MGT211 term paper--Management Planning of Nescafé

Management Planning of
NESCAFÉ

Management Planning of NESCAFÉ
November 30, 2012
Page 2
SUBMITTED BY
MGT211
Term Paper
Section 03
11/30/2012
S
Sl.
No.
Name I.D.
1. Samiya Yesmin 11304043
2. Protiti Khan 11304018
3. Sawda Nusrat Haque 11305007
4. Moinul Hossain 11204045
5. Tausif Nazran 11121019

November 30, 2012
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LETTER OF TRANSMITTAL
Date: December 1, 2012
Afsana Akhtar
Assistant Professor
BRAC Business School
Subject: Submission of Term Paper
Dear Miss:
We are pleased to submit our report on “Planning of Nestlé, regarding the brand Nescafe” for
your review. This report was done with the help of Ishtiaque Ahmed, Senior Brand Officer,
Nestlé Bangladesh Limited. He helped us with his excellent guidance and the information
that we required to complete this report.
It was a pleasant experience for us to work on this project. We would like to thank you for
giving us such a wonderful opportunity.
Sincerely Yours,
________________________
Protiti Khan
Samiya Yesmin
Sawda Nusrat Haque
Moinul Hossain
Tausif Nazran

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ACKNOWLEDGEMENT
First of all, we would like to convey our special thanks to Miss Afsana Akhtar, our faculty
advisor for her valuable guidance, which helped us to complete this report successfully. We
are highly grateful to her.
Next, we would like to acknowledge the help of Mr. Ishtiaque Ahmed, Senior Brand
Officer, Nestle Bangladesh Limited, Mr. Mahfuzul Islam, Senior Brand Officer, Nestle
Bangladesh Limited, and Mr Ahmed Shafquat Noor, Financial Planning Analyst, Nestle
Bangladesh Limited, for sharing their insights into the topic and providing us the support and
information we needed. We greatly appreciate their help.

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CONTENTS
1. Introduction ...............................................................................................................7
1.1. Origin of the report..............................................................................................7
1.2. Objectives ............................................................................................................7
1.3. Methodology........................................................................................................7
1.4. Scope ...................................................................................................................8
1.5. LIMITATION......................................................................................................8
2. Overview of the Corporation.....................................................................................9
2.1. HISTORY of the Organization............................................................................9
3. Company Profile: Nestlé Bangladesh Limited (NBL) ............................................11
4. Corporate Culture ....................................................................................................12
5. NESCAFÉ ...............................................................................................................13
5.1. Marketing Mix of NESCAFÉ............................................................................13
6. SWOT Analysis of NESCAFÉ................................................................................17
7. Profile of the Coffee Consumers: Local Scenario ...................................................18
7.1. Demography:.....................................................................................................18
7.2. Psychography: ...................................................................................................18
7.3. Geographical Segmentation: .............................................................................18
8. NESCAFÉ Market Cluster ......................................................................................20
9. Strategies for Cluster Markets .................................................................................21
9.1. Developed Leader Market .................................................................................21
9.2. Developed Challenger Market...........................................................................22
9.3. Developing Leader Market................................................................................23
9.4. Developing Challenger Market .........................................................................23
10. Management of Stakeholders ..................................................................................24
11. Industry Analysis: Porter’s Five Forces Model.......................................................26
12. Industry Players ....................................................... Error! Bookmark not defined.
12.1. Nestlé:................................................................ Error! Bookmark not defined.
12.2. Kraft Foods Inc:................................................. Error! Bookmark not defined.
12.3. Sara Lee:............................................................ Error! Bookmark not defined.
12.4. Proctor & Gamble: ............................................ Error! Bookmark not defined.
13. Conclusion...............................................................................................................28
14. Recommendation..................................................... Error! Bookmark not defined.
Bibliography............................................................................. Error! Bookmark not defined.

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ABSTRACT
NESCAFÉ is one of the strategic brands to the world’s leading food company Nestlé. In
Bangladesh the brand has a well established position as it holds 95% of the market share in
coffee market in Bangladesh. But the overall coffee market in Bangladesh is very small
compared to the large tea market of 60000 tons. Worldwide NESCAFÉ is the largest profit
making category with different ranges of coffee starting from instant coffee to coffee
specialties. In this report the suggested plan of action section of NESCAFÉ, and a lot of
promotional ideas were pitched which greatly involved the NESCAFÉ target group.
Hence we decided to study the working of Nestlé Bangladesh Limited to observe and
learn how all the management factors, related to our course “Principles of Management”, are
practically being used. Investing heavily in promotion requires a lot of budget which
normally comes from the revenue of products. NESCAFÉ needs invest a lot into promotion
but at the same time can afford to make its products more expensive. Striking the perfect
balance here is the main challenge facing NESCAFÉ in Bangladesh.

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1. INTRODUCTION
1.1.ORIGIN OF THE REPORT
Nestlé Bangladesh Limited is a leading food company with lots of global strategic
brands operating in Bangladesh. NESCAFÉ is one of the strategic brands of Nestlé
Bangladesh Limited. Worldwide NESCAFÉ is the largest profit making category with
different ranges of coffee starting from instant coffee to coffee specialties.
Hence we decided to study the working of Nestlé Bangladesh Limited to observe and
learn how all the management factors, related to our course “Principles of Management”, are
practically being used. Analyzing and learning from this huge and successful multinational
corporation, Nestlé, has been a major revelation
1.2. OBJECTIVES
- To learn about management proceeding.
- To learn how the planning procedure takes place.
- To observe how management theories come into practical use.
- To learn why and how the decisions are made.
- To learn strategic management from a realistic point.
1.3. METHODOLOGY
We have used both primary and secondary sources to collect data for this study. Our
primary information was from interviewing Mr. Ishtiaque Ahmed, and Mr. Mahfuzul Islam .
And we collected secondary information from the reports given to us by Nestlé and also from
the reports regarding Nestlé provided over the internet

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1.4.SCOPE
The key focus of the report is the company’s strategic brand NESCAFÉ. It covers the
following aspects:
 Analyzing only coffee business aspects of the hot beverage market (not tea)
 NESCAFÉ’s marketing strategy in context of Bangladesh
 Future growth potential of the product in Bangladesh
 For understanding the right strategy of NESCAFÉ, global strategy of NESCAFÉ has
also been discussed.
1.5.LIMITATION
 NESCAFÉ has room for extensive and advance study. The report does not cover any
in-depth controlling or marketing or consumer behavior models.
 In some cases, conclusions have been drawn based on logical assumptions to protect
the confidentiality of the company.
 The study has been done solely in the context of Bangladesh, hence the strategies
identified and the action plans suggested might not be applicable for other countries.

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2. OVERVIEW OF THE CORPORATION
Nestlé S.A. is a Swiss multinational nutritional and health-related consumer goods
company headquartered in Vevey, Switzerland. It is the largest food company in the world
measured by revenues. It ranks No. 1 in Consumer Food Product category of Fortune's
"World's Most Admired Companies". Nestlé's products include baby food, bottled water,
breakfast cereals, coffee, confectionery, dairy products, ice cream, pet foods and snacks. 29
of Nestlé's brands have annual sales of over 1 billion Swiss francs (about $ 1.1 billion),
including Nespresso, Nescafé, KitKat, Smarties, Nesquik, Stouffer's, Vittel, and Maggi.
Nestlé has around 450 factories, operates in 86 countries, and employs around 328,000
people. It is truly a Multinational Corporation with home country sales accounting for only
2% of the worldwide total.
With the motto “Good Food, Good Life”, Nestlé has always been dedicated to
providing the best food to people throughout their lives, with their unique experience of
anticipating consumers’ needs and creating solution. The company's strategy is guided by
several fundamental principles, which only reflects its concern for people. The business
objective is to manufacture and market the company's products in such a way as to create
value that can be sustained over the long term for shareholders, employees, consumers, and
business partners. All these sound human values and principles on which the company is built
on have resulted in Nestlé doing business for about a period of one and a half century with
evidently remarkable success.
2.1.HISTORY OF THE ORGANIZATION
In the mid-1860s Henri Nestlé, a trained pharmacist, began developing an alternative
source of infant nutrition for infants who had been unable to be breast fed. The Anglo-Swiss
Condensed Milk Company was founded in 1866-87 by Americans Charles and George Page.
In 1875 Henri sold the company to Jules Monnerat and retired. Thirty years later, Nestlé and
Anglo-Swiss Milk Company merged, not before producing fierce competition between them.
By the early 1900s, the company was operating factories in the United States, United
Kingdom, Germany, and Spain. The First World War created demand for dairy products in

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the form of government contracts, and, by the end of the war, Nestlé's production had more
than doubled. Nestlé found itself in crisis after the end of World War I in 1918. Wartime
contracts finished and civilian consumers who had adapted to condensed and powdered milk
during the war switched back to fresh milk. However, new products appeared steadily:
malted milk, a powdered beverage called MILO in 1934, and, in 1938, NESCAFÉ. It became
an instant success and was followed in the early 1940s by NESTEA.
Nestlé felt the effects of the Second World War immediately. Profits dropped from
US$20 million in 1938, to US$6 million in 1939. Factories were established in developing
countries, particularly in Latin America. Ironically, the war helped with the introduction of
the company's newest product, Nescafé ("Nestlé's Coffee"), which became a staple drink of
the US military. Nestlé's production and sales rose in the wartime economy.
In 1947, Nestlé merged with Alimentana S.A., the manufacturer of MAGGI
seasonings and soups. The acquisition of Crosse & Blackwell, the British manufacturer of
preserves and canned foods, followed in 1950, as did the purchase of Findus frozen foods
(1963), Libby's fruit juices (1971) and Stouffer's frozen foods (1973).
In 1974, the Company became a major shareholder in L'Oréal, one of the world's
leading makers of cosmetics. After this diversification endeavour, its overall financial
condition deteriorated drastically. To address this, Nestlé made its second venture outside the
food industry by acquiring Alcon Laboratories Inc., a U.S. manufacturer of pharmaceutical
and ophthalmic products in 1977. In the same year the group took its current name, Nestlé
S.A.
Between 1980 and 1984, Nestlé managed to put an end to a serious controversy over
its marketing of infant formula in the Third World. In 1984, Nestlé's improved profit figure
allowed the Company to launch a new round of acquisitions, including the IPO of American
food giant Carnation; San Pellegrino (1997), UK’s Spillers Petfoods (1998), along with
Findus brand (1999) Ralston Purina (2002) and since then pet care business has been joint
world leader and known as Nestlé Purina Pet Care. In 2007, Nestlé acquired Gerber, known
for its infant products, and Novartis Medical Nutrition. Then in 2010, Nestlé acquired Kraft
frozen pizza business in the U.S. and Canada which included Delissio.
In 150 years, Nestlé has come across a long way.

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3. COMPANY PROFILE: NESTLÉ BANGLADESH LIMITED
(NBL)
Nestlé Bangladesh Limited (NBL) stared its commercial operation in Bangladesh at 1994.
Its total authorized capital is 1.5 billion taka and total paid up capital is 1.1 billion. The only
factory of the company in Bangladesh is situated at Sreepur, 55 km north of Dhaka. The
factory produces instant noodles and cereals and repacks milks, soups, beverages and infant
nutrition products.
Popular Nestlé brands started entering this part of the sub-continent during the British
rule and the trend continued during the pre-independence days of Bangladesh. After
independence in 1971, Nestlé World Trade Corporation, the trading wing of Nestlé S.A., sent
regular dispatches of Nestlé brands to Bangladesh through an array of indentures and agents,
and some of the brands such as NESPRAY, CERELAC, LACTOGEN, BLUE CROSS etc.
became household names.
In the early eighties Transcom Ltd. was appointed as the sole agent of Nestlé products in
Bangladesh. In 1992 Nestlé S.A. and Transcom Ltd. together acquired the entire share capital
of the company Vita Rich Foods Ltd. Nestlé S. A. took 60 percent while Transcom Ltd.
acquired 40 percent. With this acquisition, the name of the company was also changed to
Nestlé Bangladesh Limited. In 1998 Nestlé S.A. took over the remaining 40 percent share
from Transcom Limited when Nestlé Bangladesh became a fully owned subsidiary of Nestlé
S.A. It has invested more than USD 28.3 million in Bangladesh and achieved above 600
crores in sales in 16 years. Today, NBL is a strongly positioned organization. It is continuing
to grow through its policy of constant innovation and renovation, concentrating on its core
competencies and its commitment to high quality, with the aim of providing the best quality
food to the people of Bangladesh. It currently employs around 462 people directly and has
more than 1000 people employed by suppliers and distributors in connection with Nestlé.

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4. CORPORATE CULTURE
Corporate culture is the specific collection of values and norms that are shared by people
and groups in an organization and that control the way they interact with each other and
with stakeholders outside the organization. Unlike corporate business policies, ethical
guidelines; corporate culture does not have any well defined written document. It is more of a
matter of feeling. Hence this part of the report requires a lot of subjective opinion. During my
short stint so far at Nestlé, whatever expression of its culture I experienced, however much I
felt its culture; I am encapsulating all that in a short passage for the convenience of the
reader.
Nestlé Bangladesh Ltd. has an innate ethical culture. Due to the practices of all the
subsidiaries all the world over, NBL encourages ethical conduct even in personal interactions
among employees which have no business implication. The management style and the
decision making process is participatory. There are more than 3 scheduled meetings every
month which require participation of people across functions and arrive at important
decisions. One unique thing in NBL is that it does not follow senior to junior work
delegation. If someone does not know how to do something, he/ she can not only take help
from the superiors, but also can delegate the work to him. There are occasions when
employees are assigned with crucial and sensitive projects but at the same time, are given
enough freedom to work in his/her way. This gives the employees sense of leadership and it
also empowers the novice for future tougher assignments. In NBL, punishment is not a
necessary element as the congenial atmosphere motivates everyone to do what is right.
Rewards come in the forms of monetary incentives as well as formal/informal appreciation.
There is one negative aspect about NBL’s culture. As a whole, it does not respond
quickly to changes. However, the relatively younger employees are initiating this culture in
the organization. Finally, NBL is more oriented to growth compared to profit. The
organization is in its growth stage. Profit orientation is not commensurate with its long term
focus.
4.1.1. Corporate Vision:
Nestlé Bangladesh’s vision is to build Nestlé as the respected and trustworthy leading
Food, Beverage, Nutrition, Health and Wellness Company in Bangladesh ensuring long term

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sustainable and profitable growth. The company is very much focused to ensure that the
vision is implemented in every aspect. The company’s vision and the roadmap to reach it are
as follows.
4.1.2. Corporate Mission:
 Be in every way, the leading company in the local food industry.
 Ensure high quality standards in everything the company undertakes.
 Provide consumers with superior quality products.
 Expand total coverage and provide brand wise distribution targets
 Provide employees a challenging and satisfying work environment.
 Be a good corporate citizen and contribute positively to the society in which NBL
operates.
5. NESCAFÉ
In Bangladesh, NESCAFÉ began its formal journey in 2000. It has two variants-
NESCAFÉ Classic and NESCAFÉ 3in1. NESCAFÉ, being the market leader, holds
almost 94% market share in the coffee category; other players in the market are Mac
Coffee, Maxwell House and Ban Coffee. Currently NESCAFÉ has a business of around
300 tons annually. “Stimulating experience in your everyday lives” is at the core of this
brand’s essence. The brand has the following positioning statement:
“NESCAFÉ is a contemporary, up-beat brand of distinctive quality that offers a
rewarding coffee experience every time, everywhere.”
5.1.MARKETING MIX OF NESCAFÉ
5.1.1. PRODUCT:
NESCAFÉ comes in different sizes. These pack sizes are designed to serve the
demand of different consumer segments and to ensure highest reach of NESCAFÉ in the
country. Presently, five different Stock Keeping Units (SKU) are available:

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Pack Size Target Users
NESCAFÉ 200 gm jar Out of home pack mostly serving the
bulk users,i.e. fast foods, restaurants etc.
NESCAFÉ 100 gm jar In- home pack, mainly for the relatively
frequent coffee drinkers.
NESCAFÉ 50 gm jar In-home pack, meeting the daily usage
need of households in an affordable way.
NESCAFÉ 14 gm 3 in 1 Containing right mix of coffee,creamer
and sugar to have right taste of coffee just by
adding hot water,convenient pack size of 14 gm
allowing the consumers to carry it with them and
have coffee anytime, anywhere.
NESCAFÉ 1.8 gm Bondhu Pack For 2 persons, affordable pack with
broader consumer base, wide distribution in retail
outlets.
Table 3: NESCAFÉ Stock Keeping Units
5.1.2. PLACE/DISTRIBUTION:
NESCAFÉ each pack size variety requires different distribution strategy. In order to
ensure NESCAFÉ along with other brands is distributed among maximum number of retail
outlets, Nestlé has engaged 77 distributors throughout the country with specified area
demarcation. Three major channels for retail business are Counter Store, Small Store and
Modern Trade. ‘Tea Bunk’ is a very significant & key channel not only for out of home
consumption but also for the entire category to grow as this channel is very instrumental for
trail generation. But this channel is yet to be exploited. As a whole, different SKUs of
NESCAFÉ have been distributed to more than 52,000 outlets nationwide.
5.1.3. PRICING:
Nestlé’s pricing strategy is different for different pack size to meet the demand of
various channels.
NESCAFÉ 200 gm Jar:
NESCAFÉ 200 gm jar is the highest priced. The unit retail price is 460 Taka. Since
the product is positioned to meet the requirement of bulk users, it basically has the lowest
price per gm.

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NESCAFÉ 100 gm Jar:
Price of this SKU is 260 Taka. Previously there was no SKU between 200 gm and 50
gm jar. 100 gm is targeted to heavy users of 50 gm jar who can save Taka 10 buying 100 gm
at once.
NESCAFÉ 50 gm Jar:
The price for NESCAFÉ 50 gm jar is 135 Taka per unit. These are mainly for
household units with high frequency usage per day. The high frequency home users are
willing to buy this pack that makes 50 cups of NESCAFÉ to save some extra money. This jar
has a higher unit price but a lower cost per gm compared to the 1.8 gm pack.
NESCAFÉ 3 in 1:
The retail price of NESCAFÉ 3 in 1 is Taka 8 per unit. It has a higher per cup price
than any other NESCAFÉ pack. Yet, those who are willing to incur extra costs to avoid the
hassle of preparing coffee prefer it.
NESCAFÉ 1.8 gm Bondhu Pack:
This is a modified version of the previous .9 gm sachet. A pair of two .9 gm sachets
comes at a price of Taka 5. These are meant mainly for the low frequency users. Despite
higher cost per gm compared to 200, 100, 50 gm jars, it is more affordable for those who
drink infrequently. These people usually buy 4 to 5 sachet at a time.
5.1.4. PROMOTION:
Investment in promotional activities is very important to ensure a sustainable growth
of NESCAFÉ and achieve the company’s long-term vision. Following are the brief of the
different promotional activities the company undertook so far.
TV Commercial:
NESCAFÉ has had a memorable presence in TV because of its “cholo shobai”
campaign. This was the pioneer of theme music videos. The target group easily connected to
the tune, videography and it became an instant hit. The video still evokes emotion in viewers’
hearts. Prior to that, NESCAFÉ had different TVCs. The first one was “anytime, anywhere”

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campaign for NESCAFÉ 3in1. Then came the “Jaago” campaign. The third campaign used
the tagline “get, set, go”.
Print Media:
NESCAFÉ has been advertising in Prothom Alo, The Daily Star, Star Weekend
magazine etc to generate awareness among the consumers.
In- Store Communication:
Trade posters, Shelf talkers, Bunting, Danglers are the main elements used for in-store
communication. Nestlé appoints merchandisers for installing these materials. These are also
called Point of Sales Materials (POSM).
Outdoor Activities:
NESCAFÉ is currently using shop signage as outdoor promotion. These help shoppers
remember the brand while they are making purchases.
Sampling:
Sampling is a very useful tool to ensure trial of coffee. Wet sampling is basically
providing samples to consumers in ready to drink form. It is done through vending machines
and also through different agencies. NESCAFÉ has yearly budget for free sampling and is
actively utilizing it with a view to familiarizing people with coffee taste.
Consumer Promotions:
Till now NESCAFÉ has adopted two ways of consumer promotion.
1. Through sponsoring different events related to the target consumers, i.e. NESCAFÉ
Unplugged, NESCAFÉ Campus Carnival and NESCAFÉ Battle of the Giants.
2. Through providing specific incentives with the pack, i.e. NESCAFÉ mug, NESCAFÉ
branded spoons, T-shirts, Caps etc.
Besides, the company has also tried out some cross brand promotional activities like
promoting NESCAFÉ and Coffeemate together in the NESCAFÉ dream couples contest.

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6. SWOT ANALYSIS OF NESCAFÉ
6.1.1. STRENGTHS:
• Strong brand image as a youth, vibrant, international brand, specially set by the
‘Cholo Shobai’ campaign
• Strong acceptability among youth
• Expert in Coffee business
• Unique activations – Sampling, Root-level activities
•
6.1.2. WEAKNESSES:
• Erratic supply
• High price perception/cup
• High skewness of business in Dhk & Ctg
• Some misconception about coffee & health
• Non-aggressiveness in OOH channels, specially ‘Tea Bunk’
•
6.1.3. OPPORTUNITIES:
• Large young non-user base
• Lower SEC groups with low price packs
• Involving brand activities to strengthen brand image
• Expand numerical coverage with small packs
• Expand OOH channel and synergize with Retail
•
6.1.4. THREATS:
• Aggressive Local competitors, especially in OOH
• Inadequate supply from our side opens the gates for local players
• Complete dependency on Transfer Price
• High Price

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7. PROFILE OF THE COFFEE CONSUMERS: LOCAL
SCENARIO
7.1.DEMOGRAPHY:
Urban and semi urban college and university students belonging to the age group of
16 to 24 years; Office executives and self-employed individuals from the age group 25 to 25;
Monthly household income >= BDT 10,000.
7.2.PSYCHOGRAPHY:
Young, College & University students
• Prefer to be cool. Values straight-talk, broad mindedness. Trying to break-out of
traditional sense. Aspire to become a trend-setter and want to enjoy live by
achievements. Highly influenced by word-of-mouth.
• Spend a lot of time OOH. Friends get a larger share of time. Movies, chatting,
fashion, music etc. are integral to everyday lifestyle. Sub-urban youth reads
magazines to keep themselves updated. Likes to be associated with trendy products.
Creating Image for them is important. Seek for differentiation and appreciation in
everything they do.
• Does not know how a perfect coffee cup should taste like though does not accept the
frequent change in taste.
• Use techno savvy gadgets, i.e. Cellular phones, Personal computers, Music device.
• Heavy use of social networking websites, i.e. facebook, myspace, twitter.
Office executives & Self-employed Individuals
• Seek for social acceptance, recognition and class. Value Self: Self-time, Self-Target.
Influenced by word of mouth. Shops in nearby stores or shopping malls. Drinks
coffee mainly because of taste, refreshment and class.
7.3.GEOGRAPHICAL SEGMENTATION:

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Now that we have identified the consumers’ profile, we can have a look at the
corresponding statistics to have an idea of what potential this market holds.
The Statistical Yearbook reveals the following population demographics in
Bangladesh:
Table 4: Urban and Semi Urban Population:
Dhaka Chittagong Khulna Rajshahi Bogra Sylhet
No of
population
(mio)
46.3 28.7 17.4 35.9 9.7 9.5
% of
National
31.6% 19.6% 11.9% 24.6% 6.6% 6.5%
Table 5: Population Number by Age Group:
15-24 yrs 25-34 yrs 35-44 yrs
No of population (mio) 25.5 20.84 16.06
% of population 17.4% 14.2% 11%
Key observations:
 Majority of our consumers live in Dhaka, Chittagong and Rajshahi
 More than 30% of our population falls below the age group of < 35 years giving a big
target base for coffee business development.
Now that the population in urban and semi urban areas and the population belonging
to NESCAFÉ’s age bracket are defined, there is scope of digging down more with respects to
household income and finding out what is the actual size of the market. Afterwards, class’s
coffee consumption can also be tracked and demonstrated in order to identify the portion of
market which is still untapped.

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8. NESCAFÉ MARKET CLUSTER
In order to understand the coffee markets better and to focus with specific strategies in
similar market Nestlé has divided all Nestlé markets into 4 clusters based on two parameters:
1. The per capita consumption of each market
2. Total share of soluble market of NESCAFÉ
These clusters are markets, which are similar to with respect to coffee consumption
habits of their consumers. Nestlé believes that this is a far more meaningful and consumer
driven approach than clustering the market by geographical location or size of business. Once
the clusters are developed Nestlé attempts to develop similar strategies in markets belonging
to any particular cluster, exchanging ideas to facilitate the faster development of Nestlé’s
soluble coffee business. The 4 clusters of Nestlé are shown below:
Figure 11: NESCAFÉ Market Clusters
DevelopingLeadership DevelopedLeadership
DevelopingChallenger DevelopedChallenger
The 4 Clusters
Less 360 Cups of coffee More
Less
50%
Market
share
More

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The above chart shows that based on the per capita coffee consumption and soluble
coffee market share in each market Nestlé have developed 4 clusters. All Nestlé markets
basically falls within any of these 4 cultures. The markets with more than 50% of the market
share and less than 360 cups of per capita consumption per annum falls in the Developing
Leadership Cluster. On the other markets with more than 50% of the market share and more
than 360 cups of per capita consumption per annum falls in the Developed Leader Cluster.
Markets with less than 50% of market share and less than 360 cups of per capita consumption
per annum falls in the developing challenger cluster. Finally markets with less than 50%
market share and more than 360 cups of per capita consumption fall within the developed
challenger cluster.
9. STRATEGIES FOR CLUSTER MARKETS
Each of the clusters mentioned above as similar markets in nature with similar type of
consumer behavior. Nestlé has developed specific strategies for each of the cluster. These
strategies have been discussed below:
9.1.DEVELOPED LEADER MARKET
The Scenario:
 In this cluster soluble sets the standard for coffee and there is already a substantial
level of consumption on which to build.
 NESCAFÉ is the leading coffee brand often dominating by a substantial margin.
 A worrying development is that R&G is developing a strong image due to OOH
activity- we need to ask ourselves whether we are still setting the standard or not.
Strategies:
 Get incremental cups from existing users by covering all important need states with
relevant NESCAFÉ products.
 Ensure full product portfolio in these markets.
 In the battle for Share of throat vs. other beverages, we mustn’t lose sight of the need
to keep ahead of our strong soluble competitors.

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 We must have clear 60/40 winners in terms of product performance, and we need to
continue our commitment to apply our most sophisticated technologies here.
 The challenge for these markets is to bring these new advances in quality to the
consumers in a relevant and competitive way.
9.2.DEVELOPED CHALLENGER MARKET
The Scenario:
 Many of these markets have a long-entrenched coffee culture and high per capita
consumption.
 R&G dominates the coffee market but is usually flat/declining.
 The stronger R&G brands have taken ownership of coffee values, making it hard for
NESCAFÉ to find a meaningful position.
 In-home drip filter machines that make good quality cups of coffee are common,
making it that much harder for NESCAFÉ to penetrate R&G households.
 Although NESCAFÉ is usually the leading brand in soluble coffee, it is not yet a
major brand within the total coffee category.
 Soluble suffers from a negative perception in these markets (not the real thing) –
NESCAFÉ is often not even on the radar screen of the consumer.
 The challenge is to find breakthrough product and positioning solution to improve
NESCAFÉ credibility/ acceptance.
 The OOH sector is well-developed and also largely dominated by R&G.
Strategies:
 Nestlé has the opportunity of growing soluble’s share by increasing focus on youth .
 This plays to the fact that though R&G is the acceptable world of coffee in general,
young people can still choose soluble as their habits are not yet set.
 Also, young people are rarely attracted to the same old brand that their parents
consume.
 The threat from other beverages- e.g. Soft drinks, is common across developed
markets (they have been luring away tomorrows NESCAFÉ consumers, while our
own recruitment efforts have been often patchy.

November 30, 2012
Page 23
 A key development is that several markets have launched innovative, tailor-made
products to attract youth.
 Strong OOH activities help to get consumers in touch with NESCAFÉ.
 But Nestlé must ensure that this branded OOH contact is really positive experience.
9.3.DEVELOPING LEADER MARKET
The Scenario:
 Soluble dominates the coffee market; R&G is only starting to show up in OOH.
 NESCAFÉ is usually the dominating coffee brand and we play the role of market
developer, helped by improving per capita income.
 There is considerable opportunity to build that coffee category in these markets as the
coffee habit is yet to be properly established.
 In addition NESCAFÉ is equal to coffee here and we can be more more aggressive
and commandeer the category.
 As a result this is the high growth cluster today.
 The key challenge is to change consumption habits from other beverages usually hot
tea to coffee.
Strategies:
 Establish NESCAFÉ as the standard for coffee (provide strong support commandeer
the category and establish NESCAFÉ as a rational, dominating beverage brand.
 Target main consumer need states (priority to morning cup)
 Adopt the 3A approach (focus on improving appeal, availability and affordability)
9.4.DEVELOPING CHALLENGER MARKET
The Scenario:
 This is the smallest cluster today in terms of both volume and values, but these
markets will become important contributors to the business in the future.
 Coffee consumption is under developed and tea is often the most consumed beverage.
 These are markets that are currently characterized by an R&G habit, but more from
custom rather than from strong branded R&G activity.

November 30, 2012
Page 24
 In most of these markets “the jury is still out on who will set the standard in the long
run.
Strategies:
 Establish soluble coffee as a desirable beverage (target most important need states
and/or exploit weakness in R&G).
 Adopt the 3A strategy approach (focus on improving appeal, availability and
affordability).
 Consumer education is key (how to prepare, sampling).
The main objective of this part of the report is to point out the gaps in
NESCAFÉ’s communication and promotional approach and to come up with strategies to
fill those gaps. From all our prior discussions, we can say this much that NESCAFÉ in
Bangladesh is in continuous effort of making this brand a happening one. But it has
overlooked some very vital opportunities it could tap in the present world.
Following are some ways by which NESCAFÉ Bangladesh can get closer to its
target group hence build its brand strongly. Since NESCAFÉ 3 in 1 is the recruitment
SKU, most of the plans evolve around it.
10. MANAGEMENT OF STAKEHOLDERS
Nestlé has well defined business principles for the proper management of its
stakeholders. The ten principles of Nestlé’s business operations are-
Consumers
Nutrition, Health and Wellness: Nestlé’s core aim is to enhance the quality of
consumers’ lives every day, everywhere by offering tastier and healthier food and beverage
choices and encouraging a healthy lifestyle. This is expressed via the corporate proposition
Good Food, Good Life.
Quality assurance and product safety: Everywhere in the world, the Nestlé name
represents a promise to the consumer that the product is safe and of high standard.

November 30, 2012
Page 25
Consumer communication: Nestlé is committed to responsible, reliable consumer
communication that empowers consumers to exercise their right to informed choice and
promotes healthier diets. Nestlé respects consumer privacy.
Human rights and labor practices
Human rights in business activities: Nestlé fully supports the United Nation Global
Compact’s (UNGC) guiding principles on human rights and labor and aims to provide an
example of good human rights and labor practices throughout its business activities.
Our people
Leadership and personal responsibility: Nestlé’s success is based on its people.
They treat each other with respect and dignity and expect everyone to promote a sense of
personal responsibility. It recruits competent and motivated people who respect its values,
provides equal opportunities for their development and advancement protect their privacy and
do not tolerate any form of harassment or discrimination.
Safety and health at work: Nestlé is committed to preventing accidents, injuries and
illness related to work, and to protect employees, contractors and others involved along the
value chain.
Suppliers and customers
Supplier and customer relations: Nestlé requires its suppliers, agents,
subcontractors and their employees to demonstrate honesty, integrity and fairness, and to
adhere to our non-negotiable standards. In the same way, Nestlé is committed to its own
customers.
Agriculture and rural development: Nestlé contributes to improvements in
agricultural production, the social and economic status of farmers, rural communities and in
production systems to make them more environmentally sustainable.
The environment
Environmental sustainability: Nestlé commits itself to environmentally sustainable
business practices. At all stages of the product life cycle it strives to use natural resources
efficiently, favor the use of sustainably-managed renewable resources, and target zero waste.

November 30, 2012
Page 26
Water: Nestlé is committed to the sustainable use of water and continuous
improvement in water management. Nestlé recognizes that the world faces a growing water
challenge and that responsible management of the world’s resources by all water users is an
absolute necessity.
There are no specific guiding business principles for media and extortionists. Media is
mainly handled by communication agencies employed by Nestlé. It also has contract with
creative agencies that develop the creative materials for communication with consumers. As
to the extortionists, the company hasn’t yet faced anything like that. The company operates
through 77 distributors. If distributors face any such problem, they solve it on their own
accord.
11. INDUSTRY ANALYSIS: PORTER’S FIVE FORCES
MODEL
To understand the industry and market better, it’s strong and weak sides; it is
recommended and very helpful to use Porter’s Five Forces Model Framework. It is essential
to examine coffee industry using this Framework to be able to see the future perspectives of
the industry.
11.1.1. CURRENT COMPETITORS:
Nestlé is the only multinational food company which has its wholly owned subsidiary
here in Bangladesh. Local companies like AMCL, Bombay Sweets have been present in the
industry with their own food products. Other local conglomerates like ACI, Square, Partex,
AKIJ group, Meghna group and Abul Khair have business in the food & beverage industry as
well. Due to their lower compliance expenses compared to Nestlé, and the opportunity of
drawing cash from sister concerns, they have a lot of cash surplus and have started to play
aggressively in the market. There is also a rise in the trend of distributorship and franchising.
Shajib Group for example markets Kraft Food’s extremely popular ‘Tang’, Pakistani juice
brand ‘Sheizan’. Capitalizing on this experience, it has launched a lot of its own brands. We
also have Cadbury products available in the market though they do not have any operations
here. Unilever Bangladesh has tea and soup brands which are strong competitors of Nestlé

November 30, 2012
Page 27
products. New Zealand Dairy has several milk brands. In the franchising arena, Transcom
group is the forerunner. It has brought renowned KFC, Pizza Hut to Bangladesh. MGH group
has brought Nandos and Barista which are very renowned as well. Apart from that, Transcom
Distribution markets Complan, Sneakers and some other food brands.
11.2. THREATS OF NEW ENTRANTS OR BARRIERS TO ENTRY:
This industry constantly faces the threat of new entrants. We have already seen in the
previous discussion that this industry is riddled with competition. Still we are seeing new
players in the market every other market. Two new players are Ejab group and AHZ Agro
Industries. Apart from new entrants, some other old companies like Nabisco, Cocola are
revamping and relaunching their products. All these, if put together, convey the message that
there are low barriers to entry in this industry. However, in the wake of rising global food
price inflation and rising costs of transport, companies are convinced that their peace time is
over.
Rising costs – increasing transport and raw material costs, mainly relating to rising
bean, oil and packaging prices, are placing significant pressure on margins in the company's
beverage operations.
11.2.1. BARGAINING POWER OF SUPPLIERS:
Suppliers can be of two types- raw material suppliers, services and indirect material
suppliers. The number of suppliers in Bangladesh is very limited. For example, only 4
companies supply shipping cartons. Given the competition scenario, we can see that the
number of clients are way bigger than number of suppliers. So the suppliers have a lot of
options to go to. Hence, they enjoy high bargaining power.
11.2.2. . BARGAINING POWER OF CUSTOMERS:
The plethora of food companies gives also the consumers an array of options to
choose from. Their bargaining power is actually a balance of two opposite phenomenon. In
terms of price, the consumer will always have cheaper options to switch to. When it comes to
quality, they are loyal to one particular company or brand. So quality conscious people will
consume a particular product no matter what the price is mostly because they trust it and are
habituated to it. They will have no option but exercise a low bargaining power.

November 30, 2012
Page 28
11.2.3. . SUBSTITUTE PRODUCTS:
Food & Beverage industry, holistically thinking, does not have any substitute product
since everything edible falls into this industry. However, from a different point of view,
substitute products are those non-branded, home-made, hand cooked items that make up the
lion’s share of our food. The 20 largest food company in the world accounts for less than 9%
of the world market. Obviously, the substitute products are predominant.
12. CONCLUSION AND RECOMMENDATIONS
Nestlé must ensure availability of its product to the hand reach of the customers. The
smaller sachets in the SKU portfolio would play a vital role to increase the distribution of the
brand and to make sure that the brand is available for consumption by the consumers
whenever and wherever possible. NESCAFÉ vending machines can also play a key role in
making NESCAFÉ available to the target consumers. The product needs to be familiar to the
consumers by establishing role of the brand in their daily lives. Sampling of the brand can
work very well in ensuring familiarity of the brand among the target consumers. Interactive
activities supported by sampling or trial of the product can work very well in ensuring
familiarity of the product. Lastly the biggest challenge of the brand would be addressing
affordability. Being an imported product, duty structure always creates pressure on the brand
as far as affordability is concerned. Nestlé must continuously look for opportunity to increase
the efficiency of the brand, save cost and thus reduce the price of the products to make it
more affordable
WORKS CITED
- Islam, M. M. (2011). Profile of the Coffee Consumers: A Case of Nescafé.
- Munch Report, www.Neevai.com
- Interviews of Nestlé employees
- www.wikipedia.com/Nestlé
- www.wikipedia.com/Nescafé
- www.necafé.com

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