Nestle SWOT Analysis

Nestle, headquarters in Switzerland, was founded by Henri Nestle in 1866. It is renowned as the world’s leading nutrition and health based company. Nestle grows is product line through innovation as well as renovation and maintains a balance on its geo-environmental activities and product lines. They opt for long term performance rather than short term goals. The Company prioritizes in bringing the most relevant products to the consumers according to their needs that will prove valuable throughout their life.

Strengths:

• Globally recognized as one of the largest and powerful food producers, covering almost every country (factories and plants).

• Employs approximately 280,000 people globally.

• Powerful brand positioning in the consumers mind.

• It has a vastly diversified product portfolio containing approximately 6000 brands (beverages, ice creams, frozen food items, chocolates and biscuits, pet care nutrition items, etc.)

• It has established joint ventures with giants like Coca Cola, General Mills and L’Oreal that are helpful in providing knowledge on different technological aspects.

• Consistently ranked as largest bottled water corporation that operates in an environmental friendly manner.

• Top 50 list of Fortune’s ‘America’s Most Admired Food Companies’, and ranked on top on Consumer Food Products.

• Strong internal growth and emphasis on innovation internally.

• Strong cultural environment, that acts as a loyalty carrier for the employees.

• Nestle has taken a visionary step as being one of the many companies that represent and encourage globalization that has also become an identity for its logo.

• Quality is a vital element regarding nestle products.

• Largest consumer products organization that operates globally.

• It also sells professional brands to different customers such as colleges, hotels, restaurants etc.

• Powerful marketer, and never seizes any opportunity to embed the brand image in the mind of the consumer. The quality of the Nestle products embeds an element of trust in the mind of the consumer that makes Nestle one of the powerful brands to be followed.

• Produces low cost products that give them an edge to their competitors. It also has low operating costs.

• Globally, biggest ice-cream producer, having a market share of approximately 17.5% (2006).

• The name Nestle also visualizes the high standard and quality of the product.

• Customer base loyalty for Nestle is very vast and powerful.

• The decentralized culture in the organization encourages employees.

• It has a dynamic and innovative approach when it comes to new trends regarding the technology.

Weaknesses:

• Hovering over the stats of 2008, the food industry grew 8.9% but Nestle lacked the potential to raise their sales in the organic food division that lay flat.

• Regulators like FDA and AMA (American Medical Association) are pressing on the firm for removing tags that hold no ground such as ‘low cholesterol’ or ‘heart healthy’. Parents have also reported diabetic epidemic due to the consumption of such goods, in children especially. Promoting infant milk products comparing to breastfeeding. Slaves in African countries that are working under it. It holds up a negative effect regarding the whole brand.

• Retailers do not get to set high margins to indulge more in sales.

• Logistics cost is quite high.

• Many products are not understandable in different countries. It did not make much of an impact in France with their LC-1 (food commodity).

• Coordination between country specific plants with the Center, due to which some plants are running exceptionally smooth while operations in other countries lack effectiveness.

• Transportation as well as storage (proper warehousing) problems.

• Supply Chain having a complex stature (India plant transitional traceability).

• The immense diversification portfolio of the firm makes it impossible to run every division smoothly.

• Russia being an unstable market for Nestle which cuts a big chunk from Nestle’s bite.

• It is also perceived that Nestle puts profit first.

Opportunities:

• Due to the high intensity of the health conscious awareness in the society, more health based products are required especially with incompromisable quality.

• Can go into the anti-allergy products that are very common, such as peanut free or gluten free products.

• They can also invest in snacks that would further diversify its product portfolio.

• Provide incentives to the retailers to increase sales volume.

• Open cafes that would exclusively provide Nestle products.

• LC-1 having the opportunity of having a greater impact in Germany (2 years had them go for 60% of the market share), and being the established market leader, they can establish more brands in the market.

• Middle class share in most of the economies are growing much larger.

• Nestle India may hold the position of being the export hub due to the low cost of labour comparatively to developed countries.

• In Asian countries like India, Pakistan, Bangladesh; consumers are mostly price conscious rather than health conscious. Nestle has an opportunity to have extensive strategies implemented to gain the market in such countries.

• Developing countries have a higher rate of GDP than those of developing countries, Nestle should enter in such markets as well.

• Recession has created such an impact that the market is struggling and has almost got out of that recession that will surely increase the cycle of cash flow which will be profitable for Nestle to cash in on such a time.

Threats:

• Contamination of products should be regarded strictly (Cookie Dough, March 2009).

• The company has a not so pretty history with the FDA. Pet Food contamination 2007 (imported from China, the vegetables contained rat poison).

• Inflation rise is giving birth to high prices. Raw chocolate prices are jumping, along with the Dairy costs; which leaves heavy cuts in the margin in order to make the customers brand loyal. They have also shrink the packaging which is not really noticeable, so the customers are paying the same amount for a lesser product.

• Competitors like Cadbury Schweppes, Hershey’s, Quaker, Heinz, Del Monte, Kellogg’s, and Kraft Foods are also well established. It’s a tough market with a tougher competition for gaining market share.

• Market is quite mature and the competitors specialize in a certain product that can hit hard on Nestle. (Yogurt Market US: General Mills)

• In the Indian market, fresh food is preferred than ready-to-eat meals.

• In still developing countries as well as underdeveloped countries, Nestle will face a large competition in market both domestic and unorganized sectors.

• Poverty sector in developing countries is also a lacking that must be watched over for.

• Malnutrition and obesity are yet another burden faced by the developing countries.

References:

http://www.nestle.com/AllAbout/AtGlance/Introduction/Introduction.htm
http://www.nestle.com/Resource.axd?Id=C6C11013-FF1A-40F4-994D-7BAFFC270218
http://money.cnn.com/magazines/fortune/mostadmired/2010/full_list/
http://www.allbusiness.com/trade-development/economic-development/5518413-1.html
http://www.equalizerpost.com/2010/01/nestles-swot-analysis.html
http://articles.castelarhost.com/nestle_background.htm
http://www.docstoc.com/docs/12163694/Nestle-Marketing-Mix
http://www.coursework.info/University/Business_and_Administrative_studies/Marketing/Nestle_is_the_world_biggest_known_brand_L92630.html

http://remorph.blogspot.com/2008/09/swot-nestle.html
http://free-pdf-ebook.com/2010/10/08/nestle-and-coca-cola-a-swot-analysis/

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