Nestle To Hike Food Prices Again In 2023: CEO
Growth won't be as steep as in 2022, but "we have a lot of catching up to do throughout the year," CEO Schneider said.
FMCG giant Nestle, which covers well-known products including, Nescafe, and Maggie, will have to raise the prices of its food products again. It will be done to cover the striking high costs of production that have yet to be fully passed on to customers, according to Nestle’s CEO, Mark Schneider. Growth won’t be as steep as in 2022, but “we have a lot of catching up to do throughout the year,” CEO Schneider said. The decision comes amid inflation in many developed economies already at multi-decade highs, largely driven by rising food and energy prices.
5,000 Crore Nestlé Investment Plan For India
The company was founded on March 28, 1959, and was supported by Nestlé Alimentana S.A. through its subsidiary Nestlé Holdings Ltd. As of 2020, Nestlé’s parent company owns 62.76% of Nestlé India. The company has 9 manufacturing facilities at various locations across India. Indian market being among Nestlé’s top 10 markets, Schneider CEO said that Nestlé has an investment plan of Rs 5,000 crore till 2025. The investment would go towards capex (capital expenditure), setting up new plants, acquisitions, and expanding the product portfolio.
NESTLÉ’s Growth In India
The relationship between NESTLÉ with INDIA started in 1912. NESTLÉ responded to Indian aspirations by setting up a company in India and setting up its first factory in 1961 in Moga, Punjab, where the government wanted NESTLÉ to develop dairy farming. Progress in Moga necessitated the introduction of NESTLÉ Agricultural Services to educate, advise and assist farmers in various aspects
Progress has involved creating prosperity on a permanent and sustainable basis, resulting not only in the transformation of Moga into the thriving and vibrant dairy it is today but also into a thriving center of industrial activity. It always focuses on better understanding the changing lifestyles in India and anticipating consumer needs to deliver taste, nutrition, health, and wellness through its product offering.
- The largest food company
With a market cap of $330+ billion, Nestlé is known as the largest and most well-known food firm with sales of Hot Pockets, Stouffer’s, DiGiorno and Nespresso, etc.
- Reputable brand
It has built a respected reputation in the food and beverage sector, offering high-quality products for everyday use around the world.
- Brand valuation
Nestlé is well positioned for growth. In 2021, Nestle ranked 62nd according to Interbrand – with a brand value of $10.6 billion, moving up 1 place compared to 2020.
- Highly diversified portfolio
Nestlé owns more than 2,000 brands worldwide and has revamped more than 8,000 products. It is one of the world’s largest companies with the widest and most diverse product portfolio.
Products of Nestle Are divided into:
- Powdered and liquid beverages – this is Nestlé’s largest segment and accounts for about 28% of total revenue. This segment sells instant coffee and other beverages such as tea and chocolate powder. Notable brands include Nescafe, Nespresso, Starbucks coffee (licensing agreement), Blue Bottle Coffee, Milo, and Nestea.
- Petcare – Nestlé’s second largest segment and accounts for about 18% of total revenue. This segment sells Purina, Lily’s Kitchen, Tails, and Merrick pet food and toys.
- Nutrition and health – accounts for about 15% of total income. This segment sells products such as vitamins, minerals, and supplements that help promote health and well-being. Notable brands include Illumina, Gerber, Nestum, Cerelac, Beba, Lactogen, Garden of Life, Pure, and Vital Proteins.
- Prepared meals and cooking aids – represent 14% of total revenue. This segment sells frozen foods, chilled ready meals, and culinary and cooking aids.
- Dairy products and ice cream – represent 12% of total revenue and sells milk products across the nations.
- Confectionery – represents 9% of total revenue. This segment sells chocolate, sugar, candies, snacks, and biscuits. Notable brands include KitKat, Cailler, and Garoto.
- Aquatic products – represent 5% of total revenue. Notable brands include Pure Life, S.Pellegrino, Vittel, and Perrier.
The company sells its products in 186 countries Instead of relying on a few markets, it has acquired a large market in many developed and developing countries to earn most of its revenue.
- America is Nestlé’s largest market, accounting for about 44.9% of total sales. The United States and Canada account for 70% of sales in this region, while Latin America and the Caribbean account for the remaining 30%.
64% of regional revenue comes from Western Europe, 18% from Eastern and Central Europe, and 18% from the Middle East and North Africa.
- Asia, Oceania, and Sub-Saharan Africa (AOA) account for the remaining 25.5% of Nestle’s total revenue. ASEAN (Association of Southeast Asian Nations) markets represent 34% of regional sales, Oceania and Japan represent 15% of regional sales, Other Asian markets represent 39% of regional sales, and Sub-Saharan Africa represents 12% of regional sales.
By country, the United States is Nestlé’s largest market, accounting for about 30% of total revenue, followed by Greater China (No. 2 largest market, accounting for approximately 6% of total revenue), France (No. 3 largest market, representing approximately 4% of total revenue), the United Kingdom (4th largest market, representing approximately 4% of total revenue) and Mexico (5th largest market, representing approximately 3% of total revenue).
The world’s leading food conglomerate, Nestlé, has reduced the amount of sugar (by 25%) used to make its popular Carnation Breakfast Essentials. In addition, the company is also incorporating completely new and eco-friendly paper packaging into the product line to increase its sustainability. There’s also the fact that many of these shoppers grew up with Carnation Breakfast Essentials products and want their children to enjoy them as well.
Weaknesses of Nestlé
- Price increase
The company has increased prices by 6.5% for a certain category of its consumer goods. The rise in prices is due to rising raw material and transportation costs, supply chain constraints, and an overall inflationary environment.
- Scope of management and organizational structure
The company is organized in a matrix structure. This means that a large number of brands fall under the same umbrella group, making it difficult to manage a large number of individual brands, which can often lead to disagreements and conflicts of interest.
- Water controversy
The company has been accused of pumping millions of liters of water from a Canadian reserve where residents are deprived of drinking water.
- Social Criticism
The company has been the target of media attention many times. Allegations of water privatization, misleading labeling, and a lawsuit over the production of chocolate using child and slave labor are some of the examples that must weaken its reputation in the market.
- The Maggi Noodles Controversy
In 2017, the company failed a laboratory test in India. This created advertising hype as people boycotted Nestlé, resulting in the loss of 80% of the market share in the country. Nestle claimed that no MSG was added to the noodle packets.
- Racially Insensitive Product Names
In Australia, The company has come under pressure to stop rampant racism with its Red Skins and Chico’s sweets and recently announced it would change the names of two confectionery products.
- Unhealthy products
The company’s history consists of a long list of products that put consumers at risk, such as the China Milk Scandal and tainted cookie dough. Consumers do not trust companies that have a history of selling unhealthy products.
edited and proofread by nikita sharma