In-Depth SWOT Analysis of Nestle | Strengths Weaknesses Opportunities & Threats

SWOT analysis of Nestle

Nestlé, which was established in 1866, is one of the world’s largest food companies, according to the Nestlé official website. It serves high-quality food to people of all ages. Nestlé’s goods are delicious and are available all over the world. Except for Antarctica, the company’s branches are based all over the world. Ulf Mark Schneide is the current CEO of Nestlé (2021).

Nestle is a Swiss multinational food and drinks company. It is one of the largest producers of food products globally, with a sizable market share. Nestlé’s largest market is in North America, while China, Brazil, and Russia are growing markets.

History of Nestlé

In 1866, Henri Nestlé founded his company in Vevey, Switzerland–which remains its headquarters. Nestlé continued to refine the technology of his invention to create better chocolate.

In 1895, he founded the Swiss Milk Company (now Nestlé S.A.) with William Power O’Malley, a partner from Ireland and one of the world’s largest milk producers at that time.

The company began industrializing by setting up production lines and introducing assembly-line production methods on a large scale. This production method became widely adopted in the industry, and soon other dairy companies began to follow suit.

The packaging of butter into pats also began in this period. Finally, the company was awarded the pen for literature and science at the 1911 World Exhibition.

In 1913, the company created a new brand name for “Butterballs” called “Champion” and also produced some of their products with a gold foil wrapper. In 1916, Butterball’s first television commercial aired on CBC Television. In the 1970s, it was ranked at No—50 of the top 100 companies by Fortune magazine.

In 1913, Nestlé also developed the formula for condensed milk (Nestlé Condensed Milk). The company then began to produce ever more condensed milk products, and in 1940, it launched a new line of condensed milk ice cream, which became an immediate success.

In 1980, Nestlé began to release its first Kit-Kat chocolate bar in Europe. In 1990, Nestlé acquired the Nutrilait Company, the largest producer of infant formula in Switzerland. In 1996, all U.S. Nestlé Waters was merged with Deerfield-based company Arrowhead and Jack in the Box as part of a $3.35 billion deal.

In 1997, Nestlé sold its holdings within North America to American Home Products Corporation and AmerisourceBergen Corporation for $22.8 billion.

In 2016, Nestlé announced that they would be selling their U.S. candy division to the Wertheim family for an estimated value of $2.8 billion, consisting largely of the Butterfinger and Crunch brands of candy bars.

The deal is expected to be completed within a year and will give the Wertheim’s ownership of an estimated 5,000 branded products in North America.

According to Statista, the Nestlé Group generated nearly half of its global revenues in the United States in 2020. Nestlé is a global consumer products company headquartered in Switzerland that is responsible for various brands such as Nespresso, Nesquik, and La Laitière, to name a few.

Nestlé was named the world’s largest fast-moving consumer goods corporation in 2018, with a record $93.4 billion in sales.  As of 2019, it employed roughly 291,000 people worldwide.

The product line is diverse, encompassing everything from powdered and liquid drinks or water (Nestlé Waters) to baby and health foods (Nestlé Nutrition) and candy and snacks (Nestlé Confectionery Sector).

Nestlé Recent Acquisitions & Developments

Nestlé Health Science has made several acquisitions in recent years.

• Vitaflo, which manufactures clinical dietary goods for people with genetic disorders.
• CM&D Pharma Ltd., a company that specializes in the development of drugs for patients suffering from chronic disorders such as kidney disease
• Prometheus Laboratories, a company that specializes in therapies for gastrointestinal diseases and cancer.

As of 2012, it also owned a minority interest in Vital Foods, a New Zealand-based business that creates kiwifruit-based solutions for gastrointestinal conditions.

Another recent acquisition was the Jenny Craig weight-loss program, which was purchased for $600 million. In 2013, Nestlé sold the Jenny Craig business unit to North Castle Partners.

Nestlé announced in December 2014 that it would open ten skincare research centers around the world, increasing its investment in a rapidly rising demand for healthcare products. Nestlé invested about $350 million in dermatology research and development that year.

Nestlé revealed in March 2017 that the sugar content of Kit Kat, Yorkie, and Aero chocolate bars would be reduced by 10% by 2018. In July, a similar announcement was made about reducing sugar content in its breakfast cereals in the United Kingdom.

Nestlé S.A. purchased a majority stake in Blue Bottle in September 2017. Although the financial terms of the transaction were not disclosed, the Financial Times reported that “Nestlé is understood to be paying up to $500 million for the 68 percent stake in Blue Bottle.” [50] Formalized paraphrase Blue Bottle anticipates a 70% rise in revenue this year.

Nestlé USA agreed to buy Sweet Earth, a California-based producer of plant-based foods, for an undisclosed amount in September 2017.

Nestlé USA revealed in January 2018 that it was selling its US confectionery company to Ferrero, an Italian chocolate and candy manufacturer. The company was sold for an estimated $2.8 billion in total.

Nestlé and Starbucks signed a $7.15 billion distribution agreement in May 2018, allowing Nestlé to market, sell, and distribute Starbucks coffee internationally and integrate the brand’s coffee varieties into Nestlé’s patented single-serve method expanding both companies’ overseas markets.

Nestlé set a new profit goal in September 2017, and in January 2018, it agreed to sell over 20 of its US candy products. However, revenue increased by just 2.4 percent in 2017, and the share price had fallen by more than 8 percent as of July 2018.

Nestlé announced the Nestlé Alumni Network launch in October 2018 as part of a strategic alliance with SAP and EnterpriseAlumni to connect with their over 1 million Alumni worldwide.

Nestlé revealed in September 2018 that it would sell Gerber Life Insurance for $1.55 billion.

The company revealed in 2019 that it would include Nutri-Score on all of its products sold in European countries that endorsed the nutritional mark.

Nestlé plans to invest in plant-based food in 2020, beginning with a “tuna salad” and meat-free products, in order to engage and reach younger and vegan customers.

Nestlé revealed on February 16, 2021, that it had agreed to sell its water brands in the United States and Canada to One Rock Capital Partners and Metropoulos & Co. The transaction was completed in early April 2021.

SWOT analysis of Nestle

Nestle Strengths:

The company has widely recognizable brands around the world and has a large margin of safety through its diversified portfolio (a major strength). Nestle also operates well within their core competencies – they have competency in both consumer goods and pharmaceuticals.

Their broad global reach provides plenty of opportunities to turn geographic diversity into a competitive advantage. Nestle’s strategy has been to focus on niche, high-income countries that have favorable demographics.

Nestle has a strong reputation with consumers, which is evidenced by their continued success in the industry. They also have a history of marketing products that are more expensive than competitors and then lowering prices when competing items are released.

Nestle is very aware of their competition and how they respond to it. It has a history of releasing products that have been in high demand, such as Nescafe coffee or Kit-Kat bars.

Nestle has a huge distribution network, most likely the largest in the world. This puts them in a position to be able to offer their products to more consumers at a lower price.

Nestle offers numerous different types of products that appeal to the customers’ different tastes. They can produce and distribute more product lines in order to appeal to different groups of people within the industry.

Nestles’ management team understands that brand image is key to success, and they are always looking for ways to improve it.

Nestle Weaknesses:

Nestle relies on a limited set of products for sales growth, which can lead to product cannibalization and price competition as well as concentration risk. This, in turn, increases the company’s exposure to cyclicality.

Nestles’ weaknesses are that it has many different types of products, and it doesn’t always have a strong relationship with its consumers.

Nestle is highly dependent on the success of a few product brands, making it vulnerable to market changes and shortages. This is evident in the 2007/2008 crisis, where China caused a shortage of infant formula. They are also affected by consumer distrust of their products due to the controversies surrounding the use of artificial growth hormones and misleading advertising.

Nestle lacks brand recognition in some countries, and its products are often considered mediocre or bad quality.

Nestle Opportunities:

Nestle has higher margins than its larger rivals (a major strength). It has a strong position in North America, China, and Brazil, where it can leverage its competitive advantages through scale and scope.

In developing markets such as Russia and India, there is potential for growth following the reduction of price promotions by competitors. Additionally, the company has an opportunity to develop new and innovative products in response to changing consumer demand.

The recent demand for healthier foods and drinks, such as lower-sugar products, indicates that Nestle may be able to expand further into this growing market. Furthermore, their acquisition of the nutrition business provides them with a good foundation for future development in this area.

Nestle has become more diversified with its products in recent years and is currently expanding into other areas.

Nestle has a strong reputation with consumers because they have remained consistent on the quality of the food they produce over time.

Nestle Threats:

Nestle has a significant dependency on commodity prices for raw material inputs; therefore, it can be affected by the volatility of raw material prices like sugar and cocoa.

The company is very sensitive to fluctuations in foreign exchange as well, as significant portions of operating costs are denominated in other currencies. Furthermore, risks stem from consumer preferences and health trends such as “consumer preference toward organic food.”

A changing environment can be a threat to Nestle because the company does not always adapt well and often make mistakes.

Globalization and technology can be a threat to Nestle because these are areas where the company does not have the strongest background. Regulatory changes  also make it difficult for Nestle,

Culture change becomes a threat to Nestle because it will require changes in its product distribution and marketing strategy.

Nestle struggles to compete with local brands. Social media tools are leading consumers to local companies that know the community better and even have better foods.

Nestle Competitive advantage:

Nestle is the world’s largest food company in terms of total annual revenue and the largest in the global packaged food market. Nestlé’s key products are chocolate, dairy, coffee, baby formula, and pet nutrition.

It has a strong portfolio of brands, including Nespresso, Nescafé (via Nescafé Dolce Gusto), and Maggi. Nestlé is involved in more than one-fifth of all consumer products sold worldwide, including infant food, bottled water, breakfast cereals, dairy products, and bottled beverages. It is the largest food company in the United Kingdom and the third largest in Japan.

Nestlé’s product lines: The company’s brands sell well across various international markets. Nestlé’s brands include Nescafé (including Nescafé Dolce Gusto), KitKat, Smarties, Nesquik, and Nespresso.

Nestle Competitors

• PepsiCo
• Kraft Heinz
• Mondelez International
• Unilever
• Mars, Incorporated
• Sara Lee
• Cadbury
• Danone
• Ferrero SpA

Key Strengths & Opportunities

Nestle’s opportunities are that their products have changed and improved over time; it diversified into new areas in recent years and is currently expanding into other areas.

Nestle has some of the most recognizable brands in the food industry and is an icon among consumers.

Nestle is looking to invest more in research and development when it comes to new products.

Nestle has a strong reputation with consumers because they have remained consistent on the quality of the food they produce over time.