Nestle is a Swiss multinational company that is engaged in food and drink processing. It was founded by Henri Nestle in 1866, and currently has its headquarters in Vevey, Vaud, Switzerland. It has become the largest food company in the world, in terms of revenue. Its brands include Nescafe, Maggi, Nespresso, Kit Kat, and Nesquik, among others. Its operations are spread across 189 countries and seven geographic operating regions, employing more than three hundred thousand people. Let us discuss Nestle’s competitive advantages.
Nestle’s competitive advantages include its strong geographic presence and its high brand value as it has been operating for more than a century; its high investment in research and development; its efficient distribution system; and its deep product penetration. Its competitive disadvantages include the loss of brand image due to multiple controversies, new entrants to the market that seem more promising, and contaminated food recalls. Read on to find a more detailed analysis of the same.
Competitive advantages of Nestle
- Strong geographic presence: Nestle has its operations and sales spread across 189 countries, covering almost the entire world. It operates under segments divided geographically, such as the Americas, Europe, Middle East, Asia, Oceania, North Africa, and sub-Saharan Africa. Nestle has its operations and sales spread evenly across different countries and it never relies on a single region to generate most part of its revenue. None of the geographic zones mentioned above contribute to even half of the total revenue. This kind of strong and even presence across the world makes it immune to losses when a particular country’s market is negatively affected.
- High investment in research and development: Nestle has the largest network of research and development centers among food and beverage companies, with more than five thousand people employed in more than thirty research facilities.
- Brand value and wide product portfolio: Nestle offers more than two thousand different product choices in different categories which allows it to target a wider consumer base and also makes it somewhat immune to changing consumer tastes in one or two segments. As it has been operating in this industry for more than a century now, its brands are recognized by a large population and thus, it has an advantage over its much newer competitors.
- Efforts for environment sustainability: Nestle’s initiatives in this direction have resulted in reducing the production of waste and the usage of packaging material and helped in keeping the environment cleaner. By 2016, about 100 of its factories had recorded zero waste from production. Such initiatives by Nestle have benefitted it in the form of lower production costs and a cleaner environment and helped in building an image of a responsible company.
Competitive disadvantages of Nestle
- Loss of brand image due to multiple controversies: Nestle found itself in the middle of many controversies including its unethical marketing of baby formula, sourcing materials from suppliers who employed child labor, using misleading nutrition and ingredient labels, and demanding debt payment from a country struck with famine, among others. Loss of trust in the company among the consumers leads to declined sales and this is one area where Nestle’s competitors gain an advantage.
- Entry of new competitors into the food and beverage industry: The companies in the food and beverage industry are usually highly competitive as they have many bases on which they can attract consumers, which include taste, price, quality, advertising, packaging, service, brand recognition, and service among others. This leads to a division of the consumer base among several players, resulting in a loss of sales for companies like Nestle.
- Contaminated food recalls: Even though Nestle follows strict measures for quality control, there have been many instances where it had to recall and destroy tons of its products due to some form of contamination. This not only results in losses in terms of sales but also in terms of the reputation of the brand.
Nestle, being a world-renowned company in the food and beverage sector, owing to its existence for over a century, has a very strong geographical presence and diversified revenue sources, which gives it an advantage over its competitors. Also, its environmentally friendly practices helped in building its image as a responsible company. However, the controversies that the company gets itself entangled in, from time to time, have led to a loss of trust among the consumers. Nestle would do good to strictly use accurate nutrition and ingredient labels, and follow a strict policy of ethical sourcing similar to that of Starbucks so that it can sustain itself in the current heavily competitive food and beverage industry.
Frequently Asked Questions
- Who are Nestle’s top competitors?
Nestle’s major competitors include the following companies.
- The Coca-Cola Company
- The Kellogg Company
- PepsiCo Inc.
- Monster Beverage Corporation
- Kraft Foods Group
- Mondelez International
- Hansen Natural Corporation
- Snyder’s Lance among many others