PROJECT

On

DISTRIBUTION CHANNEL OF NESTLE

SUBMITTED BY-

BIKI SAIKIA

MEHUL BHARDWAJ

ABHISHEK SINGH

AMITY BUSINESS SCHOOL

AMITY UNIVERSITY UTTAR PRADESH

SECTOR 125, NOIDA - 201303, UTTAR PRADESH, INDIA

 CONTENTS

SERIAL NO TOPIC

1 INTRODUCTION

2 COMPANY PROFILE

3 MAJOR COMPETITORS AND PORTFOLIO

4 MARKET SHARE

5 SUPPLY CHAINMANAGEMENT

6 DISTRIBUTION CHANNEL

7 SALES FORCE MANAGEMENT

8 SWOT ANALYSIS BCG MATRIX

9 FINDINGS

10 BIBLIOGRAPHY
INTRODUCTION

Nestlé was founded in 1866 by Henri Nestlé and is today the world's biggest food
and beverage company. Sales at the end of 2005 were CHF 91 bn, with a net profit
of CHF 8 bn. Nestlé employ around 250,000 people from more than 70 countries
and have factories or operations in almost every country in the world. The history
of Nestlé began in Switzerland in 1867 when Henri Nestlé, the pharmacist,
launched his product Farine Lactée Nestlé, a nutritious gruel for children. Henri
used his surname, which means ’little nest’, in both the company name and the
logotype. The nest, which symbolizes security, family and nourishment, still plays
a central role in Nestlé’s profile. Since it began over 130 years ago, Nestlé’s
success with product innovations and business acquisitions has turned it into the
largest Food Company in the world. As the years have passed, the Nestlé family
has grown to include chocolates, soups, coffee, cereals, frozen products, yoghurts,
mineral water and other food products. Beginning in the 70s, Nestlé has continued
to expand its product portfolio to include pet foods, pharmaceutical products and
cosmetics too. Today, Nestlé markets a great number of products, all with one
thing in common: the high quality for which Nestlé has become renowned
throughout the world The Company's strategy is guided by several fundamental
principles. Nestlé's existing products grow through innovation and renovation
while maintaining a balance in geographic activities and product lines. Long-term
potential is never sacrificed for short-term performance. The Company's priority is
to bring the best and most relevant products to people, wherever they are, whatever
their needs, throughout their lives. Taste of Nestlé in each of the countries where
Nestlé sell products. Nestlé is based on the principle of decentralization, which
means each country is responsible for the efficient running of its business -
including the recruitment of its staff.

That's not to say that every operating company can do as it wishes. Headquarters
involve sets the overall strategy and ensures that it is carried out. It's an approach
that is best summed up as: 'centralize what you must, decentralize what you can'.
Nestlé is a company which is present in all over the world but it has difference and
unique motto to deal in all over the world.
COMPANY PROFILE

Nestlé India is a subsidiary of Nestle S.A. of Switzerland. With seven factories and a large
number of co-packers, Nestlé India is a vibrant Company that provides consumers
in India with products of global standards and is committed to long- term sustainable
growth and shareholder satisfaction.

The Company insists on honesty, integrity and fairness in all aspects of its business and
expects the same in its relationships. This has earned it the trust and respect of every
strata of society that it comes in contact with and is acknowledged amongst India's
'Most Respected Companies' and amongst the 'Top Wealth Creators of India'.

NESTLÉ India is a subsidiary of NESTLÉ S.A. of Switzerland. With eight factories and a
large number of co-packers, Nestlé India is a vibrant Company that provides
consumers in India with products of global standards and is committed to long- term
sustainable growth and shareholder satisfaction.

The Company insists on honesty, integrity and fairness in all aspects of its business and
expects the same in its relationships. This has earned it the trust and respect of every
strata of society that it comes in contact with and is acknowledged amongst India's
'Most Respected Companies' and amongst the 'Top Wealth Creators of India'. The
NESTLÉ Corporate Business Principles are at the basis of our Company’s culture,
developed over 140 years, which reflects the ideas of fairness, honesty and long-
term thinking.

MISSION AND VISION

Mission Statement

Nestlé is the world's leading nutrition, health and wellness company. Our
mission of "Good Food, Good Life" is to provide consumers with the best
tasting, most nutritious choices in a wide range of food and beverage
categories and eating occasions, from morning to night.
Vision and values

To be a leading, competitive, Nutrition, Health and Wellness Company

delivering improved shareholder value by being a preferred corporate
citizen, preferred employer, preferred supplier selling preferred products.
NESTLE GLOBAL PRESENCE:

Established over 150 years ago, Nestlé is the world’s largest, most diversified food
and beverages company. We have a unique global footprint and sell our products
in 190 countries worldwide.

TERMS OF OPERATIONS:

Sales force of distributor is divided into 3 heads namely:

a. Milk Products
b. Chocolates
c. Other products

1) All the 3 teams visit the retailers once in a week on different Days

2) Sales force is complimented by a weekly visit to the district by the sales

executive of the company

3) Idea is to supplement the lags in the distribution by wholesaler and in

certain specific cases to push extra stock in the market.
Credit Policy:

 Distributors are termed as Cash Distributors because

the company charges the distributors before the
stock is delivered

 Company has connected the distributor online

and the transactions happen online

 The distributor sells goods on credit; the period

of credit ranges from 1-2 week

 The wholesaler allows discount of 1% on

cash payment (policy followed by the
wholesaler)

Stock Policy:

 As per the company regulations the distributor is supposed to maintain a

stock of 3 weeks which in monetary terms equals to Rs. 30 lakhs for the
distributor.
 Stock is formalized by the company; the dealer can negotiate on 3-4 end
days, the stock policy is formed for the month
 Distributor to push in slow moving SKU’s clubs them with fast moving
SKU’s for the retailers
 Company DUMPS significantly on the distributors, the distributor has to
mange the supply by the company.

Storage policy:

 Distributor maintains Cold Storages and Deep Freezers for the storage of the
products

 Distributor has to bear all expenses pertaining to Infrastructure requirements

PRODUCT RANGE:
MAJOR COMPETITORS OF NESTLE:

ConAgra Foods, DPSG, Hansen Natural Corporation, Kraft Foods Group,

Mondelēz International, Monster Beverage Corporation, National Beverage Corp.,
PepsiCo Inc., Snyder’s-Lance, The Coca-Cola Company, The Kellogg Company
and many other beverage, food and snack companies.

MAJOR CHALLENGES FACED:

As Nestle opens its global R&D center in Manesar, it plans to also come up with
new products in various categories. India, which contributes just less than 2 per
cent of its overall business, will see an increased focus in the premium category
products by the Switzerland-based company. Nandu NandKishore, executive vice-
president Nestle S.A.,tells Dilasha Seth that in the semi-urban to rural category it is
more of a price-point challenge, whereas in the affluent category, it is more of an
innovation challenge. The U.S. Food and Drug Administration has started testing
samples of the Nestlé noodles, the company said Nestlé sells noodles in the U.S.
that are imported from India and other countries. Earlier Nestlé said the food-
safety agency in Singapore, another market for its India-made noodles, had cleared
the product.
MARKET SHARE

Higher-than-expected margins in March quarter drove Nestle India shares 8 per cent
higher on Friday. Nestle's EBITDA (Earnings before interest, taxes, depreciation
and amortization) margin of 22.8 per cent was 350 basis points higher sequentially and
ahead of Street estimates. Analysts expected the company's margin to fall on account
of higher ad spends in the March quarter.

Nestle's net profit declined 19 per cent year-on- year to Rs 259 crore, but on a
sequential basis, profit was up 27 per cent. Similarly, Nestle India shares closed
7.61 per cent higher at Rs 6,145 apiece compared to 1.17 per cent fall in the broader
Sensex. In November, when the company relaunched Maggi after five-month ban,
it had 10.9 percent of the market share, which climbedto 35.2 percent in December,
according to a Nestle India presentation made to financial analysts and institutional
investors. Nestle India's most-famous noodle brand Maggi, which was in the news for
wrong reasons last year and faced product ban, has retained its numero uno position here
by clocking 56 percent share of the market in June this year. The company managed to
wrestle back its once dominant position in the noodle space at a time when competition
from other private biggies, including Baba Ramdev's Patanjali, has been intensifying
over last few months.

Within nine months of its re-launch, Maggi noodles now accounts for 57.1 percent
market share of the instant noodles segment riding on its marketing /branding
initiatives and new variants. In November, when the company relaunched Maggi after
five-month ban, it had 10.9 percent of the market share, which climbed to 35.2
percent in December, according to a Nestle India presentation made to financial
analysts and institutional investors. In March 2016, it had 51 per cent market share.
Nestle has launched four variants of Maggi Cuppa Noodles and Maggi Hotheads each, the
presentation said. Besides, it has also launched 'No Onion No Garlic" noodles.
PORTER’S FIVE FORCES MODEL
Porter’s Five Forces Model is a very important tool to analyze the industrial
parameters and to develop business strategy. Here five different factors would
be discussed to highlight the attractiveness and productivity of a market. Now
we will discuss it for Nestle.[sky]

THREAT OF NEW ENTRANTS

If the market is attractive the new entrants would always be a threat for the
company but if the market has been restricted to a limited resource and it has
very few areas of improvement so it becomes difficult for new entrants to get
into the market and hence monopolies exist. Although Nestle has
accomplished a strong name in the market but as the food processing industry
is very huge and viable; so there are a lot of companies who already entered
in this market and somehow achieved a place in the market even though they
could not cross Nestle in terms of market share. Every year number of
companies attempt to enter the market and strive for their share of profit and
productivity in the market but very few survive. Nestle has been the leader of
market for a century almost so now it has become a very big challenge for the
new entrants to not only work over their quality but they also have to cut the
share of Nestle to survive which is quite equal to impossible. Fundamentally,
Nestlé is persistently on the board, and therefore the threat of new entrants is
temperate.

THREAT OF SUBSTITUTE GOODS

Substitutes have always been in line whenever we talk about products market,
every kind of product has a substitute present which leads it to the heights of
competition when taken seriously. As the product is very common and daily
use product so the threat of substitutes is very high here. Like if we take the
example of bottled water so the substitute of this is lean pockets that serve as
a competition. So Nestle has to innovate its products tremendously to stay in
the market and to work efficiently for removing the threat of substitutes. We
can take the example of recent innovation which is health consciousness and
wellness factor that has been introduced in all products of Nestle. Such
initiatives would make it easier for Nestle to go beyond the substitutes .

BARGAINING POWER OF SUPPLIERS

Bargaining power of suppliers is very important factor to be considered in any

industry as they are the main strength of the company. Nestle is known for
strong relations with the suppliers around the globe due to its immense buying
power and also because of the fact that in such dairy and agricultural products
quality is always important. Nestle as always focused over strong and sturdy
business relations to make the ongoing quality stronger. Additionally, Nestlé
also presents helpful guidance to its suppliers on how to work more
proficiently to decrease redundant expenses. And thus it cares of its suppliers
which I return pays them off in the form of quality products.

BARGAINING POWER OF CUSTOMERS

The bargaining power of customers has always been an important factor in

terms of company’s performance so this should be given reasonable value
while accessing the company’s position. Customers carry huge quantity of
bargaining power concerning their utilization of different Nestlé products.
Although a lot of substitute products and competitors Nestle customers have
very influential choices but still the quality that has been maintained by Nestle
has made it very successful among the users. It is very important to
understand the power of the customers and also their needs so that they can be
better satisfied. This is what Nestle always cares about and that is reflected in
Nestle health and wellness programs that ar being used wile creation of new
products as society has in progress of becoming more health conscious.

COMPETITIVE RIVALRY WITHIN THE INDUSTRY

Competition if healthy would bring huge success but if negative would

destroy the whole industry so it should be critically analyzed for better future
of the company. Nestle has a very strong position in the food processing
industry but few major rivals do exist in the industry like Kraft Foods and
Groupe Danone. Above mentioned companies are fighting continuously to get
on to each other and avoid any sort of competition but I is still there. If we
talk about marketing and advertising these companies have spent hell of their
expenditures for the purpose of effective marketing and advertising and in
competition they have always performed each other. Competition is violent in
the food processing industry, and this is a plus point for consumers. Provided
that these companies carry on in competing with each other, consumers will
persistently
[Type here] enjoy improving product qualities.

SUPPLYCHAINMANAGMENT

In the midst of significant change, our supply chain function is a great platform for
driven, collaborative supply chain professionals. You’ll help us gain a real
competitive edge with our supply chain. Whether you join us in Demand and Supply
Planning, Procurement, Physical Logistic or Customer Service, you’ll bring us closer
to customers by making sure our products are there at the right time in the time
condition.

DISTRIBUTION CHANNEL:

 Nestle products are sent to the C&F Agents of the company from its
manufacturing unit
 Later it flows from the manufacturing unit to distributor and super
stockiest
 The distributor is responsible to manage the availability of products in his
area
 Super stockiest supplies the goods to the Re-Distributor who is in charge
of managing thee availability outside the region of the distributor.
 The distributor and Re- distributor then supplies the products to
wholesaler and retail in their respective region or area
 Nestle has its own distribution network equipped with all necessary
transportation facilities. They transport their products at major regional
sales offices, which are situated at different cities of India.
 These sales offices have their own vans with sales people who sell and
transport goods to the small retailers.
SALESFORCE MANAGEMENT
Nestle India had initiated an aggressive market growth strategy which was difficult to
implement because of the increasing turnover of the distributors' salesmen. The challenge
was likely to get aggravated in future because of increasing employment options for the
salesmen as well as increasing competition for retail shelf space. The salesmen were in
the payrolls of the channel partners, and the diversity of the management practices of
channel partners made the intervention even more difficult. The competitive analysis
of the benchmarked companies and relevant data were collected to decide on the
appropriate steps to manage the problem. It was very critical to take a well-considered
judgment on the issue as it affected the entire revenue engine of the company.

Nestle India had initiated an aggressive market growth strategy which was difficult to
implement because of the increasing turnover of the distributors' salesmen. The challenge
was likely to get aggravated in future because of increasing employment options for the
salesmen as well as increasing competition for retail shelf space. The salesmen were in
the payrolls of the channel partners, and the diversity of the management practices of
channel partners made the intervention even more difficult. The competitive analysis
of the benchmarked companies and relevant data were collected to decide on the
appropriate steps to manage the problem. It was very critical to take a well-considered
judgment on the issue as it affected the entire revenue engine of the company.

SWOT ANALYSIS
STRENGTH:
 Product diversity: As of October 2014, the company had 29 operating
brands under which 8000 products were being sold in the market. This show
the very diversity in the product line which yield a great strength for
nestle.
 Distribution channels: Nestle is successfully operating in more than
100 countries which gives a real strength to its distribution channel. Including
direct and indirect channels, it has operations in 197 countries. (Nestle
Web, retrieved: September 2015)
 Nestle’s R&D: Nestle has a strongest research and product designing teams with
great capabilities. They introduce new products through the year, which
strengthen nestle’s competitive advantage.

WEAKNESS:

 Less ability to provide good foods consistently: As consumers always

look for good tasting and healthy foods, a company should consistently
provide healthy foods. Nestle is often blamed for many products due to
poor supplies. It is hurting the image of Nestle which is a great weakness.

 Incident in India: Recently in this year, India government sued Nestle for
$100m over one of their popular product Maggi noodles, for unfair trade
practices. This will bring a negative effect on sells for the long run.

OPPORUTUNITIES:

 Demand for healthier food products: Great intensity of buying and

consuming quality foods is increasing among people. Nestle frequently
 tries to provide quality foods to its consumers.

 Strong R&D: As it has strong R&D teams, it has great advantages of

introducing new product in the future.

 Broad Sale Channel: Nestle has been broaden its selling channel in
developing countries in Africa.

THREATS:

 Trend toward healthy eating: As people’s concentration is increasing

toward healthy foods, Nestle will have to make sure healthy foods at any
cost.

 Changing trend: Chocolate and chocolate related products are the

major products of Nestle.

 Raising Prices of Raw materials: With the growth of the economy of the
world, the price of raw materials is increasing which may harm its
competitive price in future.

BCG MATRIX

CONCLUSIONS
 FINDINGS :

 Reduces Contacts :

Manufacturer just deals with wholesalers and Stockists . It Serves well in

unorganized retail market India. Manufacturer restrict themselves only with
wholesalers & stockists i.e. who keeps the goods so that’s why there is less
chances of improvement.

 Reduces costs:

Manufacturer has not any burden to keep the goods in store so which in turn
reduces the storage cost and the margin of the profit will increases in
comparison with retailers.

 Risk Sharing:

Eradicating the channels partners and opt for the company retail outlets is
the risky venture

 Promotions & Feedback:

with the advent of electronic payments the channels partners can assist
manufacturers in promoting their products & also helps in gathering
feedback.
 BIBLIOGRAPHY

 www.scribd.com
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 www.Codeproject.com
 www.Projectstoday.com
 www.Freelancer.com
 www.Slideshare.net
 www.nestle.in