SWOT Case Study - Nestle

Strengths

• Global food producer, located in over 100 countries. Consistently one of the world's largest producers of food products, with sales in the USA in 2008 of $10 billion; sales and earnings in 2008 were better than expected, even in a downturned economy. Global sales in 2008 topped $101 billion.
• Repeatedly ranked as the world's largest bottled water company and have set up facilities to operate water resources in a responsible manner.
• In 2008, Nestlé was named one of "America's Most Admired Food Companies" in Fortune magazine for the twelfth consecutive year.
• Nestlé provides quality brands and products and line extensions that are well-known, top-selling brands including:
• Lean Cuisine, Yoplait, Maggi, Dryer's/Edy's, Haagen-Dazs, Stouffer's, Boost, Dibs, Hot Pockets.
• Chocolate and Candy: Kit Kat, Toll House, Butterfinger, Baby Ruth, Crunch Bar, the Willy Wonka Candy line.
• Pet Products: Purina, Alpo, Cat Chow, Fancy Feast, Friskies, Tidy Cat.
• Drinks: Carnation, Perrier, Nesquik, S. Pellegrino, Nescafe, CoffeeMate, Taster's Choice, Juicy Juice.
• General Mills: subsidiary which makes Betty Crocker, Bisquick, Hamburger Helper, Pillsbury, Old El Paso, cereals, fruit snacks, frozen pizza, canned soups, frozen vegetables, ready-made frozen meals.
• Gerber: baby formula, prepared baby foods, baby cereals, water, juice, yogurt, foods for infants, toddlers and preschoolers.
• Professional brands sold to restaurants, colleges, hotels, and food professionals including Jenny Craig meals, Impact liquid meals for trauma patients, liquid meals for diabetics, and OptiFast weight loss products.
• 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

  • Their LC-1 division was not as successful as they thought it would be in France. In the late 1980s, Dannon entered the market with a health-based yogurt, and become the top selling brand of yogurt; Nestlé's 1994 launch was behind the product life cycle curve in an already mature market and could not compete against a strong, established brand.
  • Growth in their organic food sales division was flat in 2008, even though the industry grew 8.9%.
  • Since 2004 the breakfast cereal industry has been under fire from the FDA and the American Medical Association, both of which say that false claims of "heart healthy" and "lower cholesterol" need to be removed from packaging and advertising. They have also been forced to reduce the amount of sugar in their products, as parent's advocates groups claimed they were contributing to the diabetes epidemic among American children.
  • General Mills is an experienced, established brand and are the market leader in the USA, however, they have been lacking in innovation, have not cashed in on the booming health food craze and have been behind in creating new, niche products, especially in their yogurt division, where Yoplait is the only brand making a profit.
  • In 2008, although their products did not carry the recalled pistachios, several of their ice cream brands, Dryer's, Edy's and Haagen-Dazs, were still plagued with bad PR and loss of sales.

  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 cacao 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. Americans want luxury chocolates, and high-end chocolate is immune to the recession (so far), because it is an inexpensive indulgence.
  • Opened Nestlé Café's in major cities to feature Nestlé products.

  Threats

• Any contamination of the food supply, especially e-coli. Their Toll House brand cookie dough was recalled in March of 2009 because of e-coli. Outbreaks were linked to 28 states and the product had to be recalled globally. Nestlé has yet to find out how this happened, and is still investigating.
• They were affected by the pet food recall in 2007, in which 95 different brands of dog and cat food were recalled due to contamination with rat poison. Also in 2007, FDA learned that certain pet foods were sickening and killing cats and dogs. FDA found contaminants in vegetable proteins imported into the United States from China and used as ingredients in pet food.
• 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 Hershey's, Cadbury-Schweppes (owned by Pepsi), Lindt and Ghirardelli, Kellogg's, Post, Starbucks, Beech-Nut, Quaker, Kraft Foods, Dannon, Del-Monte, Iams, Earth's Best, Heinz, Frito-Lay (owned by Pepsi).
• by Mkt Teachers