Good Food, Good Life
Presented by:
Tran Nguyen Hung
Hoang La Phuong Hien
FEBRINA HAMBALAH
M977Z220
M977Z221
M987Z248
Overview
• Introduction
• Case Analysis
• Questions and Answers
Introduction
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Type: Public
Founded: 1866
HQ: Vevey, Switzerland
Key people: Henri Nestle (Founder)
Products: Chocolate, water, dairy products
Revenue: 88.6 billion USD
Net Income: 4.9 billion USD
Employees: 305,000
Industry Analysis
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Very strong globally
Many different brands
Compete in several markets
Chocolate, dairy products, food, water, baby
food and pet food
Global market
• Nestle leads the global milk market with a 3.2%
share
• Leads the global ice cream market with a 17%
share
• Leader of bottled water in North America, Europe,
Middle East-Africa
• Ranks third in the soft drinks global market with
3.4 percent in total sales
Did you know....
• Nestle invest around CHF 1.5 billion in Research &
Development every year.
• Nestle markets its products in 130 countries across
the world
• Nestle manufactures around 10,000 different
products and employs 25,000 people
• Nestle sells over a billion products every day
Italian Culture on Coffee Consumption
• Coffee is so much a part of Italian culture that the idea of not
drinking it is as foreign as the idea of having to explain its rituals.
These rituals are set in stone and not always easy for outsiders to
understand.
• For an Italian, coffee is an utter necessity. It is considered
essential and without its presence all aspect of civilization will fall
to pieces. Being stuck in a forsaken land mass situated across the
Pacific does not change that fact. You may take away their mobile
phones, you may take away their pasta or pizza, even their
privacy, but not their coffee.
THE COMPETITORS
Nescafe Italy
Lavazza SpA of Turin
The coffee market leader and the only
company to offer a complete product
line.
• Coffee Shop
Lavazza SpA of Turin
• Coffee Machine
Lavazza SpA of Turin
• At Home
Blend Coffee
Lavazza
Blue
Lavazza SpA of Turin
• At Work
• Foodservice Outlets
Segafredo-Zanetti SpA of Bologna
• Segafredo Zanetti is the Italian leading espresso
company worldwide. It has a huge number of clients in
all distribution channels, from bars to restaurants,
catering and large-scale distribution.
Crippa & Berger SpA of Milan
This was the first company to produce decaffeinated
coffee in Italy. The firm competed directly with Nestle
through its own brand of instant coffee, Faemino.
But its particular strength lay in
its decaffeinated coffee Hag
(65% market share, versus 27%
of Lavazza decaffeinated brand.)
Crippa & Berger’s brands were:
Gah (a new product featuring low
caffeine and low fat), Faemino
and Hag.
Procter & Gamble Italia
• The Italian subsidiary of the Cincinnati-based
multinational, with its Splendid brand, benefited from
strong distribution penetration due to the broad range of
the group’s grocery products. P&G promoted the
Splendid brand by sponsoring television programmes
with high viewer ratings (e.g. the most successful Italian
variety show, Fantastico, in 1988.)
• The positioning was different for the different products:
Splendid Oro and Classic were presented as the coffee
used in the most prestigious restaurants; the other
product in the line was targeted, through aggressive
promotion, to the large family segment.
Illy Caffé of Trieste
• This firm produced one blend of normal coffee
which seven different which seven different
degrees of roasting. Illy Caffé was well known for
its excellent quality and a series of decaffeinated
and low-caffeine coffees (Mite).
Café do Brazil
The company had a strong brand in Caffe
Kimbo, favoured especially in Southern Italy
where consumers enjoyed its strong, and bitter
flavour. Kimbo coffee had rapidly gained in
market share as a result of competitive prices
coupled to a strong advertising effort.
MARKETING MIX
4P
PRODUCTS
• Whole Coffee Beans
1. Coffee Houses
2. Restaurants
• Ground Coffee (Home)
1. 200 and 250 gram bags(49% in family
segment)
2. 400 and 500 gram bags (38%)
3. 500 gram tins (4%),
4. 1 kg bags
PRICES
Suggested Retailer selling Price:
7,500 lire /125 gram Nescafe
Instant Coffee was generally retailed to the public at
60,000 lira /kilogram, against 13,000 lire average
for normal coffee.
The price to wholesalers was 85% of the retail price,
and the variable manufacturing costs amounted to
37.5% of the retail price. Sales and distribution costs
represented 15,3%, and all of this ensured a high
operating profit of about 32,3%.
PLACE
• Food Channel, Modern Outlets, Cash and
Carry, Street Vendors
• Coffee-house Restaurant, Hotel Channels,
Coin Operated Coffee Machines, Public
Places
PROMOTION
• Using TV ads from France: The Train 1981
SWOT ANALYSIS
Strengths
- Broad geographic coverage – Nestlé is the leading player in hot drinks in every
regional market, except North America (in which it ranked sixth in 2007), insulating it
against downturns in particular markets.
- Global leader in instant coffee – the company has a clear global lead in the important
coffee sector, which is growing significantly in emerging markets, accounting for 21%
of global value in 2007.
- World number one in other hot drinks – Nestlé's portfolio of chocolate and malt milk
products have established it as the leading player in global other hot drinks, in which it
held a 23% share in 2007.
- Strong brand portfolio – the company's hot drinks portfolio includes a number of
high-recognition brands supported by considerable marketing and research and
development resources, including Nescafé, Nesquik and Milo.
- High levels of research and development expenditure – Nestlé's high levels of
investment in research and development offer significant opportunities to develop its
operations beyond the Nestlé Nutrition division, including hot drinks.
- Solid financial base – Nestlé has a number of cost-savings programmes (notably
GLOBE) in place and as a result, has been able to place itself in a position where it is
able to afford sizeable investment in brand development.
- Capacity to pass on costs – Nestlé's size and marketing power enable it to pass on a
significant proportion of the rising costs resulting from increasing coffee and cocoa
prices to retailers and consumers. Moreover, the economies of scale and synergies
available to the company increase its capacity to make internal cost savings to offset
the remainder of the increases.
SWOT ANALYSIS
Weaknesses
- Reliance on mass market – the mass-market positioning of Nestlé's core hot
drinks brand, Nescafé, presents significant difficulties in terms of tapping
into the growing demand for premium coffee products.
- Limited presence in tea – Nestlé has developed only a minimal presence in
tea, a sector which is benefiting notably from the rise in consumer healthconsciousness and would therefore seem to fit with the company's efforts to
reposition itself as a health-orientated manufacturer.
- Increasing bias towards low-margin products – the relatively strong growth
registered by emerging markets, where the company is largely represented by
lower margin brands, is negatively impacting Nestlé's beverages' operating
margin. Meanwhile, higher margin Western European markets are being hit
by challenging trading conditions.
- Bias towards caffeine-based products – Nestlé's hot drinks portfolio is
biased towards products containing caffeine, a substance which has gained a
negative image amongst many health-conscious consumers.
- Negative ethical image – Nestlé has received considerable negative
publicity for its infant formula operations in emerging markets, which may
hamper its efforts to target the trend towards ethical consumerism in markets
such as the UK.
SWOT ANALYSIS
Opportunities
- Strong growth forecast in Asia-Pacific – Euromonitor
International forecasts that Asia-Pacific will be the fastest
growing market for hot drinks over the 2007-2012 period. As
Nestlé's largest regional market, Asia-Pacific therefore presents
significant opportunities for the company in spite of poor
conditions in major Western European markets.
- The premium trend – while the mass-market positioning of
Nescafé is an obstacle, the growing demand for premium coffee
products is creating opportunities for the company to generate
growth in mature markets through the development of brands
and extensions, such as Nespresso and Nescafé Dolce Gusto.
SWOT ANALYSIS
Opportunities
- The health trend – while coffee has not received the positive health-related
publicity of tea, its image became less resolutely unhealthy in recent years,
with suggestions that it can help to prevent various conditions, including
Parkinson's disease. Moreover, the company's repositioning and substantial
research and development infrastructure place it in a strong position to
develop health-orientated new products.
- Ethical consumerism – fairtrade products are growing strongly in hot drinks
markets such as the UK, offering a potentially important way to counter
maturity in developed regions.
- Cross-branding – Nestlé's diversified packaged food and beverage portfolio
offers it the opportunity to develop brands from other categories in hot
drinks. Notably, it could further develop its confectionery brands in other hot
drinks along the lines of existing products such as Aero Hot Chocolate.
SWOT ANALYSIS
Threats
- Sluggish prospects in developed markets – market maturity and aggressive
competition amongst retailers are set to constrain hot drinks growth severely
in major developed markets during the forecast period.
- Coffee machine competition – Nestlé's efforts to attract younger consumers
and tap into the growing demand for premium coffee in developed markets
with the introduction of the Nespresso and Nescafé Dolce Gusto coffee
systems could come under threat from the development of rival cheaper
models.
- Rising costs – increasing transport and raw material costs, mainly relating
to rising bean, oil and packaging prices, are placing significant pressure on
margins in the company's beverage operations.
- Competition from beyond hot drinks – the expansion and diversification of
soft drinks, which are effectively targeting trends towards health and
convenience, pose a notable threat to Nestlé's hot drinks product
4 strategic options given by Mr Baruffa
1. To focus on old segment, already heavy
consumers of the product
2. To broaden the use of Nescafe, as a “milk
modifier”, particularly in the morning
3. To try to position Nescafe for younger and
more “cosmopolitan” professionals, marketing
Nescafe as the “international coffee beverage”
4. Try to penaltrate the CHR segment of the
market
Which of the four options outlined in
the case would you adopt and why? Is
there yet another, even better
alternative?
QUESTION 1
We highly agree with the option chosen by Mr Guiliani, head of
strategic planning:
Radically modify the Nescafe positioning, marketing the coffee as an
international coffee (not as Italian coffee) that mainly lives in the
Northern cities. Nestle food products should become standardized in
the future at least in the European market
Couples of Reasons for our decision:
- For this strategy, Nescafe still can nurture and strengthen their
mainly heavy coffee consumers – old people and singles who sensitize
to the effects of caffeine (less Robusta) and prefer the less
“aggressive” image as well as the ease of preparation
- Furthermore, they are also able to extent the coffee market due to the
significant organizational benefits could come from this policy and
that, looking at the market place, there were a “transnational
consumers” segment that, travelling and living all over the world, was
achieving “universal” consumption habits
What would be the target segment(s)?
Proposed positioning and promotion,
pricing and distribution strategies?
QUESTION 2
Target Segments
Our group has agreed to targeting the both
segments. Young Executives (25-34) and
Elders (45-54). We believe that the
composition of the age group, will help the
brand to reach it’s highest position in Italy
Market. In Recent times and also in the future.
PRODUCTS
Il Caffe
Caffe Golosi
PRODUCTS
Caffe Golosi
Il Cappucino
PROMOTION
1. Young Executives Oriented
• Go for sponsoring college/universities
events.
• Provide the special marketing team to
market their HCRs.
2. Elder People Oriented
• Sponsoring Seminar,
• Free Tester
PRICING
• The price slightly above the average is still
okay. Because the power purchase parity for
young executives and the elders are higher
than the other customers.
DISTRIBUTION STRATEGIES
• Universities, Colleges
• Food Channel, Modern Outlets, Cash and
Carry, Street Vendors
• Coffee-house Restaurant, Hotel Channels,
Coin Operated Coffee Machines, Public
Places
• Office Building
What would be the advertising copy
strategy and the budget to invest on the
“relaunch” of Nescafe?
QUESTION 3
• To counter Starbucks' test of Via instant coffee in
Chicago and Seattle, Nescafe has launched an outdoor
campaign in both cities via McCann Erickson, Los
Angeles. One Chicago subway car, plastered in the ads,
makes the price case this way: "Starbucks makes great
instant. We make great instant. So why does theirs
cost 400% more?" The last piece to the multipanel ad
proclaims Nescafe's Taster's Choice as "the smart
choice." The style, copy and even typeface strongly
resemble advertising for the Starbucks brand and
Starbucks Via.
• Given how much instant coffee has been in the news
lately, Nestle wants the communications to remind
people that with Nescafé they can enjoy a great-tasting,
high-quality cup of coffee with a wide variety of blends
and flavor options at the right price.
• There are other competitors who charge much more for
a similar-quality coffee, and we would like to encourage
people to prove for themselves that there are smarter
options from which to choose.
THANK YOU FOR ATTENTION!