Marketing Project Nestle Cerelec

SYNOPSIS

This is a semester project (Research Report) regarding a baby food product named Cerelac of Nestlé. It

starts with an introduction about Nestlé followed by the history of Nestlé. It gives a briefing about all the

brands of Nestlé.

This report also includes the marketing mix of the product. All the 4P’s of marketing mix for the product

has been discussed and explained to reveal the significance of its product, pricing, placing and

promotional activities.

BCG matrix has also been included in this report to know about the current standing of brand in local

culture.

Segmentation and target marketing will help to understand the criteria of Nestlé marketing for the

specific product.

In the end, there are some recommendations for the company to enhance their profitably according to

our research. After that, report has been concluded.

INTRODUCTION

Today, Nestlé is the world leading Food Company. Nestlé headquarters is in Switzerland. Its international R&D network supports the products made in more than 500 factories in 86 countries. The Nestlé factories are operating in the region of:

Africa America Asia Europe Oceania

Being a company dedicated to food from the beginning, Nestlé remains sensitive to culinary and eating habits, and responds to specific nutritional problems, whilst also setting and matching new trends such as growing out-of-home consumption and caring about the well being of its consumers.

Meaning Of NestléHenri Nestlé endowed his company with the symbol derived from his name. His family coat of arms, the nest with a mother bird protecting her young, became the Company's logo and a symbol of the Company's care and attitude to life-long nutrition. The Nestlé nest represents the nourishment, security and sense of family that are so essential to life.

BRIEF HISTORY OF NESTLÉ

1866 -1905In the 1860s Henri Nestlé, a pharmacist, developed a food for babies who were unable to breastfeed. His first success was a premature infant who could not tolerate his mother's milk or any of the usual substitutes. People quickly recognized the value of the new product, after Nestlé's new formula saved the child's life, and soon, Farine Lactée Henri Nestlé was being sold in much of Europe.

1905 - 1918 In 1905 Nestlé merged with the Anglo-Swiss Condensed Milk Company. By the early 1900s, the company was operating factories in the United States, Britain, Germany and Spain. World War I created new demand for dairy products in the form of government contracts. By the end of the war, Nestlé's production had more than doubled.

1918 - 1938 After the war Government contracts dried up and consumers switched back to fresh milk. However, Nestlé's management responded quickly, streamlining operations and reducing debt. The 1920s saw

Nestlé's first expansion into new products, with chocolate the Company's second most important activity

1938 - 1944 Nestlé felt the effects of World War II immediately. Profits dropped from $20 million in 1938 to $6 million in 1939. Factories were established in developing countries, particularly Latin America. Ironically, the war helped with the introduction of the Company's newest product, Nescafe, which was a staple drink of the US military. Nestlé's production and sales rose in the wartime economy.

1944 - 1975 The end of World War II was the beginning of a dynamic phase for Nestlé. Growth accelerated and companies were acquired. In 1947 came the merger with Magi seasonings and soups. Crosse & Blackwell followed in 1950, as did Findus (1963), Libby's (1971) and Stouffer's (1973). Diversification came with a shareholding in L'Oréal in 1974.

1975 - 1981 Nestlé's growth in the developing world partially offset a slowdown in the Company's traditional markets. Nestlé made its second venture outside the food industry by acquiring Alcon Laboratories Inc.

1981 - 1996 Nestlé divested a number of businesses1980 / 1984. In 1984, Nestlé's improved bottom line allowed the Company to launch a new round of acquisitions, the most important being American food giant Carnation.

1996 + The first half of the 1990s proved to be favorable for Nestlé: trade barriers crumbled and world markets developed into more or less integrated trading areas. Since 1996 there have been acquisitions including San Pellegrino (1997), Spillers Pet foods (1998) and Ralston Purina (2002). There were two major acquisitions in North America, both in 2002: in July, Nestlé merged its U.S. ice cream business into Dreyer's, and in August, a USD 2.6bn acquisition was announced of Chef America, Inc.

Mission Statement

“Nestlé is dedicated to providing the best foods to people throughout their day, throughout their lives, throughout the world. With our unique experience of anticipating consumers' needs and creating solutions, Nestlé contributes to your well-being and enhances your quality of life.”

MARKETING MIX

(Cerelac)

PRODUCT

“Product stands for goods and services that the company offers to target market.”

Cerelac is a brand of cereal made by Nestlé. It is marketed as a snack for the whole family but is popular for infants.

SizesCERELAC is available in three sizes: 350g & 175g box packaging and a 25g sachet packaging for your convenience.

Shape and colorThe shape and the color of the Cerelac are quite attractive for the customers.

Labeling and packaging The labeling, packaging includes the Nestlé brand and logo. The packaging includes an expiry date and time along with a manufacture date. Second part of labeling includes the quantity of product in grams along with ingredients and contents.

Competitive advantageNESTLÉ Cerelac is the only popular and quality baby food in Pakistan, Its unique 'Stay Fresh seal and a long lasting shelf life gives the brand a formidable competitive advantage. Not only it is easy to make but also it is completely made considering the digest system and requirement for infants on different stages of age. The factors that make Cerelac successful is quality and superior nutritional value

PRICE

“The amount of money charged for a product or service, or sums of the values that consumers exchange for the benefits of having or using the product or services.”

Price of product Nestlé Cerelac sets prices of their products according to the market demand as low as possible because Nestlé is the trend setter in the market.

Profit marginThe profit margin is usually high because of the high quality of the product.

Stability of the priceIts prices generally trend to fluctuate according to the changes in required ingredients.

Scale of prices The price of Cerelac is fixed on a reasonable scale so that majority of public can afford.

Effect of competitors on pricesNestlé Cerelac has no effect on prices by their competitors because they set their own.

Price discountsOn special occasions and festivals, Nestlé Cerelac keeps giving different kind of price discounts.

Price refund policyNestlé Cerelac never returns the paid money back. If the claim is valid then they can replace the product.

PLACE

“Placing stands for company's activities that make the product available to the target consumer.”

Outlets of product locatedNestlé Cerelac is available / distributed all over in Pakistan regardless of big and small cities.

Direct sales Nestlé Cerelac is not sold directly to the customers because of the extensive consumer groups. It is the reason they sale the product through distributors for easiness of company.

Warehousing facilitationNestlé Cerelac has its own warehouses for the storage of products as well as it has also hired some warehouses.

Transportation modes Usually Nestlé’s mode of transportation is road which is also used for Cerelac.

PROMOTION

“Advertising is any paid form of non-personal presentation and promotion of ideas, goods and services through mass media such as newspapers, magazines, television or radio by an identified sponsor.”

Pure Life WaterConfectioneries Culinary products

Milk ProductsCoffeeDietetic & Infant foods

Chocolate DrinksFruit Drinks

Channels adopted for promotionNestlé Cerelac has adopted the channels for promotion through TV, News papers, magazines Doctors and hoardings etc.

Advertisement budgetNestlé has preplanned to start the financial year but it is kept secret b the company.

SponsorsNestlé Cerelac does not have any sponsors.

Share of promotionShare of promotion is set on percentage base, it keeps changing every year. Usually it is 40% of the product.

Nature of marketing The product is marketed aggressively in the market.

Online promotion methods Nestlé Cerelac has not yet adopted online promotion methods in Pakistan but in future it may be possible.

BCG MATRIX

Above BCG matrix is defining the current standing of Nestlé’s products. If we compare Cerelac in baby food industry in Pakistan Cerelac would be standing still in cash cow because neither there is market growth in this industry nor any good competition. I couldn’t find any other baby food product which is producing in Pakistan. If there is any so that product would be standing in question mark or in dog section.

StarsThe two SBU’s, Mineral water and Confectioneries fall into this category of the BCG. These SBU’s have high market share and high industry growth rate. These SBU’s are requiring lots of investment to compete in the growing market. For example, lots of money is being spent and aggressive marketing strategies have been implemented for the Mineral water to build and maintain market share. Nestlé Pure Life has captured 50 % of the bottled-water market in Pakistan since it was introduced in 1998. Its approximate sales for 1999 are RS. 70401000. This sales figure is quite impressive as the sales rose quite high in only one year.

It is predicted that there will be additional growth in the mineral water category in coming years. The sales of the confectioneries rose to Rs.106559 000 from Rs.87758000. The huge increase of Rs.18801000 puts this SBU in the stars category and shows its increasing market share. There is a growing market for the products in confectioneries for example Kitkat (even though it’s imported), Polo Smarties etc. This can be proven from the fact that Nestlé keeps introducing new products in this category for example Allen’s Soothers were launched during the last quarter of 1998.

Cash cowsMilk products, Coffee and Dietetic and Infant food have a high market share and are doing business in mature industries. Since the customers of this product category are loyal, the marketing costs of these SBU’s are quite low and as a result a large amount of cash can be generated. Customer Loyalty is a must for these Cash cows to maintain their market share.

The sales of the Milk products have increased to Rs.108430000 from Rs.87758000. This huge increase in sales reflects the high market share of this SBU. However, its growth rate is low because in general this category is in its maturity stage – that is – a number of milk products have been launched by Nestlé, most of which are quite old. An innovation has not really been made in this category.

The same conclusion can be made about Coffee. There is an already existing market for Coffee which is not increasing further by a large amount. The sales of Coffee were Rs.4689000 in 1999 and Rs.39200000 in 1998. This huge difference shows that a great amount of cash is being generated from this SBU. Sales of Dietetic and Infant food rose to Rs. 60,935 000 from Rs. 52,655 000. The infant foods unit of Nestlé is operating in a mature industry. Like the milk products, the infant foods have been around for a long time without barely any new product line being started in this category.

Question marksIncluding in this section are the culinary products of the organization. The products such as Maggi 2-minute Noodles and Maggi cold sauces have a low market share and a high growth rate. These products especially the cold sauces are operating in a highly competitive market. The approximate sales were Rs.79919000 in 1999 and Rs.60818000 in 1998. This figure represents a great potential for growth in future. However, in contrast, the market share of the products in this category is not very high currently.

A reason for this is that Nestlé just recently introduced cold sauces such as “Emily sauce” etc. However the enthusiasm, with which the customers received the different flavors of sauces, portrays a very high potential for future growth. The firm needs to focus on differentiating its products in the competitive market to gain customers.

DogsChocolate and Fruit drinks fall into this category and they possess a low market share and a low growth rate. Chocolate drinks had sales of Rs. 19639000 in 1999, which rose from Rs. 19541000 in 1998. This is quite a small increase considering the rise in the sales of other SBU’s. However, the chocolate drinks are still profitable so the firm does not have to worry about liquidating or getting rid of this SBU. The sales of Fruit drinks rose to Rs.40620000 in 1999 from Rs. 38103000 in 1998. There has been a small amount of increase; however it is not a lot compared to other SBU’s. Firstly, there is not a huge market for chocolate drinks in Pakistan. People usually tend to buy light juices like apple or orange juice or Pepsi instead of chocolate drinks. Secondly, regarding the fruit juices, there are not a lot of flavors available currently in this category.

Nestlé needs to introduce new flavors such as apple, grape etc. to capture the market that prefer these flavors. This will not only increase the sales of the SBU, but it will also increase its market share. At the moment, additional amount of money is not being invested in these SBU’s, as they are not very profitable. Nestlé is currently trying to maximize profits from this category by minimizing expenditures and by differentiating the product to build market share.

SEGMENTATION

“A market segment consists of a group of customers who share a similar set of needs and wants.”

To occupy a clear distinctive & desirable place related to competing baby foods in the minds of the target customers Nestlé Cerelac segments its market on following bases:

Geographic segmentation Demographic segmentation Psychographic segmentation Behavioral segmentation

Geographic segmentation

“Geographic segmentation calls for division of market into different geographical units.”

Cerelac segments its market geographically on divisional basis. They divide each division in different zones and every distributor is restricted to sale its products only in his own zone. E.g. Lahore is divided into five zones like East, West, South, North, and South west.

Demographic segmentation

“Demographic segmentation is about dividing the market into various groups based on different variables.”

AgeRegarding this variable, Nestlé Cerelac has segmented the market from early age infants to 5 years old children and has launched different flavors and kinds of cereal according to their requirements, On the other hand Nestlé Cerelac has made this product for infants but has actually targeted the mothers who can either be very old or very young. Mothers are very conscious about their children’s health and they prefer to use products that help them maintain good health.

Income levelThis is also an important variable on which segmentation can be carried out. People belonging to the lower income groups cannot afford to buy readymade baby foods so Nestlé will target that segment whose income puts them in the upper middle and higher income groups.

Social stratification Buyers are divided into different groups based on social class and life style. Many consumers live a simple life style and belong to lower class; they don’t spend on buying artificial food for their children and people belong to middle class or upper class can definitely opt for this.

Psychographic segmentation

“Psychographic segmentation is a sense of using psychology and demography to better understand consumers.”

Class consciousness Nestlé Cerelac has also segmented the specific class of mothers who doesn’t want to give breastfeed to their children so Cerelac is the most preferable and best nourishing food for infants as proxy of chest food.

Level of educationNestlé Cerelac makes promotional strategies keeping in view the customer’s level of education. If the percentage of education is high in a country then through advertisements people can be made well aware of their product and can convey their message easily. Promotion and education has a direct relationship.

Behavioral segmentation

“In behavioral segmentation, marketers divide buyers into groups on the basis of their knowledge of attitude towards, use of, or response to a product.”

BenefitsBuyers are classified according to the benefits they seek. Nestlé Cerelac has launched different flavors and types of cereals according to the benefits are required by children of different stages of early age.

TARGET MARKET

“Target market is a particular market segment at which a marketing campaign is focused.”

Nestlé Cerelac’s primary target market is infant of 0-5 age and the secondary target market is the mothers. The only first P(product) of the marketing mix is designed by keeping in mind the requirement of infants on the other hand rest of the three P’s (Price ,place and promotion) and to some extent the PRODUCT too are designed by focusing on the mothers’ preferences. Target market’s profile

Geographic Dispersion UrbanSuburban

Family life Cycle Full nest – I Single parents

Social StratificationUpper – upper classLower – upper classUpper – middle class

Age Segments Infants (0 – 5)Mothers (18 – 45)

IncomeAverageAbove Average (50K to 100K Per month)

BRANDING

“Brand is the single idea of consumer’s mind.”

Or

“Set of promises is called brand.”

Or

“A brand is name, term, sign, symbol or design, or combination of them, intended to identify the goods or services of one seller to differentiate them from those of competition.”

Brand building strategyBrand development strategy of Cerelac has been far reaching and has managed to remain in the limelight ever since it became a favorite with their nutritious ingredients for infants.

The brand development strategy of Cerelac comprised redesigning of its brand development policies and techniques to keep up with the changing mindset and requirements of its consumers.

Brand image“Impression in the consumers' minds of a brand's total personality (real and imaginary qualities and shortcomings).”

Almost all of the mothers must know the name of Nestlé Cerelac, since it is a leading name in infant’s food that’s why Cerelac has created a strong brand image. Millions of mothers around the world consider Nestlé Cerelac as the best food for their children.

Brand image is the significant factor affecting Cerelac’s sale. Cerelac brand name is very well known all over the world

Brand personality“Brand personality is the way a brand speaks and behaves means assigning human personality traits to a brand so as to achieve differentiation.”

Cerelac’s brand personality reflects the positioning of its brand. When researching the positioning of a product, consumers are often asked how they would describe that product if it were a person. This can ensure that consumers have a clear view of the brand values that make up the brand personality, just

like the values and beliefs that make up a person. Many people see Cerelac as a mother because it takes care of children and understand their requirement same as mother it is also shown by the new slogan of Cerelac is:

BEROONI TAHAFFUZ DEN AAP OR ANDROONI TAHAFFUZ CERELAC

Brand differentiation strategiesNestlé Cerelac is known as an only infant’s food in Pakistan; the Company has differentiated its brand in number of way as

Performance quality“Performance quality is the level at which the product’s primary characteristics operate.”

The company has put great effort to maintain the quality level of the brand which is the main factor of Nestlé’s success.

Conformance quality“Conformance quality is the degree which gives the assurance of quality of the brand.”

Nestlé Pakistan has been declared an ISO 22000 company in recognition of its continuing excellence in quality and food safety, ISO certification gives high level of conformance to the quality of all Nestlé’s brands including Cerelac.

Features“Features show the different characteristics which supplement their basic function.”

Nestlé Cerelac doesn’t only focus on providing the basic nourishing food for the infants but the main factor of its popularity is that that it keeps adding different features in their product according to the changes and requirement which supplement the product

LABELING & PACKAGING

“Packaging consists of all activities of designing and producing the container for a product.”

“Labeling is a display of information about a product on its container, packaging or on the product itself.”

ContainerNestlé sachets are made of aluminum foil packing and boxes are packaged by tin packs to give the product a long lasting shelf life.

Brand and logoThe labeling, packaging includes the Nestlé brand name and logo which is enough to attract the customer.

Brand CharacterA blue colored teddy bear as a brand character is also tagged on the container of Nestlé Cerelac.

DatesThe packaging includes an expiry date and time along with a manufacture date.

QuantitySecond part of labeling includes the quantity of product in grams.

IngredientsIngredients are also placed on the packaging for the convenience of consumer to trust the product.

RECOMMENDATIONS

Keep maintaining the quality as a competitive edge.

Increase advertising & show your competitive edge.

Increase loyalty of customer with brand through attractive packages and extra features.

Try to target lower class too.

Increase its distribution network.

Give keen interest to CRM

Increase incentives & promotional activities

Training courses / workshops for team

Conduct training sessions of salesmen at least once a month at regional level.

CONCLUSION

According to data analysis people do not believe that competitors of Nestlé are shrinking its share because:

Nestlé Cerelac has strong brand image on the basis of quality.

Nestlé Cerelac always segments the exact customers.

Care pharmacy doesn’t not believe that till now any of

Competitors of Nestlé Cerelac are successful to compete on the basis of quality

Nestlé Cerelac has positioned among people as health provider brand for infants.