Nestle Project

PROFILE OF THE COMPANY Nestlé with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestlé and is today the world's biggest food and beverage company. Sales at the end of 2004 were CHF 87 bn, with a net profit of CHF 6.7 bn. We employ around 247,000 people and have factories or operations in almost every country in the world.

The Company's strategy is guided by several fundamental principles. Nestlé's existing products grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Long-term potential is never sacrificed for short-term performance. The Company's priority is to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives.

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BACKGROUND Nestle was promoted by Nestle Alimentana, Switzerland, a wholly owned subsidiary of Nestle Holdings Ltd., Nassau, Bahama Islands. Nestle is one of the oldest food MNC operating in India, with a presence of over a century. For a long time, Nestle India’s operations were restricted to importing and trading of condensed milk and infant food. Over the years, the Company expanded its product range with new products in instant coffee, noodles, sauces, pickles, culinary aids, chocolates and confectionery, dairy products and mineral water. Nestle was incorporated as a limited company in 1959. In 1978, the Company issued shares to the Indian public to reduce its foreign holdings to 40%. Its name was changed from Foods Specialties Ltd. to the current name in 1981.The parent held 51% stake in the company as at 2000 end. It has FIPB approval to hike stake by 10% and has been gradually acquiring shares from the open market. Parent stake in the company as at 2001 end stood at 53.8%. The parent plans to continue hiking stake through open market purchases.

Nestle India Ltd, 51% subsidiary of Nestle SA, is among the leading branded food player in the country. It has a broad based presence in the foods sector with leading market shares in instant coffee, infant foods, milk products and noodles. It has also strengthened its presence in chocolates, confectioneries and other semi processed food products during the last few years. The company has launched Dairy Products like UHT Milk, Butter and Curd and also ventured into the mineral water segment in 2001. Nestle’s leading brands include Cerelac, Nestum, Nescafe, Maggie, Kitkat, Munch and Pure Life.

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PLANT LOCATIONS Nestle started its manufacturing operations with Milkmaid in 1962 at Moga factory. Manufacturing of Nescafe started in 1964 at the same factory. The company set up another factory at Cherambadi in Tamil Nadu, for manufacture of infant foods, coffee etc. For almost two decades there were no new additions of manufacturing facilities due to restrictive policy environment. The company set up its Nanjangad (Karnataka) factory in 1989 and the Samlakha (Haryana) factory in 1992. The Ponda (Goa) factory started operations in 1995. The Company set up its sixth manufacturing unit in 1997 at Bicholim in Goa

BUSINESS PRINCIPLES Since Henri Nestlé developed the first milk food for infants in 1867, and saved the life of a neighbor’s child, the Nestlé Company has aimed to build a business based on sound human values and principles.

While our Nestlé Corporate Business Principles will continue to evolve and adapt to a changing world, our basic foundation is unchanged from the time of the origins of the Company, and reflects the basic ideas of fairness, honesty, and a general concern for people.

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People first Employees, people and products are more important at Nestlé than systems. Systems and methods, while necessary and valuable in running a complex organization, should remain managerial and operational aids but should not become ends in themselves. It is a question of priorities. A strong orientation toward human beings, employees and executives is a decisive, if not the decisive, component of long-term success. Quality products Our focus is on products. The ultimate justification for a company is its ability to offer products that are appealing because of their quality, convenience, variety and price -- products that can stand their ground even in the face of fierce competition. Long-term view Nestlé makes clear a distinction between strategy and tactics. It gives priority to the long-range view. Long-term thinking defuses many of the conflicts and contentions among groups -- this applies to employment conditions and relations with employees as well as to the conflicts and opposing interests of the trade and the industry. Of course, our ability to focus on long-term considerations is only possible if the company is successful in the struggle for short-term survival. This is why Nestlé strives to maintain a satisfactory level of profits every year. Decentralization Switzerland is home to Nestlé's Swiss subsidiary, its international headquarters and the registered office of Nestlé's holding company, but Nestlé does not regard its Swiss headquarters as the center of the universe. Decentralization is a basic principle of Nestlé. Our policy is to adapt as much as possible to regional circumstances,

mentalities

and

situations.

By

decentralizing

operational

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responsibility, we create strength and flexibility and are able to make decisions that are better attuned to specific situations in a given country. Policies and decisions concerning personnel, marketing and products are largely determined locally. This policy creates stronger motivation for Nestlé's executives and employees and a greater sense of identification with Nestlé's business. It is not Nestlé's policy to generate most of its sales in Switzerland, supplemented by a few satellite subsidiaries abroad. Nestlé strives to be an "insider" in every country in which it operates, not an "outsider." Uniformity A very important concern at Nestlé has to do with uniformity: how consistent Nestlé's principles, policies, rules of conduct and strategies should be, and to what extent they should differ depending on the country, subsidiary, region, branch or group of products. In general, Nestlé tries to limit the uniformity of its policy to a requisite minimum. This minimum is then systematically enforced, unless there are compelling reasons in a given market that justify deviation from policy. Diversification Nestlé does not want to become either a conglomerate or a portfolio manager. Nestlé wants to operate only those businesses about which it has some special knowledge and expertise. Nestlé is a global company, not a conglomerate hodgepodge. We regard acquisitions and efforts at diversification as logical ways to supplement our business, but only in the context of a carefully considered corporate marketing policy. Nestlé is committed to the following Business Principles in all countries, taking into account local legislation, cultural and religious practices: 

Nestlé's business objective is to manufacture and market the Company's products in such a way as to create value that can be sustained over the

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long term for shareholders, employees, consumers, and business partners. 

Nestlé does not favor short-term profit at the expense of successful longterm business development.

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Nestlé recognizes that its consumers have a sincere and legitimate interest in the behavior, beliefs and actions of the Company behind brands in which they place their trust and that without its consumers the Company would not exist.

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Nestlé believes that, as a general rule, legislation is the most effective safeguard of responsible conduct, although in certain areas, additional guidance to staff in the form of voluntary business principles is beneficial in order to ensure that the highest standards are met throughout the organization.

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Nestlé is conscious of the fact that the success of a corporation is a reflection of the professionalism, conduct and the responsible attitude of its management and employees. Therefore recruitment of the right people and ongoing training and development are crucial.

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Nestlé continues to maintain its commitment to follow and respect all applicable local laws in each of its

Research and development The Nestlé research and development centers have two main tasks: to create new products and manufacturing processes and to improve those that already exist. These centers play a key role in product safety and quality and also have their role in conserving resources and protecting the environment. Environmental concerns are an integral part of any development process to ensure that our future commercial operations meet the desired criteria. The Nestlé Research Center provides the scientific support needed to prevent and solve environmental problems arising in the development groups as well as manufacturing. In addition, studies are carried out to find new ways of using

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industrial residues to create valueadded byproducts. This will reduce total emissions and effluents. The Nestlé development centers prepare environmental impact studies for new products and manufacturing processes. These cover all aspects, from raw materials, through processing, to the final packed product. These analyses provide additional elements for use in deciding whether to commercialize a new product, or to introduce a new or modified process. Foresight At present, the world faces daunting questions about its ability to provide enough wholesome food for everyone. Malnutrition and poor eating habits are still serious problems in many developing countries. By 2100, the world's population will double. Will it be possible to feed a world with so many inhabitants? At Nestlé, the big picture is all about feeding the world and providing food and nutrition for an ever-growing population. Our response to this situation is to intensify research, strive for innovations and improve quality. Flexibility and simplicity The public's sense of the power and size of a corporation is often inaccurate, for a company's power is limited by a host of factors including legislation, competition, regulatory bodies and publicity. From a business point of view, it is desirable for a firm to achieve the size best suited to a specific industry or mode of production. To be competitive internationally and make significant investments in research and technology, a larger company has an advantage. From a strictly organizational point of view, flexible, simple structures work best and excessively large units should be avoided whenever possible. In both respects Nestlé has a natural advantage: Although it is a big company, it is spread out over many countries and each of Nestlé's factories has its own management and responsibility.

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Handling of raw materials The Nestlé Group is in principle not directly involved in primary production of raw materials and other food ingredients. In general we use locally available raw materials and purchase them either directly from producers or through existing trade channels. Raw materials have to meet clearly established quality criteria and are checked for possible contaminants including environmental contaminants. Our purchasing specifications comply not only with legal requirements but go further to ensure highest safety and wholesomeness of our products. Whenever possible we give preference to those goods for which environmental aspects have been taken into consideration. In those cases where the required agricultural raw materials are not available locally, but the natural production conditions exist, we encourage local production and provide assistance for cultivation and dairy farm management. We support plant growing and livestock husbandry methods which: 

preserve and improve natural soil productivity and economize and protect water resources

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allow the lowest, most appropriate and safe use of agro-chemicals

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use the least energy.

Packaging Manufacturing comprises all unit operations necessary to transform perishable raw materials into finished products, with the aim to make them safe and convenient for the consumers. The manufacturing activities of the Nestlé Group: 

respect natural resources by efficient use of raw materials and energy

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minimize waste generation and emissions

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ensure environmentally safe disposal of all waste which cannot be recycled.

Regular

assessments

of

processing

practices

are

carried

out.

These

assessments include: 

evaluation of individual plant performance with regard to operations which have an impact on the environment



definition of targets for improvement

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review of plant compliance with local government regulations, company environmental standards, as well as results achieved in comparison with targets for improvement

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full investigation of incidents which may affect the environment.

Information on developments in environmental protection technology and practices is disseminated as required to ensure that all plants are using the most effective environmental practices for their type of processing. This applies also for co packers. Marketing and distribution Marketing is based on the principle of satisfying consumer needs. This is the foundation also for the environmental marketing approach of Nestlé. Environmental product claims in advertising, promotional material and on packaging are in accordance with legal requirements, based on solid scientific evidence and used in a serious and reasonable manner. Our aim is to minimize wastage in communication, publicity and promotional material, in particular through more precise targeting of marketing activities. Consumer promotions and merchandising material such as consumer offers, instore

promotions,

display

material,

leaflets,

printed

matter,

etc.

take

environmental aspects into account. 9

This means due consideration of environmental impact in selecting both materials and printing methods. In distribution, energy efficient and pollution controlled methods are encouraged wherever possible. Information, communication and education Nestlé's policy is designed to provide correct and coherent information on the activities of the Group. Activities related to the environment benefit from the same treatment and their communication is secured through all currently available means inside and outside the Group. It is furthermore Nestlé's duty to create awareness, to train and motivate employees on their personal responsibility with regard to the protection of the environment. Legislation and regulations It is the policy of the Nestlé Group to strictly comply with all laws and regulations relevant to our activities. We participate in discussions on food legislation and regulations between international organizations, government representatives, industry, the scientific world and consumer associations. We also apply this policy to environment related matters. In doing so, we cooperate with legislators through local industry associations in order to promote laws and regulations in the field of environment which are reasonable, rational, realistic, applicable and enforceable. We oppose unjustified bans and any other discriminatory measures. We favor the harmonization of food regulations in order to remove existing trade barriers and to avoid the creation of new ones. This applies also to environmental

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issues. We favor the exchange of information, of experience and of knowledge between the various interested parties. Thanks to all these synergies, we can contribute to valuable discussions and be recognized as an active partner in helping authorities to formulate comprehensive strategies in the field of the environment.

THE NESTLÉ POLICY ON THE ENVIRONMENT Nestlé respects the environment and is committed to environmentally sound business practices throughout the world, thus taking into account the need to preserve natural resources and save energy. This commitment is put into practice by considering local legal requirements as a minimum standard. If these do not exist, our internal rules, adjusted to local conditions, apply. Research and Development and new investments include an evaluation to ensure environmentally appropriate products, packaging and processes. Management and personnel within the Nestlé organization worldwide are encouraged to help resolve environmental problems within their own sphere of influence.

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NESTLE’S BRANDS Quality and nutritional value are the essential ingredients in all of the nestle’s brands. Millions of people prefer Nestlé products every day, happy with the addition to their wellness that they bring. If you are looking for a specific brand our product, just use the alphabetical index below to jump straight to a listing. Or you can explore by category.

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Baby Foods The production of infant food goes right back to the origins of the Nestlé Company. Henri Nestlé's 'Farine Lactée' was the first product to bear the Nestlé name.

In 1867 a physician persuaded Henri Nestlé to give his product to an infant who was very ill — he had been born prematurely and was refusing his mother's milk and all other types of nourishment. Nestlé's new food worked, and the boy survived. From the very beginning, Nestlé's product was never intended as a competitor for mother's milk. In 1869, he wrote: "During the first months, the mother's milk will always be the most natural nutrient, and every mother able to do so should herself suckle her children." The factors that made baby foods success in the early days of the Nestlé company — quality and superior nutritional value — are still as valid today for the wide range of infant formula, cereals and baby food made by Nestlé. The World Health Organization (WHO) recognizes that there is a legitimate market for infant formula, when a mother cannot or chooses not to breast feed her child. Nestlé markets infant formula according to the principles and aims of the WHO International Code of Marketing Breast Milk Substitutes, and seeks dialogue and cooperation with the international health community and in particular with the WHO and UNICEF, to identify problems and their solution. Nestlé's expertise as the world's leading infant food manufacturer, gained over more than 125 years, is put at the disposal of health authorities, the medical profession and mothers and children everywhere.

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Chocolate & Confectionery The story of chocolate began in the New World with the Mayans, who drank a dark brew called cacahuaquchtl. Later, the Aztecs consumed chacahoua and used the cocoa bean for currency. In 1523, they offered cocoa beans to Cortez, who introduced chocolate to the Old World, where it swiftly became a favorite food among the rich and noble of Europe. Nestle forayed into chocolates & confectionery in 1990 and has cornered a fourth share of the chocolate market in the country.. It has expanded its products range to all segments of the market The Kitkat brand is the largest selling chocolate brand in the world. Other brands include Milky Bar, Marbles, Crunch, Nestle Rich Dark, Bar-One, Munch etc. The sugar confectionery portfolio consists of Polo, Soothers, Frootos and Milkybar Eclairs. All sugar confectionery products are sold under the umbrella brand Allen's. Nestle has also markets some of its imported brands like Quality Street, Lions and After Eight. New launches such as Nestle Choco Stick and Milky Bar Choo at attractive price points to woo new consumers. Chocolate confectionery sales registered a strong 21.5% yoy growth in 2001 aided by good volume growth in Munch, Kitkat and Classic sales. Nestle relaunched Bar-One during the year.

From the beginning, turning raw, bitter cocoa beans into what one 17th century writer called "the only true food of the gods" has been a fine art, a delicate mixture of alchemy and science.

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Ice Cream There are many myths and stories as to the invention of ice cream: was it Marco Polo who brought it back from China (along with pasta)? Probably not, considering he most likely never visited China. The story of its popularity is however connected with the invention of technology to make it on an industrial scale, and to keep it cold once made. Before refrigeration techniques, food was frozen with the aid of ice, mixed with salt, which was either stored in ice houses or shipped from cold countries. But then at the end of the 19th century, both making and freezing it became easier, and together with the invention of the ice cream cone, made the product boom. Today, the United States is the absolute leader in terms of volume consumed, but the highest per head consumers are in New Zealand. Flavors you'd never have thought of and yet they're commercially available: 

Sorbets - Smoked Salmon, Tomato, Cucumber



Ice Creams - Garlic, Avocado, Sweet corn.

The ice cream cone is the most environmentally friendly form of packaging. A Syrian from Damascus, Ernest E Hamwi is credited with its invention. Apparently, during the 1904 St Louis World's Fair, his waffle booth was next to an ice cream vendor who ran short of dishes. Hamwi rolled a waffle to contain ice cream and the cone was born. 15

Prepared Foods Convenience foods — packaged soups, frozen meals, prepared sauces and flavorings —date back more than a century. With the Industrial Revolution came factory jobs for women and less time to prepare meals. The problem was so widespread that it became the object of intense study in 1882 by the Swiss Public Welfare Society, which offered a series of recommendations, including an increase in the consumption of vegetables. The Society commissioned Julius Maggi, a miller with a reputation as an inventive and capable businessman, to create a vegetable food product that would be quick to prepare and easy to digest. The results — two instant pea soups and an instant bean soup — helped launch one of the best known brands in the history of the food industry. By the turn of the century, Maggi & Company was producing not only powdered soups, but bouillon cubes, sauces and flavorings.

.Maggi merged with Nestlé in 1947. Buitoni, the authentic Italian brand, which has been producing pasta and sauces in Italy since 1827, became part of the Nestlé Group in 1988.

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Beverages Beverages like coffee, tea and health drinks contribute to about 30% of Nestle’s turnover. Beverage sales registered a 15% yoy growth during 2001. While about 14% of sales come from domestic market, exports contribute to about 16% of sales.

Nestle's Nescafe dominates the premium instant coffee segment. Nestle’s other coffee brand Sunrise has also been relaunched under the Nescafe franchise to leverage on the existing equity of the brand. Nestle has focused on expanding the domestic market through price cuts and product repositioning. However it has been losing share in the domestic market, where it has a 37% market share. Milo, a brown-malted beverage was launched in 1996. It has an estimated volume share of about 3% in the malted food drink segment. Nestle has launched non-carbonated cold beverages such as Nestea Iced Tea and Nescafe Frappe during 2001. Nestle is one of the largest coffee exporter in the country. Key export market is Russia, besides Hungary, Poland and Taiwan. Nestle has received an award for highest export of instant coffee and highest export of coffee to Russia and CIS for FY00 and FY01. Turnover contribution from exports registered a 17.5% volume growth in F12/01. Nescafe sales to Russia accounts for 80% (Rs2.5bn) of Nestlé’s Rs3bn export turnover.

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QUALITY Everyday, millions of people all over the world show their confidence in us by choosing Nestlé products. This confidence is based on our quality image and a reputation for high standards that has been built up over many years. Quality is the cornerstone of our success Every product on the shelf, every service and every customer contact helps to shape this image. A Nestlé brand name on a product is a promise to the customer that it is safe to consume, that it complies with all regulations and that it meets high standards of quality. Customers expect us to keep this promise every time. Under no circumstances will we compromise on the safety of a product and every effort must be made to avoid hazards to health. Likewise, compliance with all relevant laws and regulations is a must and is not negotiable. People, equipment and instruments are made available to ensure safety and conformity of Nestlé products at all times. The effort is worth it. Companies with huge quality standards make fewer mistakes, waste less time and money and are more productive. They also make higher profits. Quality is their most successful product. It is the key to their success, today and tomorrow. The customer comes first Nestle want to win and keep customers: distributors, supermarkets, hotels, shopkeepers and the final consumers. They have very different requirements. Trade customers expect excellent service, correct information and timely delivery. Consumers consider taste, appearance and price when they make their choice. Its task is to understand what customers want and respond to their expectations rapidly and effectively. We serve various groups of consumers and there is demand for products at different levels of perceived quality and price. All customers, however, expect value for their money – good quality at a reasonable price. 18

When offering quality to customers we also mean environmental quality. Nestlé shares

society’s

environmentally

concern sound

for

the

business

environment practices

and

is

throughout

committed the

to

world.

Customers are central to their business and they always respect their needs and preferences.

Competition Baby food and Instant coffee are categories where brand loyalties are very strong and Nestle is the market leader. HLL is a significant competitor to Nestle in instant coffee; while Heinz is the main competitor in the baby foods market. The market for culinary products, semi-processed foods such as noodles, ready mixes for Indian ethnic breakfast and sweets, is largely an urban market. HLL and Indo Nissin Foods are the main competitors in these product segments. Nestle has also achieved a significant 25% share in the chocolate/confectionery market. The company has recently expanded its dairy products portfolio to include, milk, curd and butter. The company also forayed into the bottled water segment with the launch of its Perrier brand in the premium mineral segment and Pure Life in the purified water segment.

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Quality is a competitive advantage We live in a competitive world and must never forget that their customers have a choice. If they are not satisfied with a Nestlé product, they will switch to another brand. Their goal, therefore, is to provide superior value in every product category and market sector in which we compete. The pursuit of highest quality at any price is no guarantee for success, nor is a single-minded cost-cutting approach. Lasting competitive advantage is gained from a balanced search for optimal value to customers, by simultaneous improvement of quality and reduction cost. Success can never be taken for granted. We must watch and learn from our competitors. If they do something better, we must improve our own performance. We can achieve competitive advantage through Quality. Quality is a joint effort Operating companies are fully responsible for maintaining agreed quality standards. Not only Production units, but also Marketing, Purchasing, Distribution and Sales have a vital role to play in providing quality to customers. This implies a

thorough

knowledge

of

the

products

and

services

we

offer.

Quality units at different levels of the organization provide specific support, promote quality awareness, assume guardianship and audit the system. Quality departments monitor operations against agreed standards and must intervene in case of non-conformity. Quality policy and principles, the mandatory standards and the recommended tools for implementation are laid down in the Nestlé Quality System which is applicable throughout the group. Further directions are given through instructions, norms and guidelines, often specific to a product. Our business products, such as raw material producers, packaging suppliers, contract manufacturers and distributors are expected to share our concern for Quality. They too must set up an adequate quality system, so as to meet our requirements consistently. The quality efforts must be shared by every function and department in the company as well as our business partners.

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Quality is made by people Adequate equipment, procedures and systems are needed to make Quality; so are involved and dedicated people. Each and every Nestlé employee must do his best to provide quality products and services. Training and teamwork are crucial to the successful implementation of high quality standards. Continuous training ensures that everyone understands his tasks and has the necessary skills to carry them out. Teamwork allows us to achieve results that are greater than the sum of individual efforts. We motivate employees by demonstrating management commitment to Quality, by setting challenging goals and by giving them responsibility and recognition. It is through employee involvement that goals and targets can be achieved in the shortest time. Quality must be a way of life for everyone in the company. Quality is action Quality is the result of deliberate action. It is the responsibility of senior managers to communicate the quality objectives and to provide the resources necessary for their implementation. It is then up to all employees to make Quality happen throughout the company. Progress is followed by listening to our customers and by measuring our performance. Shortcomings and mistakes must be analyzed and corrected. Problems must be anticipated and prevented before they occur. We also must identify and take advantage of opportunities.To stand still is to fall behind. So we must strive for continuous improvement in every area. It is through many small improvements as well as through major breakthroughs that we will achieve excellence. At Nestlé, Quality is our first priority. Let us practice it every day.

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Consumer Services At Nestlé, we are committed to offering consumers high-quality food products that are safe, tasty and affordable. The Nestlé Seal of Guarantee is a symbol of this commitment. We also believe in maintaining regular contact with our consumers. This applies both to how we present our products and to how we address our consumers' questions and concerns. When Henri Nestlé prepared his first boxes of infant formula for sale, he put his address on the packages so people would know where to go if they had questions. Today, our Consumer Relationship Panel with the words "Talk to Nestlé" expresses the same commitment.

This is why we have a worldwide Nestlé Consumer Services network devoted to caring for our consumers. Our people have expertise in a wide range of areas such as nutrition, food science, food safety and culinary expertise. They provide the prompt, efficient and high quality service that consumers expect from Nestlé. In addition, we teach them talk with consumers and above all, to listen. Listening helps us to understand what people want. Nestlé uses the insights gained from relationships with consumers to drive product development. At Nestlé, we care for our consumers because our success depends on meeting their needs and expectations. Through listening and understanding, we can make products that they will want to use all through their lives.

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FUTURE PROSPECTS Nestle is focused on product expansion and improvement of distribution efficiency. The Dairy business is being expanded and is expected to drive growth in the long run, although short-term profitability may be impacted in the investment stage. The company’s entry into the mineral water segment is a concern, as the segment is already overcrowded and the company faces stiff competition especially from the Cola manufacturers. Acquisition of an established brand could catapult Nestlé’s position in the segment. In categories like beverages, culinary products and chocolate confectionery, the company is looking at driving growth through launch of smaller SKU’s, thus enabling affordability to a wide section of the population.

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