Nestle's Brand Management Strategies
Nestle Brand Management
Nestle's Brand Management Strategies
"Nestlé is a brand in its own right. For consumers, relevance of Nestlé as a company comes first of all through contact with products that are branded Nestlé. If we want to be perceived as the world's leading food company, we have to offer consumers an increasing amount of products that they can identify as Nestlé's."
- Peter Brabeck Letmathe, CEO, Nestlé .
In mid-1988, Nestlé SA (Nestlé), the world's largest consumer packaged foods company based in Switzerland, acquired Rowntree Mackintosh PLC (Rowntree), in the largest ever acquisition deal of a British company during that time. Rowntree was the world's fourth largest manufacturer of chocolates and confectionery products, with well-known brands like Kit Kat, After Eight, Smarties and Rolo.
The deal attracted considerable attention all over the world since several bids to acquire Rowntree were rejected. Rowntree claimed that the bids were too low for its valuable, well-recognized brands. In the end, Rowntree was acquired by Nestlé for £2.5 billion, two and a half times the pre-bid price and eight times the net asset value of the company. This acquisition made Nestlé the largest chocolate manufacturer in the world. Analysts felt that Nestlé had paid £2.5 billion because of Rowntree's brands, not its past financial performance. Industry observers wondered how Nestlé would manage Rowntree's brands. Rowntree followed a "one product, one brand" policy.
The brands were simply Kit Kat, After Eight, Smarties and Rolo, Rowntree was never mentioned. Moreover, Rowntree's brands were not strongly managed European brands. In fact, according to an analyst , Kit Kat was one of the worst cases of an over-localized brand of a company across Europe.
In the mid-1860s, Henri Nestlé (Henri), a merchant, chemist, and innovator experimented with various combinations of cow's milk, wheat flour and sugar. The resulting product was meant to be a source of infant nutrition for mothers who were unable to breast-feed their children. In 1867, his formula saved the life of a prematurely born infant. Later that year, production of the formula, named Farine Lactee Nestlé, began in Vevey, and the Nestlé Company was formed. Henri wanted to develop his own brands and decided to avoid the easier route of becoming a private label. He also wanted to make his company a global company.
Within a few months of establishing his company, Henri began to sell his products in many European countries. In the initial years, Henri restructured the organization to facilitate research, improve product quality, and develop new products.
In 1875, Daniel Peter, Henri's friend and neighbor, developed milk chocolate. He soon became the world's leading chocolate maker. Later, his company was acquired by Nestlé. In 1905, Nestlé merged with Anglo-Swiss Condensed Milk Company, a manufacturer of milk-based infant food. During World War I, there was a huge demand for dairy products and Nestlé capitalized on this opportunity by executing military contracts of various countries involved in the war. In 1938, after eight years of research, Nestlé discovered a soluble powder that revolutionized coffee drinking around the world. The product was launched under the brand name Nescafe and became an instant success.
The end of the World War II marked the beginning of a new phase of growth for Nestlé. The company added many new products. In its effort to expand its operations further, Nestlé merged or acquired several companies. In 1947, Nestlé expanded into culinary products by merging with Alimentana, a Swiss company that produced and sold Maggi soups, spices and other food products in many countries. In 1950, Nestlé acquired Crosse & Blackwell, a British manufacturer of preserves and canned foods. This was followed by the acquisition of Findus, a Swedish company producing frozen foods (1963), Vittel, a French mineral water company (1969), Libby's, a British fruits, vegetables and meat company (1971), Ursina Franck, a Swiss company producing milk products, baby food and culinary products (1971), Stouffer's, a US frozen foods company (1973), and L'Oreal, a leading French cosmetics manufacturer (1974). All these acquisitions (Refer Exhibit II for other acquisitions by Nestlé) led to substantial synergies in Nestlé's production, distribution and sales.