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Nestle SWOT analysis

Nestle SWOT 2024 | SWOT Analysis of Nestle

Company: Nestle AG
CEO: Ulf Mark Schneider
Year founded: 1905
Headquarter: Vevey, Switzerland
Number of Employees (FY21): 276,000
Public or Private: Public
Ticker Symbol: NESN | NSRGY
Market Cap (Jul 2022): $337.86 Billion
Annual Revenue (FY21): $ 87.47 Billion 
Profit | Net income (FY21): $16.91 Billion

Products & Services: Ambient Dairy | Chilled Dairy | Coffee | Bottled Water | Juices | Culinary and Foods | Confectionary | Baby Food | Breakfast Cereals
Competitors: Mars | Mondelez | Hershey | Ferrero | Godiva | Pepsi co | Lindt | Kelloggs

Fun Fact:

Did you know that Nestle is one of the largest food companies in the world that sells its product in 186 countries ?

An Overview of Nestle

Founded in 1905 as a result of a merger of Anglo-Swiss Milk Company, Nestle was first formed by Henri Nestlé in 1866. Nestle became the worlds’ largest Swiss packaged food company in a short span of time. With more than 150 years of stability in the market, Nestle has marked its strong position as top nutrition, health, and Wellness Company. Ulf Mark Schneider currently holds the position of CEO at Nestle.

Whether its dairy products, chocolates or juices, Nestle is always there in our everyday purchases. It’s “Good Food, Good Life” slogan has served it right, touching millions of people worldwide, both physically and literally.

It makes more than $1.1 billion of revenues a single day. Now you can imagine how big this company really is!

Find out more interesting facts about Nestle in this article and get some insights about the company through its SWOT analysis.

Key facts about Nestle
Key facts about Nestle

SWOT Analysis of Nestle

The following is the SWOT analysis of Nestle:

Nestle’s Strengths

1. Largest Food Company

With a market capitalization of $330+ Billion, Nestle has been one of the largest food companies in the world with the sales of its Hot Pockets, Stouffer’s, DiGiorno, and Nespresso etc. 

2. Reputed brand name

Nestle is the most renowned brand in the world. It has developed a respected reputation in the food and beverages sector offering high-quality products for everyday use across the globe.

3. Brand valuation

Nestle is well positioned for growth. In 2021, Nestle ranked at #62 position by Interbrand – with a brand value of $10.6 billion, moved up 1 place compared with 2020. [1]

Nestle is preceded by 

  • #28 – Pepsi (Brand value: $19.4 billion) 
  • #51 – Starbucks (Brand value: $13.0 billion)
  • #65 – Danoe (Brand value: $9.8 billion) 
  • #72 – Kellogg’s (Brand value $8.6 billion)

4. Highly diversified portfolio

Nestle owns more than 2000 brands globally and renovated over 8000 products. It is one of the worlds’ biggest companies with the broadest and diverse product portfolio.

Nestle divides its products into 7 different categories:

  • Powdered and Liquid Beverages—this is the largest segment of Nestle and represents about 28% of total revenue. This segment sells soluble coffee and other beverages such as tea and chocolate powder. Signature brands include Nescafe, Nespresso, Starbucks coffee (license deal), Blue Bottle Coffee, Milo, and Nestea.
Image source: Nestle
  • Petcare – second largest segment of Nestle and represents about 18% of total revenue. This segment sells pet food & toy brands Purina, Lily’s Kitchen, Tails, and Merrick.
Image source: Nestle
  • Nutrition and Health Science – represents about 15% of total revenue. This segment sells products such as vitamins, minerals and supplements that help to promote health and wellness. Signature brands include Illuma, Gerber, Nestum, Cerelac, Beba, Lactogen, Garden of Life, Pure, and Vital Proteins.
Image source: Nestle
  • Prepared dishes and cooking aids – represents 14% of total revenue. This segment sells frozen food, chilled prepared food, culinary and cooking aids. Signature brands include Maggi, Original Waggner, Lean Cuisine, Chef, Sweet Earth and Freshly.
Image source: Nestle
  • Milk products and ice cream – represents 12% of total revenue. This segment sells milk products and ice cream products under the brand names of Nido, Nesvita, Carnation, Lattiere, Coffee Mate, Hagen Dazs, and Movenpick.
Image source: Nestle
  • Confectionery – represents 9% of total revenue. This segment sells chocolate, sugar, candies, snacks and biscuits. Signature brands include KitKat, Cailler, and Garoto.
Image source: Nestle
  • Water products -represents 5% of total revenue. Signature brands include Pure Life, S.Pellegrino, Vittel and Perrier.
Image source: Nestle

Nestle - Revenue by product segments

Segments Revenue (CHF billion) % Share
Powdered and Liquid Beverages 24 28%
PetCare 16 18%
Nutrition and Health Science 13 15%
Prepared dishes and cooking aids 12 14%
Milk products and Ice cream 11 12%
Confectionery 8 9%
Water 4 5%
Total 87 100%

5. Global presence

Nestle has a strong global presence, and its products are sold in almost everywhere in the world. Nestle sells its products in 186 countries Instead of relying on a few markets, it has captured the sizeable market in a lot of developed and developing countries to earn most of its revenue. [2]

  • Americas is Nestle’s largest market and represents about 44.9% of total sales. The United States and Canada account for 70% of sales in this region, while Latin America and the Caribbean account for the other 30%.
  • Europe, Middle East & North Africa (EMENA) is the second largest market and accounts for about 29.6% of total revenue. 64% of regional revenues are from Western Europe, 18% are from Eastern and Central Europe, and 18% are from the Middle East and North Africa.
  • Asia, Oceania, and sub-Saharan Africa (AOA) represent the rest 25.5% of its total revenue of Nestle. ASEAN markets (The Association of Southeast Asian Nations) account for 34% of regional sales, Oceania and Japan account for 15% of regional sales, Other Asian markets account for 39% of regional sales, and Sub-Saharan Africa accounts for 12% of regional sales.

Looking at individual countries, the United States is the largest market for Nestle and represents about 30% of total revenue, followed by the Greater China Region (#2 largest market, representing about 6% of total revenue), France (#3 largest market, represents about 4% of total revenue), United Kingdom (#4 largest market, represents about 4% of total revenue), and Mexico (#5 largest market, representing about 3% of total revenue).

Nestle - Revenue by Regions

Regions Revenue (CHF billion) % Share
Americas 39 45%
Europe, Middle East and North Africa (EMENA) 26 30%
Asia, Oceania and sub-Saharan Africa (AOA) 22 25%
Total 87 100%

6. World’s largest corporation

According to the Forbes Global 2000, Nestle is among the world’s largest corporations and is ranked at 46th position in 2022 list.[3]

7. Health focused Breakfast

The world’s leading food conglomerate, Nestle, has reduced the amount of sugars (by 25%) used to produce its beloved Carnation Breakfast Essentials. Moreover, the company is also incorporating a completely new and environment-friendly paper packaging for the product line to enhance its sustainability.

The company is undoubtedly checking all the right boxes when it comes to things most important for shoppers. Plus, it’s also a fact that a lot of these shoppers have grown up enjoying the Carnation Breakfast Essentials line of products and want their kids to enjoy them too. [4]

8. License deal with Starbucks & strong relationship with other brands

Nestle has entered into a perpetual license deal with Starbucks to market its products globally. The deal strengthens Nestle’s coffee portfolio and provides Starbucks an opportunity to use Nestle’s network for global expansion. In addition, Nestle has well-established relationships with other trusted and powerful brands like Colgate Palmolive, Coca Cola, General Mills, and L’Oréal. 

9. Efficient R&D system

Nestle has the world’s largest food and nutrition research organization with 21 R&D centers Its research and development capability is one of its key competitive advantages.

There are more than 5000 employees involved in R&D operations. Recently, Nestle expanded its operations in the Greater China region to 3 R&D centers and 4 product innovation centers.[5]

10. Environmental sustainability practices

Nestle puts substantial efforts in environmental sustainability practices and take innovative initiatives in improving its quality of products. It optimizes advanced solutions to reduce waste, water usage, non-renewable energy use, and packaging material usage.

The company pledged to net zero greenhouse gas emissions by 2050. Also, deforestation free supply chain and aims to cut virgin plastics by one-third (by 2025). [6]

11. Large distribution system

Nestle owns an extensive and diversified distribution system that is not only penetrated in urban areas but also rural regions. It has adapted local distribution methods and decentralized approach to run the business efficiently in respective countries. Nestle has strong relationships with suppliers, retailers, vendors, and distributors.

Nestle’s Weaknesses

1. Increase in prices

Nestle has increased prices by 6.5% on a certain category of their consumer goods. The price increase is due to an increase in raw material and transportation costs, supply chain constraints, and an overall inflationary environment.

2. Span of control and organizational structure

Nestlé is organized in a matrix structure. That means a large number of brands are under the same umbrella group which makes it somewhat challenging to manage a large number of individual brands, which can often result in discord and conflict of interest.

3. Water controversy

Nestle was accused of pumping millions of liters of water from the Canada reserve, where residents are deprived of drinking water.

4. Social criticisms

Nestle has become a target of media attention many times. The claim to privatize water, misleading labeling, and a lawsuit for chocolate making using child and slave labor are some of the examples that have to weaken its market reputation.

5. Maggi Noodles controversy

In 2017, Nestle failed to clear a laboratory test in India. This created a publicity hype as people boycotted Nestle, leading to the loss of 80% of market share in the country. Nestle claimed ‘No added MSG in the Noodles packets. However, 1000 times more lead was found in the product after testing.

6. Racially Insensitive Product Names

Nestle has been criticized for perpetuating racism using racially insensitive names on its products. In Australia, Nestle has been under pressure to stop advancing racism with its sweets named Red Skins and Chicos and recently announced that it will change the name of two confectionery products. [7]

7. Unhealthy Products

Nestle’s history consists of a long list of products that threatened consumers, such as China Milk Scandal and tainted cookie dough. Consumers distrust companies that have sold unhealthy products in the past. [8]

Nestle’s Opportunities

1. Venturing small food start-ups

Nestle has a fantastic opportunity to grow the number of small food start-ups under its popular brand name. Nestle can also collaborate with the new start-ups to promote its brand name.

2. Online shopping

Nestle has a remarkable opportunity to boost its e-commerce sites and online shopping platform. A very few CPGs are offering online services to make the shopping experience more comfortable and pleasant. Although, Nestle has its online stores in a few countries, expanding its online services to more areas will prove a rewarding decision for the company.

3. Market penetration for breakfast cereals

Nestlé’s cereals and oats market have shown fast growth in recent years. Thus, penetrating this market more would be highly lucrative for the company.

4. Expanding ready-to-drink tea and coffee market

The demand for tea and coffee is continuously on the rise, rendering a profitable opportunity for Nestle to groom this market more.

5. Partnerships

Strategic alliances with other food and beverage giants are also a great opportunity for the company to increase its revenues and profits.

6. Authentic labeling

Nestle has already been criticized for giving misleading nutritional information on its labels. So, there’s an opportunity to improve its practices by giving trustworthy information and accurately labeling its products.

7. Expand through Acquisitions

In 2019, Nestle offloaded several low-performing brands like Herta Charcuterie and is switching to acquisitions. The company has acquired gastrointestinal medication brand Zenpep and the better health company recently. Expanding portfolio with high performing SMB acquisitions offers immense opportunities for Nestle to grow. [9]

8. Refocus on Profitable Ventures

Having too many brands can stretch a company’s resources to the limit and undermine overall performance. Nestle has been grappling under the weight of too many unprofitable brands and is seeking to sell its North American water brands like Pure Life and shift focus on strengthening the best and highly profitable brands in its portfolio. [10]

9. Nestle introduces “Vuna” a vegan substitute for Tuna

After being under fire for producing unhealthy foods, Nestle seems to be gravitating towards healthier and plant based food categories targeting a more health and environment-conscious target audience. Nestle claims that Vuna is the result of the futuristic food technology the company is working on.

After the successful launch of Vuna, Nestle also stated that it will work on bringing more vegan-based food items, especially in the protein sector. For example, Nestle will soon launch vegan alternatives for dairy products such as eggs and other seafood items such as shrimps.

Nestle’s Threats

1. Price fluctuations by retail giants

Nestlé’s grocery sales are achieved majorly through huge retail giants like Walmart, Tesco, Target and Kroger. Any reduction or increase in prices by these retailers can affect Nestlé’s sales and its profitability. 

2. Illegal rainforest destruction controversy

In 2017, Nestle was alleged of involvement in the illegal destruction of Sumatra’s last tract of rainforest. It faced severe criticisms from NGOs and environmentalists in this regard.

3. Water scarcity

Nestlé’s production is highly dependent on water usage. Accessing the clean water through less costly sources has become difficult for the company due to many reasons. These include increasing population, climate change, growing demand for food and water, increasing pollution, water wastage, and overexploitation of resources.

4. Rising competition

Many CPG companies like Mondelez and Unilever offer similar food and beverage products. It is hard for Nestle to compete in such a situation where the substitute products are easily accessible.

5. Government regulations

Government regulations can affect the business operations of Nestle. Additionally, the increasing prices of commodities force the company to increase the prices of its products. It will lead to sales reduction as consumers can switch to other brands which are available at low costs.

6. Economic Uncertainty

Even though, Nestlé’s sales were not drastically impacted during the pandemic due to panic buying catalyzed by recent events. The company’s revenue is still threatened by economic uncertainty and recession in the global markets. [11]

7. Haunting Dark Past

The US Supreme Court is reviewing whether to open human rights probe against Nestle subsidiary for knowingly helping to perpetuate slavery in cocoa farms in the African nation of Ivory Coast. Even though the events occurred over a century ago, Nestlé’s racist past can haunt the company and affect its sales, profitability, and growth for years to come. [12]

8. Under Fire for Printing Hindu God Image on Wrapper

In a flurry of heated emotions and complaints, Netizens accused Nestle India of playing with citizens’ religious sentiments. The company came under fire after printing the photograph of different Hindu gods on wrapper.  Citizens also stated that the wrappers will ultimately be disposed off in trash cans, which is blatant and utter disrespect of their gods. Nestle has since apologized for the controversy, claiming that it was never their attention to disrespect the Hindu religion.

Swot analysis of Nestle
Swot analysis of Nestle

Recommendations

Nestle is quite successful in the CPG market. However, there are still some areas where it can improve to strengthen its market standing.

Some recommendations are:

  1. Bringing innovation in the company’s offerings.
  2. Growing the number of start-ups in the food and beverage industry.
  3. Upgrading its online services to create a unique competitive advantage in the CPG
  4. Improving its production and operational procedures.
  5. Using authentic raw material to avoid outcry from environmental and social activists.
  6. Settling the media scandals and controversies to stand by with a positive reputation.
  7. Participating in CSR activities and upholding its sustainability practices.

 References & more information

  1. Nestle. Interbrand
  2. Nestle. At a glance
  3. Forbes Ranking. Company Profiles: Nestle S.A. Forbes
  4. Christopher Doering. (2022, Jan 13). Nestlé cuts sugar, adopts more sustainable packaging for Carnation Breakfast Essentials. Food Dive  
  5. Nestle S.A. (2020, April 24). Nestlé reports three-month sales for 2020, provides COVID-19 update. Globe Newswire
  6. Barbiroglio, E. (2020, January 16). Nestlé Wants To Take A Break From Virgin Plastics. Forbes
  7. Pandey, S. (2020, June). Nestle to rename Aussie candies amid race debate. Reuters
  8. Andrei, M. (2020, January 28).  Why Nestle is one of the most hated companies in the world. ZME Science
  9. Gelski, J. (2020, Feb. 2). Nestle shifts focus to acquisitions in 2020. Food Business News
  10. Koltrowitz, S. (2020, June 11). Nestle explores the sale of Pure Life in an overhaul of the water business. Reuters
  11. Ryan, C. (2020, April 24). Nestlé Can Weather Economic Storm Even After Panic Buying Stops. The Wall Street Journal
  12. White, L. (2020, July 2). U.S. Supreme Court takes up Nestle, Cargill appeals over human rights claims. Reuters

 Tell us what you think? Did you find this article interesting? Share your thoughts and experiences in the comments section below.

Brianna Parker

She is a creative writer, corporate storyteller and global brand consultant, who has a unique combination of a business and creative mindset.

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