To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Business Management Extended Essay

May 2021 Session

Topic: Marketing strategies of Nestle

Research Question

To what extent has the marketing strategies of Nestle contributed to its increase in global

market share and profitability?

EE Word Count: 3,910

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Contents

Introduction: .................................................................................................................................................................... 4
Background information: ................................................................................................................................................. 6
Scope of research: ............................................................................................................................................................ 7
Research Methodology: ................................................................................................................................................... 7
Analysis and discussion: ................................................................................................................................................... 8
Porter’s 5 forces: .......................................................................................................................................................... 9
Competitive rivalry - High: ..................................................................................................................................... 10
Potential of new entrants into the market - low: ................................................................................................... 10
Bargaining Power of suppliers-Low: ....................................................................................................................... 11
Bargaining Power of customers-High: .................................................................................................................... 11
Threat of substitutes-High: .................................................................................................................................... 12
STP (Segmenting, Targeting and Positioning) ............................................................................................................. 13
Market Segmentation: .......................................................................................................................................... 13
Geographic: ........................................................................................................................................................... 13
Demographic: ........................................................................................................................................................ 14
Target market: ...................................................................................................................................................... 14
Positioning: ........................................................................................................................................................... 15
BCG Matrix: ................................................................................................................................................................ 15
Stars: ..................................................................................................................................................................... 16
Question mark: ..................................................................................................................................................... 16
Cash cow: .............................................................................................................................................................. 16
Dog products: ........................................................................................................................................................ 17
Ansoff Matrix: ............................................................................................................................................................. 19
Market penetration: .............................................................................................................................................. 19
Product development: ........................................................................................................................................... 20
Market development: ........................................................................................................................................... 20
Diversification: ...................................................................................................................................................... 21
Marketing mix: ............................................................................................................................................................... 21
Product: ...................................................................................................................................................................... 21
Promotion: ................................................................................................................................................................. 22
Below-the line: ...................................................................................................................................................... 22
Above-the line: ...................................................................................................................................................... 22

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

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Digital marketing: .................................................................................................................................................. 23
Place: .......................................................................................................................................................................... 24
Price: .......................................................................................................................................................................... 25
Market share: ................................................................................................................................................................. 27
Ratio Analysis: ............................................................................................................................................................ 28
Gross profit margin: .............................................................................................................................................. 28
Net profit Margin: ................................................................................................................................................. 30
Return on capital employed: ................................................................................................................................. 32
Conclusion: ..................................................................................................................................................................... 34
Limitations: ................................................................................................................................................................. 34
Unresolved questions: ................................................................................................................................................ 34
Bibliography: .................................................................................................................................................................. 35

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Introduction:

Nestle is a fast-moving consumer goods sector (FMCG) multinational company whose headquarters are

situated in Switzerland.1 Its tagline is ‘Good food, Good life’. Nestle, through innovating the portfolio of its

brands and product differentiation successfully increase its sales2. The multinational company has focused

upon research and development and aimed at marketing through social media and advertisement3. Nestle has

also strengthened its brand image trough using innovative strategies to satisfy the needs and wants of the

customer having a similar cultural preference4. About 85% of the company’s product portfolio accounted for

leading market shares with an increase in sales growth by 9.6%5.

1
"Nestlé Worldwide." Nestlé Global, www.nestle.com/aboutus/globalpresence. Accessed 19 Oct. 2020
2
"Strategy." Nestlé Global, www.nestle.com/aboutus/strategy. Accessed 19 Oct. 2020.
3
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 19 Oct. 2020
4
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 19 Oct. 2020
5
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 19 Oct. 2020


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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

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6
Figure 1.1 Nestle’s
growth pattern

Nestle due to having a consumer-centric and market-oriented approach is very successful in striving customer

expectation and enjoys huge economies of scale.

6
"Nestlé India Limited Annual Report - 2019." Nestlé, Nestle, 2019, www.nestle.in/sites/g/files/pydnoa451/files/2020-
05/Nestle-India-Annual-Report-2019.pdf. Accessed 20 Oct. 2020.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Figure 1.1 (b) Nestle

better off in 2019

Nestle, through having a different approach to its consumers and the market, reportedly experienced steady

growth in sales. This essentially explains that Nestle’s market share increased. The aim of this research is to

identify how different marketing strategies helped Nestle boost its market share. Additionally, understand

the significance of effective marketing in increasing the market standing. Thus, extracted to the research

question To what extent has the marketing strategies of Nestle contributed to its increase in global market

share and profitability?

Background information:

Nestle was founded by Henri Nestle whose foundation took place in 1905 when his company merged with

Anglo swiss.8 Firstly, Henri invented his infant food. Nestle’s market is globally established and recognised

7
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 20 Oct. 2020.
8
"The Nestlé Company History." Nestlé Global, www.nestle.com/aboutus/history/nestle-company-history. Accessed
19 Oct. 2020.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

with operations in 187 countries worldwide with over 2000 brands.9 Their mission is to provide the most

delicious and healthiest food choices to its consumers.10

Scope of research:

The data that is used to understand Nestle’s marketing approach are mainly from secondary sources. This

consist of the company’s annual report, websites, reports and journals and the IB business management

textbook. Secondary data is crucial as the data is already available for me to analyse Nestle’s market success.

Having accesses to the company’s website and annual report increases the secondary data’s reliability as

holistic judgement about the company could be done.

Research Methodology:

First and foremost, the tool that would be used is ‘Porter’s 5 forces. With the intention of understanding the

competitive environment surrounding Nestle, the tool would be used.

Moving ahead STP (Segmentation, Targeting & positioning) analysis was used. This will help in

understanding how Nestle segmented and targeted its market

With a view to understanding the way Nestle increased its sales in 2019, so Ansoff Matrix will be used. The

tool can emphasize on the risk associated with growth strategies.

9
"About Us." Nestlé Global, www.nestle.com/aboutus. Accessed 19 Oct. 2020.
10
"Mission & Vision." Nestlé, www.nestle-esar.com/aboutus/missionvision. Accessed 19 Oct. 2020.



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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

A BCG Matrix will be prepared in order to understand the situation of Nestle’s product in terms of marker

share and market growth.

In order to understand how proficiently Nestle used four P’s of marketing to have achieved marketing success,

marketing mix analysis will be used

It is important to contemplate the financial aspect of Nestle, and therefore, so Ratio Analysis will be done

A Market share analysis will also be done to show the increase in market share.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

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Analysis and discussion:

Porter’s 5 forces:

Porter’s 5 forces use five industry forces to analyse the competitive environment in the company and its
11
profitability level. Companies like Nestle used this model to improve their efficiency and make effective

marketing strategies to boost their profit levels.

Figure 1.2 Porter’s 5 forces
elements

12

11
CHAPPELOW, JIM. "Porter's 5 Forces Definition." Investopedia, 22 Feb. 2020,
www.investopedia.com/terms/p/porter.asp. Accessed 20 Oct. 2020.
12
Visually, Sandra James, 21 Jan. visual.ly/community/Infographics/animals/porter%E2%80%99s-5-forces-model.
Accessed 20 Oct. 2020.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Competitive rivalry - High:

Nestle, therefore, faces high competition despite having 150 years of experience. Particularly, Kraft Foods,

P&G and Group Danone are Nestle’s strong competitors over the years. Despite this, Nestle in 2019 was

successfully able to differentiate its product from its rivals. Innovation and change in taste of one of their

chocolates ‘Milkybar’ were indeed unique13. The introduction of NESCAFE with providing competitive

pricing over its competitors helped Nestle sustain its sales growth rate14. Thus, spending on marketing of these

products through above-the-line promotion (advertisement) help Nestle increase its sales and sustain the

intense competition in the market.

Potential of new entrants into the market - low:

A company’s power would be significantly weakened if the barriers to entry are less. This will exert pressure

in the existing firm to increase its marketing activities.

Nestle’s threat by new entrants is low. Possibly, because the consumer food industry’s like Nestle are

established over the years and have built their customer base. Therefore, it makes it difficult for the new

industry to survive in the market. Since they are operating from decades, they have a better understanding of

market nature and possess the ability to reduce their average costs and offer customers at low prices15. Nestle

over time has focused upon adopting to changing consumer taste and preference and cater for their needs

through adapting different marketing strategies16.

13
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 19 Oct. 2020.
14
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 19 Oct. 2020.
15
Adamkasi. "Porter’s Five Forces Analysis (Porter Model) of Nestle|Porter Analysis." Porter Analysis, 9 Sept. 2017,
www.porteranalysis.com/porters-five-forces-analysis-porter-model-of-nestle/. Accessed 20 Oct. 2020.
16
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-
India-Annual-Report-2019.pdf. Accessed 19 Oct. 2020.


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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Bargaining Power of suppliers-Low:

Nestle has been able to maintain a healthy business relationship with its suppliers wherein they continued to

receive their support17. Moreover, nestle enjoys large market share which makes the suppliers offer them raw

materials at competitive pricing and receive the contract by Nestle. Since Nestle is a public limited company

and reaps the benefits of economies of scale, its scale of operation is large. Thus, this requires them to buy in

bulk quantities and is a benefit for the supplier receiving the contract. Hence, this reduces suppliers bargaining

power18. Nestle has as many as 4,600 suppliers and 1,700 distributors19.

Bargaining Power of customers-High:

Customers do have the strength to negotiate for cheaper prices. Particularly, this takes place when a business

has a narrower customer base. This reduces the profit margin of the business and at times their objective is

sales revenue maximisation.

Substitutes are available for the products that Nestle offers. Consequently, this increases customers power to

negotiate and reduce the revenue earned per unit. This is because customers of Nestle can easily switch to

buying from Kraft Foods or P&G without incurring any expenditure. Nestle, in order to develop brand loyalty,

comes up with innovative promotion like making a framework for the customers and focusing on them. In

2019, they did not have any customer complaints pending that shows Nestle’s operational efficiency and how

well the customers were satisfied20. Nestle came up with consumer app to indulge with customers and this

ensured prompt responses and deliveries leading to greater customer satisfaction21. Moreover, nestle

18
Adamkasi. "Porter’s Five Forces Analysis (Porter Model) of Nestle|Porter Analysis." Porter Analysis, 9 Sept. 2017,
www.porteranalysis.com/porters-five-forces-analysis-porter-model-of-nestle/. Accessed 20 Oct. 2020.
19
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-
India-Annual-Report-2019.pdf. Accessed 19 Oct. 2020.
20
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-
India-Annual-Report-2019.pdf. Accessed 19 Oct. 2020.
21
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-
India-Annual-Report-2019.pdf. Accessed 19 Oct. 2020.
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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

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constantly conducts after-sales feedback survey to gauge their satisfaction level and this marketing research

helps them in developing brand loyalty22.

Threat of substitutes-High:

Substitutes are when several businesses are selling a similar product in the marketplace. If the goods that a

business offers have no close substitutes, then the finance for the business could be increased by raising the

selling price of the good. On the other hand, if the product has close substitutes then it requires the business

to substantiate its products from rivals.

Products like baby food, pasteurised milk, coffee, Maggi and more have close substitutes23. For example,

Maggi competes with Yippee noodles. Given the fact, nestle was accused of having excessive lead and MSG24

in Maggi noodles lead to many dissatisfied customers who are health conscious and this led to a potential drop

in sales as many customers switched to consuming other variety of noodles. However, nestle with having

developed varieties of Maggi flavours were able to reduce the threat to substitutes. Also, the persuasive

advertisements increased the demand for the product and helped Nestle regain its sales.

Porter’s 5 forces proved advantages in determining the competitive environment in the industry in terms of

suppliers and customers power, threat by competitors and suppliers. The analysis explained that Nestle faces

an intense competition which drew the company’s attention in innovating their products. They have low threats

by suppliers while faces high rivalry and high threats from substitutes.

22
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-
India-Annual-Report-2019.pdf. Accessed 19 Oct. 2020.

23
Adamkasi. "Porter’s Five Forces Analysis (Porter Model) of Nestle|Porter Analysis." Porter Analysis, 9 Sept. 2017,
www.porteranalysis.com/porters-five-forces-analysis-porter-model-of-nestle/. Accessed 20 Oct. 2020.
24
Rautray, Samanwaya. "Maggi Controversy: SC Revives Govt's Case Against Nestle India in NCDRC." The
Economic Times, 3 Jan. 2019, economictimes.indiatimes.com/industry/cons-products/food/supreme-court-revives-
governments-case-in-ncdrc-against-nestle-india/articleshow/67363564.cms?from=mdr. Accessed 20 Oct. 2020.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

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STP (Segmenting, Targeting and Positioning)

STP is an effective tool in revising the marketing plan and strategies of a business. It makes businesses shift

from product-centric approach to customer-centric approach and allows them to segment the market in various

groups25. Additionally, target them and to cater to their needs and wants accordingly, adjust the position of

their products.

Market Segmentation:

It is the process of identifying the groups of people in the market on the basis of demographic, geographic and

psychographic factors26. This provides fruitful results as the marketing strategies could be narrowed down to

the specific requirements of a particular group. This can ensure better customer understanding and ensuring

customers’ needs are met.

Geographic:

Geographic factors require businesses to consider the changes in terms of consumer taste and preference in

different parts of the world.

25
"STP Marketing: Segmentation, Targeting & Positioning Analysis." Luth Research, 12 Feb. 2020,
luthresearch.com/stp-marketing-segmentation-targeting-positioning-
analysis/#:~:text=STP%20marketing%20stands%20for%20segmentation,specific%20and%20actionable%20marketin
g%20strategy. Accessed 20 Oct. 2020.
26
"STP Marketing: Segmentation, Targeting & Positioning Analysis." Luth Research, 12 Feb. 2020,
luthresearch.com/stp-marketing-segmentation-targeting-positioning-
analysis/#:~:text=STP%20marketing%20stands%20for%20segmentation,specific%20and%20actionable%20marketin
g%20strategy. Accessed 20 Oct. 2020.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Nestle in Singapore segmented the Nescafe Ice as it accounts for seasonal changes27. This is a type of

innovation wherein the consumers can consume the coffee with ice in it during the warm season. Different

countries have different cultures which Nestle takes into account.

Demographic:

Demographic factors consist of age, income, occupation that’s taken into account.

Baby products like Lactogen, Cerelac and Milo are only aimed at children. However, products like coffee are

segmented for adults28. Nestle has come up with organic cereals under Cerelac that ensure taste and safety29.

Nestle has been enjoying greater market share in these products due to market segmentation.

Target market:

A target market involves businesses targeting a particular set of potential customers whom they want to sell

their goods. Targeting the market provides focus on marketing campaigns for the business and ensures

effective promotion and sales.

Nestle targets upper and middle upper-class people for brands like Milo as they tend to be expensive30. This

targeting approach allows them to have a differentiated or concentrated approach to the market. Having

persuasive promotion for this product through targeting nestle has declared Milo to be the world’s number 1

coca-malt beverage31.

27 "NESTLE – GOOD FOOD GOOD LIFE." T2 2016 MPK732 MARKETING MANAGEMENT (CLUSTER B),
8 Aug. 2016, mpk732t22016clusterb.wordpress.com/2016/08/08/nestle-good-food-good-life-2/. Accessed
20 Oct. 2020.

28
"Market Segmentation." Nestle, 2 Sept. 2017, nestleblogcom.wordpress.com/2017/09/02/market-segmentation/.
Accessed 20 Oct. 2020.
29
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 20 Oct. 2020.
30
Kabii, David. "Nestle Market Analysis and Marketing Strategy." Medium, 22 Nov. 2018,
medium.com/@david.kabii/nestle-market-analysis-and-marketing-strategy-8bd2ffbd8acb. Accessed 20 Oct. 2020.
31
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 19 Oct. 2020.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Positioning:

Market positioning is done with the aim to attract potential customers towards the organisation and strengthen

their brand image32. With the view, to make customers aware of the existence of the enterprise market

positioning is done to build a customer base.

STP analysis helped in understanding how Nestle distributed its marketing focus on different groups. Doing

this assisted Nestle in focusing on satisfying the needs and wants of a particular target market and accordingly

opt for the most cost-effective marketing method. If the segmentation and targeting are done accurately it

saves unnecessary expenditures on market.

Segmenting, targeting and positioning explained how well Nestle’s market is segmented and target that allows

them to focus on specific needs and wants of a particular group and satisfy them to earn profits.

BCG Matrix:

BCG Matrix by Boston Consulting group is a tool which aids in long-term strategic planning and helps

businesses consider growth opportunities and assesses the risk factor.

32
Corporate Finance Institute. "Market Positioning - Creating an Effective Positioning Strategy." Corporate Finance
Institute, 5 Nov. 2019, corporatefinanceinstitute.com/resources/knowledge/strategy/market-positioning/. Accessed
20 Oct. 2020.


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Figure 1.3 BCG

Matrix for Nestle

Stars:

Nestle, in baby products like Lactogen and Cerelac is enjoying market share of 96.5%33. Nestle provides best

and healthiest nutritious meals for baby which leads to greater customer satisfaction34.

Question mark:

Nestle has faced low market share despite the saturated market growth for pet products. Their brand ‘Purina’

does not enjoy the dominance of market due to having relatively less market share35. It is important that Nestle

apply effective promotional strategy to increase the sales of the product and do sampling and testing in order

to understand the customer need and wants. Cash cow:

33
"Nestlé India 29th Financial Analysts & Institutional Investors Meet." Nestlé, 9 Aug. 2019,
www.nestle.in/sites/g/files/pydnoa451/files/2019-08/Nestle-India-Analysts-Meet-Presentations-09-08-19.pdf. Accessed
20 Oct. 2020.
34
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 19 Oct. 2020.
35
Kabii, David. "Nestle Market Analysis and Marketing Strategy." Medium, 22 Nov. 2018,
medium.com/@david.kabii/nestle-market-analysis-and-marketing-strategy-8bd2ffbd8acb. Accessed 20 Oct. 2020.



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and profitability?

Although Nestle’s Nescafe has a market share of 50.5%36, it has low market growth37. Nespresso is a similar

brand to this as both are coffee brands. Nespresso has been a star as consumers taste and preference is in

favour of Nespresso as compared to Nescafe.

Dog products:

Nestle’s water bottles have observed a fall in sales over the years. Brands like Acqua Panna, Vittel and

Arrowhead water have very less brand recognition. Bisleri, Qua and Acquafina are some of the brands

dominating in the market.

36
"Nestlé India 29th Financial Analysts & Institutional Investors Meet." Nestlé, 9 Aug. 2019,
www.nestle.in/sites/g/files/pydnoa451/files/2019-08/Nestle-India-Analysts-Meet-Presentations-09-08-19.pdf. Accessed
20 Oct. 2020
37
Kabii, David. "Nestle Market Analysis and Marketing Strategy." Medium, 22 Nov. 2018,
medium.com/@david.kabii/nestle-market-analysis-and-marketing-strategy-8bd2ffbd8acb. Accessed 20 Oct. 2020.




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38

Figure 1.4 Sales of water

bottle by nestle

BCG Matrix, particularly was important in understanding which brands of Nestle have high market share. For

products lying in problem child(pet products) or dog’s(water bottles) category are the ones which requires

immediate attention by the company.

38
"Sales of Nestlé Waters Worldwide by Region 2019." Statista, www.statista.com/statistics/268906/sales-of-nestle-
waters-worldwide-by-region/. Accessed 21 Oct. 2020.


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Ansoff Matrix:

Ansoff matrix is an analytical decision-making tool which shows the risk associated with investing upon each

choice. It is a useful tool in understanding whether to go for investment or not.

39

Figure 1.5 Ansoff matrix

for Nestle

Market penetration:

It is a low-risk growth strategy wherein the existing products are sold in the existing market. Since the product

would already be successful in the market with customer making repeat purchases the chances of loss is

mitigated.

39
www.mindtools.com/media/Diagrams/Ansoff-Matrix-1-NEW.jpg. Accessed 21 Oct. 2020.
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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Nestle’s baby products have shown a rapid market growth as due to being nutritious and healthy. Nestle, has

a market share of 67.4%40 in 2018 for Lactogen and a market share of 66.6%41 in 2019. Had Nestle supplied

more of these products with effective promotional strategies using above-the line and below-the line their

market share wouldn’t have fallen. Additionally, penetrating deep into the market would have increased the

sales for the product.

Product development:

This is a medium-risk growth strategy that inculcates developing new and innovative products in the existing

the market.

Japan is one of the countries the Nestle operates in out of the 187 countries. Nestle, launched pink KitKat in

Japan to make it appealing to their young target audience42. Nestle’s innovation in the flavour along with

commercialising it through websites and YouTube helped increase sales for the product.

Market development:

This is also a medium-risk growth strategy that involves selling existing products.

Nestle has variations in Maggi offered to Pakistan and India and this is not being sold in US43. Thus, with

applying product extension strategies and doing modifications in the product in terms of packaging and design

Nestle can sell to US consumers and increase profitability.

40
"Nestlé India 29th Financial Analysts & Institutional Investors Meet." Nestlé, 9 Aug. 2019,
www.nestle.in/sites/g/files/pydnoa451/files/2019-08/Nestle-India-Analysts-Meet-Presentations-09-08-19.pdf. Accessed
20 Oct. 2020
41
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 20 Oct. 2020.

42
Fleming, Molly. "Nestlé Launches Pink KitKat and Lidl Slows US Plans: International Round-up." Marketing Week,
18 Jan. 2018, www.marketingweek.com/nestle-japan-lidl-abandons-us-expansion-international-round-up/. Accessed
21 Oct. 2020.
43
---. "Ansoff Matrix of Nestle." Ansoff Matrix, 5 Jan. 2020, ansoffs.com/ansoff-matrix-of-
nestle/#:~:text=In%202018%2C%20the%20company%20earned,product%20or%20launches%20new%20products.
Accessed 21 Oct. 2020.


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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

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Diversification:

Diversification is the riskiest growth strategy amongst all as it involves selling new product in new market.

Nestle has a strong and diversified product portfolio which allows nestle to make their assets more liquid with

generation of sales.

Ansoff matrix emphasized on the risk associated with going for an option. It is important for a multi-national

business like Nestle to penetrate and develop in the market. Alongside, spread the risk through diversification.

The tool explained how choosing for those strategies help Nestle increase its sales and eventually market

share. Increased its product portfolio 1-2 lines

Marketing mix:
A marketing mix comprises of place, price, promotion and product which must be strategized by businesses

in order to ensure brand recognition and market success.

Product:
Product refers to the tangible or intangible products being market to suit the needs and wants of the potential

customers. Nestle, being a fast-moving consumer goods sector widely sells consumer goods.

Nestle have several bands like infant cereals, Lactogen, Nestle everyday, Maggi noodles, chocolates and

confectionary, Beverages and nutrition44. About 71 innovations over the years has been pivotal in ensuring

that 85% of Nestle’s product portfolio has leading market shares45. Most of its products like Lactogen can be

seen at the saturation stage if the product-life cycle. Milky bar, also reached its saturation stage and in order

44
"Nestlé India 29th Financial Analysts & Institutional Investors Meet." Nestlé, 9 Aug. 2020,
www.nestle.in/sites/g/files/pydnoa451/files/2019-08/Nestle-India-Analysts-Meet-Presentations-09-08-19.pdf. Accessed
28 Oct. 2020.
45
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 20 Oct. 2020.
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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

to prevent the decline in sales Nestle developed a new ‘Munch crisp-pop’ which has taste of caramel

popcorn46.

Promotion:
Promotion refers to attracting potential customers to make purchases from the business and strengthen its

brand image with a view to become global market leader.

Below-the line:
Below-the line promotion involves have no means of mass-media communication and are relatively

inexpensive to carry out.

Packaging is a form of advertisement that is done with the intention to persuade and attract customers to

purchase the good. Nestle has transformed to mono material packaging designed to cater the needs and wants

of current generation by not jeopardising the needs and wants of future generation. The new form of packaging

is environmentally friendly already in use for Maggi Noodles and Munch by Nestle47. This has strengthened

company’s corporate image which increased the chances of Nestle applying for government grants.

Above-the line:
Above-the line promotion involves use of mass-media communications such as television, radio and

magazines to reach out to the target market.

Advertising through television ensures that the advert is reached out to the wider and global audience that

helps built a stronger customer base. Nestle has done advertisements48 of their several brands which would

have assisted them in sales growth of those products.

46
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 20 Oct. 2020.

47
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 20 Oct. 2020.
48
"NESTLÉ Ad Campaigns." Nestlé, www.nestle.in/brands/tvc. Accessed 28 Oct. 2020.


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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Digital marketing:
Digital marketing refers to the use of internet mediums such as e-commerce and websites to promote their

goods and services.

Through the help of e-commerce business Nestle were successfully able to increase their revenue over the

years. E-commerce was an excellent opportunity for growth as due to collaboration with various online selling

platforms nestle were able to gaze some revenue out of it.

49

Figure 1.6 E-commerce growth of

Nestle

Website and YouTube advertisements50 has proved beneficial to Nestle as it has increase customer

conveniency since websites and YouTube videos can be accessed by anyone, anywhere and at any time.

Additionally, nestle is making their presence in social media platforms like Facebook and Instagram.

49
Nestlé, www.nestle.in/sites/g/files/pydnoa451/files/2019-08/Nestle-India-Analysts-Meet-Presentations-09-08-19.pdf.
Accessed 28 Oct. 2020.
50
"Our Websites and Social Media Presence." Nestlé, Nestle, www.nestle.in/aboutus/websites-social-media. Accessed
28 Oct. 2020.
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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

51

Figure 1.7 Social media

marketing by nestle (Instagram)

Through use of social media platforms Nestle was successful in making customers aware of the existence of

their products and hence, this resulted in better brand recognition.

Place:
Place refers to the point of sale or the distribution channels used to get the products from producers to

consumers.

Nestle has around 29 distribution channels with around 2600+ wholesalers52. Nestle also sells to retailers like

supermarkets and having a channel specific53 to nestles product attracts customers to purchase those products.

With the help of wholesalers and re-distributors nestle reaches out to the rural community54 which widens

their customer base. In order to increase their brand awareness, they conduct marketing activities such as

51
"Nestle." Instagram, www.instagram.com/nestle/?hl=en. Accessed 28 Oct. 2020.
52
Nestlé, www.nestle.in/sites/g/files/pydnoa451/files/2019-08/Nestle-India-Analysts-Meet-Presentations-09-08-19.pdf.
Accessed 28 Oct. 2020.
53
Nestlé, www.nestle.in/sites/g/files/pydnoa451/files/2019-08/Nestle-India-Analysts-Meet-Presentations-09-08-19.pdf.
Accessed 28 Oct. 2020.
54
Nestlé, www.nestle.in/sites/g/files/pydnoa451/files/2019-08/Nestle-India-Analysts-Meet-Presentations-09-08-19.pdf.
Accessed 28 Oct. 2020.


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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

village Haat activity55. Having review on a daily basis at the distributors point and building partnership with

distributors56 help Nestle ensure that the delivery of the products is prompt and efficient.

Figure 1.8 channel specific product by

nestle to attract customers

Price:
Price refers to the cost price of a good paid by customers to the business.

Nestle follows competitive pricing57 for products like Maggi. Since Maggi has very close substitutes like

Yippee and Wai-Wai Nestle ensured they are offering competitive pricing. Nestle also follows price

skimming58 for Nescafe coffee which are charged at a higher price than compared to its rivals. It is a smart

55
Nestlé, www.nestle.in/sites/g/files/pydnoa451/files/2019-08/Nestle-India-Analysts-Meet-Presentations-09-08-19.pdf.
Accessed 28 Oct. 2020.
56
Nestlé, www.nestle.in/sites/g/files/pydnoa451/files/2019-08/Nestle-India-Analysts-Meet-Presentations-09-08-19.pdf.
Accessed 28 Oct. 2020.
57
Heartofcodes. "Marketing Mix of Nestle | 4Ps of Marketing Mix of Nestle." Heart Of Codes, 5 Aug. 2018,
heartofcodes.com/marketing-mix-of-nestle/. Accessed 28 Oct. 2020.
58
Heartofcodes. "Marketing Mix of Nestle | 4Ps of Marketing Mix of Nestle." Heart Of Codes, 5 Aug. 2018,
heartofcodes.com/marketing-mix-of-nestle/. Accessed 28 Oct. 2020.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

pricing decision since these products are of premium quality and can secure a premium price for the same.

For certain products Nestle follows psychological pricing which makes customers feel they are receiving the

goods at comparatively lower price. The pricing strategy is what Nestle focuses upon a lot as it needs to

provide competitive pricing without incurring a loss to its customers such that they don’t switch over to buying

from its competitors.

59

Figure 1.9 Phycological pricing

by Nestle

Marketing mix does allow Nestle to focus upon marketing planning with a view to strengthen the brand image

and increase customer retention.

59
"Buy Nestle Chocolates Online for Rs 199 Each." The 199 Store, THE 199 STORE,
the199store.com/collections/buy-nestle-chocolates-online. Accessed 28 Oct. 2020.
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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Market share:
Market share is the proportion of a business’s sales revenue of the total sales of the industry. It is calculated

by:

𝐹𝑖𝑟𝑚. 𝑠 𝑠𝑎𝑙𝑒𝑠 𝑟𝑒𝑣𝑒𝑛𝑢𝑒

𝑀𝑎𝑟𝑘𝑒𝑡 𝑠ℎ𝑎𝑟𝑒 = ×100
𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑦 . 𝑠𝑎𝑙𝑒𝑠 𝑟𝑒𝑣𝑒𝑛𝑢𝑒

Market share tends to have positive co-relation with profits of a company and allows them to dominate in the

market. Therefore, many profit-seeking companies aim for becoming the market leader.

60

Figure 2.0 Market share for

various FMCG MNC’s

60
"Top FMCG Companies Worldwide." Statista, 4 July 2019, www.statista.com/statistics/260963/leading-fmcg-
companies-worldwide-based-on-sales/. Accessed 28 Oct. 2020.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Nestle was enjoying the largest market share in the globe compare to other FMCG sectors. They accounted

for nearly 93400 million U.S. dollars sales compare to its competitors. This explains that nestle received

highest market share. The fact that Nestle has 85% of its product portfolio with leading market share and

Cerelac having 96.5%61 market share makes Nestle a strong market leader.

Ratio Analysis:

Ratio analysis is a quantitative decision-making tool which helps determine the financial performance of a

business62. It is important to have a favourable profitability and efficiency ratio in order to ensure the company

is succeeding and is financially stable.

Gross profit margin:

Gross profit margin exemplifies the gross profit as a percentage of sales. However, it does not take into

account the cost contribution towards the cost of production.

𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡
𝐺𝑃𝑀 = 63 ×100
𝑠𝑎𝑙𝑒𝑠 𝑟𝑒𝑣𝑒𝑛𝑢𝑒

61
Nestlé, www.nestle.in/sites/g/files/pydnoa451/files/2019-08/Nestle-India-Analysts-Meet-Presentations-09-08-19.pdf.
Accessed 28 Oct. 2020.
62
Hoang, Paul. "3.5 Profitability and ratio analysis." Business and Management, 3rd ed., 2014, p. 285.
63
Hoang, Paul. "3.5 Profitability and ratio analysis." Business and Management, 3rd ed., 2014, p. 287.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

GPM OF NESTLE:

2019 2018 2017 2016 2015

Sales Revenue 122,952.7 112,162.3 101,351.1 94,917.2 84,304.4

Cost of goods sold

1. Cost of 51,503.0 43,656.8 42,316.6 37,750.9 33,588.7

materials

consumed

2. Purchases 2,178.1 2,305.6 1,747.6 1,153.8 980.7

of stock-in-

trade

Cost of goods sold 53681.1 45962.4 44064.2 38904.7 34569.4

(1. + 2.)

Gross profit 69271.6 66199.9 57286.9 56012.5 49735

(Sales revenue –

cost of goods sold)

Gross profit 56.34% 59.02% 56.52% 59.01% 58.9%

margin

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Nestle’s gross profit has been increasing then staying constant and again increase. Since Neste’s scale of

operations enlarged over the years, the need to increase the size of production increased. Nestle in 2019 have

56.34% which essentially means that for every rupee 100 million of sales, rupees 56.34 million is the gross

profit and another rupee 43.33 million is left and being accounted for cost of production.

Net profit Margin:

The net profit margin is a profitability ratio which shows the percentage by which the sales turnover into

profit. Net profit margin is a better measure of a businesses’ profitability since it takes into account paying of

both direct and indirect taxes.

𝒑𝒓𝒐𝒇𝒊𝒕 𝒃𝒆𝒇𝒐𝒓𝒆 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒂𝒏𝒅 𝒕𝒂𝒙

𝑵𝑷𝑴 = ×𝟏𝟎𝟎64
𝒔𝒂𝒍𝒆𝒔 𝒓𝒆𝒗𝒆𝒏𝒖𝒆

64
Hoang, Paul. "3.5 Profitability and ratio analysis." Business and Management, 3rd ed., 2014, p. 287.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

NPM OF NESTLE:

201965 201866 201767 201668 201569

Sales Revenue 122,952.7 112,162.3 101,351.1 94,917.2 84,304.4

Net profit 26,749.9 24,289.5 18,393.0 14,415.4 8,136.3

before interest

and tax

Net profit 21.8% 21.7% 18.14% 15.18% 9.7%

Margin

Nestle’s net profit margin has improved constantly over the years and experienced a steady growth in 2015

(9.7%) to 2019 (21.8%). This means nestle due to effective promotional strategies were successful in raising

profit for the company.

65
Nestlé India Limited Annual Report - 2019. 2019. www.nestle.in/sites/g/files/pydnoa451/files/2020-05/Nestle-India-
Annual-Report-2019.pdf. Accessed 20 Oct. 2020.
66
Building For a Healthier Future. Nestle, 2018.
www.nestle.in/sites/g/files/pydnoa451/files/investors/stockandfinancials/documents/annual_report/nestle-india-annual-
report-final-2018.pdf. Accessed 21 Oct. 2020.
67
Nestlé India Limited • Annual Report 2017. Nestle, 2020.
www.nestle.in/sites/g/files/pydnoa451/files/investors/stockandfinancials/documents/annual_report/nestle-india-annual-
report-2017.pdf. Accessed 20 Oct. 2020.
68
"Nestlé India Limited • Annual Report 2016." Nestle, 2016.
www.nestle.in/sites/g/files/pydnoa451/files/investors/stockandfinancials/documents/annual_report/nestle-india-annual-
report-2016.pdf. Accessed 21 Oct. 2020.
69
"Nestlé India Limited • Annual Report 2016." Nestle, 2016.
www.nestle.in/sites/g/files/pydnoa451/files/investors/stockandfinancials/documents/annual_report/nestle-india-annual-
report-2016.pdf. Accessed 21 Oct. 2020.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Return on capital employed:

Return on capital employed is an efficiency ratio that compares the amount of capital invested by the company

and the returns from it. It is preferable to have a higher return on capital employed rate since more money

would have been left as profit.

𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑡𝑎𝑥

𝑅𝑂𝐶𝐸 = ×100
𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑒𝑑

ROCE OF NESTLE:

2019 2018 2017 2016 2015

Sales Revenue 122,952.7 112,162.3 101,351.1 94,917.2 84,304.4

Net profit before 26,749.9 24,289.5 18,393.0 14,415.4 8,136.3

interest and tax

Equity 19,322.6 36,737.4 34,205.9 32,823.3 28,178.4

Non-current 29,784.3 25,593.9 24,492.9 21,613.8 17,868.9

liabilities

Capital 49106.9 62331.3 58698.8 54437.1 46047.3

employed

(Equity + Non-

current

liabilities)

ROCE 54.5% 39.0% 31.3% 26.5% 17.7%

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Nestle were successful in making sure that their profit generated in 20189 were higher than past years. In

2019, for every rupee 100 million sales Nestle rupee 54.5 million is the profit generated which is higher than

any other year. Due to application of product extension strategy and innovating the taste and quality of the

product helped Nestle increase sales. Therefore, in 2019 Nestle’s customer base was strengthened which led

to an increase in 𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑡𝑎𝑥 for Nestle.

Ratio analysis was useful in understanding how Nestle’s financial stability changed over the years. It has

become more worthwhile from 2015 to 2019.

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 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

Conclusion:

Through the analysis of tools, it could be said that Nestle has achieved higher market standing in 2019

compared to other years. This shows how successful Nestle’s marketing was that ensure a strong customer

retention to the company. This is important as it’s an excellent source for generating future revenue. Porter’s

5 force successfully explained the need to tackle the intense competition by substantiating its products from

rival. On the other hand, STP analysis signified the importance of segmenting and targeting the market. This

allowed Nestle to save time and cost for carrying out their marketing activities. BCG matrix, therefore, helped

Nestle take corrective measures for the products that has relatively low market share and market growth.

Ansoff matrix was fruitful too in determining the need to develop new products. Ratio analysis was important

in order to judge their financial performance. Even though their non-current liabilities and borrowings were

high in 2019, their profit margin and return on capital employed remained highest amongst all years. This

explained how well the operations and financers are making Nestle’s marketing campaign cost-effective and

assist in increasing market share. They are a tough competition to other rivals and their unique marketing

strategies such as adapting to changing customer tastes, sampling, feedback survey, product extension

strategies contributed to the growth in sales of the company.

Limitations:

• Since the essay wholly relies on the secondary data it reduces the scope of analysing as segmentation,

target and positioning lacked depth in terms of analysing. Had primary data be consolidated the

analysis would have been better.

• The study solely focuses upon the marketing and hence, ignores the relation of marketing with HR and

operations.

Unresolved questions:

• Did Nestlé’s brand image got negatively affected after the Maggi fiasco? 

34 | P a g e

 To what extent has the marketing strategies of Nestle contributed to its increase in global market share

and profitability?

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