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Nestlé - History, Evolution, Present and the Future

A comprehensive background of Nestlé containing its History and Origins, Early Evolution, Modern Business, Global Expansion, Company Structure, Recent Efforts and Company DNA. As one of the chapters of the book FMCG: The Power of Fast-Moving Consumer Goods by authors Greg Thain and John Bradley. For more details on their success story and that of other leading FMCG companies, check or Amazon

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Nestlé - History, Evolution, Present and the Future

  1. 1. History & Origin . . . . . . . . . . . . . . . . . . . 3 Modern Business . . . . . . . . . . . . . . . . . 15 Company Structure . . . . . . . . . . . . . . 21 Recent Efforts . . . . . . . . . . . . . . . . . . . 25 Company DNA . . . . . . . . . . . . . . . . . 33 Summary . . . . . . . . . . . . . . . . . . . . . . . 34 Social Media Accounts . . . . . . . . . . . 35 2
  2. 2.  Founded in the small town of Vevey, Switzerland by Heinrich “Henri” Nestlé  Born in 1814 in Frankfurt-am-Main  In 1857, a business was set up with other Vevey businessmen to manufacture a liquid fuel of his own invention and an artificial fertilizer  In 1866, Farine Lactée was made  a wholesome Swiss milk and a cereal component baked by a special process of my invention  For a more personal branding, the company logo was based on the meaning of his surname – little nest  During the same year, a London office was opened. Soon followed by sales offices in France, Germany and the United States  In 1872, the company was exporting as far as South America and Australia 3
  3. 3.  Jules Monnerat, president of the Company Simplon Railway, became the chairman of Nestlé for the next 25 years  First task was to build upon a new product Henri had launched in 1874: condensed milk  Patented in USA by Gail Borden in 1856  Founded the New York Condensed Milk Company  The American consul in Zurich, Charles Page, founded the Anglo- Swiss Condensed Milk Company in 1866  Henri Nestlé moved into condensed milk, seeing clear manufacturing synergies between this product and Farine Lactée  Became involved in another booming new category, milk chocolate  In 1875, Daniel Peter compared notes with Henri Nestlé on how to develop a milk chocolate  Combination of fat-rich cocoa powder with water-based milk 4
  4. 4.  Teamed up with his father-in-law, who ran Switzerland’s first chocolate maker, the Cailler Company  Brought in Nestlé’s condensed milk as an ingredient  Peter-Cailler-Kohler: The world’s leading manufacturer of chocolate  In 1898, Viking Melk, a milk company in Norway was purchased  In 1900, a US factory was opened  In 1904, an agreement was reached with the Swiss General Chocolate Company to produce Nestlé branded products  In 1905, the merging of Nestlé/Anglo-Swiss took place  Factories were operated in other areas in addition to their Swiss base:  United States  Britain  Germany  Spain 5
  5. 5.  In 1907, Nestlé’s first factory was built in Australia  Soon opened warehouses in:  Singapore  Hong Kong  Bombay  In 1911, the world’s largest milk condensing plant in Dennington, Australia  Nestlé went on a factory buying spree in America  Government orders for condensed milk sky-rocketed  More international in focus o Operated a semi-global supply chain  By 1920, there were two defining aspects of Nestlé:  Global operations  Highly decentralized decision-making 6
  6. 6.  Demand for condensed milk plummeted  Worsened by rapidly rising prices for raw materials  Worldwide economic slowdown  Adverse exchange rates  Hyperinflation in the German economy  In 1921, the company recorded its first ever loss  Factories were closed  Debt was paid down  In 1929, acquired Peter-Cailler-Kohler company  Basic focus was on milk dried to varying levels o Key ingredient for its main product lines of baby formula and condensed milk  Nestlé’s core competence: the science of drying water-based ingredients 7
  7. 7.  In 1930, approached by the Brazilian Coffee Institute  Find a better use for Brazil’s huge coffee surpluses  Asked to come up with an improved means of creating an instant coffee  In 1934, Thomas Mayne developed Milo  A scientist in Nestlé’s Australian business o Labeled as Nestlé’s Fortified Tonic Food  In 1938, Nescafé was introduced in Switzerland on April 1st, 1938  Maintains as the company’s leading product  In 1939, company profits plummeted  Down to $6 million from $20 million the year before  In 1943, the production of Nescafé reached a million cases a year  By 1945, annual sales were more than double the 1938 level at $225 million 8
  8. 8. 9  In 1946, the company was operating 107 factories spread across five continents  The production was concentrated in four large and growing categories  Milk products (primarily sweetened, condensed milk)  Baby foods (where the postwar baby boom did wonders for sales of infant formula)  Chocolate  Instant beverages o Nestea joining the range in 1946 o Nesquik, instant hot chocolate in 1948  In 1947, Merger was agreed between Nestlé and the Swiss food company, Alimentana  Large range of soups, bouillon cubes and spices was sold under the Maggi name
  9. 9.  Common links of the said companies: o Evaporation processes o Drying processes  Company name evolved once again to the Nestlé Alimentana Company  In 1950, the acquisition of Britain’s Crosse & Blackwell was made  A manufacturer of soups and canned foods  In 1952, the coffee evaporation process improved  Produced 100% roast coffee beans  Sales quadrupled from 1945 to 1960 to a level of $2.5 billion  In 1963, the company invested in the US version of their British Crosse & Blackwell subsidiary, Libby, McNeill & Libby  A canner of fruits, vegetables and meats 10
  10. 10.  During the same year, Findus International was purchased  Frozen foods sector  Primarily operated in Britain and Scandinavia  By 1965, Swiss laboratories perfected a revolutionary freeze-drying method for instant coffee  In 1966 came the creation and launch of a whole new premium instant sector with Tasters Choice  In 1968, the company entered a new category, Bottled Water  Bought 30% stake in Vittel, a French mineral water company  Nestlé was already Switzerland’s largest company during that time, operating 200 factories around the world.  Nestlé also got into the restaurant business  Founded Eurest o A joint venture with Compagnie Internationale des Wagon Lits et du Tourisme 11
  11. 11.  Bought Cahills o An Australian restaurant chain  Purchased Beringer Wines plus a host of vineyards  In 1973, the company acquired Stouffer  Consisted of three divisions: o Frozen foods o Restaurants o Hotels  An ice cream business was also started in France  Partnership with France Glaces  By 1974, the German water business was acquired  Sales again quadrupled between 1960 and 1974, from $2.5 billion to $9.9 billion  Through organic growth and acquisitions 12
  12. 12.  Operating in 11 product areas: Canned goods, Ice cream, Frozen foods, Chilled foods (including yoghurt), Mineral water, Restaurants, Wineries  Merging of L’Oréal and Nestlé took place  Liliane Bettencourt (daughter of the founder of L’Oréal) proposed swapping 30% of her L’Oréal stock for an equivalent amount of Nestlé stock o Feared nationalization from the incoming socialist French government  In 1975 and 1977, the price of coffee and cocoa (two of Nestlé’s main raw ingredients) rose fourfold and threefold and Alcon Laboratories had been acquired (manufacturer of pharmaceutical and ophthalmic products )  By then, the Nestlé Group Chairman was Pierre Liotard-Vogt 13
  13. 13.  In 1984, the Infant Formula Action Coalition, a US-based protest group, initiated a boycott of all Nestlé products  Failed to convince everyone that it satisfied the requirements of the human body o Infant food  In 1979, sales reached $13.2 billion 14
  14. 14.  In 1981, Helmut Maucher became one of the three-person Executive Committee of Nestlé  All major food companies had essentially the same technical and managerial capabilities. Difference was clarity in direction and speed of execution  In 1985, Carnation Company was acquired for $3.4 billion  Chose Carnation for several reasons: o Nestlé’s US business was not huge by American standards o Had some key product synergies with Nestlé’s core strengths o Had interesting products which Nestle’s marketing department thought they could improve: Contadina tomato products, Coffee-Mate coffee creamer & Friskies cat food o The company was buyable, being family-controlled with key members looking to cash in  Purchased the American coffee roasters, Hill’s Brothers 15
  15. 15.  In 1987, the company bought single market companies in categories where the company was interested in expansion: Canadian pet food company, Dr. Ballard and the roast coffee company, Club Coffee  During the same year, the company took full ownership of Vittel  The chocolate business also became the sixth largest in the world  4% global share  Company’s fifth largest product category with sales of around $2 billion  In 1986, Nespresso encapsulated espresso coffee concept  Test marketed in the office coffee sectors of Switzerland, Japan and Italy  In 1988, two major acquisitions were made  Buitoni-Perugina Pasta Company (Italy’s third-largest food company) for $1.3 billion 16
  16. 16.  Bought shares from Rowntree (fourth largest in the world in same the industry) for $4.5 billion  Nestlé was propelled to being the second largest confectioner in the world  Around 11% share, and 18% in Europe  Products: Kit Kat, Smarties, Rolo, Lion Bar and Black Magic  Powerful vehicles for building and promoting the Nestlé name  Nespresso had been introduced into the Swiss household market in partnership with Turmix, who manufactured the machines  Acquired Spillers  Pet food became the next product sector to increase global scale  By 1990, three joint alliances were formed: General Mills, Coca-Cola, Walt Disney Corporation. 17
  17. 17.  In 1992, Nestle became the world leaders in the bottled water category  Bottled water was organized globally under the name Nestlé Sources International which was headquartered in Paris  San Pellegrino, a mineral water brand, had also been acquired  In 1994, Alpo, the second largest pet food company in Europe, was acquired  By 1997, Nestlé labs created a formula to add mineral salts to completely purified water. This was handed over to Perrier Vittel in France.  Developed a production capable of being installed anywhere worldwide  During the same year, Nestlé Pure Life was first launched by Nestlé Pakistan 18
  18. 18.  Come 1999, the same concept was launched in Europe under the name, Nestlé Aquarel  Helmut Maucher also handed over the CEO position to his chosen successor, Austrian and lifetime Nestlé man, Peter Brabeck  The combination of portfolio cleansing and process outsourcing netted Nestlé $1 billion; and resulted in the sale or closure of fifty-four factories  Greater accessibility of Nestlé products, “Whenever, Wherever, However”  Improved consumer communication  Created a Nestlé Nutrition Division  Sales increased from the 1980 conglomerate days by over 200%. Net profits had also increased almost three-fold, from 2.6% of sales to 6.3% 19
  19. 19.  Fortune magazine named Nestlé the Most Admired Global Food Company  By 2001, pet food giant Ralston Purina was acquired for $10.3 billion  Merged with Friskies business to form another global entity, Nestlé Purina Pet Care  Annual sales of over $6 billion  Nestlé became the world’s leading pet food company  Also acquired was Dreyer’s: the microwave snacks segment with the purchase of Chef America Inc.  In 2002, the six global brands were: Nestlé. Nescafe, Nestes, Maggi, Buitoni and Purina 20
  20. 20.  Local operating autonomy was the only practical choice to manage the company  Concentrated on its portfolio in the 1980s and ‘90s. Teams with global category responsibilities were assembled  These five regions were the key operating units of the business:  Zone 1 – Europe  Zone 2 – Asia & Australia  Zone 3 – Latin America  Zone 4 – North America  Zone 5 – Africa & Middle East  Adopted the one board-level role: Product Direction and Marketing Service  Looking ahead unencumbered by profit responsibility  Operate to support and advise the regions and operating units 21
  21. 21.  By 1993, there came a major change in the acquisition of Perrier  Prompted to combine all its water interests into one globally managed division, Nestlé Waters  In 2005, the Nestle Nutrition division was made an independent entity within the group. It assumed global responsibility for Infant nutrition, Healthcare nutrition, Weight management and Performance nutrition  Around this time, the existing Strategic Business Units were: Beverages (excluding waters), Milk, Nutrition & Ice cream, Chocolate & Confectionery, Prepared Dishes & Cooking Aids, Pet Care Products, Health Care Nutrition and Out-of-Home Catering (now called Professional Food Services)  Three units directly report to the CEO: Nestlé Waters, Nestlé Professional and Nestlé Health Care Nutrition 22
  22. 22.  The remaining five units report to one board member, who also has responsibility for Marketing and Sales  Tasked with forecasting how the categories will evolve and developing global category strategies  The five regional zones were also reduced to three to cope with increased level of complexity at the corporate level. These are Europe, The Americas and Asia/Oceania/Africa  Around this time, the existing Strategic Business Units were: Beverages, Milk, Nutrition & Ice cream, Chocolate & Confectionery, Prepared Dishes & Cooking Aids, Pet Care Products, Health Care Nutrition and Out-of-Home Catering  Three units directly report to the CEO: Nestlé Waters, Nestlé Professional and Nestlé Health Care Nutrition 23
  23. 23.  The remaining five units report to one board member, who also has responsibility for Marketing and Sales  The five regional zones were also reduced to three to cope with increased level of complexity at the corporate level. These are Europe, The Americas and Asia/Oceania/Africa 24
  24. 24. 2004  Performance had been muted by a relatively poor year in Europe (declined by 1.6%)  Organic growth for Eastern Europe of nearly 8%  Organic growth in Zone Americas was nearly 8%, and 7% in Zone Asia, Oceania and Africa.  Waters achieved volume growth but partially through dropping prices in the key North American market  Other driver of growth (now in 34 markets)  Nestlé Pure Life  Nestlé Aquarel  Condensed milk was re-launched in Brazil, its largest market  Carnation Instant Breakfast and Clinutren helped drive Nutrition 25
  25. 25.  Slow Churned Dreyer’s Garand Light was launched in the USA using a patented technology to deliver a product as creamy as normal but with half the fat  Cereal Partners Worldwide was proving to be an excellent partnership  Nestlé’s chocolate business was lagging the company average  Pet care rolled out their new strategic tagline of ‘Your Pet, Our Passion’ across multiple markets  Food services division launched fortifying soups for the elderly in France and Maggi Wellness in the Netherlands  Nestlé Nutrition became a stand-alone global business organization  The Corporate Wellness Unit was formed. It was responsible for driving the nutrition, health and wellness agenda across all the strategic business units 26
  26. 26. 27 2005  Drove sales to a new high of nearly $73 billion  Focused on embedding new structures and processes  Operated in more than 100 countries  10,000 employees building close relationships with medical professionals  Acquired Protéika  French wellness firm  Weight management and metabolic disorders  Rollout of the Nutritional Compass on-pack labelling across 50% of the entire product range  Inclusion of more Branded Active Benefits (BABs)  Introduced in 1999  Aim of increasing the nutritional content and health benefits of the products
  27. 27.  Peter described his vision as Nestlé being a fleet of agile, fast-moving businesses  Businesses would remain fast moving by staying focused on consumers, innovation and communication  Moving towards a global and ultimately a global multifocal company 2006  Marked the 140th year of operation  Sales increased by over 8% to a shade under 100 billion Swiss francs  Two basic strategies prevailed: To make a transition to a nutrition, health and wellness product platform & to make a transition to being selectively global, where scale was a competitive advantage  Acquired Jenny Craig weight management business  Acquired Australia’s Uncle Toby’s (Breakfast cereals, Nutritious snacks & Instant soups) 28
  28. 28.  Now had 30 brands, generating sales over 1 billion francs  Introduced the concept of “Popularly Positioned Products”  Invested in direct store delivery networks  Had 481 operational factories  Integrated concept of Business Executive Manager  Each market now had a profit-responsible manager for each category 2007  Became the final year as CEO of Peter Brabeck  The major steps in the transition to being a nutrition, health and wellness company were now complete  Acquired Novartis, Medical Nutrition Division & Gerber baby food business  The new CEO was Paul Bulcke 29
  29. 29.  Comprised of four business units: Infant Nutrition, Healthcare Nutrition, Performance Nutrition and Weight Management 2008  Consumer down-trading due to the economic environment  Cereal and beverages joint ventures racked up an amazing 20% Real Internal Growth  Shift to being a Nutrition Health & Wellness company was complete  ‘Creative shared value’ focused on three areas: Nutrition, Water and Rural Development 2009  Alcon and the L’Oréal ventures did better than the Nestlé food and drink business  High level of local operating autonomy  An ideal strategy in times of great economic uncertainty 30
  30. 30. 2010  Got back to making some strategic moves via mergers and acquisitions.  Purchase from Kraft of the DiGiorno brand of frozen pizzas  Waters in China  Culinary in the Ukraine  Confectionery in Turkey  Pet Food in North America  Sold Alcon ophthalmic business in August: $41 billion  Split off healthcare nutrition into a standalone Nestlé Health Science unit 31
  31. 31. 2011  Two Chinese businesses acquired 60% ownership positions  Hsu Fu Chi-Makers of sugar confectionery and traditional Chinese snacks with a strong route-to-market network  Yin Lu-A Nestlé co-packer who also made ready-to-drink peanut milk and ready-to-eat canned rice porridge  First ever-global launch of a new machine, PIXIE  Reduced the pre-heat time to less than 30 seconds  Cereal Partners Worldwide (Nestlé + General Mills) had now garnered a global market share of over 20% in the breakfast cereal category  Beverage Partners Worldwide (Nestlé + Coca-Cola) had evolved into a sales vehicle for Nestea  Dairy Partners of America, formed with Mexican dairy company Fonterra, delivered another year of double-digit growth 32
  32. 32.  Nestlé DNA is very simple and consists of two complimentary elements  Global o Factories in 83 countries o Brand positioning o Quality standards o Design styles o The company does not spend its time endlessly redrawing boundaries of responsibility, or wrestling with the “who does what” debate that can preoccupy other global giants  Local o Everything is done at the local level, tightly managed by the Nestlé Zone business units  It is this mix of local entrepreneurialism, combined with a light but firm hand of global consistency that makes Nestlé such a successful company 33
  33. 33.  Nestlé considered themselves, not a food and beverage company, but a Nutrition, Health and Wellness company  Three elements of Nestlé’s approach to Nutrition, Health and Wellness  Nestlé Health Science to pioneer critical illness nutrition solutions  Addressing specific consumers’ nutrition needs via Nestlé Nutrition  Offering consumers healthier and tastier choices through the day  Acquisitions have by no means been directed clearly towards the nutrition agenda  An extremely strong and very well run food and beverage company with a unique footprint, gigantic product range and entrepreneurial operating culture 34
  34. 34. Website: LinkedIn: Facebook: Twitter: Youtube: Flickr: 35