Nestle's Past, Present and Future
Maggi, Nescafe, KitKat - these are all household names owned by Nestle. How did Nestlé capture the minds and hearts of Indians? Read on.
News flash: 'Nestle announces stock split in the ratio 1:10’.
What does this mean?
In simple words, a stock split is splitting one stock into multiple smaller stocks.
In this case, every share gets broken down into 10 shares.
This increases the number of Nestlé's shares in the market, meaning higher liquidity.
Since the price of each share comes down, a stock split also helps companies make their shares more affordable for retail investors.
What about existing shareholders?
Well, they receive additional shares in the ratio of the stock split!
For every share of Nestle that an investor holds, they will be getting 10 additional shares.
Good news?
Investors think so.
Nestlé's stock hit an all-time high of Rs. 25,442.75 on 19 December, 2023!
Now, while we're talking about Nestlé, let's dive deep into the origin story of this brand that has been around since forever.
Read on.
Nestlé: The Origin Story
The year is 1866.
In a small Swiss town, Vevey, lived a pharmacist named Henri Nestle.
Fueled by a passion for nutrition and a knack for innovation, Henri developed a simple, yet groundbreaking product:
Infant cereal to combat malnutrition.
Little did he know, this wasn't just food; it was a lifeline.
A lifeline for the very foundation of Nestlé. A lifeline for Nestlé's commitment to ‘Good Food, Good Life’.
Fastforward to 1912, Nestlé Global established a subsidiary in India to enter the Indian market.
In 1961, now that India was independent, Nestlé saw an opportunity to set up a manufacturing arm in India.
This manufacturing plant was the foundation for the giant that Nestlé India is today.
From just one product to over 20 brands, 4 branch offices and 9 manufacturing units across the country, Nestlé has become a household name.
Maggi, KitKat, Munch, Nescafe - these aren't just brands, they are emotions in India.
How exactly did Nestlé capture the minds and hearts of Indians?
Simple: by understanding the Indian palate.
It knew that India isn't just a country; it's a bouquet of cultures, each with its own unique tastes and preferences.
By customising products like Maggi noodles to suit Indian flavours, Nestle didn't just sell a product; it created an experience.
This lip-smacking experience has made Maggi the king of the instant noodles market in India, with 60% market share.
And this experience generates a lot of revenue for the brand - Packaged foods contribute to 32% of the brand's revenue.
Nestle's strategy isn't just about understanding local tastes; it's about being part of the local community.
From sourcing to production - everything is localised.
From dairy products or confectioneries, Nestle made sure it had a 'desi' touch.
To go truly Indian, Nestlé followed a RURBAN Strategy.
It focused on reaching the under-penetrated towns and villages of India.
The vast ocean of FMCG calls for constant innovation and expansion.
Remember when Maggi introduced 'Atta' noodles?
It was an instant hit because Nestle tapped into the health-conscious market.
Their latest launch of Korean Noodles yet again proves the strong pulse they have of the Indian market.
And, why just innovation?
Nestlé also adopted a multiple pricing strategy to appeal to different customers.
Whether you want a KitKat all for yourself, or if you want to share it with your partner, Nestlé has got you covered!
Now, now.
No matter how strong your pricing or brand positioning is, if your product quality is not right, it will never fly off.
Nestle built trust by ensuring its products met high-quality standards.
It was doing great until…
The famous Maggi crisis hit it.
Remember when Maggi got banned in June 2015 because of the allegations of presence of traces of lead in the product?
This was a huge loss for Nestlé. How much?
It lost over Rs. 500 Crores, as it had to destroy 37,000 tonnes of Maggi noodles!
But the company did not lose hope.
It trusted its product and quality standards, and patiently appealed to the Bombay High Court.
It also ran campaigns to rebuild the image of Maggi and regain the trust of customers.
Finally, in November 2015, Maggi was relaunched in the market.
But, in this Maggi crisis, Nestlé saw an opportunity.
An opportunity to expand its product line and diversify its portfolio.
Since then, it has been adding multiple products to the untapped markets in India.
It has also been strengthening its manufacturing base.
In July 2023, Nestlé announced its plan to invest Rs. 4,200 Crores (till 2025) to set up a new manufacturing plant in Odisha.
And, hey.
The predominantly offline company has also entered the D2C market!
All of these well-thought strategies have been reflected in its strong financial performance of Q3 2023:
It clocked net sales of Rs. 5,009 Crores (9.4% growth)
Net profit stood at Rs. 908 Crores
Earnings per Share was Rs. 94.18
FMCG: Tough to Crack?
India's FMCG industry size stands at $56.8 billion in 2022 and is expected to reach $615.87 billion in 2027 (CAGR 27.9%).
Rising urbanization and increase in disposable income are major growth drivers of this industry.
While this industry is growing rapidly, it is equally competitive.
HUL, ITC, Britannia, Dabur, Patanjali, P&G - these are all giants trying to capture large shares of the market.
Why just the biggies?
New age startups and regional brands have also sprung up in this space!
And one brand which is competing with Nestlé is Ching’s Secret.
Yes, the Desi Chinese wala Ching's.
Yes, Ranveer Singh wala Ching's.
If you want a detailed piece of Ching's, you can check it out here.
Now, here's the interesting part.
Nestlé was eyeing to acquire this spicy brand for Rs. 4000 Crore - Rs. 5000 Crore to strengthen its portfolio back in March, 2023.
But, in a turn of events, Tata Consumer is now expected to acquire a controlling stake in Capital Foods (parent company of Ching’s Secret) for Rs. 5,500 Crores!
If this deal goes through, it will pitch Nestlé and Tata as direct competitors!
Is Nestlé ready to take on this battle? Will it continue to dominate the FMCG market?
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