SWOT Analysis of Nestle. Nestle is a food & drink Swiss multinational company. Its headquarter is situated in Vevey, Vaud, Switzerland. Henri Nestle laid the foundation of the company in 1866 as a milk company.
The annual revenue of Nestle in 2018 was 90.12 billion US dollars, out of which the net income of the company was 7.1 billion dollars. The brand was employing 352000 people by the end of 2019. Nowadays, Nestle is one of the largest food and drink companies in the world. According to the ranking by Fortune Global 500, the company ranked at 64th positions out of 500 world’s leading companies.
Some of the main products of Nestle are pet food, baby food, snacks, medical food, frozen food, bottled water, ice cream, breakfast cereal, dairy products, coffee & team, and confectionary items. According to an estimate, the annual sale of 29 products of Nestle is more than 1 billion US dollars.
Nestle is running 447 factories in more than 189 countries worldwide. The brand has also acquired many companies over the years like Gerber in 2007, Klim in 1998, Mackintosh in 1988, Libby’s in 1971, Findus in 1963, and Crosse & Blackwell in 1950.
In the swot analysis of nestle, we’ll discuss various internal and external factors of the company that are impacting its growth. If you want to learn about the external factors, check out the pestle analysis of Nestle. Here it follows;
Strengths of Nestle
Famous Brand Name
Nestle is one of the few brands that have positive publicity worldwide. It’s because the company is delivering quality products over the years across the world. That’s why Nestle is famous among the public.
Well Recognized Brand
According to the ranking by Forbes Global 2000 in 2016, Nestle ranked at 33rd position among 2000 world’s leading companies. The company ranked in 64th position in 2017 by the ranking of Fortune Global 500. It shows that the brand has strong brand recognition and awareness in the world’s market.
Nestle is running business operations and delivering products in more than 190 countries across the world. The revenue stream of the company comes from the market of both developed and undeveloped countries. It includes countries like Brazil, France, China, the US, UK, etc. according to an estimate, Nestle earned approximately CHF 26.7 billion in 2017 from the US market.
High Valuable Brand
Whether we talk about market share, net profit, annual revenue, company’s asset, brand’s worth, or market capital; according to a study conducted by Forbes Global in 2018, nestle falls under the category of the world’s top leading brands.
Nestle offers a variety of products to its customers and the company’s revenue stream comes from various sources like confectionary items, dairy products, water, and dishes. Diversification has made the revenue of the company less volatile and stable.
For instance, people in the US used to drink more milk in the past approximately 50 years ago. It’s because the people have become vegetarian and they prefer plants based green food. However, it didn’t impact the revenue of the company much, because the milk-based product only comprises 15% of the total sale.
Pro Relationships with other Brands
Nestle has built strong professional relationships with other world’s leading brands like L’Oreal, Colgate, General Mills, Palmolive, and Coca Cola. Many other companies are working under the umbrella of Nestle like Maggi, Nescafe, Milo, KitKat, and Gerber.
Eco-Friendly & Sustainable
Whether it’s the reduction of waste, usage of renewable sources of energy, organic packaging material, and using less water; Nestle has always preferred eco-friendly and sustainable ways to produce quality products.
According to an estimate, 253 factories of Nestle were producing zero waste by the end of 2017. The brand is working consistently towards the cleanliness of the environment.
Research & Development
According to an estimate, Nestle has approximately more than 21 research and development centers across the world. The brand has employed over 500 in those facilities to perform researches on food and nutrition. In 2017, Nestle has spent approximately more than 1.72 billion Francs on research and development.
Nestle has a very strong distribution network in different markets both rural and urban areas across the world. The company uses multiple approaches like decentralization and local distribution methods to reach the customers living in far places. The company also maintains good relations with vendors, distributors, suppliers, and retailers to keep things going smoothly.
Strong Marketing & Advertisement
Nestle uses various marketing and advertisement campaigns to make customers remember the company’s product while shopping.
Nestle has one competitive edge that people remember and recalls the brand name. That’s why the customer retention ratio of the company is high.
Merger & Acquisition
Nestle has merged and acquired many companies over the years. It made the company stronger than ever.
Weaknesses of Nestle
Kroger, Walmart, and Tesco are the major retail outlets of Nestle, and the company’s total sale is dependent on them. Whenever these retail outlets change the prices of the product, it impacts the overall sale of the company.
Controlled Structure b/c of too many Brands
Nestle follows the matrix structure. It means that all the acquired and merged brands work under the umbrella of the parent company. It increases the administration and becomes very difficult to manage and check the performance of multiple brands. When too many brands work under one roof, it creates a conflict of interest.
Controversy of Water
There are rumors and reports that Nestle has been pumping water illegally in different countries, where the rest of the people are facing drought.
Criticism on Social Media
Issues chocolate preparation is employing child and slave labor, privatization of water reservoir and mislabeling have pushed away many people. That’s why many people are criticizing the brand on social media. Such controversies are very bad for the brand image of the company.
The controversy of Maggi & Noodles
Some of the products failed lab tests in India in 2017, and the test showed that products contained 1000 times more lead in them. It captured a lot of media’s attention and many people boycotted the brand. The company lost 80% of its market share as result.
Check out this article: SWOT Analysis of Swiss Nestle
Opportunities available to Nestle
Small food startup venture
There are many growing small food startup that Nestle can bring it under its umbrella. It’ll be beneficial both for the company and the startups. They’ll get a big brand name and the company would increase its product portfolio.
Ecommerce & Online Shopping
Growth in online retail shopping presents a great opportunity for Nestle. Although the company has online in some countries; but they aren’t big compared to its competitors. If the brand creates a catchy and user-friendly interface, it would attract the attention of many customers.
Projects of Nestle like breakfast cereal and oats turned out to be a great success and they showed remarkable growth. If the brand could penetrate the cereal market, it would be very profitable for the company.
Ready-to-Drink Tea & Coffee
The demand for tea and coffee has never declined in any market across. If Nestle could offer ready-to-drink tea and coffee, then it would be a huge success for the company.
Partnerships and Alliances
If Nestles could successfully make alliances with other world’s leading brands, it would help the brand to increase the market.
Authenticity of Labels
Many people have criticized Nestle for presenting wrong/misleading information about its product. If the company starts providing the right information on its products, it would help the company to regain the trust of the people.
Threats Nestle has to face
Destruction of Rainforest
There were rumors and reports that Nestle showed involvement in the destruction of the rainforest like Sumatra. Many critics and environmentalists severely criticized this act of the company.
Scarcity of Resources like Water
Many products of Nestle heavily rely on the usage of water. Issues like growing population, increasing demand for food and water, exploitation of resources, and wastage of rainy water are making it difficult for the company to access clean water.
Competitors like Unilever, CPG, and Mondelez are growing and they’ve acquired more market share every year. Therefore, it’s becoming difficult for the brand to compete when competitors are delivering the same quality.
Regulations of the Government/Prices
Government policies and regulations play a very important role and they can impact badly various business operations of the company.
Supplies and processing costs are increasing and it forces the company to increase the prices of its products. High rates would make it difficult for the company to compete in the market.
Some countries have banned the plastic packaging and some even banned the product in it. Therefore, Nestle must find a way to redesign the packaging of its products in an eco-friendly manner.
Vegan Products in Meat Market
Nestle has recently launched a plant-based product for the vegetarian market like almond milk, non-dairy ice cream, and soy. These products are selling well in the vegan market, but they have to face strong competition in the US meat and burger market.
In light of the swot analysis of nestle, we have realized that the company had faced some difficulties over the years in some markets. But the overall position of the company is profitable and stable. The diverse market and portfolio help nestle to reduce the risk. Nestle should capitalize on the opportunities to expand its market share.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.