The Indian subsidiary of Swiss Multinational company ‘Nestle’, Nestle India is one of the largest players in India’s FMCG segment & has a long history in the country. Incorporated at New Delhi on 28-March-1959, Nestle India spent decades building a beloved brand in India. Therefore, the company achieved leadership position in Indian market in various segments.
(A) Market leaders
Nestle holds a leadership position in many product categories – over 85% of its product portfolio.
It enjoys enormous brand recall in products like instant noodles (Maggi), instant coffee (Nescafe), chocolates (Classic, KitKat, Munch, Milkybar), Cereals (Cerelac, Lactogen). These brands act as cash generators for the company because of good margins & very high operating leverage.
(B) Nestle Product segments
Nestle provides variety of products in FMCG segment from beverages to prepared dishes targeting infants as well as adults. The company basically divides its products into four categories:
(i) Milk Products & Nutrition:
The segment includes Dairy whitener, condensed milk, UHT milk, yogurt, maternal & infant formula, baby foods, health care nutrition.
(ii) Prepared dishes and cooking aids
The segment includes instant noodles, sauces, seasonings, pasta, cereals.
(iii) Powdered & Liquid Beverages
The segment includes instant coffee, instant tea, ready to drink beverage.
The segment includes chocolate bar countlines, tablets, sugar confectionery.
(C) Contribution to Revenue
(i) Segment wise revenue contribution
Segment wise revenue contribution ratio remained almost the same for the company over the last 10 years.
(ii) Nestle India Net Sales
Over last 10 years, revenue of the company grew at a CAGR of 7.99%. On the other hand, PAT grew at a CAGR of 9.79%. CY15 was impacted by MAGGI Issue. Due to strong market holding in most of its products, Nestle secures pricing power. Moreover, cost efficiency drives good margin growth. PAT margin grew from 10.57% for CY16 to ~15% for CY20.
The average price of products sold did not see much increase since CY16 til CY19. The management’s focus is on volume-based growth. Also check Cash Flow Analysis of Nestle India (click to view).
(iii)Nestle India Profit After Tax(PAT)
(iii) Nestle India Quantity of Products Sold
The volume of products sold grew at a CAGR of just 1.06% over the last 10 years. The highest volume growth is for the ‘Prepared dishes/cooking aids’ segment. The volume for the segment grew at a CAGR of 2.82% over the period which includes products of Maggi Brand. In addition, the company achieved good volume growth in CY16, CY17, 18 & 19. Volume growth for CY16 is 26.2%, CY17 is 9.8%; for FY18: 11.1% and for FY19: 7%. However, Volume growth for FY20 is 2.6%
(D) Milk products & Nutrition
- The Milk Product and Nutrition business continued to deliver good performance despite disruptions caused by COVID-19 and challenges linked to commodity price fluctuation.
- In milk & nutrition segment, Everyday Dairy (powdered milk) whitener is one of the Nestle’s top selling product & is also market leader in the category of powder milk. Milkmaid sweetened condensed milk is also good performing product & received well by consumers over the years.
- Under Infant nutrition, Nestle Lactogen is definitely the market leader.
- Nestle milk and nutrition products contribute around 45% of the company’s earnings.
- The company spent a lot on research and development and try to make some innovation every year in their products. In order to expand products range, the company launches variety of new products in existing product lines or in different range every year after doing careful study of markets.
New launches/Re-launches/Variants introduced in Milk products & Nutrition Category
The Company launched LACTOGROW Toddler under the Toddler portfolio. The company expanded its offerings in the weight management category by launching OPTIFAST vanilla flavor variant.
The company relaunched Nestle Lactogen 1 with L reuteri and Pre- Nan with DHA & ARA. Moreover, the company launched Nestle a+ Banglar Misthi Dai & Ceregrow organic Cereals.
Nan Pro with DHA and Nestle Everyday Chai life in 3 variants.
Nestle a+ Grekeyo greek yogurt as well Nan Excella pro.
Nestle Everyday Masala Fusion Diary whitener in 6 variants.
Products went very well
- In 2003, the company introduced Milkmaid Squeezy in convenient packaging. Consumers well received the product.
- The company also launched several successful new flavors under dairy category over the years. These include Nestle Slim Dahi, Milkmaid Fruit Yogurt.
- Also, many times, the company launched its products in select geographies after conducting thorough research. For instance, the company launched Nestle nutrition milk in select areas in year 2010.
- In 2012, the company marked its entry in maternal nutrition category with the launch of Nestle ‘Baby and Me’. Then, in the year 2014, it launched Nan Lo-Lac as the first ever formula for nutritional management of diarrhoea.
- In 2003, the company introduced ‘Nestle Developmental Nutrition Plan’. It formed major outbreak in infant feeding with the launch of Cerelac123.
(E) Prepared dishes & Cooking aids
‘Maggi instant noodles’ is the most loved product of Maggi brand of the company. Also, its market share is growing day by day despite of tough competition in this category. In addition to the instant noodles, each product under the brand of Maggi is doing well in the market.
Maggi and family :
The company launched various other products under the brand name ‘Maggi’ which include wide range of Sauces, Soups, Pastas, Pohas and much more. Every year, the company adds new products to its Maggi brand. These include more flavors in Maggi Noodles as well as more variety in soups category or new range of Nestle Sauces. Some of well known products in these include Maggi Ata Noodles, Maggi Imli chutney, Tomato soups.
Before launching any new product, the company conducts market research which is the reason for good performance of Nestle products.
New launches/Re-launches/Variants introduced in Prepared dishes and Cooking aids
Nestle India launched new flavors of Maggi such as Yummy Capsica and Chatpata Tomato and renovated Desi Cheesey. It also launched MAGGI Atta Spinach noodles for consumers seeking both taste and nutritional benefits.
Further, the company launched MAGGI Fried Rice Masala with two spice mixes – Classic Veg and Chilli Garlic
fried rice, and MAGGI Paneer-aeMagic Shahi Paneer and Kadhai Paneer Masala mix.
The company launched Maggi Nutrilicious Ata Noodles, Maggi Fusian Noodles in 3 variants , Maggi Fusian Chilli Garlic Sauces and Maggi Liquid seasoning.
The company added Maggi Nutri Licious Baked Noodles and Maggi Special Masala Noodles into the portfolio.
Maggi Masala of India in 4 variants.
Maggi launched Maggi Hot Heads in 4 variants, Maggi No onion & No Garlic Masala, Maggi Hot Heads Cuppa Noodles, Maggi Cuppa Masala, Maggi Cuppa Chilly Chow and Maggi Cup-a- Licious soups in 6 variants.
Nestle Noodles Disaster
In 2015, Maggi Noodles got banned by the Government of India because the officials were of the view that Maggi contained higher amount of lead which is not good for health. Therefore, FSSAI announced a temporary ban on the manufacture, sale, & distribution of Maggi Noodles.It shook the very foundation of the brand.
Cost to the company
Over 35,000 units of Maggi Noodles were withdrawn & destroyed. Due to this ban, the profits of the company suffered to a great extent as Maggi Noodles was one of the top selling product of the company. But despite all this, it’s no secret that Maggi Instant Noodles has seen a resurgence in popularity & is now back to being the market leader.
With this, Nestle India seemingly rose from the ashes to challenge for the top berth in the Fast Moving Consumer Goods (FMCG) space once again.
Back with a Bang
The results of the internal & external tests for over 3,500 samples showed that lead levels were well within the limits specified by food regulations. Hence proved that MAGGI Noodles are safe to eat. The company re-launched MAGGI Noodles on the auspicious eve of Deepawali and on the day of Dhanteras on 9th November 2015. Hon’ble Bombay High Court set aside the earlier ban. Thus, after the re-launch, ‘Welcome Back MAGGI’ communication echoed the consumer sentiment across the country.
Nestle Deal with Snapdeal
Nestle partnered with ‘Snapdeal’ to sell 60,000 ‘MAGGI Welcome Kits’ through e-commerce. These were all sold out within 5 minutes after the sale opened. Close to 10 lakh consumers pre-booked in order to participate in the sale. Thus, Maggi Instant Noodles saw a resurgence in popularity and came back to being the market leader. With this, the company seemingly rose from the ashes to challenge for the top berth in the Fast Moving Consumer Goods (FMCG) space once again.
(F) Powdered and Liquid Beverages
Nestle Instant coffee Nescafe is the leading coffee brand in India & has a major contribution in the sales of the company. In addition to Nescafe coffee, the company has many more range of products in the beverages category. The company has also set up various coffee corners across the country since 2003 and is gradually increasing it.
Nestle setup various instant coffee making machines in selected areas in year 2004 & increased it with every passing year. Now, the company is leading the market in coffee corners. Today in almost every coffee shop in the country, Nescafe is the one which is served and loved by people at large.
Innovation & Nestle
Nestle spent a good amount on research & development activities. This is one of the reasons, the company always comes up with unique & innovative products and always try to give something new to its customers every year.
In 2002 Large number of Nestle Consumption Zones including Cafe Nescafe, Coffee Corners and multibrand stalls were set up and innovative vending machines were introduced for Iced Tea
In 2012 nestle launched Nescafe sunrise especially for the consumers of Andhra Pradesh to provide them instant solution for filter coffee which achieved good market share.
Cold coffee & tea
In cold beverages Nestea which is a unique blend of cold & refreshing drink and Nescafe Cold Coffee range shows good results.
In 2019 Nestle than launched Nescafe Gold to enter into premium segment in its instant coffee category with very interesting advertisement named ” for the moments that matter” which received very good result from customers.
New launches/Re-launches/Variants introduced in Powdered and Liquid Beverages
Nescafe Cappuccino , Nestle Ready- to- Drink Iced Tea were introduced.
Nescafe E Smart Coffee Machine (all in one Coffee Machine) which was a unique and innovative product was launched.
Nescafe Latte , Nescafe Iced Tea , Nescafe RTD in 3 variants and Nescafe Sunrise Insta Filter were added to the portfolio.
Nestle Munch & Nestle KitKat are leading brands in the light wafer choco layer segment. ‘Munch’ is the highest selling bar in choco wafer category and contributes a major share in sales of Nestle Chocolate category. Nestle Kitkat is also very unique offering by Nestle because of its rich chocolaty taste & is loved by consumers. Nestle Kitkat also maintained a unique position in the minds of customers from decades.
One and only
Nestle Milkybar is the only white chocolate available in india having no competitors.
Old but New
Nestle introduced various new chocolates under the brand Nestle Munch, Nestle KitKat and nestle Milkybar. The names of these chocolates were same but the sizes, packaging were different. The company introduced these old chocolates with a new perception.
- Nestle Kitkat launched in single finger pack for Rs.5/ and received good results.
- The company launched Nestle ‘Munch’ Maha pack at Rs. 10 which was also performed well.
- Nestle Milkybar Moosha also generated good result in the market.
New launches/Re-launches/Variants introduced in conffectionary
The Company launched multiple ‘category first’ innovations across key brands, such as Nestlé POLO Extra Strong and Nestlé POLO Paan.
Kitkat Desert Delight Rich Chocolate Fudge , Munch Crisp Pop and Milkybar Mosha Cocoa Crispies.
Kitkat Desert Delight Brownie Kubes , Munch Crunch O Nut and Kitkat Strawberry varinats were introduced.
Kitkat Desert Delight was introduced and Milkybar was relaunched in this year.
Kitkat Duo , Nestle Munch Duo were added to the portfolio and New Nestle Alpino was launched.
(H) Some Bad Decisions
Nestle despite of always providing unique & innovative products to its customers has taken some bad decisions about its product which did not increase any profit but caused cost to the company these products performed below expectations and later discontinued in past ten years by the company some of these are Nestle pure life premium water bottle, Nestle choco cafe, Nestle desert mixes, Nestle Butter, Nestle launched different candies in confectionery category which also does not provide satisfactory results.
All in all, Nestle’s product launches which received good acceptance from consumers, created a niche within the respective segments.
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References: Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry’s Publications.
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