Market and Company Analysis of Nestle

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Nestlé, the world’s leading food company, produces nutritious food and is conscious of the importance of informing the consumer about the link between nutrition and health. A healthy diet contributes significantly to the overall quality of a good life.

2.2 Nestle Ghana LTD

**Note: Please REPHRASE and COMBINE this section; it’s taken WORD BY WORD from the available source.

Source 1: Marketing Information and Research Task 1and 3.pdf

Source 2: Nestle Pure Life Drinkng Water.pdf

Nestle Ghana limited is a private company operating in Ghana. Its activities include condensed and evaporated dairy products, beverages, coffee, tea, and chocolate and confectionary. The company employs four hundred and seventy two work forces. Nestle started business in Ghana in 1957 under the trading name of Nestle products Ghana limited with the importation of nestle products such as milk and chocolate. In 1968, it was incorporated as Food Specialties (Ghana) limited to manufacture and market locally well known Nestle brands. The company became nestle Ghana limited in 1987. In 1971 the production of two products, Ideal Milk and milo started at the factory in Tema, the port city. The factory has since been further developed and now also produces carnation milk, Chocomilo, Chocolim, Cerelac, Cerevita and Nescafe 3 in 1. These products are not only produced for Ghana but also exported across West Africa. In 2003, Nestle Ghana limited invested in a new warehouse named the Central Distribution Centre, located next to the factory in Tema. The company runs sales offices with warehouse in Kumasi, Takoradi, Koforidua and tamale, all in Ghana. The business activity of Nestle Ghana limited is a direct contribution to the economy of Ghana. For all these and other endeavours, nestle Ghana limited has been recognized by the Government of Ghana and other bodies as a responsible corporate citizen.

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Nestlé Ghana Limited started business in Ghana in 1957, with the importation of Nestlé products such as milk and chocolates. The company built its factory at Tema in 1971 and started the production of IDEAL Milk and MILO. In 1987 Food Specialties Ghana Limited became Nestlé Ghana Limited. Since then, the product portfolio has increased with the additional production of CARNATION, CARNATION TEA CREAMER, CHOCOLIM, CHOCOMILO, CERELAC (Maize, Wheat, Wheat Bean, 3 Fruits, Honey, Rice and Banana), NESCAFÄ’ Crem 3 in 1 and NESQUIK, which is produced for import. Other products like NESCAFÄ’ and MAGGI are imported from Côte d’Iviore. Nestlé Ghana Limited continues to thrive in business because great importance is placed on value creation for our stakeholders and customers. Ensuring long term profitable growth and sustainability has been achieved by building on the company’s strengths and balancing the portfolio on three (3) sound pillars: milk, cocoa beverage, and culinary. As a member of the Central and West Africa region (CWAR), Nestlé Ghana aims to be an efficient and competitive inter-company supplier: using and contributing to CWAR synergies by becoming a sound manufacturing base for Ghanaian exports like cocoa beverage; aiming to increase Nestlé Ghana exports from ten

percent (10%) to thirty percent (30%) of annual turnover. To achieve this, Nestlé Ghana is diligently improving processes through capacity usage and working capital optimization, such as the introduction of environmentally friendly equipment, and upgrading information systems, with the introduction of GLOBE (SAP). The advent of these changes enhances and enforces Nestlé Ghana’s determination develop Nestlé employees.

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In 2003, Nestlé Ghana Ltd invested in a new warehouse, the Central Distribution centre, located next to the factory in Tema. The company also runs sales offices with warehouses in Kumasi, Takoradi, Koforidua and Tamale. The business activity of Nestlé Ghana Ltd is a direct contribution to the Ghanaian economy. For all these and other endeavours, Nestlé Ghana Ltd has been recognized by Government and other bodies as a responsible citizen.

Since its establishment, Nestle Ghana limited has significantly stimulated the Ghanaian economy with a dynamic, well trained dedicated work force, manufacturing and marketing well-known brands such as:

Ideal Full Cream Evaporated Milk, Carnation Filled Milk, Carnation Tea Creamer, Milo, Chocolim, Chocomilo Cerevita porridge, Cerelac Maize Milk And Cereal Wheat / Milk. Nestle Ghana also imports and distributes brands such as: NIDO milk powder, lactogen infant formula, NAN infant formula, Nescafe soluble Coffee, and Maggi Bouillons and cold sauces.

Nestle Ghana Ltd. is now seeking to capitalize on the goodwill enjoyed by it brand chocolim, by introducing chocoless, a brand extension, aimed at generating growth for the company.

 

ANALYSIS

Industry Analysis

Industry of Cocoa in Ghana

Cocoa beans were first introduced to Ghana in 1878 by Tettah Quarshie. Thereafter, the cultivation of cocoa increased steadily until Ghana became the world’s largest cocoa producer, supplying more than one-third of world production by the mid-1960s. By the early 1980s, production was less than half that of two decades before; market conditions were aggravated by a drop of nearly 75% in world cocoa prices between 1977 and 1982. In 1983/84, cocoa production totaled 158,000 tons, the lowest since independence; by 1999, production had rebounded to about 409,000 tons (second highest after Côte d’Ivoire). The Ghana Cocoa Marketing Board purchases and (at least in theory) exports the entire cocoa crop, as well as coffee and shea nuts. Cocoa smuggling was made punishable by death in 1982.

[http://www.nationsencyclopedia.com/Africa/Ghana-AGRICULTURE.html#ixzz1DlAhbER2]

Since the introduction of democracy in Ghana in 1992, the cocoa beverage industry has shown considerable growth. Total number of players is estimated around five. Difficulties in discovering this number arise due to increasing of imported product by unauthorized company. The advent of a democratic government has led to a more business friendly environment and privatization policies have led to an increase in the size of the private sector in the country.

Leading Businesses in the Industry

Cocoa beverage industry in Ghana is highly fragmented, with the presence of multinationals, domestic and foreign companies. Except in categories where domestic players are protected by legislation, multinationals usually dominate. Notable players include Cadbury (Ghana), Cocoa Processing Company (CPC) and NABB Brothers. It is common for large international companies to form alliances with Ghanaian companies, to repackage and/or market their products in Ghana. This lowers the risk of market entry, as well as enabling the international company to benefit from the existing marketing and distribution capabilities of the Ghanaian company.

Factors That Affect Growth

Economically, Ghana was in the lower tier of developing countries and classified as a least developed country (LCD) by international development agencies because its per capita annual income was US$400 [textbook].

A positive outlook is forecast for consumer goods in Ghana. One of the main contributory factors will be the country’s political and economic stability. Higher disposable incomes and increasing company advertising are expected to boost value growth. The average Ghanaian will spend more on packaged food, especially on items previously regarded as luxuries. Value growth will also benefit from the increasing sophistication of Ghanaian consumers and improving product quality. Food items that are fast and convenient, such as pasta and noodles, will continue to post dynamic value growth.

The sector faces many challenges caused by the environment in Ghana such as poor infrastructure, poor standards of education, and high levels of corruption and a generally low level of disposable income of the population. There is little manufacturing for export, but a significant activity exists in the manufacture of fast moving consumer goods aimed at the domestic market. In recent years, multinational corporations have increased their investment in physical plants, information technology and staff training with a view to improving their operational performance.

The consumer goods sector is a major part of the manufacturing sector in Ghana. And like all other manufacturers, the consumer goods industry is characterized by low valued added production. What we see are processors who process imported raw materials into finished products, with very little value added. Multinational companies operating in this industry hardly add value because they import concentrates from their parent companies, which they convert into finished products with minimal value added.

The industry is dominated by wholesalers and distributors. In fact, distributors and wholesalers account for over 50% of total sales within the industry. Their dominance is as a result of fragmentation nature at the retail end of the market. The retail end lacked adequate supermarket and glossary stores. They mainly comprise of roadside kiosks, stores, and small sized restaurants, whose sales volumes are generally low. Distribution to the retail market is hampered by huge investments required for delivery trucks general bad road network.

Marketing Strategy

-What types of marketing strategies are prevalent within the industry?

-Determine current operational/management trend within the industry?

Neslte Creating Shared Value (Source: Nestlé Creating SharedValue Report 2009.pdf)

care about the people

water treatment

Water treatment

Because good water quality in the areas surrounding our plants has direct benefits for our business, society and the environment all our water is treated in wastewater treatment plants. Our preference is to use municipal wastewater plants to ensure we return only cleaned water back into the environment, but where these are insufficient, we invest in our own on-site facilities (approximately 292 to date, including our latest in Tema, Ghana). We remove 97% of the organic load of the water leaving our factories before it is returned to the environment. In 2009, we discharged 91.34 million m3 of water, a decrease of more than 5% on 2008, with an average level of organic load of 91 mg COD/l (Chemical Oxygen Demand per litre). During 2009, we have reviewed this KPI and have determined that figures for previous years were underreported.

 

Competitor Analysis

Nestle Ghana was facing a direct competition and indirect competition. Their direct competitors are Cadburry Schweppes Ghana Ltd, NABB Brothers, Cocoa Processing Company, Allied Cocoa Products Ltd and Kings Cocoa Processing Company Ltd (KCPCL). All those competitors are manufactured and marketed cocoa products. Cadburry and NABB Brothers are multinational companies which have wide experience in international marketing. The rest are local companies which plant cocoa and manufactured cocoa products for Ghanaian.

Multinational companies which enter Ghana earlier than Nestle is Cadburry Schweppes Ghana Ltd entered Ghana on 1910 for its own benefit. It was 100% owned by Cadburry Schweppes (UK) with 120 employees. NABB brothers is imported cocoa products to Ghana, there are the leading distributor of supermarket products.

The earliest local company which produced cocoas product is Cocoa Processing Company Limited established in 1965 and situated in the picturesque port city of Tema in Ghana. The company comprises three factories (2 Cocoa Factories and a Confectionery Factory). Kings Cocoa Processing Company Limited is a limited liability company incorporated in Ghana on November 30, 1981. The shares of the company are publicly traded on the Ghana Stock Exchange. Allied Cocoa Products Ltd was serving Ghana since 1998. Kings Cocoa Processing Company Limited is a private limited liability company which was incorporated in 2000 to take over the cocoa processing business of the parent company, Luki Investments Limited, which has been trading since 1992.

Furthermore, Nestle Ghana was facing indirect competition as well. In Ghana, Milo and Chocolim were marketed for cocoa products by Nestle. They have to compete with other products which are not cocoa products because Ghana also planted tea, coffee and else and can be manufactured into variety products. Cocoa might be chosen by children and teenagers but not elders.

Competition by Product

Cocoa is the largest cash crops in Ghana since 19th century. However, the earliest local company serving cocoa products for citizen is Cocoa Processing Products in 1965. Cadburry Schweppes entered Ghana on 1910 while Nestle started in Ghana on 1957. This time frame show us that even though Ghana have plant cocoas for a long time but they only manage to produce it on 1965 because they are classified as a least developing country (LDC). Their products are chocolate drink and Golden Tree chocolate bars.

The Cocoa beverage market is divided into three categories based on the product: The Premium Segment, Mass Market and Institutional Market. Nestle had a strong market in Premium and Mass Market segment. The Institutional Market is for products that contain basic unsweetened cocoa powder supplied to school, hospitals, the armed forces, and so on. Nestle pulverized cocoa drink consisted of Milo and Chocolim. The major brand Nestle which manufactured Milo was the leader in the premium category, while state owned Cocoa Processing Company manufactured Golden Tree Vitaco was the strongest in the Institutional Company.

As we can se here, all of the companies were marketed cocoas products. Bournvita and Richoco which manufactured by Cadburry Schweppes Ghana Ltd, imported Ovaltine which marketed by NABB Brothers, Golden Tree Vitaco Instant Drinking Chocolate which made by Cocoa Processing Company, Broma which made by Allied Cocoa Products Ltd and Kings Cocoa Processing Company Ltd (KCPCL). All those competitors are manufactured and marketed cocoa products.

 

Competition by Price

Ghana has a long history of government-controlled prices for consumer goods and people were quiet sensitive to price changes and were said to have long-term negative perceptions of companies that were perceived to engage in price gouging. These happened because Ghana was in the lower tier of developing countries and classified as a least developed country (LDC) by international development agencies because its per capita annual income was US$400. Nestle (Ghana) needs to develop products that are affordable to the common people because they are dealing with a developing country which has a  low per capita income of US$400. Nestle perceived better quality products were sold at premium of 5% to 10% over competitors. The products were becoming less affordable with waning real incomes. There was also increasing price pressure from imports that were flooding the market as a result of import liberalization.

People in developing countries look for affordable products and do not pay attention to the eminence of the products thereby Nestle (Ghana) should not have its products above the average price of similar products in the market. Thus, Nestle (Ghana) should make its products more affordable to the common people. The disadvantage for Nestle (Ghana) is the external economic environment was increasingly hostile and risky with the rapid increases in inflations; high interest rates and the high level of currency instability were leading them to increase the prices.

Competition by Promotion

Nestle also operated its own sales outlet and largely distributed through supermarkets and departments. Nestle had 100 regular distributors nationwide and the biggest distributor was Unilever s G.B. Ollivant subsidiary. Nestle used an amalgamation of media advertising and sales promotions targeted at the youth for Milo. The company sponsored highly popular youth soccer leagues, sponsored tennis tournaments and marathon race for all ages. Sales promotion technique of wet sampling (free drinks) was intended at promoting the sales. Media advertising promoted the themes of good health, growing up, and success as closely related and linked to drinking Milo. Nestle s strategy in Ghana was to ensure high awareness of its brands, widespread distribution and quality of its products which helped trounce its competitors in the cocoa beverage market.

The statistics shows that only 35.8% of the population of Ghana lives in urban areas, the rest 64.2% of the population lives in rural areas where there are low levels of consumer durable ownership such as telephone, television, house, radio and low circulation of print media. Such setbacks in rural areas mean that mass promotion was viable primarily in the urban areas. The main drawback is that companies have to use large investment in promotion of product into the rural areas to exploit 64.2% of the population. As an alternative of spending 150 million cedis (about US$150,800) on sales promotions in urban areas on non media promotion of 60% and 40% covered media expenditure, Nestle can utilize the investment to aggressively promote the product in rural areas. It will help Nestle (Ghana) to venture into the majority of the population and take control of the market from both sides.

Competition by Market share

Nestle pulverized cocoa drink consisted of Milo and Chocolim. The two products were quite similar with sixty percent of the company s powdered sales from Milo and forty percent from Chocolim. Chocolim was aimed at rural areas and low-end urban market while Milo was the premier brand and was targeted to the high-end of the market.

Nestle brands were sold at premiums of 5% to 10% over competitors because if it’s perceived better quality in the market. The Cocoa beverage market was divided into three segments: Premium Segment, Mass Market and Institutional Market. Nestle managers estimated their share of 80% in the cocoa beverage market; other observers believed Nestle share was closer to 55%.

Major competitors for Nestle were Bournvita and Richoco, manufactured by Cadbury (Ghana) with an estimated 20% to 40% market share. Cadbury (Ghana) was 100% owned by Cadbury Schweppes (U.K) and had 120 employees. Another entrant, though on a much smaller scale, was state-owned Cocoa Processing Company (CPC) which made Golden Tree Vitaco Instant Drinking Chocolate. In the institutional market CPC was the strongest market. An additional category of competition came from imports, the most prominent of which was Ovaltine, marketed by NABB Brothers, a leading distributor of supermarket products. Milo was the leader in the premium category, while Golden Tree was the strongest in the Institutional Market. Richoco was believed to lead Chocolim by about 5% to 10% market share in the mass market.

http://www.goldentreeghana.com/thecompany.html

http://www.alibaba.com/member/lumor/aboutus.html

http://www.scn.org/rdi/kw-coc.htm

http://business.everythinghana.com/index.php?option=com_mtree&task=viewlink&link_id=48&Itemid=26

http://en.wikipedia.org/wiki/List_of_bean-to-bar_chocolate_manufacturers

http://alliedcocoa.com/index.asp

 

Definition of Population growth rate: The average annual percent change in the population, resulting from a surplus (or deficit) of births over deaths and the balance of migrants entering and leaving a country. The rate may be positive or negative. The growth rate is a factor in determining how great a burden would be imposed on a country by the changing needs of its people for infrastructure (e.g., schools, hospitals, housing, roads), resources (e.g., food, water, electricity), and jobs. Rapid population growth can be seen as threatening by neighboring countries.

SWOT Analysis

Strengths

Global food producer, located in over 100 countries. Consistently one of the world’s largest producers of food products, Global sales in 2008 topped $101 billion.

Nestlé provides quality brands and products and line extensions that are well-known, top-selling brands.

Successful due in part to their unquestionable ability to keep major brands consistently in the forefront of consumer’s minds (and in their shopping carts) by renovating existing product lines, keeping major brands from slipping into saturation/decline and having superior access to distribution channels.

Weaknesses

Growth in their organic food sales division was flat in 2008, even though the industry grew 8.9%.

Nestle Ghana lack of rural market promotion

Products are not affordable by common people

Opportunities

In today’s health conscious societies, they can introduce more health-based products, and because they are a market leader, they would likely be more successful.

Provide allergen free food items, such as gluten free and peanut free.

They launched a new premium line of higher cocoa content chocolates dubbed Nestlé Treasures Gold, in order to cash in on the “recession economy” in which consumers cut back on luxury goods, but regularly indulge in candy and chocolate.

Opened Nestlé Café’s in major cities to feature Nestlé products.

Nestle strategy in Ghana was to ensure high awareness of its brands, widespread distribution and quality of its products which helps trounce its competitors in the cocoa beverage market with its theme of good health, growing up and success as closely related to its products.

Expand to Institutional Market

Nestle (Ghana) needs to develop products that are affordable to the common people because they are dealing with a developing country which has a low per capita income of US$400.

Threats

Any contamination of the food supply, especially e-coli.

Raw chocolate ingredient prices are soaring; dairy costs alone rose 50% in 2008, this cuts heavily into their profit margins and often gets passed on to consumers, by shrinking the packaging in a way that is almost unnoticeable-therefore the consumer is paying the same prices for less product.

They have major competitors, like Cadburry Schweppes Ghana Ltd, NABB Brothers, Cocoa Processing Company, Allied Cocoa Products Ltd and Kings Cocoa Processing Company Ltd (KCPCL)

The external economic environment was increasingly hostile and risky with the rapid increases in inflations; high interest rates and the high level of currency instability were leading them to increase the prices.

RECOMMENDATIONS

We would suggest Nestlé (Ghana) should make products affordable to the common people. By developing Nestlé (Ghana) products that are affordable to the common they can reach majority of the population because they are dealing with a developing country which has a low per capita income of US$400. Nestlé’s perceived better quality products can help it market in rural areas if the product is affordable. It will help Nestlé (Ghana) also exploit 64.2% of the rural population and take control of market from both the sides. It will also help Nestlé expand into new market segments like the Institutional Marketing. People in developing countries look for affordable products and don’t pay attention to the eminence of the products thereby Nestlé (Ghana) should not have its products above the average price of similar products in the market. Nestlé (Ghana) can make maximum profits from a developing country like Ghana and exploit to every side of the population, urban and rural.

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