BUSINESS ECONOMICS

CIA- 2

MONOPOLISTIC MARKET

NESTLE

Submitted by:
Khushi Dalla (JU2024MBA10231)
Kumaresan (JU2024MBA16369)
Jocelyn A(JU2024MBA9015)
Mohammad Sajed (JU2024MBA18612)
Krishnagiri Yogya Sahithi (JU2024MBA11189)
Introduction
Nestlé S.A. is one of the global food and drink companies, based in Vevey, Switzerland,
and has its existence more than 150 years. It was founded by Henri Nestlé, a pharmacist,
in 1866. Its initial goal was infant formula development so that the baby deaths rate
would decrease. Its strong commitment to health and nutrition enabled it towards
becoming a world giant.

Nestlé now operates in 189 countries with more than 2,000 different brands, from
well-known to new ones such as Nespresso, Nescafé, Maggi, and Purina. Because of the
many kinds of products the company sells, including dairy, coffee, nutrition, frozen
foods, and pet care, the company meets the needs of lots of different kinds of customers.

when the company set up its first factory at Moga in Punjab. The company has then
expanded hugely and today there are several manufacturing units of the company present
in the country. Goa, Punjab, and Uttarakhand are some of the production houses of the
company in India. Nestle India has been proven to be both a source of yielding great
returns for the food industry, but in return, they have also provided a lot of benefits for
the local economies by providing employment and imbuing skills into people.

Nestle India encompasses a wide range of products, targeting all segments of the market.
The major categories are:

· Dairy Products: The various milk and dairy products offered by the company
include the names Nestle A+, Dairy Milk, which is also good for weight watchers.

· Infant Nutrition: One of the famous brands used in infant nutrition is the Nestle
Cerelac and Nestum brand, which provides babies and toddlers with essential
nutrients.

· Instant Noodles: probably the very first and most easily recognizable product that
comes under Nestle India is the noodles. When it was launched, during 1983, it had
huge popularity as an easy to cook product that really had a great taste.

· Coffee: Among all the coffee brands in India, Nescafe has occupied a leading space
and has some incredible instant coffee products that are catering to the growing
culture of cities.
· Confectionery and Snacks: Other than the food products, Nestlé also manufactures
confectionary products and snacks targeting different consumer tastes and
preferences.

Strategic Focus and Innovation

Health, wellness, and sustainability make up the other strategic objective that Nestlé
strives to achieve. The company continues to evolve according to the needs of the
customers so that it may promote healthier and more environmentally friendly products.
This includes reducing sugar and salt content in their food and drinks to ensure a net zero
emission reduction in all greenhouse gases by 2050. It is responsible sources and better
packaging that are among the other ways through which Nestlé has been striving to be
environmentally friendly.
Market Position and Challenges

Nestlé is always ranked as one of the best food and drink companies in the world. It
competes with big names like Unilever and PepsiCo and yet it is pretty much ahead of
competition due to its large distribution network and brand name. But what it suffers
from are issues such as fluctuations in commodity prices, increased competition brought
in by new brands, and changing rules, especially while dealing with health claims and the
environment.
INDUSTRY OVERVIEW

Nestlé operates primarily in the global food and beverage industry, one of the largest and
most diverse sectors in the world economy. This industry is characterized by its
resilience, constant innovation, and increasing focus on health and sustainability.

Market Size and Growth

The global food and beverage market is massive, valued at approximately $7.8 trillion in
2022, with projections to reach $9.7 trillion by 2027, growing at a CAGR of 4.5%. This
growth is driven by factors such as population increase, rising disposable incomes, and
changing consumer preferences.

Industry Trends

Food and Beverage industry is influenced by the following key trends:

1. Health and Wellness: The increasing concern about healthy, functional and organic
food among consumers.
2. Sustainability: The increasing preference for green and ethical products.
3. Convenience: The Increasing Consumption of ready-to-eat foods and snack foods.
4. Personalization: Nutrition focused on the individual based on their needs and
fancies.
5. Plant-based Alternatives: The Quick Adoption of Plant Based Meat & Dairy
Products.
6. Digital Transformation: E-commerce and other direct channels are on the rise.

Challenges

1. The sector has a number of difficulties:

2. Regulatory Environment: Strict laws governing food safety and labeling
specifications.
3. Events such as the COVID-19 pandemic show vulnerabilities in the supply chain,
resulting in disruptions.
4. Price of Commodities Volatility: Variations in the price of raw materials have an
impact on profitability.
5. Consumer Preferences are Changing: Dietary practices and tastes are changing
quickly.
 6. Environmental Concerns: Push for a decrease in plastic consumption and carbon
footprint.

Opportunities

1. Notwithstanding difficulties, the sector offers a wealth of opportunities:

2. Emerging Markets: Developing nations experiencing rapid expansion in the
middle class.
3. Blockchain, IoT, and AI technology integration for increased traceability and
efficiency.
4. Functional Foods: Expanding market for goods that offer extra health advantages.
5. Eco-friendly packaging materials: advancements in sustainable packaging.
6. Utilizing data and technology to create individualized dietary plans is known as
personalized nutrition.

Nestlé's Position
Nestlé, one of the biggest food and beverage corporations in the world, is well-positioned
in this changing market. Major industry trends are well-aligned with its diversified
portfolio, global presence, and emphasis on nutrition, health, and wellbeing. Nestlé has
demonstrated its ability to adapt to changing market demands through its continuous
efforts in areas like plant-based products, tailored nutrition, and sustainable packaging.

Nestlé's capacity to innovate, adjust to shifting customer preferences, and handle

regulatory obstacles will be essential to preserving its competitive advantage in this
sizable and fast-paced global market as the industry develops.
COST ANALYSIS

Nestlé is one of the greatest companies and has a very well chalked out pricing policy in
India. The company structure of its pricing is based on a holistic approach that balances
the giving of low-cost goods with high value goods. This approach of the company
depends on diverse factors ranging from market segmentation to customer behaviors,
competitiveness, and cost.

Nestle changes its prices for different classes of consumers in India because the Indian
population varies in its income and cannot afford the same products. The company is
targeting a different class of consumer, from the middle-class urbanites to low-income
people. This segment helps Nestlé market at multiple price levels but still maintain the
value of the brand.

The company sets its prices in India to be competitive as that market has a very
diversified price-sensitive consumer. To maintain low prices, the company monitors the
competition companies, that being Hindustan Unilever and Britannia. By creating
multiple offers and bundles during festivals and promotions, the company sells more of
the same volume without losing its brand identity.

Products and Pricing variations:

Nestle sells everything in India-from milk products to instant noodles, coffee, baby food,
or snacks. Each has its price strategy.

· Dairy Products: These products from Nestlé Dairy and Nestlé A+ fall in an
affordable category to ensure a cut across the market to gain mass appeal. For
example, a pack of 200 ml of Nestle A+ milk costs around ₹25, which makes it
reasonable for those who consume it on a daily basis.

· Maggi: it is one of the names that have become pretty popular in India under the
umbrella of Nestlé, and their price level attracts masses towards it. The particular
product is now being sold in a pack for about ₹12 to ₹15. A 70g can cost, and students
as well as the working lot likes to grab it because of its quick meal option.

· Coffee products: Nestlé offers various coffee products including Nescafé at a wide
range of price points. A 50g pack of Nescafé Classic may cost between ₹150 and
₹180. It is developed for those who seek quality coffee but have something that is
very easy to use.
· Infant Nutrition: The infant nutrition product line of Nestle, with offerings such as
Cerelac, is pricier in the market as compared to its competitors. This is because
Cerelac contains more ingredients and nutrients compared to other brands. The 500g
packs of Cerelac usually cost between ₹300 and ₹350. Their target market lies with
the healthy-conscious parents who are willing to pay more for their child's nutrition.

The total cost structure: Specific sub-divisions covers both fixed and variable cost
structures that are present in Nestlé India’s total cost structure.

Key Components of Costs

1. Raw Materials and Ingredients

a. Main Inputs: milk, sugar, coffee, cocoa and various grains are basic
ingredients
b. Cost Volatility: Due to these reasons, the pace of production of unwanted
materials is high.
2. Manufacturing and Production
a. Production Facilities: The company Nestlé has several manufacturing
plants all over the country which results to costs like;
b. labor: labor force consisting of skilled workers and unskilled workers cost
shells.
c. Utilities: water, electricity and gas costs.
d. Maintenance: Maintenance on the machines and the building on a regular
basis.
e. Updating of Technologies: There is constant technological sophistication to
achieve efficient operations so as to minimize wastage.
3. Logistics and Distribution
a. Cost of Delivery: There are extra expenses when they take to transport the
products to the city centers as well as rural places such as fuel cost,
maintenance, warehousing etc.
b. Supply Chain Management: Search of effective Clinical Logistics
Strategies to minimize costs while ensuring timely and complete discharge
of predetermined details of activities.
4. Marketing and Promotion
a. Advertising Expenses: A huge amount set aside in advertising budget for
advertising the introduction of a new product or brand building campaigns
is aimed at advertising sales.
 b. Sales Promotions: Discounts, promotional offers, and partnerships with
retailers can also impact costs.
5. Administrative Expenses
a. Corporate activities incurred operational costs include costs for
management and staff salaries, accommodation space and IT equipment.
6. Regulatory Compliance
a. Based on these reasons, it is justifiable to incur compliance costs in
strengthening brands as legal obligations which include food safety
regulations, environmental protection laws, or provincial policies on quality
management systems.
7. Profitability Analysis
a. Revenue Streams: Other than dairy products, snacks and beverages, infant
nutrition products help in keeping reliable revenue.
b. Profit Margins: It also assists in understanding how well costs are managed
by evaluating the gross as well as the operating margin. Higher margins are
expected from the premium products than the normal ones.
8. Financial Performance Metrics
a. Cost Ratios: Some useful ratios that can be used to measure needs are based
on cost of goods sold (COGS) ratio to sales.
b. Return on Investment (ROI): ROI of marketing and capital spending to
ascertain levels of success of such strategies.
9. Challenges and Considerations
a. Market Competition: Pricing competition is common in the FMCG sector
posing operational challenges due to depressed margins targeting profits.
b. Changing Consumer Preferences: The rising concerns over healthy and
eco-friendly products may impose different sourcing and production
practices.
c. Economic Factors: Through taxation and inflation as well have cost and
pricing implications.
REVENUE ANALYSIS
Nestlé's revenue has grown from ₹8.734 trillion in 2013 to ₹9.314 trillion in 2023, a
6.64% increase over the decade. This growth, however, was not linear and reflects the
complex interplay of various economic factors.
Economic Concepts and Year-by-Year Analysis

2013-2015: Initial Decline

● 2013: ₹8.734 T (5.66% growth from previous year)

● 2014: ₹7.796 T (-10.75% change)
● 2015: ₹7.564 T (-2.98% change)

Economic Concepts at Play:

1. Economic Ideas in Motion:

2. Business Cycle: Many economies had a contractionary phase following the global
financial crisis, which decreased consumer spending.
3. Exchange Rate Fluctuations: Unfavorable currency translation effects resulted
from the strengthening of the Swiss Franc (Nestlé's reporting currency) against
other currencies.
4. Market Saturation: Nestlé encountered difficulties in developed areas,
underscoring the idea of declining profits in well-established markets.
5. Elasticity of Demand: Given that they are not necessities, a few of Nestlé's items
would have had elastic demand during recessions.

Specific Factors:

● Declining global economy has an impact on consumer expenditures

● Emerging market challenges, such as China's slower development
● Restructuring the portfolio and selling off failing companies
● Food safety issues in certain markets (Indian Maggi noodles, for example)

2016-2017: Recovery and Growth

● 2016: ₹7.394 T (-2.25% change)

● 2017: ₹7.747 T (4.78% change)

Economic Concepts at Play:

1. Innovation and Productivity: Nestlé's emphasis on innovation and operational

efficiency serves as an example of the economic premise that productivity growth
is the primary driver of long-term economic growth.
 2. Market Segmentation: Targeting distinct market segments for the best possible
resource allocation is an economic idea that is shown in the company's
concentration on high-growth categories.
3. Economies of Scale: Nestlé's global reach gave it access to production and
distribution economies of scale.

Specific factors:

1. Realignment strategically to focus on high-growth categories (e.g., pet care,

coffee)
2. Investing in digital transformation and e-commerce
3. Enhanced outcomes in important emerging markets
4. Introduction of new goods aimed at people who are health-conscious

2018-2020: Steady Performance

● 2018: ₹7.825 T (1.01% change)

● 2019: ₹8.043 T (2.78% change)
● 2020: ₹8.058 T (0.19% change)

Economic Concepts at Play:

1. Supply and Demand Shocks: The 2020 COVID-19 pandemic showed how
exogenous shocks can affect market equilibrium by causing both supply
interruptions and demand shifts.
2. Customer Behavior: Shifts in customer choices regarding sustainability and health
show how changing consumer preferences can affect market demand.
3. Market Structure: The ideas of oligopolistic competition and brand distinctiveness
are highlighted by Nestlé's capacity to sustain consistent growth in a cutthroat
sector.

Specific Factors:

● Balanced approach to expansion in both established and new markets

● Ongoing portfolio optimization
● More emphasis on eco-friendly packaging and procedures
● COVID-19's mixed effects on various product categories
2021-2023: Accelerated Growth

● 2021: ₹8.031 T (-0.34% change)

● 2022: ₹8.607 T (7.17% change)
● 2023: ₹9.314 T (8.22% change)

Economic Concepts at Play:

1. Economic Recovery: The idea of an economic recovery after a recession is

illustrated by the post-pandemic upsurge.
2. Inflation and Pricing Power: In imperfectly competitive markets, Nestlé's ability to
transfer cost increases to customers is a reflection of the economic concept of
pricing power.
3. Mergers and Acquisitions: The financial drivers of corporate consolidation are
shown by strategic acquisitions in fast-growing industries.
4. Globalization: The advantages and disadvantages of economic globalization are
demonstrated by Nestlé's performance in new regions.

Specific Factors:

● Recovery from the pandemic increasing consumption outside the house

● Effective initiatives for e-commerce and digitalization
● Put an emphasis on high-end goods (premiumization strategy)
● Strong results in the product categories for health and wellness
● Strategic purchases in markets with strong growth
PROFIT ANALYSIS
Key Profit Metrics

Revenue: Total income from sales of goods and services.

Cost of Revenue: Direct costs of producing goods or delivering services.

Gross Profit: Revenue minus cost of revenue.

Operating Profit: Gross profit minus operating expenses (such as SG&A, marketing,
etc.).

Net Profit: Profit remaining after all expenses, taxes, and interest have been deducted
from total revenue.

Profit Trends (2013-2023)

· Revenue and Gross Profit Growth

Over the past decade, Nestlé’s revenue remained relatively stable, ranging from CHF
84.3 billion (in 2020) to CHF 94.4 billion (in 2022). Despite fluctuations in global
market conditions and economic challenges, including the COVID-19 pandemic, Nestlé
demonstrated resilience through strategic cost management and diversification of its
product offerings.

In 2020, revenues dropped to CHF 84.3 billion, reflecting the broader economic
challenges posed by the pandemic. However, a strong gross profit margin of 48% helped
cushion the impact.

By 2023, revenues rebounded to CHF 93.0 billion, showing the company’s recovery from
global disruptions and an ability to adapt its operations and supply chain effectively.

· Gross Profit Margin Stability

The gross profit margin, a key indicator of how efficiently the company converts sales
into profit after accounting for the cost of goods sold, fluctuated slightly during the
decade. It ranged from 43% to 48%, showing the company’s ability to manage cost
pressures effectively.
In 2018, the gross profit margin hit a low of 43%, coinciding with rising input costs and
expenses.

In 2020, Nestlé achieved a gross profit margin of 48%, its highest during the period,
demonstrating better cost control and operational efficiency during a challenging year.

· Operating Profit and Efficiency

Operating profit is a critical metric that measures profitability from core business
operations. Nestlé consistently maintained a solid operating profit margin, demonstrating
its ability to manage fixed and variable costs effectively, including SG&A, marketing,
and administrative expenses.

2018 saw a rise in operating costs, primarily due to increased marketing and restructuring
activities, which temporarily lowered profitability. However, by 2020, Nestlé had adapted
to changing market dynamics, reducing operating expenses and improving profitability.

· Net Profit and Shareholder Returns

Net profit, the bottom line of a company’s financial health, varied throughout the decade
due to external factors such as exchange rate fluctuations, global commodity price
volatility, and one-time restructuring costs. Nestlé, however, maintained its focus on
delivering shareholder value through dividends and share buybacks.

2017 was a standout year in terms of profitability, as the company benefited from strong
organic growth in key markets and favorable exchange rates, boosting net income.

In 2021 and 2022, despite cost pressures from inflation, Nestlé continued to deliver
strong net profits, reflecting efficient cost management and growth in premium product
categories like plant-based food and health science.

Strategies Affecting Profitability

1. Portfolio Restructuring: Over the decade, Nestlé strategically focused on

streamlining its portfolio, divesting slower-growing brands (e.g., selling its U.S.
confectionery business in 2018) and acquiring high-growth segments like health
science and plant-based products.
2. Innovation and Digital Transformation: Nestlé invested in innovation to tap into
consumer demand for healthier and more sustainable products. By embracing digital
tools and e-commerce platforms, the company maintained its competitive edge,
particularly during the pandemic.

3. Cost-Cutting Initiatives: Nestlé has consistently worked on reducing overhead and

operational inefficiencies through automation, restructuring efforts, and improved
supply chain management. These initiatives helped protect margins even when
revenue growth was flat.

Challenges and Market Conditions

1. Currency Fluctuations: Nestlé's global operations exposed it to currency risks,

particularly in emerging markets. This had a direct impact on profit margins,
especially in regions like Latin America and Asia.

2. Commodity Prices: Volatile prices for raw materials such as dairy, coffee, and cocoa
impacted cost of revenue, but Nestlé’s ability to hedge against price swings and pass
some costs onto consumers through pricing adjustments helped protect its margins.

3. Pandemic and Inflation Pressures: The COVID-19 pandemic and the subsequent
inflationary pressures had a significant impact on the global economy. However,
Nestlé's resilience and ability to shift towards e-commerce and prioritize core brands
ensured steady profitability during this period.
BREAK EVEN ANALYSIS
Over the period, Nestlé has maintained substantial revenues, with relatively stable gross
profit margins and fixed costs (SG&A expenses). Key metrics used in the break-even
analysis include:

Revenue: Total sales generated by Nestlé each year.

Fixed Costs (SG&A): Selling, General, and Administrative expenses, which are
considered fixed costs for the purpose of this analysis.

Gross Profit Margin: The percentage of sales revenue that exceeds the cost of revenue,
contributing towards covering fixed costs and generating profits.

Break-Even Revenue Calculation

The break-even point is calculated using the following formula:

Break-Even Revenue = Fixed Costs (SG&A)/Gross Profit Margin

Analysis of Key Years

· 2013:

Revenue: CHF 92.2 billion

Fixed Costs (SG&A): CHF 25.0 billion

Gross Profit Margin: 44.0%

Break-Even Revenue: CHF 56.82 billion

Nestlé's revenue comfortably exceeded the break-even point, indicating healthy

profitability.

· 2015:

Revenue: CHF 88.8 billion

Fixed Costs (SG&A): CHF 25.3 billion

Gross Profit Margin: 45.0%

Break-Even Revenue: CHF 56.22 billion

Despite a slight dip in revenue, Nestlé maintained profitability, as actual revenue was
significantly higher than the break-even point.

· 2018:

Revenue: CHF 91.4 billion

Fixed Costs (SG&A): CHF 28.0 billion

Gross Profit Margin: 43.0%

Break-Even Revenue: CHF 65.12 billion

Nestlé’s SG&A expenses increased this year, causing the break-even point to rise.
However, the company still performed well, exceeding the break-even revenue.

· 2020:

Revenue: CHF 84.3 billion

Fixed Costs (SG&A): CHF 25.3 billion

Gross Profit Margin: 48.0%

Break-Even Revenue: CHF 52.71 billion

Nestlé managed to maintain a high gross profit margin during a challenging year (due to
global events like the COVID-19 pandemic), keeping the break-even revenue relatively
low.

· 2023:

Revenue: CHF 93.0 billion

Fixed Costs (SG&A): CHF 25.4 billion

Gross Profit Margin: 46.3%

Break-Even Revenue: CHF 54.8 billion

In 2023, Nestlé continued to operate well above the break-even point, reflecting strong
operational efficiency.

Trends and Observations

1. Stable Revenues: Nestlé’s revenue remained relatively consistent over the decade,
ranging from CHF 84 billion to CHF 94 billion. Even in years where revenue dipped
slightly, the company maintained strong financial performance.

2. Gross Profit Margin Variations: The gross profit margin fluctuated between 43%
and 48%. In years where the margin was higher (such as 2020), the break-even
revenue was significantly lower.

3. Fixed Costs Management: Fixed costs (SG&A) were managed carefully, typically
staying within CHF 25-28 billion. Increases in these expenses were generally
balanced by higher gross profit margins or revenue growth.

4. Break-Even Trends: The break-even revenue varied over the years, with the
highest being CHF 65.12 billion in 2018 and the lowest being CHF 52.71 billion in
2020. Nestlé consistently generated revenue well above these levels, ensuring
profitability each year.
Year Revenue Fixed Costs Gross Profit Break-Even
(CHF (SG&A, CHF Margin (%) Revenue
billion) billion) (CHF
billion)

2013
92.20 CHF 25.00 CHF 44.00 CHF 56.82 CHF

2014
91.60 CHF 25.30 CHF 45.00 CHF 56.22 CHF

2015
88.80 CHF 25.30 CHF 45.00 CHF 56.22 CHF

2016
89.50 CHF 25.50 CHF 45.00 CHF 56.67 CHF

2017
89.80 CHF 25.50 CHF 43.50 CHF 58.62 CHF

2018
91.40 CHF 28.00 CHF 43.00 CHF 65.12 CHF

2019
92.60 CHF 28.40 CHF 46.00 CHF 61.74 CHF

2020
84.30 CHF 25.30 CHF 48.00 CHF 52.71 CHF

2021
87.10 CHF 25.30 CHF 48.20 CHF 52.49 CHF

2022
94.40 CHF 25.30 CHF 45.60 CHF 55.48 CHF

2023
93.00 CHF 25.40 CHF 46.30 CHF 54.86 CHF
CONCLUSION
Nestlé has demonstrated remarkable financial stability and operational efficiency from
2013 to 2023. The company’s ability to keep revenues well above the break-even point in
all years reflects its robust business model, effective cost management, and adaptability
to changing market conditions. Despite some fluctuations in revenue, SG&A, and gross
profit margins, Nestlé remained profitable throughout the decade, consistently covering
its fixed costs and ensuring financial health.
Challenges Nestle faced:

Cost Analysis Challenges:

1. Complexity of global supply chain: Managing costs across diverse

geographic locations and suppliers.
2. Raw material price volatility: Fluctuations in commodity prices (e.g.,
cocoa, coffee, milk).
3. Manufacturing and logistics costs: Optimizing production and distribution
expenses.
4. Currency fluctuations: Impact on import/export costs and global pricing.
5. Regulatory compliance costs: Adapting to changing food safety and
environmental regulations.

Revenue Analysis Challenges:

1. Market competition: Maintaining market share amidst intense

competition.
2. Changing consumer preferences: Adapting to shifting consumer tastes
and trends.
3. Geographic market risks: Managing revenue in diverse markets with
varying economic conditions.
4. Product mix optimization: Balancing revenue from various product
categories.
5. Pricing strategy: Managing price elasticity and profitability.

Profit Analysis Challenges:

1. Margin pressure: Maintaining profit margins amidst rising costs and

competition.
2. Product profitability: Identifying and optimizing profitable product lines.
3. Geographic profitability: Managing profitability across diverse markets.
4. Currency impacts: Mitigating foreign exchange risks on profitability.
5. Research and development (R&D) investments: Balancing R&D spend
with profitability.

Break-Even Analysis Challenges:

1. Accurate cost estimation: Ensuring precise calculation of fixed and

variable costs.
2. Sales volume uncertainty: Estimating sales volume to determine
break-even points.
3. Pricing strategy: Setting prices that balance revenue and profitability.
4. Product mix complexity: Managing break-even points across diverse
product lines.
5. Market fluctuations: Adapting break-even analysis to changing market
conditions.
Nestle-Specific Challenges:

1. Water scarcity and sustainability: Managing water usage and

sustainability costs.
2. Sugar reduction and reformulation: Adapting to changing consumer
preferences and regulations.
3. E-commerce and digital transformation: Investing in digital infrastructure
and marketing.
4. Emerging market risks: Managing risks in developing markets (e.g.,
political instability).
5. Brand reputation and social responsibility: Maintaining a positive brand
image.
Solutions of Nestle:
Cost Analysis Solutions:

1. Supply Chain Optimization: Streamlined logistics, transportation, and

procurement, resulting in:

- 10% reduction in transportation costs (2020)

- 5% decrease in procurement costs (2019)

2. Cost-cutting initiatives: Reduced energy consumption, waste reduction,

and process improvements, resulting in:

- 12% decrease in energy consumption (2019-2020)

- 15% reduction in waste generation (2018-2019)

Revenue Analysis Solutions:

1. Product Innovation: Introduced new products, flavors, and packaging,

resulting in:

4.2% increase in organic sales growth (2020)

- 6.5% increase in coffee segment sales (2020)

2. Emerging Market Expansion: Entered new markets, particularly in Asia

and Africa, resulting in:

- 10.3% increase in sales in Asia, Oceania, and Africa (2020)

- 12.1% increase in sales in Latin America (2020)

Profit Analysis Solutions:

1. Margin Improvement: Focused on high-margin products and categories,

resulting in:
- 14.8% operating margin (2020)
- 16.3% operating margin in coffee segment (2020)

2. Pricing Strategy: Adjusted prices to balance revenue and profitability,

resulting in:

- 2.5% price increase in 2020

- 1.8% price increase in 2019

Sustainability Initiatives:

1. Water Conservation: Reduced water usage in operations, resulting in:

- 35% reduction in water usage (2015-2020)

- 25% reduction in water intensity (2015-2020)

2. Energy Efficiency: Implemented renewable energy sources, resulting in:

- 20% reduction in greenhouse gas emissions (2015-2020)

- 15% reduction in energy consumption (2015-2020)
Comparative analysis

Comparison of Nestle with Unilever

Nestle Profile:
Nestle started its business in India in 1961, in Moga, Punjab. Now it has
four offices and eight production units in India. Nestle is very closely associated with
India, and satisfies its stakeholder. The company is giving a large number of
employment opportunities to the Indian people. Nearly one million people are getting
benefits from employment. The quality of the company’s product is famous in both
national and international markets. The famous brands of the company are Nescafé,
Maggi, Milkybar, Kit Kat, Bar-One, Milkmaid and Nestea.

Unilever Profile:
Hindustan Unilever Ltd (HUL) started its business in 1993 in India. It is one
of the biggest fast moving consumer goods (FMCG) corporations in India. HUL is
earning a very high amount of profit in the competitive market where large numbers of
competitors are entering the market. They are achieving their target through
innovations, marketing and efficient management. Their research and development is
helping them to apply innovations in the product and marketing. The company is in the
12th position in the super 50 list of the world’s most innovative companies in the
financial year 2012-13, by Forbes.
SWOT Analysis:

SWOT NESTLE UNILEVER

Strengths ● High Brand Value ● Strong Business Model

● Strong Financial Performance ● Strong Brand Portfolio
● Efficient R&D System ● Sustainability
● Affordability
● Global Presence of the Brand ● Strong Distribution
● Shifting Focus Towards Network
Environmental Sustainability

Weakness ● Expensive Advertising Model ● High Threat of

● Highly Complex Organizational Substitution
Structure ● Shifting Consumer
Preferences Toward
● Dependency on Western Natural Products
Markets ● Over-dependence on
● Problems in Product Marketing Retailers
● Unhealthy Products ● Environmental Impact
Concerns
● Pricing Pressure

Opportunities ● Emerging Markets ● Emerging Markets

● E-commerce Growth Potential
● Collaborating with Smaller ● Surge in
Health-Conscious
Startups Consumables
● Sustainability ● Commitment to
● Expansion into Trending Innovation
Sectors ● Amplifying Brand
Recognition and Loyalty
● Optimizing E-commerce
Platforms

Threats ● Increasing Competition From ● Intensifying Competition

Other Brands ● Dependence on Limited
● Climate Impact Markets
● Supply Chain Disruptions
● Market Saturation ● Economic Uncertainty
● Government Regulations ● Technological
● Haunting Dark Past Disruptions
REVENUE ANALYSIS:

NESTLE ( CHF billion) UNILEVER ( Euro Billion)

Total Revenue - 92.998 Total Revenue - 59.604

Revenue growth rate - 7.2% Revenue growth rate - 7.0%

Operating Income - 14.520 Operating income - 9.758

Net income - 11.209 Net income - 7.140

COST ANALYSIS:

NESTLE ( billion CHF) UNILEVER (euro billion)

Cost of goods sold -$56.06 Cost of goods sold - 35.04

Operating expenses - 47.3 operating expenses- 46.5

Fixed cost - 1.7 Fixed cost - 1

PROFIT ANALYSIS:

NESTLE UNILEVER

Operating profit -14 063 Operating profit -9,758

Net profit - 11 509 Net profit - 7,140

Gross Profit Margin -45.9% Gross Profit Margin - 40.3%

Balance Sheet and Income Sheet Analysis:

Year 2023 NESTLE UNILEVER

(Million CHF) (euro million)

Total asset 126 550 75,266

Total liability 90 163 54,502

Shareholder’s Equity 36 387 20,764
Total 126550 75266

A= L+ S’E Equals Equals

Sales 92 998 59,604

Operating Profit 14 063 9,758
PBT 12 703 9,339
Net profit 11 509 7,140

Summary:

The comparative analysis of Nestlé and Unilever for 2023 highlights key differences in
their financial performance, particularly concerning cost, revenue, and profit.

Nestlé exhibited strong revenue growth, benefiting from a diverse product range and a
solid presence in health-focused markets. Effective cost management helped the
company maintain healthy profit margins, positioning it well within the industry.

In contrast, Unilever also saw steady revenue increases, driven by its commitment to
sustainability and innovation. However, the company faced higher raw material costs,
which exerted more pressure on its profit margins compared to Nestlé.

Overall, Nestlé outperformed Unilever in terms of profitability, while Unilever’s

sustainability initiatives suggest potential for long-term growth. This analysis
underscores the varying strategies and challenges both companies face in a
competitive landscape.
 CONCLUSION
The financial analysis of Nestlé indicates a strong, financially sound company with a
solid foundation for continued growth and profitability. However, it is essential to
monitor market trends, economic conditions, and competitive dynamics to ensure the
company's ongoing success.
Strong Financial Position: Nestlé has demonstrated a robust financial performance,
consistently generating significant revenue and profits. Its diversified product portfolio
and global presence have contributed to its market dominance and financial stability.
Efficient Cost Management: Nestlé's cost management strategies have been effective
in controlling expenses and maximizing profitability. The company's ability to optimize
its supply chain, manufacturing processes, and operational costs has been instrumental
in maintaining a competitive advantage.
Healthy Profit Margins: Nestlé has maintained healthy profit margins across its product
lines, indicating efficient pricing strategies and effective cost control. The company's
ability to generate consistent profits has allowed it to reinvest in research and
development, marketing, and expansion.
Strategic Pricing: Nestlé's pricing strategies appear to be well-aligned with market
demand and competitive dynamics. The company's ability to balance pricing with value
perception has been crucial in driving sales and profitability.
Resilience and Adaptability: Nestlé has demonstrated resilience in the face of
economic fluctuations and market challenges. The company's ability to adapt to
changing consumer preferences, regulatory environments, and competitive pressures
has been a key factor in its long-term success.

Reference:
1) Nestle annual report 2023
2) Nestle sustainability report
3) Unilever annual report 2023
4) https://seekingalpha.com/article/4575581-nestle-vs-unilever-reassessing-ahea
d-full-year-earnings
5) https://businessmodelanalyst.com/nestle-swot-analysis/
6) https://www.marketing91.com/swot-analysis-of-nestle/
7) Euromonitor International: "Nestle SA - Company Profile" (2020)
8)
9)