introduce this product to the market. By filling in their particulars on the coupon card and submitting it to participating retailers, customers will have a chance to try out the new product for free. This product can also be promoted by having free samples in supermarkets and hypermarkets during weekends when most people do their grocery shopping. Sales promotion A sales promotion of buy 2 free 1 or giving out some nice freebies with every purchase of the product will also be done at different period of time to create added value for customers. 20% discount promotion on price (PPP) will also be done during certain period of time. Contest A contest will also be held in conjunction with the launching of this product which will be held for 2 months by just answering 3 simple questions on the contest form. Entitlement for this contest: 4x250mL 1 contest form, 1.2L 1 contest form, 2.0L 2 contest form Winners: RM50,0001; RM10,0003; RM1,00010; RM500x50 Advertisement Advertisement for this product will be done on billboards, newspapers and health magazines This is to remind, reinforce and at the same time create awareness for this newly launched product and available on-going promotions. In order to launch this promotional campaign, Nestlà © Malaysia will have to hire a specialist agency to organize the development of this campaign for this new product. People The following are ways to sell this product to retailers: In order to have working productivity among the employees in the key account management division, Nestlà © Malaysia must follow the cycle of motivation as stated in the diagram: This product is a low involvement purchasing behavior product among customers. Therefore, it is better to create awareness by having trial for this product and to collect feedback from customers to make improvement according to customers needs and wants in order to have repeat purchase in the future. Process Purchases of this product can be easily made by way of payment at the place of distribution. Physical Evidence NesFruits will be packed in a tetra pak form in which the 1.2L and 2.0L comes with bottle cap to open and close the drink easily so that the drink will not spill where as the 250mL will come with a straw and a sealed lid for convenience to drink straight away from the pack. Marketing Research Product Free sampling will be done during weekends at hypermarkets and supermarkets to get direct feedback from customers about the new product. Price Monitoring competitors through environmental scanning, and gathering, buying, soliciting information about competitors by comparing the prices of other competitors and setting the product at a reasonable price for customers under the Popularly Positioned Product once there is a high demand. Promotion Using email survey to collect feedback from customers about the product that they obtained from retailers using the coupon card and customer who answer the survey will get a discount voucher to purchase Nestlà © products. Directly ask for customers feedback and record it during sampling in retailer outlets and customers who gives feedback will obtain a small gift Place Regular site visits to retailers to check on the availability. The visitation will be done on a weekly basis at different locations for 1 to 3 years depending on how well the new product sells. KEY AVTIVITY PLANNER MARKETING ACTIVITY BUDGET Overall Strategies Strategies Cost Event to launch NesFruits in support with the Ministry of Malaysia RM200,000 Giving out product brochure to introduce NesFruits to Dear Nestlà © members with coupon card and discount voucher for members to try out the product RM250,000 Giving out free samples of NesFruits with a purchase of RM20 and above on Nestlà © products RM600,000 Sampling in hypermarkets and supermarkets RM200,000 Buy 2 free 1 sales promotion