Nestle Boxed Water Executive Summary Management Essay

nuzzle Boxed Water Executive Summary Management EssayThe main point of this report is to show how nuzzle will practice their Boxed Water harvest-tides in the United Kingdom for diversification of their intersection point distinguish. The report starts by giving some historical data about approach, and providing a list of mathematical productions that come on offers to their customers worldwide. It will analyze the channel proficiency of nuzzle, and analyze the nursing bottled body of body of body of pissing system persistence, supplemented by a further analysis of our competitors and the macro environment. It continues by dealing the business principles of the United Kingdom, and show some key business challenges for Nestle. Finally, the study recommends some suggestions to Nestle regarding the business principles and products required to achieve sustainable offshoot in the gigantic run and the process of the manu concomitanture and sale of Boxed Water in the Un ited Kingdom.Table of Contents1.0 NestleNestle is a rise-known Swiss multinational broad(prenominal) society that specializes in nutritional viands and consumer goods. The partnership is headquartered in Vevey, Switzer belt down, and was established by Henri Nestle in the social class 1866. In its initial year they were named Anglo-Swiss Condensed Milk Comp any(prenominal), and in the next thirty nine years the alliance would change their name twice. Finally, in the year 1905 the society changed their name to Nestle. Nestle is the bulkyst food ships association in the world in toll of annual gross, and also acts as major sh beholder for LOreal (largest cosmetics conjunction in the world). Nestle offers various products much(prenominal)(prenominal) as Maggi, Stouffers, Nespresso, KitKat, Nescafe, Smarties, Vittel, and Nesquik to global customers. Nestle employs more than(prenominal) than 330000 people all together in over 150 countries, and has 461 factories estab lished crossways the globe. Sales revenue for the lodge in the year 2011 was CHF 83.7 billion. Major milestones for the company evoke be summarized in the following mannerTime PeriodEvent1866-1905The Anglo-Swiss Condensed Milk Company coordinated with Nestle.1906-1918Number of factories decreased due to world war I but the company started their operations in the USA.1919-1945The company launched Nescafe.1946-1975The company acquired Alimentana in launch to elevate access to Maggi products. They also became a major sh atomic number 18holder with LOreal.1976-1980The company entered in pharmaceutical merchandise by acquiring Alcon Laboratories of USA1981-1995The company acquired American food giant Carnation to improve their bottom line. In 1986, the company entered espresso coffee particle by launching Nespresso.1996-2005The company expanded their operation in the segment of health, nutrition, and wellness with the help of series of acquisition.2006-2009The company acquired M edical Nutrition unit of Novartis. The company established shared value forum in New York.2010-2012The company launched Cocoa Plan in decree to supply disease resistant plantlets to farmers.(Source Nestle, 2012)1.1 Nestle Bottled WaterThe bottled water segment contributes a significant number of product diversification for the company. A way that Nestle has been able to maintain their dominance of the bottled water industry worldwide is through offering different prints of bottled water. Some of these mark offs areNestle Pure Life The company launched Pure Life in the year 1998. This product is currently being sold in over cardinal countries.Perrier This is a form of light mineral water. Nestle introduced this brand in order to enter the twinkle mineral water segment.Poland constitute This is the oldest mineral water brand in the world. Nestle has maintained the brand for many years.S. Pellegrino Nestle launched this brand in order to gain access to top restaurants in the world. S. Pellegrino is a form of drinking water mixed with minerals (Nestle, 2012).1.2 Analysis of Product portfolio of Nestle most(prenominal) people know Nestle by their brand and product portfolio. The product portfolio of Nestle can be summarized in the following graph(Source Nestle, 2012)The company maintains a broad product portfolio in order to compensate loss from any single segment. Sales volume for the company is increasing at a rate of more than 3% during the last few years. Segment wise product portfolio can be divided into threesome segments like food beverages, nutrition and ice cream. The company is always thriving to find excellence in product innovation and service delivery. The company achieved 7.7% of organic growth in the year of 2011 by maintain their large product portfolio.The following section will discuss about product innovation in Nestle.SegmentProductTarget MarketBusiness StrategyIce CreamNestle GoldPortugal, Spain, and GreeceThe company collaborated with Haagen- Dazs in order to provide tribute quality ice cream to customers and they did it in order to achieve product diversificationWaterPerrier150 countries crosswise the globeNestle diversified their business into the bottled water segment. The company drug ab utilize a digital platform to engage customers with the Perrier brandCoffeeNescafe AlegriaMore than 60 countriesThe company launched an easy to use instant coffee machine to flip the brand.Pet ProductPurinaNetherlands , Austria and GermanySpecial TV commercial for dogs and dog owners. With help of this action mechanism the company entered the web 4.0 eraNutritional milkMOM meSouth Asian countriesThey expanded their distribution channels by recruiting nutrition officers(Source Nestle, 2012a)Top playacting brands of the company have helped them earn respect from customers. The following section will discuss contribution of brands carried by the company towards overall organic growth.Overall fundamental crop 7.7%Nesc afeNanMiloNespressoPure LifeNidoMaggi11%18%13%22%11%11%10%(Source Nestle, 2012)1.3 Organizational Structure of Nestle (Nestle, 2012)D. P. Frick (Corporate Service Governance)J.-M. Duvoisin (Human Resource)R. Ramsauer (Corporate Communication)P. Bulcke (CEO)L. Cantarell (Nestle Health Science)P. Brabeck-Letmathe (Chairman)Executive Board (P. Bulcke, W. Bauer, J. Lopez, J. J. Harris, L. Freixe, C. Johnson, P. Bula, N. Nandkishore, W.L. Martello, M. Caira, J.-M. Duvoisin, K. Schmidt and D.P. FrickC. Johnson (USA Head)N. Nandkishore (Asia/Africa/Oceania Head)L. Freixe (Europe Zone Head)J. J. Harris (Nestle Water)M. Caira (Nestle Professional)K. Schmidt (Nestle Nutrition)W. Bauer (Technology,RDP. Bula (Marketing Sales)J. Lopez (Operation)W.L. Martello (Finance Control)P. Bulcke (CEO)1.4 Global Presence of NestleThe company ope order in more than one hundred and fifty countries. tardily the company has launched their nutrition product segment in the South Asian Market. Africa is also b ecoming lucrative in terms of nutritional product for the company. The potful started their first global operation almost 100 years ago, and the business has segmented their international operation into ii parts developed market and rising market. The following chart will explain the international business growth of Nestle.Developed MarketTotal Contribution to group SalesOrganic Growth60%4.3%France6.4%Portugal, Spain, UK3.7%Japan3.6%North America2.5%Emerging MarketTotal Contribution to group SalesOrganic Growth40%13% chinaware23%India20%Africa18%Mexico14%(Source Nestle, 2012)Global operation of the company understood with the help of zone wide analysis1.4.1 American ZoneThe American market is al take in saturated due to the presence of a large number of consumer durable companies. In this situation Nestle has diversified their business into the rimed foods and chocolate segment by launching DiGiorno and Skinny Cow to attract customers. The company also did partnership with Hagen -Dazs in order to increase interlingual rendition in their ice cream products. In Latin America, the company performed well with their soluble coffee products and achieved double digit growth.1.4.2 Europe ZoneThe European market is going through a financial crisis, so overall sales growth for the company has not been very attractive for last two years. In this uncertain period, Nestle has adopted an innovation strategy to counterbalance poor performance in their different product segments. Nestle has introduced an innovative product line Nescafe Dolce Gusto, Herta, and Nescafe Sensazione, to attract customers. This strategy was successful for the company to fetch sales from east and central Europe.1.4.3 Asia, Africa Oceania ZoneThe company has had a presence in this local anaestheticity for more than 100 years. Recently, they have celebrated their 100 year anniversary in the following countries Turkey (1908-2008), Philippines (1911-2011) and India (1912-2012). Maggi and Nescafe are one of the most popular products in this region while the company extended their product line with Nido essential and Nescafe Milky in order to cater demand of people belong to the Afro-Asian region. The company recently launched their nutrition division to increase penetration in the region.1.5 Mission Objective of NestleThe company always thrives for achieving leadership position in Health Wellness, and nutrition segment. Nestle also wants to be a reference in the industry for their financial performance.1.6 Strategic receipts of Nestle1.6.1 Competitive AdvantageThe company has carefully designed their product portfolio in order to a maintain balance with market demand. The product portfolio maintained by the company cannot be easily copied by their competitors. The company has planned their product portfolio in accordance to demand of each zone such as America, Europe and Asia.The corporation invests large amount of capital on research and development to produce better prod ucts. The company already made an agreement with a renowned university to open a research division for their nutritional products. Nestle emphasizes on victimisation local ingredients in their products in order to satisfy demand of local customers. For example, in Malaysia, the company introduced a nutritional product complemented with Asian ingredients such as ginger, Chinese red grass and ginseng to lure local customers (Oxford Business Group Malaysia, 2008, p. 132).The brand has presence in more than 150 countries. They have the opportunity to channelize revenue from strong business unit to a poor performing region. The company also adopted a parent company strategy to manipulate business operations internationally. Nestle has opened multiple strategical business units (SBU) across the globe to expand their business (Pride Ferrell, 2007, p. 32).The company believes employees are their asset and treat them with utmost care. Nestle feels that their employees are their biggest s trength. The company has also adopted green populace strategy to decrease their carbon impression caused by their products, working with Forest Trust in order to prevent Deforestation and decrease carbon footprint in the supply chain (Emmett Sood, 2010, p. 192). The company has announced that they will use befouls preferably of tree oils in their future products in order to make their products more environment friendly.1.6.2 Growth DriversThe business has understood that the consumer food market is becoming saturated day by day due to presence of many players. Nestle has diversified their business into Nutrition Health, and Wellness segment in order to avoid saturation in food market. Nutrition segment is showing more than 20% growth rate for past three years, which is greater than their overall organic growth of 7.7%.The company has shifted their focus on emerging markets because developed markets are already becoming saturated. Nutrition product segment of the company has rea dily become popular in Asian markets, while Oceanic region has contributed last sales volume for the companys coffee segment.Nestle has recently launched instant coffee machine for customers in order to give them out of home consumption experience. some schools, colleges, and offices have already installed instant coffee machine to enjoy Nescafe. The strategy helped the company to increase their brand equity among young people.The company adopted premium pricing for their products in order to show status and quality to customers. Customers purchase Nestle products in order to experience mellowed quality products and they are ready to pay for it.1.7 Shared Value Model for NestleShared value model for the company works in triplet format such as sustainable development in water management and nutrition products, protect environment, and maintaining ethical business practices.Stage 1The corporation invested a huge amount of money in research and development in order to create nutriti onal products for customers. In recent times, the Vevey based company has introduced nutritional compass customers to measuring the nutrition value of food. Nutritional compass is complemented with the nutrition information box, which indicates amount of specific nutrients such as carbohydrates, fats, protein and sugars present in a Nestle product, as well as health related tips, and question boxes. In Poland, the company has partnered with two major retailers to provide health related advice to customers. Ninety nine per centum of Nestle products contain nutrient specification in order to provide information to customers.The brand has opened verdant factories in order to provide farming(a) support to farmers. They have taken an open system approach to boost the growth of the rural economy. Nestle established factories in order to employ rural people and help farmers to sell their product without any middlemen. Survey reports suggest that the company is performing pretty well in developing nations to generate revenue and incentivize the morale of rural people.The company took various initiatives for water resource management. They have planned to implement aquifers, watersheds, and artificial river basins to create efficient water resource management. Nestle started water management initiatives by engaging stakeholders into multiphase pilot projects to increase sustainability of the development. (Sources Nestle, 2011)Stage 2Nestle has changed their supply chain management and product package in order to decrease their overall carbon footprint. The company uses 12% renewable energy in their factories and also they have planned to achieve range in wastage within the next two years. The company is employ reclaimable products for packaging in order to decrease plastic contamination and hazards. For example, the company used recyclable packaging products instead of plastic for Ninho caps in Brazil and Purina ONE packaged drinking water in France.The corporat ion not only reduced the use of plastic in their product, but also optimized environmental performance of the product. Nestle uses Global Environmental Footprint (GEF) and Packaging intrusion Quick Evaluation creature (PIQET) to measure the environment sustainability of bottled water. Environment impact of new packaging systems for bottled water can be analyzed by the following picture(Source Nestle, 2011)Stage 3Nestle has established an Alignment board to measure quarterly performance share value objectives. This board acts as an Umbrella Corporation to design strategic implementation Shared Value objectives. The company implements leadership principles to design proper business ethics conduct. Also, United Nations Global Compact Principles helped the company to create a sustainable business environment. Nestle follows the United Nations guidelines for creating shared value in terms of labor law, human rights, corruption free business policy, sustainable environment, and opposi tewise important issues.1.8 Value Chain of Nestle (Bottled Water)1.8.1 SourceThe company has developed terpsichore water sites to source their water products. Nestle has transformed open land sources into take shape water resources to strengthen their value chain. Generally, the business uses 87% of their spring water sites to source water products.1.8.2 ManufacturingNestle has implemented solar panels in their water plants in order to reduce energy consumption and maintain purity of minerals used in the manufacturing process. The company manufactures 98% of packaged bottles in their owned plants in order to reduce cost regarding transportation of empty bottles. The total manufacturing process saves 6.5 zillion gallons of fuel and eliminates more than 6,100 metric dozens of CO2 emissions.1.8.3 PackagingNestle has invested a huge amount of capital to change packaging of the water bottles in order to create an eco-friendly bottled water. The corporation is planning to use paper in stead of plastic to reduce the carbon footprint produced by their company. The Vevey based company has already introduced the Eco Shape bottle which contains only 60% PET plastic in order to save 250 million pounds of plastic per year. Nestle reduced the bottle size by 33% in order to save 10 million pounds of packaging paper yearly.1.8.4 TransportationNestle started to use hybridization vehicles for transportation in the year 2008. Heavy duty trucks and environment friendly trucks are used by the company for transportation purposes. The company has forecasted that they will reach 25% fuel economy within the next three years by using hybrid transportation models.1.8.5 RetailRetail channels for Nestle water products are focused regionally in order to increase penetration levels. The company transports 90% of bottled water directly to the retailers in order to eliminate warehouse storage and costs associated with storing products. The whole process helped the company to reduce 10,900 metric tons of carbon footprint or carbon dioxide emissions yearly. Benefits of green value chain maintained by Nestle can be summarized in the following chart(Source Nestle-water, 2011)1.9 Financial Performance of NestleTotal group sales for the company were $ 83.6 billion in year 2011 with an organic growth of more than 7.5% annually. It is interesting to short letter that the company has achieved annual sales growth in a multi-dimensional way without depending on a single product segment. The company achieved maximum sales growth from their nutritional product division. Operating profit has also increased to $ 12.5 billion with a growth rate of 15.0%. The company has also performed well in terms of shareholders value and return on investment.Shareholders return can be analyzed in the following tableNet Cash Returned to ShareholdersReturn on investmentDividend per Share$10.7 billion44.4%$ 5.9 billion through dividend$ 4.8 billion through share buy back14.1% from goodwill30.3% f rom external operation$1.95 + 5.4%(Source Nestle, 2012)Financial statement of the company is explained in the Appendix A to C.2.0 Global Bottled Water industriousnessResearch scholars and market research reports suggest that the bottled water industry is dynamic as well as multidimensional. Global reports suggest various companies sold more than 200 billion water bottles in the year 2011. Consumer Food Companies such as Nestle or beverage giant, Coca- dummy, and many others have entered the bottled water market in order to explore business opportunities. Retail channel sales are development at rate of 11% and analysts have forecasted that the market will reach $150 billion within next couple of years. Although bottled water market is evolution at a steady rate, the penetration level is not homogeneous in the entire region.Customers prefer to drink mineral water in order to experience purity and freshness. Nestle also emphasizes on the purity of their bottled water in order to sell the item. Global players try to create their bottled water using underground aquifers, minerals, and springs in order to show purity. Nestle also did the same by changing their product line by adding minerals and aquifers in three of the products S.Pellegrino, Perrier, and Poland Spring. Industry analysis shows that bottled water market can be segmented into three portions.2.1 Product CharacteristicsBottled water can be segregated into three types lock (dominant with more than 70% penetration), Sparkling (penetration level is low such as 21%), and Flavored (near about 6% penetration). Nestle has maintained a product line complemented with Still and Sparkling category while they have not took any initiative to add flavored water in portfolio2.2 Water SourceTwo types of water sources are available for manufacturers are chemically purified and natural spring water, and both are used in order to manufacture bottled water. Water sourced from natural spring has two subdivisions Single Sp ring (bottled near the source location without any chemical treatment except filtration) and Multiple Spring (bottled far from source location after multiple chemical treatments). Nestle offers customers only Single Spring bottled water but they have a future plan of entering in the Multi Spring segment.2.3 Marketing ChannelCompanies in the bottled water industry follow two types of marketing channel on trade- off trade, or retail sales in order to distribute their products to customers. On trade channels focus on distributing bottled water directly to business, houses, hospitals, catering, and various event sponsors while retail channel focuses on tertiary sales. Global sales volume in terms of unit for on trade channel is only 16% but striking fact is that sales volume in terms of monetary value for on trade channel is 55%. These differentiation occurs due to the fact that water bottle price is three times higher in contrast to off trade channel (Gimeno, 2012).3.0 Competitors Anal ysis3.1 DanoneDanone is the major competitor for Nestle in the water industry. The company is the market leader in Spain and United Kingdom for purified water business. Danone uses merger acquisitions in order to expand their business and they have achieved more than 24% market penetration by following the same strategy. The company maintains product portfolio complemented with Sparkletts, Alhambra, and Crystal in order to offer still and spring water to customers.3.2 PepsiCoThe company entered the packaged drinking water industry in the year 1994 by establishing cooperation with bottlers. The company provides spring, flavored, and still water to global customers. Aquafina is the major bottle water brand for the company while the brand has achieved more than 10% penetration in UK market. Distribution channels maintained by the company can be termed as their core competency. PepsiCo sells their water product in UK with the help of Directo Store Delivery Method (DSD) and also the com pany is planning for category extension in the sparkling water segment.3.3 Coca ColaThe company launched their bottled water brand Dasani in the year 1999, spending more than $20 million dollars in sales progression and advertising to push the brand during its initial period. Coca Cola Enterprise (CCE) is also a big bottler worldwide. The company has launched their multi spring water brand BonAqua in European countries. Market share for the company in the UK is not more than 3%. Hence they have planned to increase market share by incorporating product differentiation in the future.4.0 Analysis of the Packaged Water Industry in United Kingdom4.1 SWOTThe SWOT analysis method can be done in order to analyze business scenario for the packaged water segment in UK (Ferrell Hartline, 2010, p. 122).4.1.1 StrengthThe lifestyle of people in the earth is changing with time, and as a result, the demand for pure water is increasing. Packaged water gives people the opportunity to carry mineral water or sparkling water with convenience.4.1.2 WeaknessCompanies need to find open water sources to manufacture bottled water, but availability of such resources is low in the UK compared to other European countries. presidential term is strict about environment norms and pushes foreign companies to decrease carbon footprint throughout business operation. Companies trying to expand business in UK need to plan value chain in order to decrease environment pollution. Because of this, the Boxed Water product is fitting to combat this weakness.4.1.3 OpportunityPeople in the field have become more health conscious in recent times due to the increase of epidemic diseases. The quality of open source water has also degraded randomly within the last ten years. Companies have the opportunity to manipulate market demand by offering mineral and spring waters to customers of the boorish, and it is Nestles opportunity to offer the Boxed Water idea to fulfill this demand.4.1.4 ThreatMultinati onal companies are facing threat from regional and small local players in the country. Many small level companies are counterfeiting and imitating product portfolios of large players such as Nestle, Danone, and others. Counterfeiters are selling products at a price spurn than market average in order to spoil competition.4.2 Porters Five ForcesPorters five force model can be used to analyze bottled water industry in United Kingdom (Ahlstrom Bruton, 2009, pp. 131-140).4.2.1 Threat of Substitute in that location is no substitute for water but the same cannot be said for bottled drinking water. Substitutes such as vitamin and mineral water, and single and multi-spring water can be termed as close competitor for purified bottled water. Tea, beer, and soft drinks are the distant competitors for packaged drinking water therefore, the threat of substitute for packaged water is moderate.4.2.2 Threat of New EntrantsThreat of new entrant is low for the packaged water industry due to three re asons.Huge financial resources are needed to establish water plants and a wide distribution channels to retailers nationwide.Companies must have sufficient resources to offer high retail margins to distributors (industry average is more than 15% but Nestle offers 33%) in order to survive in market competition.Companies must have the susceptibility to compete against multinational giants such as Coca Cola, PepsiCo, Nestle, and Danone to be successful in the long run.4.2.3 Bargaining Power of SupplierNestle uses their own hybrid transportation model in order to decrease dependency on suppliers. In general, companies manufacture and bottle their products near the water source in order to decrease stages of value chain. Large bottlers can purchase bulk volume of 1 liter, 2 liter or 5 liter bottles from manufacturers at borderline cost. Presence of many alternatives has decreased bargaining power of suppliers.4.2.4 Bargaining Power of CustomersPackaged water is seen as a basic product and price predisposition issue of customers is not a major concern. This means that big brands such as Nestle can charge a premium price for their multi spring and single spring water segments. Bargaining power of customers is moderate for the industry.4.2.5 CompetitionMarket competition is high for the bottled water industry due to presence multinational players as well as regional sellers. They mainly compete in terms of retailer margin, product price, and product differentiation. Companies are investing a huge amount money in developing distribution channels while there is no doubt that beverage giants such as PepsiCo and Coca Cola have a clear advantage due to their long association with retailers. Nestle needs to design distribution network by maintaining equilibrium amid on trade and off trade channel.FactorsThreat of new EntrantsThreat of substitutes productsBargaining power of buyersBargaining Power of SuppliersExisting RivalryLevel of ImpactHigh Medium Low4.3 Porters Diam ond ModelNestle needs to use porters diamond model in order to explore opportunity in the country (Walker, 2003, p. 177)Uncertain events such as Euro zone crisis can impede the growth of businessMarket competition in bottled water industry is high from both regional and international playersDemand for packaged drinking water is high in the UKNestle can use both skilled and inexpert labor for their business due to abundance of human resource pool in the countryPresence of supporting players such as paper suppliers and other members of the value chain is abundantGovernment of the country provides tax exemptions to companies investing more than 10,000 on research development5.0 Why the United Kingdom? There were three countries, each in three different continents that seemed very interesting for Nestle to introduce the idea of a new packaging, Boxed Water. The idea of case water consists of redesigning the container into a complete new design with no damaging chemicals for human con sumption, and at the same time being better for the environment.The first country taken into account in this report is Singapore. Singapore is one of the nations in the world with a well-established and efficient free-market economy. The government of Singapore has a significant control in most corporations, which constitutes about 60% of the GDP through business entities like Sovereign Wealth Fund. The country has a free business environment with comparatively low levels of corruption, transparency in management of public affairs and constant/predictable prices changes. Compared to other developed countries Singapore has low tax rates with a very high per capita GDP globally. Singapore has a very innovative and stable economy, which is merged with efficient economic planning under the stinting Development Board that helped to establish a free market. Moreover, Singapore has a port that is strategic enough to give it an edge over the neighboring countries that carries trade. Most of its labor comes within the population, which is owed to the efficient education policy in the country that produces skilled labor for the industries in the country.The government