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INTRODUCTION

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FMCG companies have now realized that India lives in its rural villages. So that

rural marketing has become the latest marketing mantra of most FMCG majors. Thelure of an untapped market has driven the marketers to chalk out bold new strategies

for targeting the rural consumer in a big way.

India is on the move and so are the markets in India. Apart from economic

changes, India is also facing social changes like changes in life style, hobbies etc.

New fashions, Adventures holidays, etc. are in today.

Further, food habits of Indians are changing rapidly. Chocolates which were

believed to be kids preference are now being consumed by kids, teenagers, and

adults. Chocolate market in India (Currently 28 000 tones) is growing at a fast rate

annually.

To take advantage of the growing market, international confectionery

companies are getting ready to woo the proverbial Indian Sweet tooth. An influx of

worlds leading Chocolate players is expected.

Nestle also piled primarily on the urban consumers. After understanding the

great potentiality rural India possesses, Nestle is also experimenting in big way to

bring the much needed volumes and help itself to bank upon the volume driven

growth, in this severe competitive FMCG sector where the dispersion or market

penetration plays a big role. So Nestle is eying on the market penetration and it is

being targeted by devising different marketing strategies.

The rational behind Nestle going for the market penetration is to acquire new

consumer base by making the products available to the every interior of the countryand increase its sales, to sustain growth. The company is having a marketing strategy

to drive penetration through wholesale marketing. But is it a right marketing

strategy? Or will it prove to be an expensive mistake? If they want to increase their

penetration then how and where they should go for? These are the issues Nestle is

facing today.

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This project is a market research and it touches every aspect of the current

wholesale marketing and predicament associated with it. It also juxtaposition that howpenetration, can be possible through wholesale marketing, what is the cost of doing it

and maintaining it. This project gives an insight into the every feasible aspect that is

associated in Driving penetration through wholesale marketing, for Nestle.

In the above context, the prime objective of this report is to prepare a

marketing plan for any brand that is planning to enter the India Chocolate Market.

Therefore, this report is generic (broad-based) to the extent that it does not focus on

any single brand. However, this may prove to be a relevant marketing guide for anybrand launch in India.

The FMCG sector has been the cornerstone of the Indian economy. Though,

the sector has been in existence for quite a long time, it began to take shape only

during the last fifty-odd years. To date, the Indian FMCG industry continues to suffer

from a definitional dilemma. In fact, the industry is yet to crystallize in terms of

definition and market size, among others. The sector touches every aspect of human

life, from looks to hygiene to palate. Perhaps, defining an industry whose scope is sovast is not easy.

After witnessing booming sales and flooding markets with innumerable

products, FMCG companies have had to abruptly apply the brakes and look for

various ways to save costs.The MORE THAN RS. 43,000 crore (listed companies)

FMCG industry in India, which has been on a roll for many years, faces tough times

ahead, although many segments still shows good growth.

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CHAPTER 1

LITERATURE REVIEW

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1.1 COMPANY PROFILE

NESTLE FOODS INDIA LTD.

Nestle Foods India is a Transnational company (TNC) with its worldwide

operations in over 70 countries. The founder of Nestle was Henry Nestle who from a

modest beginning founded the company in 1866 at Switzerland for manufacturing

milk powders for babies. At that time Switzerland faced one of the highest infant

mortality rates and the milk formula saved the lives of many infants whose mothers

were unable to breast feed successfully.

Nestle has been a partner in India's growth for the past nine decades and hasbuilt a very special relationship of trust and commitment with the people of India. The

culture of innovation and renovation within the company and access to the Nestle

Group's proprietary technology/ Brands, expertise and the extensive centralized

Research and Development facilities helps the company to create value that can be

sustained over the long term. Nestle India manufactures products of truly international

quality under internationally famous Brand names such as Nescafe, Cerelac, Maggi,

Milky Bar, Milo, BarOne, Nestea and Kit Kat and in the recent years the company hasalso introduced products of daily consumption and use such as Nestle Milk, Nestle

Dahi, Nestle Butter, Nestle Fruit 'n milk ready to drink beverage and Nestle Pure Life

bottled drinking water.

Nestle is often quoted by most as "multinational of multinationals." There is a

good reason, as less than 2% of the turnover comes from the domestic market in

Switzerland and rest from its other operations worldwide.

At present Nestle in the world's largest food company with its international

headquarters at Vevey, Switzerland. With almost 500 factories world wide it employs

many people directly or indirectly.

Nestle is under first 50 companies of Fortunes five hundred list. It is present

over all five continents of the globe in over 80 countries. It is having 200 operating

companies, one basic research center and 17 technological development centers and

around 2,76,000 employees.

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Nestls Philosophy

When Henri Nestle introduced the first commercial infant formula in 1867, he

also created a symbol of the Bird's nest, graphic translation of his name, which

personifies the company's business. The symbol, which is universally understood,

evokes security, motherhood and affection, nature and nourishment, family and

tradition. Today it is the central element of Nestls corporate identity and closely

parallels the company's corporate values ad culture.

Mission Statement

At Nestl, our research makes it possible for everyone to enjoy better food for

a better life.

Good Food is the primary source of Good Health throughout life. We strive to

bring consumers foods that are safe, of high quality and provide optimal nutrition to

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meet physiological needs. In addition to nutrition, health and wellness, Nestl

products bring consumers the vital ingredients of taste and pleasure.

As consumers continue to make choices regarding foods and beverages they consume,Nestl helps provide selections for all individual taste and lifestyle preferences.

Research is a key part of our heritage at Nestl and an essential element our

future. We know there is still much to discover about health, wellness and the role of

food in our lives, and we continue to search for answers to bring consumers Good

Food for Good Life.

Promote awareness of the effect of our lifestyle both on ourselves and on ourenvironment.

Exist as a financially successful, non-hierarchical, democratic organization whereworkers participate in the creation and running of their working Environment, as

an example to encourage others to do likewise.

Provide an environment that encourages and helps people to develop and achievetheir potential.

Actively support co-operatives, fair trade, environmental issues and communityactivities.

Vision Statement

Your VISION defines your long-term dream. It should not be

achievable. That may sound ridiculous, but the objective is for your vision to always

be just slightly out of your reach. It's what you constantly strive to attain, and it

becomes your reason for being.

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1.2 ORGANISATION HISTORY

In 1860s Henri Nestle, a Swiss pharmacist, established the world-renowned

Nestl brand amid a spirit of innovation and goodwill. In 1866 he developed a foodfor babies whose mothers were unable to breastfeed. His first success was a premature

infant who could not tolerate his own mother's milk or any of the usual substitutes.

The value of the new product was quickly recognized when his new formula saved the

child's life, and soon,Farine Lacte Henri Nestl was being sold in much ofEurope.

In 1905 Nestle merged with the Anglo-Swiss Condensed Milk Company. By

the early 1900s, the company was operating factories in the United States, United

Kingdom, Germany and Spain.World War I created new demand for dairy products

in the form of government contracts. By the end of the war, Nestl's production more

than doubled.

The first Nestle factory to begin production in the United States was opened in

Fulton, Oswego County, New York. The factory however was closed in 2001, after

the company decided that the cost of restoring, and updating the factory could not

financially be justified. Employees of the factory were furious, and raised the

company flag upside down the day the closing was announced.

After the war, government contracts dried up and consumers switched back to

fresh milk. However, Nestls management responded quickly, streamlining

operations and reducing debt. The 1920s saw Nestls first expansion into new

products, with chocolate the company's second most important activity.

Nestl felt the effects of World War II immediately. Profits dropped from

US$20 million in 1938 to US$6 million in 1939. Factories were established indeveloping 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. Nestls production and sales rose in the wartime economy.

The end of World War II was the beginning of a dynamic phase for Nestl.

Growth accelerated and companies were acquired. In 1947 came the merger with

Maggi seasonings and soups. Crosse & Blackwell followed in 1950, as did Findus

(1963), Libby's (1971) and Stouffer's (1973). Diversification came with a

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shareholding inLOrealin 1974. In 1977, Nestl made its second venture outside the

food industry by acquiring Alcon Laboratories Inc.

The Brazilian president, Lula da Silva, inaugurates a factory in Feira de Santana

(Bahia), February, 2007.

In 1984, Nestls improved bottom line allowed the company to launch a new round

of acquisitions, notably American food giant Carnation and the British confectionery

company Rowntree Mackintosh in 1988, which brought the Willy Wonka Brand to

Nestle.

The first half of the 1990s proved to be favorable for Nestle: trade barriers

crumbled and world markets developed into more or less integrated trading areas.

Since 1996 there have been acquisitions including San Pellegrino (1997), SpillersPetfoods (1998), and Ralston Purina (2002). There were two major acquisitions in

North America, both in 2002: in June, Nestl merged its U.S. ice creambusiness into

Dreyer's, and in August a US$2.6 billion acquisition was announced ofChef America,

Inc. In the same time frame, Nestle came close to purchasing the iconic American

company Hershey's, though the deal fell through. Another recent purchase includes

the Jenny Craig fitness firm for US$600 million.

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In December 2005 Nestl bought the Greek company Delta Ice Cream for240

million. In January 2006 it took full ownership of Dreyer's, thus becoming the world's

biggest ice cream maker with a 17.5% market share.[3]

In November 2006, Nestle purchased the Medical Nutrition division of

Novartis Pharmaceutical for $2.5B. In April 2007 Nestl bought baby food

manufacturerGerberfor $5.5 billion.

NESTLE OVER THE YEAR

Nestle was established because of Henris concern for his fellow citizens. Henri, who

had a passionate interest in pursuing his work ideals, hoped that his efforts would one

day benefit society. He produced the first milk cereal food for children, an

achievement that even today, is recognized as one of the major advances in public

health throughout the world.

While the original business was based on milk and dietetic foods for children,

numerous other food products have been added to the range over the years. These

include chocolate, instant beverages, culinary, refrigerated and frozen products, icecream, mineral water and pet food.

Nestls other products include numerous chocolate bars as well as Nescafe

coffee and Perrier water.

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TABLE1.2 OUR BRANDS

Milk Products & Nutrition Chocolates&Confectionery

NESTL EVERYDAY Dairy Whitener NESTL KITKAT

NESTL EVERYDAY Slim NESTL KIT KAT LITE

NESTL EVERYDAY Ghee NESTL MUNCH

NESTL Milk NESTL MUNCH POP CHOC

NESTL Slim Milk NESTL MILKYBAR

NESTL Fresh 'n' Natural Slim Dahi NESTL MILKYBAR CHOO

NESTL Jeera Raita NESTL BAR-ONE

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NESTL NESVITA NESTL FUNBAR

NESTL NIDO NESTL Milk Chocolate

NESTL MILKMAID NESTL clairs

NESTL MILKMAID Fruit yoghurt POLO

NESTL MILKMAID FUNSHAKES POLO Power mint

NESTL CEREVITA POLO Zero

NESTL TANG EEZ

Beverages Prepared Dishes & Cooking Aids

NESCAF CLASSIC MAGGI 2-MINUTE Noodles

NESCAF SUNRISE MAGGI Vegetable Atta Noodles

NESTL MILO MAGGI Dal Atta Noodles

NESCAF Mild MAGGI Rice Noodles Mania

MAGGI Sauces

MAGGI Pizza Mazza

MAGGI Healthy Soups

MAGGI Healthy Soup- Sanjeevni

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1.3 INDUSTRIAL SCENARIO

The processed foods sector, which currently accounts for less than 2% of total

food consumption in the country, is slated to grow at a fast pace. The Indian

Government has identified Food Processing as a high potential industry and has been

creating a policy environment conducive to its growth. Historically, the policy

framework favoured small and unorganized players while the MNC players were

restricted from adding capacities. This led to the mushrooming of a vast unorganized

sector. Large players with strong marketing network and brand equity were forced to

source from third party producers. During the last few years, however, several foodproducts have been de-reserved from small-scale sector. MNCs as well as domestic

players have made aggressive investments in the sector. Quantitative restrictions on

import of several food products have been lifted, leading to greater availability of

imported products. MNCs are able to offer a wider product range, without the need to

establish a manufacturing base.

1.4 COMPETITION

Baby food and Instant coffee are categories where brand loyalties are very

strong and Nestle is the market leader. HLL is a significant competitor to Nestle in

instant coffee; while Heinz is the main competitor in the baby foods market. The

market for culinary products, semi-processed foods such as noodles, ready mixes for

Indian ethnic breakfast and sweets, is largely an urban market. HLL and Indo Nissin

Foods are the main competitors in these product segments. Nestle has also achieved asignificant 25% share in the chocolate/confectionery market. The company has

recently expanded its dairy products portfolio to include, milk, curd and butter. The

company also forayed into the bottled water segment with the launch of its Perrier

brand in the premium mineral segment andPure Life in the purified water segment.

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1.5 PROBLEM STATEMENT

Problem defining is the most crucial aspect of any research. It helps in

understanding the background of the problem by analyzing it in an appropriateenvironmental context. This helps in translating the exact problem faced by the

management into marketing research problem.

A wholesaler plays a pivotal role in the distribution channel of any company

especially in a FMCG Company. Wholesalers are important as they carry out the role

of the Conduit in any companys distribution network and cater to a large pool of

retailers which a distributor of a company cannot cater.

So retailers who come from distant places and whose purchasing power is less are

been taken care by the wholesalers. So wholesalers can be impetus to drive the

penetration in the market.

The main problems that new product faces is that of getting experienced and

effective channel members. As existing marketing marketer/manufacturer can piggy

back on the existing channel structure. A new company will have to provide greater

incentives convince channel members to stock the product offering. Quick handling

of problems of stockiest & dealers. The biggest problem in distributing a product

category like chocolates is lack of infrastructure. The product needs to be kept in

refrigeration (more so, in summers)-limiting the points at which it is available (ideal

temperature needed for chocolates is 18 to 25 degrees). Hence, summer see sales

suffer. Demand falls by almost two-thirds in the summer months. Nestle' markets

infant formula according to the principles and aims of the WHO International Code of

Marketing Breast Milk Substitutes, and seeks dialogue and cooperation with the

international health community and in particular with the WHO and UNICEF, to

identify problems and their solution.

In India 70% of population lives in villages and so this population plays a pivotal

role in the turnover figures of any company, especially FMCG Company. As many of

the competitors of Nestle is going rural to increase its consumer base, Nestle is also in

the purview to increase its penetration in the every interiors of the country, so that

every product of Nestle should be available to every part of the country and on the

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other hand to increase the consumer base and its sales figures. So the Problem

statement can be summaries as following

Nestle wants to go rural as many FMCG companies are doing so, including itscompetitors.

Management decision problem is whether to take step to carry out thepenetration through wholesalers or not?

Management is unaware of the current level of penetration in the up-countrymarket?

If Penetration through wholesalers is possible then how to go about it? The customers can be tapped directly through the distribution channel or not

or penetration en-route wholesalers would be the optimum solution?

What is the profile of the customers to have the knowledge regarding theconsumer behavior and their buying behavior?

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CHAPTER 2

PRODUCT DESCRIPTION

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2.1 DISTINGUISH CHARACTERISTICS OF THE

INDUSTRY

FMCG companies sell their products directly to consumers. Major features

which distinguish this sector from the others are as follows:

LOW CAPITAL INTENSITYMost product categories in FMCG require relatively minor investment in plant

and machinery and other fixed assets. Therefore shortage of product for want of

capacity would be a rare phenomenon. The turnover is typically five to eight times the

investment made in a Greenfield plant at full capacity. This is also due to the fact thatthe business being marketing driven, players do not integrate backward. Also, the

business has low working capital intensity as bulk of sales from manufacturers takes

place on a cash basis.

HIGH INITIAL LAUNCH COSTNonetheless, there is a large front-ended investment made in new products

including cost of product development, market research, test marketing and most

importantly its launch. To create awareness and develop franchise for a new brand

requires enormous initial expenditure is required on launch advertisements, free

samples and product promotions. Launch costs are as high as 50-100% of revenue in

the first year and these costs progressively reduce as the brand matures, gains

consumer acceptance and turnover rises. For established brands, advertisement

expenditure varies from 5 - 12% depending on the categories. It is common to give

occasional push by re-launches, which involves repositioning of brands with sizable

marketing support.

TECHNOLOGYBasic technology for manufacturing is easily available. Also, technology for

most products has been fairly stable. Modifications/ improvement rarely change the

basic process. Nonetheless, major global players spend enormous sums on R&D due

to their ability to spread cost over the wider base of their global operations. Their

R&D efforts are towards:

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Cost effective manufacturing process without compromising on quality andfunctional performance.

Research driven formulations, which give cutting edge. High standards of hygiene/ purity for personal care and food products. Standardized formulation, which can be used across countries. MARKETING DRIVE

In relative terms, marketing function has greater importance in FMCG

companies. The players have to reach out to mass population and compete with

several other brands which essentially offer similar products. The perceiveddifferences are greater than the real differences in the product.

MARKET RESEARCHConsumers' purchase decisions are based on perceptions about brands. They

also keep on changing with fashion, income and changes in lifestyle. Unlike industrial

products, it is difficult to differentiate products on technical or functional grounds.

With increasing competition, companies spend enormous sums on product launches.

Market research and test marketing become inevitable.

BALANCE SHEETS ARE MISLEADINGThe most critical asset for FMCG companies is represented by its brands and

distribution network. Brands are bought and sold like any other assets. Typically,

when an FMCG business is sold, the value of the brand is several times of that of

tangible assets. However as per the current accounting practices in most countries,

investment made in building of brands are written off as revenue expenditure. This is

due to high risk involved with a new brand, subjectivity involved in its valuation, lack

of consistency and difficulty in separating a brand's value from that of tangible assets

employed in the business. While a successful brand will pay back the investment

several times, in case of brand failure, entire investment has to be written off. High

return on net worth of most established companies is also misleading due to the fact

that the assets sans brands are considerably understated in the balance sheet

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THIRD-PARTY MANUFACTURINGManufacturing of products by third party vendors is quite common. Third

party manufacturing used to give fiscal advantages particularly of excise duties. Thesehave been considerably diluted in the past 7 years of reforms. In the last budget the

government proposed to change the basis of excise levy to MRP basis. A total of 43

product categories have been brought under the MRP net in the subsequent budgets.

Besides excise benefits, third party manufacturing also provides other benefits.

TABLE 2.1 THE INDUSTRY CHRONOLOGY

YEARS DEMANDS

RUPEESTERMS

GROWTHRATE

1990 12 000tones

350 crores 2 %

March -1995

Excise Duty increased to 15percent

3 %

Excise duty further increasesto 28.75 % Cocoa Prices Zoom

Drops to 6-7%

1998 Excise duty reduced to 25 %,further to 20 percent and finally to18 %. Import Nestle launches Kit-Kat-sets up a new unit.Production Arrangement with CAMPCO continues. Mars selects production site.

2005 Market zooms up due to greatermarketing thrust by players(especially Nestls) Chocolates-Selected importItem

3 %

2006 Chocolates-Open General License 20 000tones 3 %

2007 Quantitative restriction lifted 32000tones 3.6 %

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The Indian Chocolate market can be sliced into four parts.

1. MOULD CHOCOLATE SEGMENT- comprising slab chocolates like

Dairy milk chocolates, etc. These are made by pouring the ingredients into moulds.

2. COUNT LINE SEGMENT- comprising bars like 5 star, Bar One, Perk, Kit

Kat, etc. These have ingredients other then chocolate and are usually Bar shaped,

making for chunky bites.

3. CHOCO-PANNED SEGMENT- comprising chocolate forms like

Butterscotch, Nutties, Tiffins, etc. Panned varieties have different cores/centers

which are covered with a layer of chocolate.

4. SUGAR-PANNED SEGMENT - comprising chocolate forms such as

Gems, Chocolate clairs, etc. These generally have a sugar coating on the outside.

The rejuvenation exercise of Nestls, was one of the key reasons behind the churning

up of the countrys Rs.350-crore chocolate market to a growth rate of 32 percent in

2005, from a mere a few years earlier .

Fig.2.1

Chocolate Market shares

CADBURY

74%

NESTLE

20%

AM UL

5%

OTHERS

1%

CADBURY

NESTLE

AMUL

OTHERS

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2.2 NESTLE FOODS INDIA LIMITED- HISTORIAL

HIGHLIGHTS

Incorporated in 1959 as Food specialties, Nest India (NIL) was promoted by

Nestle Alimantana, Switzerland, which presently holds 51% equity stake in the

company. Manufacturing in India began with the startup of the Mega Factory in 1962.

Nestls first unit at Moga, Punjab is manufacturing:

Milk products

Infant milk formulae

Weaning cereals Culinary products

Beverages

It is the main manufacturing unit of Nestle India Limited. The second factory

at Choladi, Tamil Nadu to produce beverages i.e. 100% EOU for instant tea was set

up in 1967.

The third plant in Nanjangud, Karnataka was set up in 1989 to produce

Instant Coffee

Health Beverages

The fourth plant at Samalkha, Haryana, was set up in 1993, to produce

Weaning cereals

Culinary products

Health beverages

Milk products

The fifth plant at Ponda, Goa was set up in 1994 to produce:

Wafers

Waffles

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The sixth plant at Bicholine, Goa was set up in 1997 for manufacture of culinary

products. Nestle India is now putting up another factory at Pant Nagar in Uttaranchal.

Nestle India will invest over Rs 100 crores in the factory. This is the seventh plant of

Nestle India and like the other plants, this plant will also be of international standards.

This factory at Pant Nagar will initially manufacture culinary products including its

very popular MAGGI. The factory will benefit from and will be closely aligned with

the research and Development Facilities of Nestle Group and its proprietary, world

class technology.

Nestle India; the largest food company in the country is continuously looking

at new niches in the market place for its various products.

In milk products Nestle has made a considerable mark. For instance, the company was

the first to introduce a Dairy Whitener with its product 'Everyday'. And till today that

product is a brand leader despite the presence of a host of other brands in the field. IN

the case of Milkmaid condensed milk, Nestle relaunched the product as desert maker

and has seen the sales graph climbing since.

In baby foods, Nestle has made its strong hold with Lactones and Cerelac.

Nestle is also popular in pure ghee segment. Its Everyday pure ghee has gained a quite

satisfactory market share; Nestle has also entered into fitness food products. Nestle

today is a household name. Nestle extended the product line in coffee by bringing in

Dolco, and then Sunrie.

In 1990, NIL entered the chocolate business introducing Nestle Premium

chocolate. Nestls products are sold under brand names such as a Milkmaid,

Everyday, Cerelac, Nescafe, Maggi, Lactones, and clairs etc. It launched the world

famous Kit Kat chocolates in 1995. During the year 1996 Milo the world's largest

selling chocolate energy food drink was launched.

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2.3 MAJOR PRODUCTS

Fig 2.2

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RECENTLY LAUNCHED PRODUCTS

Set Dahi

New Tomato and Curry Flavors in Maggie NoodlesNew Dal and Atta in Maggie Noodles

A new confectioneryNestle Choc Stick

Soft Chewy fudge Milky bar Choo

Nestle` recently launched products Tea Iced Tea

Nestle slim milk

The company is also setting up CAF NESCAFE and COFFEE

CORNERS across metros and mini-metros in India.

NESTL: 4.6% ORGANIC GROWTH IN FIRST QUARTER

Group-wide organic growth of 4.6% 6.3% sales increase at constant exchange rates Swiss franc sales down 7.5% as a result of a 13.8% negative foreign exchangeimpact

The overall organic growth of 4.6% in a difficult quarter, aggravated by lateEaster, is mainly due to our successful drive for innovation and our strong market

positions. Our consolidated sales clearly took a hit from the strong Swiss franc, but

we expect this effect to taper off in the course of the year. We are confident that the

rest of the year will bring an acceleration of growth and that we will therefore achieve

our stated objective of improving the Group's performance in constant currencies for

2007."

The Nestl Group's consolidated sales for the first three months of 2007amounted to CHF 19.7 billion. In constant currencies, sales increased by 6.3%,

reflecting organic growth of 4.6% (real internal growth 2.5%, pricing and others

2.1%), as well as a small contribution from acquisitions, net of divestitures. As a

result of the strong Swiss franc, the adverse foreign exchange effect was 13.8%.

Foreign exchange factor held back consolidated sales, and real internal growth

was impacted by the late Easter date and the competitive situation in Japan.

Additionally, in keeping with the Group's policy of ensuring margin improvements,

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Nestl raised prices in several product categories to reflect cost increases.

Nevertheless, the Group expects its strong brands, its broad distribution network and

its capacity for innovation to lead to an improvement in sales growth as the year goes

on.

TABLE 2.2 SALES BY MANAGEMENT RESPONSIBILITIES ANDGEOGRAPHIC AREA

Jan.-MarchJan.-

MarchOrganic Growth RIG

2007 2006 Jan-March 2007 Jan-March 2007

In CHF million % %

one Europe6'778 '628

+1.8 -0.4

one Americas5'978 '154

+4.8 +1.9

one Asia, Oceania andfrica 3'291 '633

+3.2 +1.9

estl Waters1'719 '740

+10.9 +10.7

Other Activities *

1'947 '156

+9.4 +8.4

Total 9'713 1'311 +4.6 +2.5

The growth rate in Western Europe reflects the importance of chocolate and ice cream

to that Zone, both of which were impacted by the late Easter date. There should be

some improvement, therefore, in the first half. Canada and the US performed well, but

there was some slowness in Latin America. Importantly, however, the key markets of

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Brazil and Mexico both achieved positive RIG and organic growth. Most Asian

markets are growing at a good rate, with Greater China outperforming its ambitious

target of double-digit RIG. In Japan measures were taken to improve the quality of

sales in the ready-to-drink business. The water business and Alcon again delivered

good growth, capitalizing on their leadership positions in their respective markets.

Among the product groups, beverages, especially soluble coffee and coffee

mixes under the Nescafe brand, and powdered beverages, under brands such as Milo

and Mosque, did well, as did the specialty roast & ground coffees. There was good

progress also in the chilled and the frozen culinary sector; the recently acquired Chef

America achieved double-digit growth. The performance of chocolate and

confectionery was impacted by the late Easter, as well as by price increases.

SALE In CHF million

Fig 2.3

2006

2007

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2.4 RESEARCH OBJECTIVES

Development of a sound marketing strategy is an essential part of starting a business.

The marketing strategy determines the use of the company's resources and tactics toachieve its specific marketing objectives based on the needs and desires of its

stakeholders, including customers, employees, investors and rivals. The marketing

strategy is typically designed around three elements: selecting a target market,

specifying the market strategy and creating a marketing mix.

Selection of a Target Market

Identifying the target market may be the most important decision a company makes in

the strategic planning process. The company must first specify whom it is trying to

attract based on its own strengths and weaknesses, the intensity of the market

competition and the potential costs and gains. Businesses may treat the entire market -

- called mass marketing -- or target one or more specific segments or groups in the

market -- market concentration or multi-segmentation.

Specification

Businesses must decide which market position they want to take. The company thatgains the largest market share and dominates the competition becomes the market

leader. The market challenger is the position when a company confronts the leader of

the market. The market follower is a company that follows and copies the leader

rather than attacks it. Many small businesses choose to fill a market niche: a position

that specializes in a narrow segment of a large market.

Creation of a Marketing Mix

After selecting the target market, specifying the position that the company wants to

take and researching the needs and preferences of customers, the company must

define its marketing mix along the "4Ps" -- product, price, promotion and place -- to

achieve a competitive advantage. For example, its product must be of higher quality,

its prices must be lower, its promotion must be more effective, and its distribution

must cost less than its competitors must.

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CHAPTER 3

MARKETING STRATEGY OF NESTLE

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3.1 MARKETING STRATEGY

IMPROVED PENETRATION

Improved penetration of brands is an important consideration in the Companys

vision of sustained growth. Expansion of distribution and reach was a focus area.

Some of the initiatives that are expected to contribute significantly include

introduction of single serve convenience packs at affordable price point, such as

NESCAFE Redimix and MAGGI Hot Cup Soup Powder. The initiative to automate

distributor operation has continued and is expected to be complete during 2005. This

will help NIL achieve greater speed and transparency in the flow of information,

ensure better levels of customer contact and enable faster response to consumer needs.

OUT-OF-HOME CONSUMPTION

The Company continued to strengthen initiatives to facilitate availability of

products for out of-home consumption. These initiatives were supported by a number

of new product launches. The development of NESTEA Instant Tea premix for hot

vending offers consistency and convenience as compared to tea bag preparation;

NESCAFE Frappe premix fort cold vending has been introduced in Quick Serve

Restaurants; Low Sugar NESCAFE premix has been developed for health consciousconsumers; MAGGI Hot Cup Soup dispensed through vending machines is an

innovative and pioneering concept in the market. Large number of Nestle

Consumption Zones including Cafe NESCAFE, Coffee Corners and multibrands stalls

were set up and innovative vending machines were introduced for Iced Tea. Sustained

focus on continuously improving the value to the consumer, helped to introduce

vending machines with eight beverage options to offer consumers a range of specialty

beverage at the same location.

On the manpower development front, programmed during the year continued to be

focused on the operational front more particularly sales and production.

To support the growth plans and distribution strategy, and simultaneously improve

the operational efficiency, the on strengthening chain continued to receive attention

during the year.

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INNOVATION, RENOVATION AND TECHNOLOGY

FROM NESTLE

The continuous efforts on product innovation and renovation during the year hascontributed significantly to the performance of the Company during the year and

would remain a key element even in the future to sustain leadership and profitable

growth, especially in a market that is becoming increasingly competitive under the

General License Agreement with Nestle Group, NIL has the license for know- how,

patents, brands and other intellectual property, in relation to the products

manufactured and/or sold by your Company. Access to proprietary technology of

Nestle and the fruits of extensive centralized Research and Development is available

on a continual basis. The excellent performance of the Company over the years has

been greatly influenced by these inputs.

COMMUNITY DEVELOPMENT

Initiatives by the Company, for community development continued to be focused

on programmed in the areas where the factories are located. These programmed gives

importance to providing drinking water facilities in schools, supporting and

participating in immunization programmers, providing basic facilities to local schools

and arranging medical camp.

SUPPLY CHAIN (DISTRIBUTION STRATEGY)

Thrust on strengthening the supply chain continued to receive attention during the

year and the Company advanced towards becoming the Best in Class Supply Chain in

the FMCG sector. Distribution costs were contained by increase and efficient use of

railways for primary dispatches. Simultaneously, the vehicles transporting raw and

packing to factories were used for finished goods dispatches too, thereby saving

freight costs. Efforts in collaborative logistics with other companies and third party

services providers have begun to yield benefits.

In order to improve response to customer demand, forecasting was given

considerable attention. This has led to an empowered demand planning role that

ensures optimized inventory as well as satisfaction of consumer demand. Initiatives in

e-connectivity with the distributors and also with the suppliers are further aligning our

efforts in this direction.

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3.2 MARKETING STARTEGIES OF NESTLE INDIA

LIMITED

Marketing strategy is the complete and unbeatable plan designed especially for

attaining the marketing objective of the firm.

The marketing objectives indicate what the firm wants to achieve; the

marketing strategy that decides the success at the business unit level which in turn

decides the total corporations success. The link between marketing strategy and

overall success is indeed direct and vital. And in this linkage lies the significance ofmarketing strategy.

Nestle India ltd. has an aggressive marketing strategy which is very well

understood when one goes through the in-depth study of the 4-Ps of the marketing

and price strategies with respect to its products. One comes to the conclusion that NIL

has a well defined roadmap to success i.e. to reach its ultimate objective of realizing

customer satisfaction through value for price products.

PRODUCTS

Quality is the essential ingredients in all of our brands and the reason why

millions of people choose Nestls products every day. Our consumers have come to

trust in Nestls commitment to excellence and turn to Nestle brands to maintain

nutritional balance in a fast paced world.

BABY FOODS

The production of infant food goes right back to the origins of the Nestle

Company. Henri Nestls `Farine Laces was the first product to bear the Nestle

name.

In 1867 a physician persuaded Henri Nestle to give his product to an infant

who was very illhe had been born prematurely and was refusing his mothers milk

and all other types of nourishment. Nestls new food worked, and the boy survived

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from the very beginning, Nestle' product was never intended as a competitor for

mothers milk.

In 1869, he wrote; During the first months, the mothers milk will always bethe most natural nutrient, and every mother able to do so should herself suckle her

children.

The factor that made baby foods success in the early days of the Nestle

companyquality and superior nutritional valueare still as valid today for the wide

range of infant of infant formula, cereals and baby food made by Nestle. The World

Health Organization (WHO) recognizes that there is a legitimate market for infant

formula, when a mother cannot or chooses not to breast feed her child. Nestle' markets

infant formula according to the principles and aims of the WHO International Code of

Marketing Breast Milk Substitutes, and seeks dialogue and cooperation with the

international health community and in particular with the WHO and UNICEF, to

identify problems and their solution. Nestls expertise as the worlds leading food

manufacturer

Gained over more than 125 years, is put the disposal of health authorities, the

medical profession and mothers and children everywhere.

Milk based products and baby food contributes to 34% of Nestls turnover.

For ensuring regular procurement of good quality milk, Nestle has developed a

network around its Mega factory for collection of fresh milk every day from the

farmers. Nestle' has a dominating 87%market share in the baby weaning foods with its

Cerelac and Nestum brands. Infant milk powder is sold under the Lactogen and

Nestogenbrands. Brand loyalties are very high in categories such as infant food and

weaving cereals, enabling the company to command a price premium.

Other milk products include dairy whiteners (21% market share ) sold under

theEvery Day and Tea Make brands, sweetened condensed milk and ready to cook

mixes for traditional Indian sweets sold under the Milkmaid brands. The company

also markets ghee (6% market share) under the Every Day) brand. Nestle has

expanded its milk product portfolio with the launch of new dairy products such as

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UHT milk, Curd and Butter. Huge investments arte being made in building a

diversified dairy business and the distribution infrastructure for the same. Milk

products sales registered a 10.6% growth during 2006. The major competitors are

HLL withMilkana, Amul withAmulya, Britannia withBritannia Dairy Whitener, and

Kwality with Kream Kountry. Britannia with 11% of market share, Amul with 19%,

and HLL with 8%, Kwality with 4% of it, Rest of the market share lies with local

players like Nova, Indiana etc. local players are very active & some of them are

operating under the small scale industries. Nestle is still the market leader in the long

term & is continuously on the 4-Ps to grow further.

DAIRY BRANDS

Nestle' has long been a major player in the dairy industry, originally with well-

known shelf stable brands such as Nido, Nespray, La Lechera and Carnation, then

building a strong international presence in Chilled dairy and Ice cream under the

Nestle' brand.

Innovation and renovation play a major role in the development of milk based

products as well as of breakfast cereals, managed as a joint venture with General

Mills.

The area of nutrition, with its benefits to health and wellbeing, is having a

significant impact on the development of our business. A wide range of proven,

science based solutions such as starter and follow-up formulas, growing-up milks,

cereals, eternal diets, oral supplements and performance foods are actively developed

and successfully brought to market under the Nestle brand.

BREAKFAST CERAELS

Although cereals have been with mankind in form or another for millennia, it

was not until the mid-19th century that scientific research, technological innovation

and then influence of a group of American health reformers, gave rise to the currently

foodstuff we know today as breakfast cereal.

Nestle' has a joint venture with General Mills outside North America, Cereal

Pardoners Worldwide, which is active in more than 80 countries.

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The joint venture began in 1990 and its rapid growth has been characterized

by branding and lately the launching of breakfast cereal brands into the fast-growing

cereal bar market.

ICE CREAM

There are many myths and stories as to the invention of ice cream: was it

Macro Polo who brought it back from China (along with pasta)? Probably not,

considering he most likely never visited China.

The story of its popularity is however connected with the invention of

technology to make it on an industrial scale and to keep it cold once made. Before

refrigeration techniques, food was frozen with the aid of ice mixed with salt which

was either stored in ice house or shipped from cold countries. But then at the end of

the 19th century, both making and freezing it became easier and together with the

invention of the ice cream cone made the product boom.

Today the United States is the absolute leader in terms of volume consumed

but the highest per head consumers are in New Zealand. Flavors youd never thoughtof and yet theyre commercially available:

Sorbets- Smoked Salmon, Tomato, Cucumber Ice-Creams Garlic, Avocado, Sweet

Corn.

The ice cream cone is the most environmentally friendly form of packaging. A

system from Damascus, Ernest E Hamwi is credited with its invention. Apparently

during the 1904 St Luis Worlds fair. His waffle booth was next to an ice cream

vendor who ran short of dishes. Hamwi rolled a waffle to contain ice cream and thecone was born.

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3.2 CHOCOLATE & CONFECTIONARY

The story of chocolate began in the New World with the Mayans, who drank a

dark brew called cacahuaquchtl. Later, the Aztecs consumed chacahoua and used thecocoa bean for currency. In 1523, they offered cocoa beans to Cortez, who introduced

chocolate to the Old world, where it swiftly became a favorite food among the rich

and noble of Europe.

From the beginning, turning raw, bitter cocoa beans into what one 17th century

writer called the only true food of the gods has been a fine art, a delicate mixture of

alchemy and science. Centuries ago it was discovered that by fermenting and roasting

the beans, an almost otherworldly flavor could be created.

In 1875, after years of trying, a 31-year old candy madder in Vevey named

Daniel Peter figured out how to combine milk and cocoa powder. The result milk

chocolate.

Peter, a friend and neighbor of Henri Nestls started a company that would

quickly become the worlds leading maker of chocolate. For three decades the

company called Peter, Cailler, Kohler relied on Nestle for milk and marketing

expertise. In 1929, the almost inevitable merger took place as Nestle acquired Peter,

Cailler, and Kohler.

Indian chocolate market is growing day by day. Premium segment is opening

upon. The companies like Nestls are launching indigenous product made to

international standards of the 20,000 tonnes chocolates market worth about Rs 400

crore, Nestles accounts for around 65% of market share followed by Nestls around

23%. Amul has 5% of the share, with the minor players taking the Rest.

Though with much smaller portfolios, Nestle is putting up a touch fight from

the treat for kids, chocolate are now being positioned as near- meal substitute. Thanks

to the initiative taken by Nestls India. The market has become broad based in the

sense that adults are important target segments now. The repositioning of Nestls

dairy milk in 1994 as real taste of life grew the entire category of milk chocolates

by 20%. If facilitated the repositioning of Nestle brands in the basket.

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5 STARS:As energy bar, earlier targeted to teenager, before launch of perk 5 star

energy bar positioning made it snacking chocolate with Nestle' pitching Bar-one in

1993 gaian it For those in between times.

MUNCH: Munch is the market leader in the chocolates. It is the largest selling

chocolate in India & is followed by Nestls Dairy Milk.

ECLAIRS:competing in the chewable toffee segment, clairs was relaunched by

Nestls during the mid-90 with a new name milk-clairs. Its worth is 4000 tones

now. Nestle' also presents here NESTLE' ECLAIRS. Due to launch of multibrands

Nestle can not pay attention to brands like Mr. Pop Candy Lollypop.

KIT-KAT: Kit- Kat which was launched in India in 1995 today leads the chocolate

coated wafer bars category. It has 11.5% share of chocolate market. But Nestles perk

is with9%.

PRODUCT PRICE WEIGHT

KIT- KAT Rs. 14 36 gm.

PERK Rs. 10 2x17.5 gm.

Nestle forayed into chocolate & confectionary in 1990 and has cornered a

fourth share of the chocolate market in the country. The category contributes 14% to

Nestls turnover. It has expanded its products range to all segments of the market the

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Kit-Katbrand is the largest selling chocolate brand in the world. Other brands include

Milky Bar, Marbles, Crunch, Nestle Rich Dark, Bar-one, Munch etc.

Amul is also competing in this category especially in western regions of India.But Nestle' still has its own position in the market. The sugar confectionary portfolio

consists ofPolo, Soothers and Frootos. All sugar confectionary products are sold

under the umbrella brand Allens. Nestle has also markeys some of its imported

brands like Quality Street, Lions andAfter Eight.New launches such asNestle Choc

StickandMilky Bar Choo at attractive price points to woo new consumers chocolate

confectionary sales registered a strong 21.5% of growth in 2006 aided by good

volume growth in Munch, Kit-Kat and Classic sales. Nestle relaunched Bar-One

during the year 1993.

3.3PREPARED FOODS

Convenience foodspackaged soups, frozen meals, prepared souses and

flavorings----date back more than a century. With the industrial revolution came

factory jobs for women and less time to prepare meals.

The problem was so widespread that it became the object of intense study in 1882 by

the Swiss Public Welfare Society, which offered a series of recommendations,

including an increase in the consumption of vegetables.

The society commissioned Julius Maggi, a miller with a reputation as an

invention and capable businessman, to create a vegetable food product that would be

quick to prepare and easy to digest. The results two instant pea soups and an instant

bean soup --- helped launch one of the best known brands in the history of the food

industry. By the turn of the century, Maggi & Company was producing not only

powdered soups, but bouillon cubes, sauces and flavorings.

Maggimerged with Nestle in 1947.

Buitoni the authentic Italian brand, which has been producing pasta and sauces in

Italy since 1827, became part of the Nestle' Group in 1988.

Ready to cook food/ cooking aids are sold under the umbrella brand name

Maggie.Culinary product account for about 14% of Nestls turnover. Maggie is the

market leader in the noodles (45% market share), the Ketchup (43% market share) and

soups (41% market share) categories.

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Other products sold under the umbrella brand Maggie, are ready-to-cook

gravy/sauces, soups, seasonings, as well as traditional Indian foods such as pickles

and instant snack mixes (dosa mixes). New taste variants are continuously launched to

add variety to the product offerings.

HLL, Heinz, Knor & Indo Nissin Foods are Major competitors in this

category. Gits mixes, Top Raman, Hot serve, are some products that are in

competition to products under Maggie brand. But Maggie has used Quick and Easy

cooking as its Unique Selling Preposition that worked to distinguish the Nestle' to lie

ahead than all brands. HLL as brand Wagon is the part of our daily life uses creative

selling prepositions to maintain its position as the top FMCG firm in India. Its

marketing strategies (including launch, pricing & distribution strategy are goodenough to shatter the competition, so Nestle is working as an early worker to remain

and lead in the market.

The distribution network of Indo Nissin food is strong enough & it has

covered a large portion of market in very short time. Its distribution network is not

very long & the prices are also low. The company had adopted a low budget

promotional strategy and is very fine at merchandising. These all are working together

for the good of the company.

Nestle has the advantage of great brand image & it is actually working for

maintenance and growing it.

BEVERAGES

In 1937, Nestle scientists perfected a powered coffee product that was

introduced in 1938 under the brand name Nescafe- the worlds first commercially

successful soluble coffee.

It became so popular during World War II that for one full year the entire

output of the Nescafe plant in the United States (more than one million cases) was

reserved for military use only. Since then, Nescafe has become one of the worlds

best-known brands. In addition, Nestle' is a major producer of chocolate-based and

malted drinks.

Its leading brands, Nesquik, Milo and Nescau are very popular with a

growing number of young people around the world. Nestle' ready-to-drink beverages

Nestea and Nescafe are sold in various forms (cans, bottles). These are distributed by

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Nestls joint-venture with the Coca-Cola Company, Beverages Partners Worldwide.

Nestle' is also present in fruit juices (Libbys) as well as espresso coffee in capsules

(Nespresso).

Beverages like coffee, tea and health drinks contribute to about 30% of

Nestls turnover. Beverages sales registered a 155% growth during 2007. While

about 14% of sales come from domestic market, exports contribute to about 16% of

sales.

NestleNescafedominates the premium instant coffee segment. Nestls other

coffee brand Sunrise has also been relaunched under the NESCAFE franchise to

leverage on the existing equity of the brand. Nestle' has focused on expanding the

domestic market through price cuts and product repositioning. However it has been

losing share in the domestic market, where it has a 37% market share.

The major competitors are Coca-Cola, which launched coffee & tea under

brand name Georgia in 2002. Its tea in four flavors which are classic, Adark, Masal &

Elaichi and coffee in three variants Classic, Cappuccino & Mochaccino to suit the

taste of customer. They adopted the strategy to distribute vending machine to even

small retailer so as to cover a large market. Tata coffee also Works against Nestle'.

But n is still the market leader in terms of market share, Customers choice & quality.Milo,brown-malted beverages was launched in 1996. It has an estimated

volumes share of about 35 in the malted food drink segment.

Nestls Bourn vita & HLL with Boost are the major players in the market

along with Milo. Bourn vita is with largest market share of 35%. The promotional

strategies of Nestle' for Milo are working fast for the good of Milo. Nestle' has

launched non-carbonated cold beverages such as Nestea Iced Tea and Nescafe

Frappe during 2004.BEVERAGES

Nestle' Food Services provides food and beverages professionals with a wide

selection of branded products. Our solutions meet the growing opportunities to service

consumers in out-of-home channels.

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Beverages solutions featuring well known consumer brands such as Nescafe,

Nestea and Nesquik as well as host professional brands including Minors, Chief

and Davigel are part of the diverse portfolio of Nestle' Food Services.

Working to meet the need of Food Service operators across a wide spectrum

of business channels such as quick service restaurants supports our commitment to

giving consumers the brands and quality they come to expect and rely on in the home

as well as out of the home.

BOTTLED WATER

Nestle' brgan its entry into the water business in 1969 with a 30% stake in the

owners of the SocieTe Genele Des Minerals De Vittal. It acquired a controlling

interest in SGEMV in January 1992, and went on in May of the same year to buy the

entire Perrier Group.

In 1992, Nestle' was the first company to dare to launch a mineral water,

Valvert, in five different countries at once. Its originally lied in the use of an all-new

plastic, P.E.T. (Polyethylene teraphthalate), which is stronger and more elastic than

the PVC used since 1968. Besides P.E.T. is recyclable.

By the end of 1997, the group was present on every continent, and the

purchase ofSan Pellegrino gave it the leadership in the Italian market. In 1998 f or

the first time in its history, Nestle' associated its name with bottled water: Nestle

Pure Life.

The brand was launched in Pakistan and soon appeared in Brazil, followed by

Argentina, Thailand and Philippines, China and Mexico in 2000. in 2001 India,

Jordan, and Lebanon followed and in 2002, Egypt, Uzbekistan and then United States.Nestle Pure Life is drinking water that has been treated and rematerialized

using a standardized industrial process to ensure purity and quality and is marketed in

emerging countries.

A second product with the Nestle' name was launched in May 2000, this time

in six European countries: Nestle Aquarelle. A natural spring water currently from

nine different springs in France, Germany, Belgium, Hungry, Italy and Spain, Nestle'

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Aquarel also uses the multi-source concept to satisfy new consumer expectations,

especially for water with a low mineral content that the whole family can drink.

In April 2002, the group changed its name to Nestle' Waters, a token ofNestle' decisive commitment to the bottled water market, which now represents 9% of

its sales. Today, Nestle' Waters is established in 130 countries and markets about 70

different brands. The group is able to offer top quality brands ad innovative packaging

to meet the individual needs of the water consumer all over the world, whenever,

wherever and however thanks to the wide variety of its offer in terms of distribution

and product mix.

PETCARENestle' entered the pet care business with the purchase of carnation in 1985,

and we consolidated our position in Europe with acquisition of the spillers brand in

1998, and further with the acquisition of Ralston-Purina in 2001 creating Nestle'

Purina Pet Care.

Carnation for its part developed the Friskies brand in the United States in the

1930s and in selected markets in Europe and Asia since the 1960s. Today Nestle' is

well-positioned with a balanced portfolio of internally developed and recently

acquired brands.

Technologies to develop and add value continually for pets and their owners

are engineered into our current product range. These include state-of-the-art

nutritional innovations, such as products which help maintain feline urinary tract

health or innovations for the most discriminating of pets and their owners. Nestle' has

already become an industry leader and we continue to develop our international

presence.

3.4 CONSUMER SERVICES

At Nestle' we are committed to offering consumers high-quality food products

that are safe, tasty and affordable. The Nestle' seal of guarantee is a symbol of this

commitment.

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We also believe in maintaining regular contact with our consumers. This

applies both to how we present our products and to how we address our consumers

questions and concerns. When Henri Nestle' prepared his first boxes of infant formula

for sale, he put his address on the packages so people would know where to go if they

had questions. Today our consumer relationship panel with the words Talk to

Nestle' expresses the same commitment.

This is why we have a worldwide Nestle' consumer services network devoted

to caring for our consumers. Our people have expertise in a wide range of areas such

as nutrition, food science, food safety and culinary expertise. They provide the

prompt, efficient and high quality service that consumers expect from Nestle'.

In addition we teach them talk with consumers and above all, to listen.

Listening helps us to understand what people want. Nestle' uses the insights gained

from relationships with consumers to driver product development.

At Nestle' we care for our consumers because our success depends on meeting

their needs and expectations. Through listening and understanding we can make

products that they will want to use all through their lives.

PROMOTIONPromotion is an attempt to influence customers. Its aim is inform & remind the

prospective consumers of the companys offer & to advocate the cause of its

production in the minds of its audience. Thus informing, reminding & advocating

about the companys product are real purpose of the promotion component of the mix.

NIL has rightly understood the production of a good product is not enough to

ensure success in the market, unless target customers are aware of its existence,

features and products. So company has framed a very strong and very wide

communication plan.

ADVERTISING

NIL is associated with MUDRA advertising company in India. It has properly studied

the market and developed the commercials in several languages. NIL has booked spot

for the advertising in almost all the channels.

EXHIBITIONS & TRADE SHOWS

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It also participates in trade shows & exhibitions.

IN 1997, at Jawaharlal Nehru Stadium in an exhibition NIL displayed its all old and

new products. This was the time when MILO was launched in India.

AHARA 97, Here Nestle' India Ltd. presented its wonderful world of Nestls

recipes along with its products. It also exhibited the various to make Maggie tastier.

This shows that Nestle' never leave its product even if it is market leader & is the

good source of its revenue.

FOOD EXPO 98, organized by CII & attended by over 100000 people. The

Mumbai branch of NIL ensured high visibility for its products like products under

Maggie brand, MILO & chocolates by setting the venue ablaze with Nestls hues Vic

banners, umbrellas posters & product displays.

INTERNATIONAL FOOD CONFEDERATION 1998:IFCON provided

opportunity for the leading, international food scientists, technologists & research

institutes to reflect massive change sweeping across the food processing sector.

FOOD EXPO 1999:

In October in Chicago NIL participated there also.

CHILDREN SPORT MEET 98:

At DPS R. K. Puram children between age group of 4-13 years put their best

foot & arm forward. Attired in colorful MILO T-Shirts & Caps they participated in 12

events.

FREE GIFTS

Like giving school Kit i.e., pen scale etc, with Maggie. Noodles & chocolates,

Free Cricket bag or a sport watch, badminton racket, bag etc on the payment of a veryminimal amount of Rs. 10 with Milo.

OTHERS

Some other examples of exhibition in which NIL participated are:

India international trade fare (IITF).

Nestle' Hungama 1998.

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Maggie Display Contest. Splendor 1999. Boarding School Development Campaign. Moga Summer School Camp.The competitors of NIL are also very Active and they also participate in these

events and sponsor some event in their own ways & methods. HLL participates in

most of the regional trade shows through its retailers. It displays its new products at

large. HLL is the 1st largest company of India in terms of advertising & promotional

expenditure. It also invents largely on window display contests retail level.

Amul promotes its products by using emotional appeal in order to use the

emotional aspects if Indian citizen. It uses kiosks and hoardings to promote its product

range. The promotional expenses of Amul are not so big as that of the MNCs but still

it is a respected firm in our eyes.

Nestles under its promotional campaign that is designed by Ogilvy & Mather the

adv shows the power of positioning with emotional benefits and it really works for

Nestles & leaves it with dramatic increase in sales.

PLACE:

Physical distribution is also called as market logistics. It involves:

Planning Implementing

Controlling the physical flow of the materials and final goods from point of

origin to point of use to meet customers requirements at a profit. Over the last several

years, NIL has introduced a number of new products. These include: Kit-ka, Polo,

Milo, Cerelac, Maggie, Dosa Mixes, Bar-one etc.

The success of these products is in part based in Nestls nation wide

distribution system and its strong relation with channel members, which allow it to

quickly place new products in the market.

Channels of distribution tend to be traditional for a number of product

categories. For i.e. in the beverages and food industry, manufacturers normally sell

through wholesalers, who deal with retailers. But the distribution strategy of Nestle' is

not a traditional one. The products manufactured in various production units are

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passed on to C&F agents. Practically each C&F agent covers just one state. The

products are then sent to various distributions, the company itself has defined the

particular area to be covered by each distributor. Salesman from the distributors

office then approaches various retailers of their area & book the order. The products

are delivered to on the next day as against the orders. For instance MILO is

manufactured at Karnataka. C&F agents located at various places collect the product

from production unit. In Delhi C7F is in Mandali Village, Trans Yamuna. The agent

in turn send the products to distributor and then to retailers.

The distribution channel includes 6, 00,000 outlets in 3000 towns throughout

the country, serviced by 39,000 distributors. Practically every shop dealing in

consumer goods is an outlet for Nestle'. This is formulating its marketing strategies.

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TABLE 3.1 DISTRIBUTION NETWORK OF NIL

DISTRIBUTOR (4%-7%)

C & F AGENTS (1%-3-% Margin)

SUPER STOCKIST (3%-6%)

MANUFACTURER

STOCKIST (3%-5%)

ORGANISED RETAILER (6%-18%)

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TABLE 3.2 NESTLES MOST LIKED PRODUCTS

PRODUCTS PERCENTAGE

CHOCOLATE 10%

COFFEE 28%

MILKMADE 5%

MAGGIE 40%

MINERAL WATER 2%

INFANT FOODS 5%

SOUPS 4%

SAUCES 6%

Fig 3.2

0%

5%

10%

15%

20%

25%

30%

35%

40%

PERCENTAGE

CHOCOLATE COFFEE MILKMADE

MAGGIE MINERAL WATER INFANT FOODS

SOUPS SAUCES

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10% people like chocolates as Nestls best product. Among chocolates the

Kit-Kat & Munch are the most liked ones. Munch is the largest selling chocolates inIndian chocolate market followed by Nestls Dairy milk. Coffee is considered as the

best product of Nestle' by 28% of respondents. They like the taste & aroma as it best

quality. Milkmaid is liked by 5% of people & this crowd involves women &

surprisingly children. Maggie noodle is the most loved product by 40% respondents

especially mothers & children as they consider it as the all time dish (Fast to cook,

good to eat). Infant products are liked by 9% of respondents, most of them were

mothers but, it is very interesting to quote that some mothers them & their elder

children liked the taste of Cerelac & it increased the purchasing frequency of the

product.

Fig. 3.3 REASONS TO LIKE NESTLES PRODUCTS

REASONS TO LIKE NESTLE' PRODUCTS

COLOR

TASTEPACKAGIN

G

PRICE

ADVERTIS

EMENT

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TABLE 3.3

FEATURES PERCENTAGE

COLOR 2%

TASTE 64%

PACKAGING 4%

PRICE 20%

ADVERTISEMENT 10%

Most of the respondent (64%) liked the products because of the great taste of

products like Maggie, Munch , Kit-Kat, Coffee, Frappe, Slim Milk & sauces. 2% ofthe respondents say that they like the color of the product most as it shows the

freshness of the product. 20% people are satisfied with the price.

TABLE 3.4 BRAND LOYALTY FOR NESTLES

LOYALTY STATUS CONTRIBUTORS

HARD CORE LOYALTY 53%

SHIFTING LOYALS 19%

SWITCHERS 28%

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Fig 3.4

BRAND LOYALTY FOR NESTLE

53%

19%

28%

HARDCORE

LOYAL

TYS

HIFTING

LOYALSSWITCHERS

CONTRIBUTORS

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3.4 BRAND LOYALTY FOR NESTLE

Brand loyalty is very high for Nestle' as 53% of respondents denied to switch

over to other product, when any gift or scheme is offered by the competitors. Productsthat have highly loyal customers are Maggie noodles, coffee, munch & everyday.

People also like & are loyal for sauces and it is showing an increasing trend (Heinz

recently started the Diwali offer to give 500 gm only for Rs. 39. people responded that

the offer wasnt so interesting to switch from Maggie & also it was a short-term offer.

19% respondents said that they will some time switch over if they find a really

attractive offer. They also said that Nestle' is the company that uses least of the

marketing gimmicks to promote its products & people believe in quality of Nestle'.20% people said that they switch in most of the cases.

TABLE 3.5 SHOULD NESTLE IMPROVE SOME OF ITS

PRODUCTS

PRODUCTS OPINION

CHOCOLATES 63%

SOUPS 21%

COFFEE 15%

MAGGIE 1%

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Fig 3.5

63% of respondents want the company to work on the taste of Milky bar and Classic.

21% people want the soups to be offered in more flavors, at present

there are 12 flavors. They also want to make the soups creamier.

16% people say that Nescafe is the most powerful brand of Nestle', but they

say that prices are too high to afford, although Nescafe red mix is a big relief but it is

not so creamy.

TABLE 3.6 QUALITY WISE POSITIONING

Quality wise Nestle' and Amul are the most admired companies. They blamed

Nestles because of the recent issue of worms in the Nestles chocolate. They say that

Nestls quality is trusted.

COMPANY OPINION

NESTLE 37%

BRITANNIA 21%

CADBURAYS 12%

AMUL 30%

PRODUCTS THAT NEED IMPROVEMENT

0%

10%

20%

30%

40%

50%60%

70%

CHOCOLATE

S

SOUP

S

COFFEE

MAG

GIE

OPINION

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Fig 3.6

TABLE 3.7 AVAILABILITY WISE COMPARISONNestle' produces the products that are part of most of the peoples daily life. So

availability of fresh Nestle' productis smooth.

COMPANY OPINION

NESTLE 26%

AMUL 11%

BRITANIA 28%

NESTLES 35%

QUALITY WISE COMPARISON OPINION

NESTLE

BRITANNIA

CADBURA

YS

AMUL

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Fig.3.7

The pricing policies of Nestle' regarding products like Coffee, Dahi & Milk needs

revision.

TABLE 3.8 PRICE WISE COMPARISON

COMPANY OPINION

NESTLE 23%

AMUL 38%

BRITANIA 21%

NESTLES 18%

AVAILABILITY WISE COMPARISON

0%

5%

10%

15%

20%

25%

30%

35%

40%

NESTLE AMUL BRITANIA CADBURYS

OPINION

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Fig.3.8

3.5 MARKET SEGMENTATION AND TARGET

MARKET SELECTION

Market segmentation and target market selection have an intimate relationship

with market strategy formulation.

The company may focus on the following factors while laying down the target

market.

1. GEOGRAPHIC SEGMENTATION

Geographically the country can be broadly divided into 3 sub segments -Rural,

Suburban and Urban.

In the first phase (after the test launch), Urban parts of the country should be

targeted. The chosen segment is targeted because

Lack of infrastructure, like refrigeration-not to venture rural markets. The consumption pattern & behavior in Rural India does not fit with the product

attributes and perceived benefits.

PRICE WISE COMPARISON

0%5%

10%15%20%25%30%35%40%

NESTL

E

AMUL

BRITANIA

CAD

BURY

S

OPINION

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The limitation of disposable income is another factor that hampers entry in ruralareas.

Semi-Urban may be considered in the second phase. An year after the launch.Within Urban India, the cities with 1 million + population i.e. top 23 metros

will be targeted. A soft launch of the brand should be undertaken before taking the

brand to th