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    Nestle faced challenges maintaining growth in Western markets due to stagnating populations and declining food consumption. Emerging markets presented opportunities for growth through expanding economies and populations. Nestle's strategy was to enter emerging markets early and build substantial market share by selling basic popular products under local brands. As incomes rise, Nestle introduces more premium products. While using global brands in developed markets, Nestle focuses on customizing products and brands locally in emerging markets.

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    Nestle faced challenges maintaining growth in Western markets due to stagnating populations and declining food consumption. Emerging markets presented opportunities for growth through expanding economies and populations. Nestle's strategy was to enter emerging markets early and build substantial market share by selling basic popular products under local brands. As incomes rise, Nestle introduces more premium products. While using global brands in developed markets, Nestle focuses on customizing products and brands locally in emerging markets.

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    44 views2 pages

    Nestle Case Study

    Uploaded by

    Interior Design
    Nestle faced challenges maintaining growth in Western markets due to stagnating populations and declining food consumption. Emerging markets presented opportunities for growth through expanding economies and populations. Nestle's strategy was to enter emerging markets early and build substantial market share by selling basic popular products under local brands. As incomes rise, Nestle introduces more premium products. While using global brands in developed markets, Nestle focuses on customizing products and brands locally in emerging markets.

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    Despite its undisputed success, Nestle’ realized by the early 1990s that it faced significant

    challenges in maintaining its growth rate. The large Western European and North American
    markets were stature. In several countries. Population growth had stagnated and in some there
    had been a small decline in food consumption. The retail environment in many Western nations
    had become increasingly challenging, and the balance of power was shifting away from the
    large-scale manufacturers of branched foods and beverages and toward ration wide supermarket
    and discount chains. Increasingly, retailers found themselves in the unfamiliar position of
    playing off against each other manufacturers of branded foods, thus bargaining down prices.
    Particularly in Europe, this trend was enhanced by the successful introduction of private-label
    brands by several of Europe’s leading super-market chains. The results included increased price
    competition in several key segments of the food and beverage market, such as cereals, coffee and
    soft drinks.
    At Nestle, one response has been to look toward emerging markets in Eastern Europe,
    Asia and Latin American for growth possibilities. The logic is simple and obvious – a
    combination of economic and population growth, when coupled with the widespread adoption of
    market-oriented economic policies by the governments of many developing nations, makes for
    attractive business opportunities. Many of these countries are still relatively poor, but their
    economies are growing rapidly. For example, if current economic growth forecasts occur, by
    2010 there will be 700 million people in China and India that have income levels approaching
    those to Spain in the mid 1990 S. As income levels rise, it is increasingly likely that consumers
    in these nations will start to substitute branded food products for basic food stuffs, creating a
    large market opportunity for companies such as Nestle.
    In general, the company’s strategy has been to enter emerging markets, early-before
    competitors – and build a substantial position by selling basic food items that appeal to the local
    population base, such as infant formula condensed milk, noodles, and tofu. By narrowing its
    initial market focus to just a handful of strategic brands, Nestle’ claims it can simplify life,
    reduce risk, and concentrate its marketing resources and managerial effort on a limited number
    of key niches. The goal is to build a commanding market position in each of these niches. By
    pursuing such strategy, Nestle has taken as much as 85 percent of the market for instant coffee in
    Mexico, 66 percent of the market for powdered milk in the Philippines and 70 percent of the
    market for soups in Chile. As income levels rise, the company progressively moves out from
    these niches, introducing more upscale items, such as mineral water chocolate, cookies and
    prepared food stuffs.
    Although the company is known worldwide for several key brands, such as Nescafe, it
    uses local brands in many markets. The company owns 8,5000 brands, but only 750 of them are
    registered in more than one country, and only 80 are registered in more than 10 countries. While
    the company will use the same, “global brands” in multiple developed markets, in the developing
    world it focuses on trying to optimize ingredients and processing technology to local conditions
    and then using a brand name that resonates locally. Customization rather than globalization is the
    key to the company’s strategy in emerging markets.
    Questions
    (a) Does it make sense for Nestle to focus its growth efforts on emerging markets? Why?
    (b) What is the company’s strategy with regard to business development in emerging markets?
    Does this strategy make sense?

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