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Business Report writing is a designed structure of analyzing a company to its routes also it is a perfect concept for readers to gain the knowledge of not only the company being scrutinized but also giving an idea of how company face dilemmatic scenarios.
The objective of this report is to outline the company performance over the last 8 months and provide the overview of cooperate governance and its strategic analysis and financial performance.
Furthermore, This report has been divided into four sections; first section is concentrate on the company introduction, brands, cooperate governance and Growth of the company in an international prospective, moreover, second part of the report is concentrate on company performance and company international business strategy, furthermore, third part of the report is discuss the company critical issue and SWOT analysis with capturing the close picture of company performances and its weaknesses and last section of the report will explain the company financial performance. Furthermore this report has been divided into essential elements along with sub headings for a further in-depth analysis to give accurate understanding of discussion.
Company introduction (www.nestle.com)
Nestle is one of the largest Nutrition, health and wellness company in the world. Company was founded in VeVey (Switzerland) in1866 by Heinrich Nestlé. Heinrich Nestle was a great scientist and also a great pharmacist, in 1867 Heinrich was invented a formula to convert liquid milk into powder milk and introduced Nestle to distribute milk as a infant food. After the success full implementation of this product company established the first foreign office in London in 1868. Moreover in 1905 company was merged with "The Anglo Swiss condensed milk" company. Furthermore in 1929 Nestle acquired the Swiss chocolate marker and move into the chocolate business. By the end of 2000 Nestle had 500 factories in 76 different countries and sold his product almost every country in the world.
Furthermore, Nestle is a decentralized organisation with few layers of management and span of control. Moreover, currently company is operating in 84 countries with 456 numbers of factories, also company have seven strategic businesses Unit (SUBs) and 18 Research and development center (R&D) around the world. In order to ensure the company long term sustainable growth and better understand of customers need and demand, Company constantly reviews its product portfolio and focuses on its efforts to conduct research. Company is committed to provide the best Nutritional food and products around the Globe.
The Nestlé brand portfolio such as milk and dairy products, nutrition's, weight management, performance and healthcare, breakfast cereals, ice cream, coffee and culinary products (prepared dishes, cooking aids, sauces) pet care, bottled water etc. practically cover all food and beverage categories. Many of the brands have leadership with in the local and global market and existed for several years, for instance S.Pellegrino the mineral water from Italy, and Nestlé Moça in Brazil, are over 100 years old. The best-known global brands include Nescafé, Nestea, Maggi, Buitoni, Purina and Nestlé itself. Furthermore other brands for instance Milo, Nespresso, Nesquik, Kit Kat, Smarties, Polo, Friskies, Perrier and Vittel sells in many countries. It is considered that total number of brands including local and international reaches into the several thousands.
Peter Brabeck-Letmathe (Chairman) (www.nestle.com)
Peter Brabeck-Letmathe was joined the Nestlé Group's in 1968 as a salesman in Austria. Furthermore, between 1970 and 1987, he held a series of responsibilities in Latin America. In 1987, Peter Brabeck-Letmathe was transferred into the Nestlé's international Headquarters as a Vice President and in 1992 was elected for Executive Vice President. Moreover 1997, Peter Brabeck-Letmathe was elected as a member of the Board and in 2001, was appointed the CEO; furthermore, he was elected for voice chairmen in 2005 and has been selected the chairmen of the board in 10-april-2008.
Nestlé Corporate Governance (www.nestle.com)
According to the company article of associations 2009, Nestle governance bodies consist of,
Board of Directors (Board)
Chairman and Corporate Governance Committee (CCGC)
Compensation Committee (CC)
Nomination committee (NC)
Audit Committee (AC)
Chairman of the Board
Chief Executives Officer (CEO)
Executive Board (EB)
Board of Directors (Board)
The Board of Directors shall consist of at least seven members also board shall be elected for three years by the General Meeting. Furthermore each year board will renew by rotation and will establish new order of rotation in the case of increase or decrease of board of director.
The board Members are:
Two Voice Chairmen
Chief Executive officer (CEO)
Members of the Committee
Role of the Board and its Committees
Board is responsible for the selection of chairman and voice Chairmen, Furthermore general power of the board such as board can conduct business to the extent that is not within the board regulation or general meeting. Moreover board is responsible for,
Management and supervision of the business
The appointment and removal of the chairman and Voice chairmen
The appointment and removal of committee members
The appointment of CEO and members of Executive board (EU)
Preparation of Management report also preparation of General Meetings including agenda and proposal.
The company long term Strategy
Establish or close branch office
The Chairman and Corporate Governance Committee (CCGC)
The CCGC committee consists of Chairmen, Two voice chairmen, Chief executive officer and elected member of the board. Furthermore, committee liaises between board and chairman. The board approved power and duties for (CCGC) and
Particularly (CCGC) acts as a consoler and solve the management issue between Chairman and chief executive officer.
The Compensation Committee (CC)
The Compensation committee is consists of minimum two non executive members of the board and chief executive officer; furthermore CC recommends compensation policy to the board and also proposes the remuneration system and principals for approvals.
The Nomination Committee (NC)
The Nomination committee is consists of independent and non executive members of the board preferably not the member of (CCGC) committee, furthermore this committee establish principal to select candidate for board of director also prepare proposal for board decision.
The Audit Committee (AC)
The Audit committee is consists of minimum two non executive members of the board and voice chairmen who control the committee, furthermore majority of the members are independent and at least one member have financial expertise. Moreover the responsibly of AC is to assists the Board to fulfill its responsibilities with respect to financial and accounting reporting process also overview of risk management as well as internal and external audit process also unrestricted approach to the company's record .
Chairman of the Board
The chairman is responsible to supervise the board (subject to the power of board) and management of the company governance. Chairman responsibilities are,
Leads the Board
Overall responsibilities for the development of strategies (together with CEO)
Appointment and removal of proposal shareholder and executive management
To ensure the alignment of board's strategies and board committee
To ensure the proper flow of information
In coordination with CEO, Responsible to organise and chair the board meeting
Responsible to organise and chair the General Meeting
Work close to nomination committee (assessment of board of director nomination)
Takes a leading role to design the group corporate governance
The Chief executive officer
The chief executive officer is considered the supreme executive authority for the company and the Group's (subject to the power reserved to the board) the committee and the chairman, furthermore, CEO has following duties and powers,
Organise, manage and monitor the business affairs
To approve, acquisitions, participations, investment and divestitures
In coordination with chairman, submit proposal to the board for the nomination or dismissal
To call and chair the meetings of Executive board
Report to chairman
The vice Chairmen
The board shall appoint two independent directors as vice chairmen, responsibilities of vice chairmen are to work close to the chairmen and discuss industrial, strategic marketing, internal control as well as financial issue. Furthermore, one of them should be have financial expertise to ensure the good internal financial control and second should have industrial experience on the global level.
Appendix 1 for detail
Annual General Meeting (www.nestle.com)
On 15-April-2010 The Nestle Annual General Meeting was held in VeVey (Switzerland), the main points of the meeting was for instance,
The meeting has approved the annual reports and re-elected the Peter Brabeck-Letmathe (chairman), for three year,
Furthermore, other board member such as Steven G. Hoch (Founder and senior partner) and André Kudelski (Chairman and CEO Kudelski group) and two new board members, Ms Titia de Lange and Mr. Jean-Pierre Roth selected for three years.
Moreover 2,640 shareholders have approved the proposal for increase the dividend to CHF 1.60 per share. Moreover chairman has point out the issue regarding deforestation of rainforest to shareholders and explained Nestle is working towards to the end of deforestation of rainforest.
Acquisition of Kraft Foods' frozen pizza business (www.nestle.com)
On 05-January 2010 Nestle has showed the interest to acquire the Kraft food frozen business in the USA and Canadian market with including brands are such as California Pizza, DiGiorno, Tombstone, Jack's and Delissio for USD 3.7 billion in cash.
Consequently, on 01 March 2010 after completion of closing conditions Nestlé has concluded the acquisition of Kraft Foods' frozen pizza. Furthermore, the reason for the acquisition is, USA is the largest pizza market in the world and it generate about USD 37 billion, therefore Paul Bulcke, CEO of Nestlé said
"This acquisition will provide the strong pillars and will enhance the Nestlé's frozen food activities in North America and Canadian market.
Nestlé Bets on Mexican Coffee (Business Environment 2010)
Nestlé has announced the plans to invest US$ 390 million in Mexican production and infrastructure facilities. The investment will be directed Nescafe instant coffee processing plant to expand the capacity by 40%, which will make it the world's largest coffee processing plant. Due to the low production cost and vast network of trade, Nestle is planning to build Mexico as a regional export hub in the American zone.
Nestlé opens global R&D Centre (www.nestle.com)
On 05-Jan-2010 Nestlé has open a Global R&D center in Santiago de Chile. The New R&D Center will include the bioactive ingredients to reduce the sugar and fat level in the biscuits without compromising the biscuit quality.
Sell of remaining Alcon shares to Novartis (www.nestle.com)
On 04 Jan 2010 Nestlé S.A. has transferred the Alcon remaining 156,076,263 shares to Novartis, which company had agreed the contract on 6 April 2008. Moreover, the reason for transfer the control are gradually based on three issues for instance,
"The divestment of Alcon,
The initial IPO of 23.25% in 2002
The sale of 24.8% in 2008
And the exercise of the call option by Novartis. Alcon was acquired by Nestlé in 1977 for USD 280 million"
Nestle share buy back Programme. (www.nestle.com)
Nestle Board has announced the share buy back Programme on 15 August 2007 for over the next three year to improve the capital efficiency and future prospects of food and beverage business.
Nestle boards of Directors believe that significant share buy back Programme should help to drive the performance of food and beverage business and enhance the shareholder value.
Furthermore, due to the acquisition of Novartis medical nutrition and Gerber, which has created a critical Mass in Nutrition sales approx CHF 10 billions.
As a consequence, in 2009 the group has brought back CHF 7 billion, which is equal worth of its own shares and the remaining CHF 5 billion in share will be brought back in the course of 2010.
After completation of this Programme further group will launch a new CHF 10 billon share back Programme with intent to buy additional CHF 5 billion share before the end of the year.
Prospective Global Strategy and Competitiveness (www.nestle.com)
For the significant growth in future, Nestle is actively focused on the Developing and developed economies market, Nestlé's Prospective and Global strategies are for instance.
Bring the best and most relevant products to people,
Long-term potential is never sacrificed for short-term performance
Enter the emerging market before the competitors and build a substantial position.
Nestle concentrate its marketing recourse and managerial effort.
By pursing this Strategy Nestle Has Achieved
85 % market for instant coffee in Mexico
66 % Powder milk market in Philippines
70 % soup market in Chile
Moreover, Nestle is continuously focused on developing and emerging market (D&E), for instance India and China. It is considered that the populations of D&E economies will increase by 3300 million by the end of 2050. The Sales in D&E economies market is accounted CHF 35,000 millions in percentage 30% of the total sale which has been increased 15.4% over 2007 and company expects to double in the next ten years.
Furthermore, Nestle, competitive advantages among the competitors are based on four points, For instance,
Nestle product and brand portfolio such as Nestle Group is the manufacturer of billions of different products and operates in thousands of value added brand around the world.
Furthermore, Nestle unmatched Geographically presence, for instance Nestle spend approx CHF 35 billions in emerging market in every year which is higher than a average growth and profitability.
Moreover, Nestle leading R&D capabilities, for Instance Company spend approx CHF 2.0 billions on R&D for innovations and renovation to increased awareness in local taste and preference.
In addition, company international business strategy such as to respect and follows all applicable local, laws, legislation, religious practices and culture aspect.
Strategic Approaches for Reduce Political, Operational and Administrative Vulnerabilities. (www.nestle.com)
Corporate Business Principles (International)
Nestle business objective is to market and manufacture the products such a way to create long term value for business partner, shareholders, consumers, and employees, and also to ensure the highest standard of organisation.
Moreover nestle is committed to create the value for all those communities around the world where Nestle market there products. Nestle corporate business principles are based on fairness, honesty and sound human values therefore, company respect and follows all applicable local, laws and legislation, religious practices and culture aspect.
In additions, Nestlé Management is committed to follow the strategic business Principles to avoid the administrative and operational Vulnerabilities; therefore management is responsible for,
Manage professional skills,
Curiosity and open-mindedness
High level of interest in other cultures,
Commitment to continuous learning, improving, and sharing knowledge
Motivate staff in order to contribute wider group performance
Involvement of each employee at all levels (concerned with continuously adding value to company).
Consequencely, success of Nestle is a reflection of clear defines responsibilities, reflection of professionalism, responsible attitude of management, well defined objective as well as significant global leadership position.
The world's largest food and beverage company has been internationally criticized for purchasing and using the palm oil, water bottling issue in USA, child labor problems in cocoa-growing nations and its aggressive marketing of baby food product all over the world.
Greenpeace Campaign. (www.greenpeace.org.uk)
Greenpeace organisation has started a campaign against Nestle over its purchase of palm oil by an Indonesian company called Sinar Mas.Â Greenpeace claims that Sinar Mas getting the palm oil by destroying the rainforest and use in it for candy bars and other products. Considerably, rainforests contributes about 20% of greenhouses gases also support transport sector. Therefore, deforestation of rainforests and the excessive use of bio-fuels are serious environmental issues on the global level.
Bottle Water issue (Steel, Emily. 2010, Journal)
Nestle is a top water bottling company and selling water under 70 different brands name in the world. Nestle controlled one third bottled water market in America. However, Oregon Department of Fish and Wildlife (ODFW) and coalition of others environmental organizations have launched the campaign against Nestle in North America to prevent the new bottle water facility in Cascade Locks Oregon. The reason for this campaign is bottled water facility would contributes to the plastic waste problem also it is the waste of prime resources and potential way to destroy the local wildlife.
Baby Milk Scandal (www.babymilkaction.org)
Nestle has been targeted and criticized by the International baby food action network (IBFAN) for the violation of international code of marketing of breast milk substitutes and also aggressive baby food marketing strategies for selling artificial infant feeding which has the cause of unnecessary death of children.
SWOT ANALYSIS (2010. "DATAMONITOR)
Nestle is the world largest company by sales and strong brand portfolio with manufacturing and marketing the branded food product around the world.
-Strong brand name
According to the Inter brand management company, Nestlé is one of the best-known companies in the world and ranked 63rd best global brands in 2008 and its top 30 brands earn over CHF 1,000 million which is 70% of its sales. Furthermore,
Customise products to the local market conditions
Strong global operations
-Increasing product recalls history
In November 2008, Nestlé USA recalled the product called Nesquik Strawberry Powder, due to the fearing of small fragments of aluminum.
Furthermore, Nestlé Prepared Foods Co has recalled 900,000 pounds worth of meals the Lean Cuisine brand frozen chicken due to the small chunks of blue plastic.
Moreover in September 2008, in Hong Kong Company recalled UHT milk due to contained the melamine chemical.
The Nestle is utilising the R&D capabilities to achieve the competitiveness in the health and wellness market. For instance, Nestlé is focusing on nutrition combining taste to reduce the fatty acids, salt and sugar and increase the micro nutrients such as minerals and vitamin for consumer better health and to ensure for the profitable growth.
Furthermore, Nestle is working on,
Scientific innovations to address obesity and diabetes
On developing economies
Focus on external Market
Currently company generate 50% of food and beverage in North America, India, China, Russia, Brazil and company is expected double of the sale in next ten years.
The company has been internationally criticized for issues and fines for instance
Purchase and use of palm oil
Water bottling issue in USA,
Child labor problems (in cocoa-growing nations)
Aggressive marketing of baby food product all over the world
In February 2009 Nestle and Coca Cola Company has been fine in US$ 650,000 against Enviga-Brand green tea beverage products.
In February 2010 Nestle has been fine E30 million by Greece's competition watchdog for abusing against its dominant position in the coffee market.
-Political and Economical Factor (Alvarez, Colin and Richard (2010)Â
Nestle company is operating in 84 countries in the world with having entire different cultural, political and economical back ground. The concerning issues regarding these countries are, the political stability, the infra structure, the local regulation, the foreign trade which might be potentially affect on Nestle ability to do business with in these countries.
As being not a member of European Union Switzerland is a country with low rate of corporate tax which provides an opportunity to large multinational firms such as Novartis, Glencore and Nestle to save large amount of money and also in 2008 Switzerland ranked second position on the "Index of Economic Freedom 2008. The assessment of index was in term of monetary and business trade freedom. (The Heritage Foundation 2008)
Since 2004 to 2009 Nestle` has been maintained a High level of net profit figure CHF 0.4 billion. During the last three since 2007- 2009 Nestle sales figure was
In 2007 Total sale 107.6 billions Net profit 10.6 billions
In 2008 Total sale 109.9 billions Net profit 18.0 billions
In 2009 Total sale 108.0 billions Net profit 10.4 billions
In 2009 reason for drop in profit was reduced consumer spending predicated by company analysts.
Nestle` is one of those firm who has made several social beneficial movies for instance
Nestlé has around 400 community projects running in 90 countries.
In India, Nestle` organised 60 deep bore wells for 20,000 people
In Africa Nestle` work to improve water and sanitation
In Nigeria Nestle` promote educational Programme For example, more than 800,000 Nigerians have received HIV/AIDS education with 2,600 peer educators
Nestle` invests an average of CHF 100 million each year for the protection of the environment.
Nestle` aim is to maximize the production of goods while minimizing consumption of resources and at the same time reduce waste and emissions.
Nestlé has recently launched Jenny Craig's weight management Programme in France and UK.
Recently Nestlé has opened a new Global R&D centre in Santiago de Chile. The New R&D centre is a fully computerized and equipped with latest technology will include the bioactive ingredients which can be use to reduce the sugar and fat level in the biscuits without compromising the biscuit quality. Apart from this Nestle` have seven research and Development (R&D) centre around the world.
Being a multinational giant, Nestle has a many legal implications. For instance
Purchasing and using the palm oil,
New labeling laws for infant-formula
Water bottling issue in USA,
Child labor Issue in cocoa-growing nations
Aggressive marketing of baby food product all over the world
Advertisement of Horlicks cereals (criticized by claiming it 'Makes children tall')
Nestle Group sales, profitability and financial position (www.nestle.com)
"Nestlé Group's sale in 2009 was in at CHF 107.6 billion
With organic growth of 4.1%
Operating profit was in at CHF15.7 billion,
Net profit was CHF10.43 billion
With organic growth of 4.1 percent
In North America, internal growth accelerated in the, ice cream, pet care, soluble coffee and chocolate in the and slow down in frozen food, Moreover Brazil build the positive momentum and mainly to growth in dairy category also rest of the region has showed the positive improvement in the third quarter.
"Total Sales was CHF 23.4 billion
6.4% organic growth
2.3% real internal growth"
France, Switzerland, Germany, Italy and the Iberian region has rise internal growth. The Great Britain region delivered the strong performance, Eastern Europe presented a weaker real internal growth in Czech, Slovak Republics, Russia and positive in Poland and the Ukraine
"Total Sales was CHF 16.5 billion
0% organic growth
-1.5% real internal growth"
Zone Africa, Asia and Oceania:
The organic growth was same in Oceania and Japan and the rest of all emerging regions were improved, Furthermore, China, Philippines, South Asia and Africa has shows the strong real internal growth
"Total Sales CHF 11.7 billion
3.0 real internal growths
5.8% organic growth"
Appendix No-2 for more detail
This report has presents the steady start by giving an outline of company introduction and its brands portfolio, furthermore the in depth explanation of company corporate governance structure has created a good base of understanding what Nestle is all about. Further explanation of the company performance over the last eight month and Growth of the company in an international prospective has pointed out the many of its major functional strategies and the problems associated with Nestle. Further in depth analysis capturing the close picture of company performances and its weaknesses to give accurate understanding of discussion.