...Oxfam: International Commodity Research – Coffee Confidential: Not for distribution or publication The Coffee Market – a Background Study Oxfam: International Commodity Research – Coffee Confidential: Not for distribution or publication Acknowledgements This background study was written by Oliver Brown, Celine Charveriat and Dominic Eagleton. The authors want to thank the following persons for their useful comments: Mehmet Arda, Maria Jose Barney, Bart Ensing, Penny Fowler, Brian Lewin, Lamon Rutten, Denis Seudieu, Robert Simmons, Marcelle Strazer, Kevin Watkins, Michael Wheeler and Pete Williams. i Oxfam: International Commodity Research – Coffee Confidential: Not for distribution or publication EXECUTIVE SUMMARY '[When prices are low] , we sacrifice a lot in the way of clothing, tools and food. We can’t afford meat, we had to buy other parts of the animal which were inferior. We can’t eat eggs, or drink milk...When the children get ill we don’t have the money to take them to the doctor… One always lives with uncertainty, always in debt; it's always borrow here, borrow there; we live dependent on credit... Of course, there is no peace living with such uncertainty. You don't know whether to take out a loan or not because you could lose the money you've invested.’ Vitelio Menza, small coffee producer in Colombia1 Providing livelihoods to farmers in developing countries is a crucial challenge for reducing world poverty. When fairly priced, export...
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...Acquisitions and the emerging market strategy Since Nestlé is a global organization, the strategy of acquisitions and mergers is widely and frequently followed by it. Its competitive strategies are associated mainly with foreign direct investment in dairy and other food businesses. Nestlé aims to balance sales between low risk but low growth countries of the developed world and high risk and potentially high growth markets of Africa, Latin America and Asia. Nestlé recognizes the profitability possibilities in these high-risk countries, but pledges not to take unnecessary risks for the sake of growth. This process of hedging keeps growth steady and shareholders happy. In Asia, Nestlé’s strategy has been to acquire local companies in order to form a group of autonomous regional managers who know more about the culture of the local markets than Americans or Europeans. Nestlé’s strong cash flow and comfortable debt-equity ratio leave it with ample muscle for takeovers. Recently, Nestlé acquired Indofood, Indonesia’s largest noodle producer. Their focus will be primarily on expanding sales in the Indonesian market, and in time will look to export Indonesian food products to other countries. A flurry of acquisitions which has made Nestle the biggest food company on Earth In the 1920s, Peter, Cailler, Kohler Swiss Chocolate Company was acquired and with it chocolate became an integral part of Nestlé’s business. This sparked further variety in the products offered – including a powdered...
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...Initiating Coverage March 23, 2012 Rating Matrix Rating Target Target Period Potential Upside : : : : Buy | 5074 12-15 months 10 % Nestlé India (NESIND) Strong brand dominance to rule growth… CY13E 16.8 18.0 19.0 19.0 | 4604 YoY Growth (%) (YoY Growth) Net Sales EBITDA Net Profit EPS (Rs) CY10 21.9 20.8 25.0 25.0 CY11 19.8 24.3 17.5 17.5 CY12E 18.8 17.3 22.4 22.4 Current & target multiple P/E (Adjusted) Target P/E EV / EBITDA P/BV Price / Sales RoNW RoCE CY10 53.0 59.9 35.3 51.9 7.1 95.7 131.2 CY11 43.6 51.0 29.2 34.8 5.9 75.5 62.3 CY12E 37.7 41.7 24.7 24.2 5.0 64.1 64.6 CY13E 31.7 35.0 20.8 18.1 4.3 57.1 67.0 Stock Data Bloomberg/Reuters Code Sensex Average volumes Market Cap (| crore) 52 week H/L Equity Capital (| crore) Promoter's Stake (%) FII Holding (%) DII Holding (%) NEST.IN / NEST.BO 17,361.7 6,515.0 44,389.8 4588 / 3501 96.4 62.8 10.9 8.0 Comparative return matrix (%) Return % HUL ITC GSK Nestle 1M 2.9 4.6 5.3 2.9 3M 9.1 (3.1) 7.8 9.8 6M 5.8 19.3 15.1 4.8 12M 25.2 47.9 29.2 22.7 Nestlé India Limited (NIL), the undisputed leader of instant noodles (~88% share by volume in FY11) and milk products segment in India, is largest food company in country. Its strong brands, ‘Maggi’, ‘Cerelac’, ‘Nescafe’ and ‘KitKat’ have become synonymous with the respective categories. Despite increasing competition in the segments (noodles, milk products and chocolate), NIL’s strong brand value has helped it to consistently maintain its volume growth (~12% CAGR FY04-11). Going ahead...
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...management team of Nestlé had to take in determining whether to introduce the Partners’ Blend Coffee into the UK market with their own Nestlé Initiative or to introduce the coffee into the market with Fairtrade certification. This decision was prompted by the feedback they received from their customers to introduce a coffee line that has Fairtrade certification. The main idea of the Fairtrade movement is to address issues of unfair conventional trade practices that discriminate against the poorest and weakest producers in order to empower them to improve their position and have more control over their lives. In the course of analyzing where to introduce Partners’ Blend, the management decided to incorporate it with Nestlé UK because the UK has a natural desire to donate to other less fortunate nations especially as they are a relatively wealthy nation. As a result, many charity organizations have their headquarters in UK. This report would analyze the challenges and opportunities that Nestlé should consider in making the final decision to introduce the coffee either with or without the Fairtrade logo. It includes analyzing the power of suppliers, consumers, the competitive rivalry, the threat of substitute goods and the threat of new entrants when they want to take advantage of the opportunity to position Nestlé in a positive light with ethical coffee line. This report concludes with analyzing the risks and benefits of the potential responses that Nestlé management should...
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...1. Behind the Scenes: Nestlé Carola Trinkle • Andrea Restrepo • Christine Lee Jason Schron • Jesse C. Vaughan May 2, 2011 2. 3. Strategic Analysis 4. SWOT Analysis Internal Environment Strengths : Strong reputation, largest global food company, brand equity, historical expertise Weaknesses : labor condition controversy, coordination and communication problems External Environment Opportunities : health conscious consumers, organic markets, new technology Threats : rising commodity prices, many strong competitors for each brand product, government regulation 5. General Strategy Product Differentiation Strategy “ Renovation and Innovation” of products and brands. Their portfolio ranges from baby foods, bottled water, coffee, chocolate, drinks, ice cream, and petcare Mergers and Acquisitions with Peter, Cailler, Kohler Chocolats Suisses S.A and joint ventures with L’Oreal, Coca-Cola, and General Mills Low Cost Strategy Majority of products are produced in-house Operational Effectiveness Nestlé Continuous Excellence (NCE) program addresses increasing efficiency in standard operating procedures, consistency and manufacturing management 6. Current Strategy Premiumisation Promoting premium products like high-end coffee and chocolate brands Launched a new tea-brewing system called Tpresso Emerging Markets 45% of sales by 2020, $7 billion over 2 years Asia, Latin America and Africa Growing population, rising disposable income 7. (Cont.) Health Science & Nutrition Concerned...
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...Strategic Analysis of Nestlé and its Competitor Kraft Foods Course: International Business Strategy (IB BA) Professor Lewis University of Applied Sciences Dresden Project Members: Katerina Schneiderova Sandra Merkel Nicole Klötzer Carolin Wiese Samuel Weimer Nicole Schröder Date: 11th June 2010 Executive Summary In the following, two companies and their strategic positions within the coffee consumer goods industry will be described. The focus lies on Nestlé and its competitor Kraft Foods. As coffee is one of the most popular products worldwide, this is a very demanding business. It is necessary to provide high quality products, especially when working in the more affluent segments like Nestlé and Kraft Food do. Several political, economic, social, technical, environmental and legal aspects have an impact on the industry branch they are operating in. In addition, there is not only a differentiation in Robusta and Arabica coffee, but also in filter coffee, portioned and non-portioned soluble coffee. To satisfy the diverging needs of all customers, different strategies are applied to gain more market share. In this report it is examined how those companies operate in the specific business context, what they have in common and where they differ. Furthermore, an analysis of the industry attractiveness, of the market segmentation and value chain and an overview of resources and capabilities are part of this paper. After intense research...
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...around 13% annually 8. As per Euromonitor study, Indian candy market is currently valued at around USD 664 million, with about 70%, or USD 461 million, in sugar confectionery and the remaining 30%, or USD 203 million, in chocolate confectionery 9. Entire Celebrations range marketshare is 6.5% 10. The global chocolate market is worth $75 billion annually Companies 1. The chocolate market in India has only three big players, Cadbury, Nestle and Amul 2. New brands such as Sweet World, Candico and Chocolatiers are present in several malls 3. The largest target segment for Cadbury is youth 4. Delhi-based Chocolatiers, started with a small shop in south Delhi’s Chittaranjan Park and has now ventured into malls and multiplexes in NCR, Mumbai and Bangalore, with focus on high-end or designer chocolates, a niche market of their own 5. Candico India is aiming for 400 locations across malls and multiplexes in the country by 2010. Companies & Brands 1. Cadbury - Cadbury, 5 Star, Bytes (chocolate snack), Celebration, Dairy Milk, Gems, Perk 2. Nestle...
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...ECO-102-AC01 M,W,F 11-11:50 a.m. The documentary “Cappuccino Trail – Tales from Global Economy in a Cup” is an example of supply and demand. The demand for coffee today is huge. So huge that it is second only to oil as the most globally traded commodity on the market. A chain like Starbucks sells to about 14 million customers a day for cups that are 99% water making for a 2000% mark-up. This being said the locations with the perfect climate and elevation are limited. The “coffee belt” as it is called is 15-16,000 feet above sea level with plenty of sun and rain providing for over 200 brands. The people who live in these conditions have embraced the opportunity to farm the land as much as possible to make a descent living in a place that would otherwise have little option. When the supply of coffee is abundant all is well. However if too much coffee is available the shelf price stays the same but the farmers have to sell for much less. When this happened in Brazil they opted to fix the saturation of supply by burning a bunch of beans. On the other hand when there is a cut in supply from a natural disaster, like the one that happened in Peru from the effects of El Nino that wiped out a train that carried the supply the market price shot up. Sometimes the market will go up just because a renowned analyst scouting the commodities market gives a positive projection, as was the case in 1997 the cost went from $1.20 to $3.18. This makes the producers very happy but not the suppliers since...
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...LP: SIX COFFEE PRICES Characterization of a perfect competition market depends on a number of issues or attributes. Evidently, the coffee market is not a perfectly competitive market given the fact that the players in the market are not price takers. Corporations that buy coffee from the farmers are acting as cartels in a bid to affect the prices of coffee, which is consequently hurting the farmers who receives little payment of their coffee. Oxfam is giving indications that the current crisis is as a result or coffee rosters deliberating on the prices to pay farmers thereby interfering with the free market. Hence, the market for coffee is not perfectly competitive given that the players cease to be price takers and affect those prices. In perfectly competitive markets, there are infinite sellers and buyers in that the entry or even the exit of one seller or buyer does not affect the market (King et al 61). In addition, there should be absence of either political or social barriers that will hinder the entry of other companies into the market (Baumol and Blinder 27). Products offered ought to be homogenous and the concept of no increasing returns to scale facilitates the sufficiency of firms in the market. Clearly, there are a score of characteristics that the coffee industry fails making it not a perfect competition market. As a result, companies like affect the market directly and the collapse of such companies will render the entire market failed. World coffee market fails...
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...1. Is it important for coffee marketers such as Starbucks, Kraft, and Nestle to create “ethical supply chains” Why? In today’s global marketplace it is imperative for organizations to transform their brands and create an ethical supply chain. No longer do “old style” metrics depict the actual value of a brand. The world’s consumers have increasingly become aware of the true costs involved in the production and distribution of an item. Currently, there is a dire need to realize the historically ignored social, environmental, and personal impact throughout the supply chain. Ethical supply chain management in the coffee industry has been addressed through the implementation of the Fair Trade program. This program ensures that coffee bean growers in impoverished countries receive a reasonable wage for their harvest (www.globalexchange.org). In the past, market fluctuation, bean surpluses, and currency disparity severely affected growers’ income worldwide. With such an enormous global demand for coffee, it is sound business practice to compensate these workers fairly and encourage sustainable farming practices. This will decrease the environmental damage caused by the production of beans, leading to a more secure crop supply – positively impacting the coffee market at large. 2. A recent study by the UK’s Institute of Grocery Distribution determined that the majority of consumers do not buy fair trade products. The report noted, “self-interest is at the center of food choice for...
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...Case Analysis Nestlé Group 3 11 February 2010 David Chol, Whitney Drost, Raynard Geason, Sarah Laborde, Casey Landers, Darren McNeely, Vanessa Robicheaux, Nicholas Knight, Taylor Mendel, Jonathan Bush, John Priola, William Ratcliff Table of Contents Introduction3 Goals3 Constraints3 Introduction Through the years, Nestlé has emerged as a multi-national company that serves as a brand in itself as well as an umbrella company for many well-recognized processed food commodity brands. Nestlé was established in 1867, with the distribution of its first product, dehydrated baby food; this product quickly made the company profitable. Through a series of well-coordinated mergers and the growth of a vast selection of innovative food products, Nestlé became the global giant it is today. Nestlé’s success can be attributed to its deep agricultural supply chain, strong local market teams, hiring from within, and long tenured CEOs. Nestlé has become the epitome of innovation and success in the retail food product industry. In 1996 Nestlé established the Nestlé Environmental Management System (NEMS) in an attempt to produce more environmentally friendly products. NEMS required innovative eco-design in the company’s products and activities, and gave preference to suppliers who worked to improve their levels of efficiency and sustainability regarding their use of resources. Aside from this, NEMS also requires independent environmental auditing regarding the practices...
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...1.0 Introduction: Nestle is founded by Mr. Henri Nestle in 1866, thereafter he diversified his business and latter was branded the world’s largest food and beverage company. Nestle adopted the international strategy and led them to provide nourishing food for Asians’ health and wellness. In order to attain a higher market positioning, Nestle designed a customer-driven marketing strategy that build the right relationships with the right customers and in turns segmented them based on their needs and preferences. Hence, their variables are demographic and psychographic. Since then, in responding to fast economic growth, Nestle invested and set up their first Asia Research and Development (R & D) office in Singapore to support in developing more products. 1.1 Unique Selling Proposition Nestle Coco-yoghurt is a nutrient setter in market. They are the first to introduce the coco-yoghurt in the market. The USP of coco-yoghurt is unique, nourishing, instant and affordable and Nestle will positioned it as a high quality nourishing beverages of consumer’s convenient focus. Positioning statement like “To all baby boomers, Generation X & Y who are always on the go, Nestle Coco-Yoghurt drink is an attributes to a healthy lifestyle of premium ingredients in relation to Convenient, Nourishing and affordable to start your day in seconds. “ Therefore, the positioning will be achieved by leveraging Nestle coco-yoghurt a competitive edge: market experience from its competitors...
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...Background Nestlé Company had started off from a single man's idea, and developed into a giant corporation. Our history begins back in 1866, when the first European condensed milk factory was opened in Cham, Switzerland, by the Anglo-Swiss Condensed Milk Company. Nestlé’s headquarters are located in Vevey, Switzerland, but the Nestlé Company has factories or operation in almost ever country in the world In 1866 Henri Nestlé, German pharmacist, launched his Farine lactée, a combination of cow’s milk, wheat flour and sugar,, and developed a milk food formula for infants who were unable to tolerate their mother milk (Nestle.com). His product became a success, and it created a demand throughout Europe. As Nestlé’s popularity grew more businesses wanted to merge and become partners with Henri Nestlé's business. From 1866 to 1947 the Nestlé Company had gone through several name changes. In 1905, Anglo-Swiss Condensed Milk Co. and Farine Lactee Henri Nestlé merged, and the company’s name became Nestlé & Anglo-Swiss Condensed Milk Co. Then in 1929, Peter-Cailler-Kohler Chocolats Suisses S.A. merged with the company. The name was then changed to Nestlé & Anglo-Swiss Holding Co. Ltd, on November 27, 1936. In December 1947, Co. acquired all the shares capital of the Alimentana S.A. company in exchange for fifteen Nestlé shares and fifteen Unilac shares for each of Alimentana S.A. share, so this point the name was at Nestlé Alimentana S.A. And then finally, the last name change...
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...Nestlé The Nestlé concept of corporate social responsibility as implemented in Latin America The Nestlé concept of corporate social responsibility as implemented in Latin America Nestec_latin_cover_GB.indd 1 9.2.2006 12:04:25 Nestec_latin_cover_GB.indd Sec1:2 9.2.2006 12:04:26 Contents An introductory discussion 2 A framework for Creating Shared Value 5 Nestlé’s philosophy: a long-term perspective 7 Latin America: challenges and opportunities 9 Overview: Nestlé in Latin America 1 1 Agriculture and sourcing 12 Sourcing practices for quality, safety and sustainability Research and development for better yields Knowledge transfer and farm assistance Partnerships for sustainable agriculture 16 17 20 23 Manufacturing and distribution 26 Food safety through improved standards of operations Risk management for food safety — Early Warning System Developing people Labour policies for mutual benefit Creation of development and employment opportunities in the community Improved environmental standards Managing water sustainably 30 31 33 34 Research for consumer benefit Consumer nutrition, health and wellness Knowledge and education for healthy nutrition and lifestyles 52 54 58 Nestlé’s future in Latin America 62 Products and consumers 48 Front, inside and back covers: Farmer Rufino Chindicué (front cover) and son Luis (inside back cover) supply milk to Nestlé. Three decades ...
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...NESTLE: The Organizational Transformation Nestle is the largest multinational food and beverage company in the world. It contain multiple product in different category baby food, bottled water, breakfast cereals, coffee and tea, confectionery, dairy products, ice cream, frozen food, pet foods, and snacks. The product includes Nespresso, Nescafé, Kit Kat, Smarties, Nesquik, Stouffer’s, Vittel, and Maggi. Nestle has 477 factories in 194 countries and 33,33,000 employees world wide. Nestle company started in 1866 and found by George Page and Charles Page, and Farine Lactée Henri Nestlé. The Nestlé mainly based on Corporate business principles in which all the cultural activity are shown.Nestle long term success for our shareholders. They ensure that all the activities are sustainable but additionally we have to create significant value for society. Nestles is main shareholder for company loreal cosmetic company.The company owner hennery nestle had lunched the combination milk,flour and sugar for saving a neighbor child . The founder of milk company American chlaes and George Parle tie up with nestle for expanding business. The company grew the time of First World War and follow up by Second World War. It is 140 years old company. The nestle company follow long term value and market strategy for consumer and making community center for making business pattern. Nestle main vision to sell for in high quality with low prices. Their main objective to sell product with good prices...
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