Product analysis of Nestle
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Published: Mon, 5 Dec 2016
Nestlé is the largest food company in the world, marketing over 8,500 brands and 30,000 products. It operates nearly 500 factories across 5 continents and employs over 200,000 employees worldwide. As the World Food Company, Nestlé is the provider of the best food for whatever time of day and for whatever time of your life. Nestlé R&D Singapore plays an important role in the development of products for Nestlé Nutrition, with focus on creating products with micronutrient fortification to address deficiencies.
Nestlé has an extensive product mix targeted at many different segments of the market. The chosen product category for in-depth analysis is Nestlé milk products, which is targeted at parents of young children (age 1 – 5) and health conscious adult consumers who desire to retain heart and bone health. In the adult category in specific, the functional milks offer a range of functional benefits, from cholesterol management and heart health to bone health.
A product mix is the set of all products a particular seller offers for sale. A product mix consists of various product lines and has a certain width, length, depth, and consistency. The table below shows the product-mix width and product-line length for Nestlé products in Singapore.
Confec-tionery & Choco-lates
Product Line Length
Growing Up Milk
ALPO Dog Food
Full Cream Milk
Pro Plan Dry Food
Take Home Tubs
Nestle Ice Cream
Sauces & Seasonings
Yang Sheng Le
The width of a product mix refers to how many different product lines the company carries. Nestlé’s range of product lines includes baby foods, milk, cereals, dairy products, confectionery, ice cream and chocolates, culinary foods and pet care products. Nestlé also provides a broad range of nutritional and flavored beverages and offers product line with specific nutritional functions. The length of a product mix refers to the total number of items in the mix. Nestlé had an average product length of 2.8. Within the range of Nestlé’s milk products include growing up milk, full cream, filled milk and adult milk. The depth of a product mix refers to how many variants are offered of each product in the line. For instance, Nestlé adult milk comes in two functional forms (bone and heart health). The consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. Nestlé’s product lines are consistent insofar as they are consumer goods that go through the same distribution channels.
Company can expand its business in four ways: it can add new product lines, thus widening its product mix; it can lengthen each product line; it can add more product variants to each product and deepen its product mix; or it can pursue more product-line consistency. To reach our targeted market, Nestlé can add new product line in the area of elderly health food, thus widening its product mix.
In Singapore, the National Mental Health Survey (NMHS) conducted in 2003 reported a prevalence of dementia among the elderly as 5.2% for > 60 years, 6.0% for > 65 years, and 13.9% for > 75 years. Health Minister Khaw Boon Wan expects the numbers to double by year 2020. According to research, nutritional deficiencies in elderly are one of the factors influencing their cognitive functioning. In the article “Many over-50s not eating properly” (The Straits Times, September 2, 2010), the columnist shared a recent survey results indicating that older Singaporeans are not getting enough nutrition, with only 1 per cent of 421 respondents aged 50 years old and above have a balanced diet that meets the recommendations of the Health Promotion Board (HPB).
Contrary to common belief, dementia is not an inevitable part of the ageing process and preventive and protective factors can help reduce the risk or delay the onset of dementia (Health Promotion Board). The best way to fight dementia is to maintain a good cognitive function and having a healthy and balanced diet is essential. There is a growing need and market for Nestlé to produce brain-healthy functional foods targeted at the segment of the silver market who desire to retain memory, brain health and have a balanced diet. In Singapore, although there are already a number of brain health supplements targeted at the elderly, fortified food products aimed at this group are lacking.
The first reason why Nestlé’s product may be modified to reach the targeted segment is because Nestlé Research Centre (NRC) is internationally renowned for its work in the food and nutritional sciences. For instance, as milk is particularly sensitive to heat, Nestlé developed a soft sterilization of milk that protects the delicate amino acid, lysine and etc in their dairy products. In the article “Brain food” (The Business Times, December 02, 2009), Fernando Gomez-Pinilla, a professor of neurosurgery and physiological science at UCLA Medical School shared his findings on how dietary factors affect brain function. And he emphasized that Omega-3 fatty acids, with DHA are essential for normal brain function, and has been proven to enhance synaptic plasticity. Through Prof Gomez’s exploration, he has proven that folates and antioxidants also helped reduce age-related decline in cognitive function. Presently, Nestlé offers different milk products fortified with iron, zinc, vitamin A and other micronutrients aimed at addressing specific health deficiencies and they have existing product such as NESTLÉ® NAN® infant milk formula that contains DHA and ARA, two important ingredients that support brain development of young children. Nestlé Research teams can work on improving the ingredients used in their existing products and offer milk products fortified with Omega-3 fatty acids, folates and antioxidants aimed at maintaining the cognitive function of the aging population. What is needed is a marketing effort, advertising the new range of products as brain-boosting functional food to the elderly.
Next, Nestlé had distinctive product lines catering to the needs of infant, young children; adults who are concerned with their health; and athletics who wants a performance boost. Nestlé R&D Singapore has always been focusing on creating products with micronutrient fortification to address deficiencies, therefore, with Nestlé’s expertise in the field and food and nutritional sciences, they can aim to develop an additional product line with a range of milk products cater for the management of elderly health, besides, the development of brain healthy fortified food is for the benefit of the aging population in Singapore. In the longer run, Nestlé can also introduce a range of new food products such as elderly snacks, healthy food and drinks and healthier culinary products with a different positioning and target the different segments of the silver market.
Question 2 (18 marks)
In this section, I will move on to discuss how Nestlé currently makes use of the marketing mix concepts of pricing, promotion and distribution channels to reach its key target market for Nestlé adult milk products in specific. Their adult milk products are targeted at health-conscious adult consumers who desire to retain heart and bone health.
Price is the one element of the marketing mix that produces revenue and communicates to the market the company’s intended value positioning of its product or brand. Nestlé’s consumers range from the poorest to the wealthiest, and those seeking for convenience food or specific alternatives with perceived consumer benefits. These offer opportunities for them to provide high quality nutritious products. (Nestle Management Report, 2007). Nestlé has adopted value pricing through winning loyal customers by charging a fairly low price for a high-quality offering. For instance, Nestlé targets the lower income group through their Popularly Positioned Products (PPP) strategy, which focuses on creating items that are both highly nutritious and affordable on a daily basis for low-income consumers. Value pricing involves re-engineering their company’s operations to become a low-cost producer.
Nestlé set strategic price points for their products, considering the fact that those with lower incomes have an even greater need for highly nutritious foods. (Nestle Management Report, 2007). Nestlé had developed product lines rather than single products and introduce price steps, known as their multi-price point strategy, aimed at capturing all market opportunities. In this way, their targeted consumers are able to trade up and down without trading out of Nestlé’s products. An illustration of their multi-price point strategy for a packet of 900g of adult milk within the product line is estimated as follow:
Nestlé also stimulate purchase of their milk products through various promotional pricing. For instance, the Nestlé milk powder promotion at FairPrice offers a redemption of $10 NTUC FairPrice gift vouchers when customer accumulate $100 worth of Nestlé milk powders purchase. The promotion encourages purchase of Nestlé milk products within a specified time. Nestlé also establish special prices in certain events to draw more customers.
Nestlé had an unmatched geographic presence in many markets, including emerging markets. Nestlé has created very close relationships between their brands and their consumers as well as an in-depth understanding of their consumers and an expertise in related trends. This has also enabled Nestlé to develop local management teams, build local manufacturing and R&D and establish local supply-chain initiatives including long-term relationships with suppliers. Internationally, Nestlé’s milk product is available in more than 100 countries throughout the World. (Nestle Management Report, 2007)
Nestlé used intensive distribution strategy by placing their milk products in as many outlets as possible, knowing that their targeted consumer requires a great deal of location convenience. Intensive distribution increases product availability. In Singapore, we can find Nestlé’s milk product in popular outlets like convenience stores, pharmacies, and all leading supermarkets. These places are situated within 10 minutes’ walking distance from consumers’ homes.
Marketing communications is the means by which firms attempt to inform, persuade, and remind consumers about the products and brands that they sell and Nestlé enhance consumer communication with nutritional messaging. The marketing communications mix consists of six major modes of communication: advertising; sales promotion; events and experiences; public relations and publicity; direct marketing; and personal selling. Advertising can be used to build up a long-term image for a product or trigger quick sales. Nestlé employed the used of various media and methods to promote their milk products. Just recently, they started an integrated print/radio ad for Nestlé Nesvita Omega plus Acticol milk, advertising it as Singapore’s 1st and only milk with plant sterols which are shown to lower blood cholesterol. Consumers have been hearing on the radios and seeing in the papers about the benefit of having a lower cholesterol levels associated with consuming Nesvita Omega plus Acticol milk daily.
Nestlé also drew attention to their products by arranging special events. Nestlé held a health exhibition “Nestlé Presents Health and You 2010” which caters for the young and old. They had activities which appealed to all in the family at the event, including free cholesterol and bone density checks by Nestlé Nesvita Omega plus Acticol for the health conscious and health seminars and talks by health professionals, nutritionists and doctors. In addition, Nestlé had a strategic partnership with Singapore Heart Foundation (SHF) known as “Love Your Heart”. The partnership allows Nestlé to carry the SHF logo on the Nestlé Omega Plus range, endorsing it as the preferred adult milk choice as it has the added benefit of heart health as well as calcium for bone health. Nestlé also promotes heart health through the media, such as the “Cholesterol Challenge” in which the public are invited to lower their bad cholesterol. By becoming part of a special and more personally relevant moment in consumers’ lives, Nestlé’s involvement with events broadened and deepened the relationship with their target market.
Question 3 (28 marks)
The brand name for our new product is “Nestlé MindFit Silver”, a fortified milk powder offering benefits as follow: maintain the cognitive function of elderly by slowing down and stabilizing age-related brain decline and provide specific nutritional food value for a balanced diet. Our target segment of the silver market for the Nestlé MindFit Silver is elderly who desire to retain memory, brain health and have a balanced diet. This segment can be described demographically by age (50-55 and older). Nestlé strategy is based on a positioning of product differentiation.
Product is the first and most important element of the marketing mix. Packaging is a major styling weapon that provides the buyer’s first encounter with the product and is capable of either turning the buyer on or off (Kotler et al, 2009). Packaging is defined as all the activities of designing and producing the container for a product. We will introduce elegant gold and silver-trim packaging container as we wanted a sophisticated-looking package that reflects the quality of Nestlé MindFit Silver. A good packaging helps to identify our brand and convey descriptive and persuasive information to our target consumers. Functionally, structural design is crucial. We make out that resealability, freshness and easy-to-open and close packaging are of huge importance to the elderly consumers, and has incorporated these packaging innovations in our new product. The label on our package will carry our brand name, logo and the Nestlé nutritional compass that provides our consumers with tips and nutritional facts that guide them towards informed choices about their diet. We will also have a picture of a sharp-looking senior ambassador in his 50s on the product label; this makes it easier for the elderly to distinguish our product from other brands on the shelves.
Pricing decisions must be consistent with the firm’s marketing strategy, target markets, and brand positioning. The Nestlé MindFit Silver will be introduced at $18 estimated retail price per 400g tin and we will use several pricing techniques to stimulate purchases. In the first 6 months of product launch, we will offer a cash rebates of $4 to draw more first-time customers. We expect to come up with more variations of the Nestlé MindFit Silver, such as cereals, infusion of more flavorings and priced them differently to meet the needs of more consumers. We will also establish special prices in conjunction with HPB’s dementia campaign to draw more customers.
Marketing channels are sets of interdependent organizations involved in the process of making a product available for use or consumption. Our channel strategy is to use selective distribution, marketing Nestlé MindFit Silver through Hospital pharmacies, selected Unity Pharmacies, Guardian and Watsons stores, selected NTUC Fairprice, and selected Cold Storage outlets. By doing so, we can gain adequate market coverage with more control and less cost than intensive distribution. As we are targeting the elderly consumers, we implemented home delivery as an additional point of access. This is because we understand that some elderly has difficulty going out to buy groceries due to health problems. Since the awareness of nutrition service for cognitive health is our objective, other channels of distribution could include local broadcast media or public forums at community centre. Place should take into account the convenience of the product to the consumer and where the consumer can obtain it most readily. In support of channel partners, we will provide full-color posters displaying the picture and key benefits of Nestlé MindFit Silver. Our training staff will work with retail sales personnel to explain the benefit of the product. Finally, we plan to arrange special payment terms for retailers that place volume orders with us.
Marketers need to creatively employ multiple forms of communications to effectively reach and influence target markets. The marketing communications mix consists of six major modes of communication: advertising; sales promotion; events and experiences; public relations and publicity; direct marketing; and personal selling. We will make use of advertising; sales promotion; events and experiences; public relations and publicity to market Nestlé MindFit Silver to the targeted segment of the silver market.
We will start an integrated television, print and radio ads targeting the elderly. TV advertising is an effective means of vividly demonstrating our product attributes and persuasively explaining their corresponding benefits to the elderly. Our TV ad will show a smart looking elderly man sharing with his friends about the benefits of Nestlé MindFit Silver, and how the milk product help him to stay sharp and alert. This is a creative way to reinforce the message that Nestlé MindFit Silver help maintain the cognitive functions in elderly. Out print ads on newspaper and magazines can provide much more product details and can also effectively communicate user and usage imagery. Our radio ad will add a tag line promoting the Nestlé MindFit Silver as a brain healthy food for the aged parents.
As the multimedia advertising efforts continues, we will also distribute new point-of-purchase displays to support our retailers and increase the number of spontaneous buying decision. We will add consumer sales promotions such as distributing samples to elderly at the store and we will organize contest offering prizes such as cash and holiday trips as a result of purchasing our products within the specified time period.
We will also participate in the 50plus Expo, a consumer fair for the elderly organized by the Council for Third Age. The expo is targeted for those aged 50 and above and is devoted to shopping, performances, talks, demonstrations and more. We will educate consumers on the benefits of drinking Nestlé MindFit Silver as a daily healthy beverage and at the same time, generate channel support for our product launch.
Nestlé has been actively involved in sponsorships of a variety of causes. A sponsored event must meet the marketing objectives and communication strategy, and the audience delivered by the event must match the target market of our product. Nestlé will sponsor the Health Promotion Board (HPB)’s Dementia Awareness Campaign. To raise awareness of dementia, HPB has air on Channel 8 and Suria a short film on dementia that is being directed by local director, Royston Tan. Other activities in conjunction with the campaign include informative talks held at Tan Tock Seng Hospital, shopping centre, hotels, and public library. Nestlé can strategically identify itself at the events using banners and signs advertising Nestlé MindFit Silver as the top brain food choice for active seniors. Nestlé will also provide free product samples at the events to generate buying crowds.
Social network such as Facebook has become an important force in marketing. A key aspect of social networks is word of mouth. Consumers talk about dozens of brands each day and Facebook offer exposure and the targeted market are more likely to spread the brand message. IT classes have opened up a whole new world for the elderly who learn how to surf internet and use Facebook and these elderly are becoming more internet savvy and Facebook is a popular social network among them. To reach our targeted market, we will set up a Facebook page for Nestlé MindFit Silver, and will post updates on our latest promotions, contests, events and generate thread discussion. Our aim is that more elderly can be linked to our Facebook page, to learn more about our products, and share their feedback on our product.
We believed that an integrated marketing communications (IMC) can produce stronger message consistency and greater sales impacts as it forces management to think about every way the customers comes in contact with our product. IMC should improve our company’s ability to reach the right customers with the right messages at the right time and in the right place. (Kotler et al, 2009).
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