Name, Mission Statement and How Long the Company Has Been in Business
Nestle, a drinks and food processing firm, is the largest food company in terms of revenue globally. According to Birahim (11), the brand name is highly trusted, and the organization continuously innovates through its research and development department. In 2017, the fortune Global 500 ranked it position 72 (Gold, Kunz and Reiner 251). The company’s main products include babies’ food, snacks, tea and coffee, frozen foods, pet foods, and dairy products. Nestle’s mission statement revolves around being the leading health, wellness and nutrition firm globally. Its Good Food, Good Life mission show its intention to offer clients their best tasting and most nutritious products in various food and beverage categories (Nestle 1). Nestle intends to improve its shareholder value by being a distinguished corporate citizen, supplier and employer. Besides health, wellness and nutrition, Nestle brings consumers the most crucial ingredients to enhance their pleasure and taste and offer optimal nutrition that meets clients’ physiological requirements.
Nestle has been operating since 1905; hence, it has remained in business for 117 years. Nestle’s line of business is the manufacture of foods, snacks, breakfast cereals, chocolates and beverages. It has manufacturing facilities for such products in almost all parts of the world. One of Nestle’s top competitors is Mondelezis, which became operational in 2012. Mondelezis is headquartered in Illinois, and it produces various types of snacks, including cookies and confectionery. It also produces beverages and chocolates. The organization operates worldwide and gets its revenues from other regions besides the US. Mondelezis is present in around 1655 countries, and it generates an income of appropriately $30 billion across its brands. The organization customizes its products to suit clients’ tastes depending on the location, and it modifies its products from time to time. The second competitor is Mars, a renowned producer of confectionery goods and non-confectionery ones such as pasta sauce and Uncle Ben’s rice (Loutskina and Shapovalov 31). The outstanding products offered in the organization make it Nestles top competitor because many customers like them. Unilever also poses a significant threat to Nestles products because it is a leading producer of foods, beverages and household items. Since its inception in 1930, it has consistently provided quality products to the market. The popularity among customers and extensive distribution channels make Unilever highly competitive. The company’s presence in around 190 countries and many years of existence are also crucial factors in making Unilever Nestle’s top competitor.
History of Nestle
Nestle’s history dates to 1866, when the Anglo-Swiss Condensed milk company started operating. Charles and George Page, who were brothers, established the firm and used the knowledge gained in their homeland Switzerland to establish the first condensed milk facility in Cham. They also began supplying their Milkmaid brand to industrial towns in Europe. The brand was an alternative for milk because it was a long life. In 1867, Henri Nestle, a Germany born pharmacist, launched a flour that combined cow’s milk, sugar and flour to reduce infant mortality rates by ensuring that infants who could not breastfeed had something to feed on (Kumari and Muralidhara 41). Around that time, he began using his “Nest” logo while operating from Vevey. However, he later sold the firm to three local businesspeople in Vevey in 1875. The new owners began employing skilled workers and chemists to help in the expansion of production and selling of their products. This event was important because it marked the beginning of Nestles venturing into the market as professionals. Anglo-Swiss expanded to the US between 1882 and 1902, but George Page died, making it difficult to pursue their new markets. Resultantly, it sold its US-based companies, paving the way for the eventual merger with Nestle (Nestle 2). On the other hand, Neste had developed new ventures such as exporting chocolate for Peter & Kohler. However, Nestle had also participated in the development of milk chocolate when it supplied Daniel Peter with condensed milk to enable him to develop the first commercial products in the 18890s. Therefore, being in the chocolate business was not an entirely new venture for Nestle. Henri Nestle’s leading venture at that time was the development of infant foods, and in 1905, his company merged with Anglo-Swiss to firm the current Nestle group. During that period, the growth of cities, steamships and railways reduced commodity costs and spurred international trade.
Nestle has developed significantly over the years and it currently has over 2,000 brands ranging from global icons to favorite local products. However, it has been selling some of its businesses in various countries for various reasons. For instance, in 2018, it sold its US candy business to Ferrero for $2.8 billion due to low sales in the region (Osterwalder 34). Therefore, Ferrero took control of more than 20 Nestle brands and acquired the manufacturing facilities in Itasca, Franklin Park and Bloomington. Currently, Nestle remains a top multinational firm with its presence in almost all parts of the world.
Ethical Decisions
Ethics and compliance are crucial aspects of how organizations conduct their businesses. Nestle intends to remain ethical and conduct its businesses correctly even when regulatory requirements are not available. The commitment to integrity, authenticity, and fairness manifests throughout the organization’s values and purposes. The executive compliance management systems support the organization’s managers and workers to follow the right procedures and protect the company’s reputation. Nestle’s management and workers base their values on respect because they believe that authenticity and integrity begin with each person (Nestle 1). Additionally, they respect the people they interact with to create a trustworthy climate and encourage people to be the best daily. Nestle also respects other people’s lifestyles, ways of thinking and culture by exhibiting inclusiveness and openness in their interactions. They also respect the future world and generations, hence the need to be responsible and courageous in their actions.
An example of a time Nestle acted ethically is in its declaration to improve 30 million livelihoods in communities that directly relate to its business activities. Nestle intends to achieve this by supporting young individuals to ensure that they manoeuvre and overcome employment barriers. Therefore, it provides opportunities and skills that help the young farmers diversify their income (Nestle 5). They also improve the livelihoods of the local communities and farmers who provide them with raw materials. Their work is encouraged by the opportunity to promote human rights in their areas of operation and ensure that the communities are fair, sustainable and have dignified lives. Over the past ten years, the organization has helped more than 2 million women in skill development and provided training to over four million farmers. It has also given more than 207 billion portions of fortified products to its consumers globally (Shared Value Project 2). The organization’s commitments help it achieve its collective efforts to achieve the specific objectives. Nestle participates in all these activities to enhance better lives and help drive poverty eradication. I find this approach ethical because the projects support people to lead better lives by eradicating poverty and creating employment for others. The unemployed or unskilled farmers also get the opportunity to earn a livelihood through Nestle’s prophets and partnerships.
Another good ethical decision the company has made is helping with the COVID-19 response through actions such as offer support to the medical institution, relief organizations on the frontier and food banks. The company has also been assisting medical institutions with the resources necessary to fight the pandemic. Nestle also works closely with physicians to enhance the development of new tailored COVID-19 medical nutrition essential for the treatment protocols. The organization has also been participating in the drive to encourage massive vaccination against COVID-19 and ensure that developing nations receive vaccines. The firm further donates to food banks and food delivery companies that aim to support needy individuals and offer immediate support to its business partners (Nestle 5). Extension of payment terms, suspension of rental fees for coffee machines and provision of free products to clients are also part of the procedures the company has undertaken to help ease the fight against the pandemic. Other ways it has participated include donating food and nutrition products to the most affected regions, providing the International Federation of the Red Cross and Red Crescent Societies (IFRC) with logistic resources to support various countries’ needs and donating 10 million CHF to be deployed to the neediest parts immediately (Nestle 2). The company made this decision to ensure that individuals’ lives do not drastically change for worse due to the effects of the COVID-19 disease. It also intends to reduce the transmission rates by ensuring that people do not break protocols while searching for better livelihoods. This act is ethical because it helps boost the fight against COVID-19. Many people, especially those in low-income regions, are suffering as a result of job loss during the pandemic or loss of their breadwinners. Therefore, the financial and materials assistance will significantly help them as they look for alternative ways of sustaining their lives.
Unethical Decisions
One unethical decision Nestle took was in 2003 when the Michigan courts found it responsible for draining the Dead River watershed by pulling approximately 400 gallons per minute. These amounts translated to 210 million gallons annually, and the act adversely affected the local community by illegally extracting the groundwater and depleting the available sources for the local communities (Otts, Janasie and Bowling 21)). The lack of water also led to drought. On the other hand, Nestle was packaging the water it had drawn from underground and selling it to the same communities who had no choice but to buy from the company because they were left with no natural water source. In a nine-year court battle that ended in 2009, Nestle took responsibility and agreed to significantly reduce the amount of water it was taking and start monitoring the levels. This act was unethical because Nestle only cared for profits and disregarded the community and environmental welfare. Accepting to reduce the amounts of water it was taking also showed that it was aware of what was happening and did not intend to stop until individuals developed an interest in the matter. Reports also indicated that Nestle’s independent scientist tried fabricating data, and the company’s study was not availed to the public. This shows that the company knowingly participated in the unethical act of depriving local citizens of healthy lifestyles.
In another instance, Nestle was suspected of adding GMOs to its products without openly disclosing the information to the Brazilian market. An investigation by the Brazilian Consumer’s Defense Institute (IDEC) established that nestle had not informed the public about the presence of GMOs in its products (McAllister 134). Initially, the products were banned after a successful lawsuit by IDEC against Nestle, but it was later allowed to sell the product but have clear warming of the presence of such products. This act was unethical because Nestle understood clearly that not all people prefer GMO products, but it decided to remain silent to increase its sales at the expense of uninformed clients.
Marketing Distribution Strategies
Nestle applies various marketing distribution strategies depending on its market. The most common approaches include demographic marketing, which involves segmenting customers based on their gender, income, education and age. The firm does not offer the same products for different age groups and provides a variety. For instance, it offers milo for children and coffee for adult consumers. Products such as ceregrow, Lactogrow and Kokocrunch are intended for children, while Sunrise, Nescafe and various protein products are designed for adults (Abhishek 2). Another marketing approach is geographic, which involves segmenting clients according to their regions. Nestle divides divisions into various zones and controls distributors to sell in their designated areas. For instance, the provision of Nescafe ice enables individuals in either hot or cold regions to consume it depending on the weather. The segmentation approach also ensures that nestle captures a broad market by offering products suitable for different categories. Throughout the production process, Nestle partners with distributions, redistributors, wholesalers and retailers to help with the distribution process. According to Nestle (4), the organization works with approximately 165 000 and 695 000 direct suppliers and individuals farmers respectively to ensure a smooth flow of operations.
Nestle’s operations
Nestle’s product portfolio includes products and services that match consumer demands. The organization strives to ensure that its products enhance public health and sound environments. Therefore, the company applies health, nutrition, and wellness efforts to enable people and pets to have better and healthier lives. The company also meets the clients’ needs by providing delicious, nutritious and convenient products that boost their time-constrained lifestyles (Nestle 6). For example, individuals can purchase Nestle bottled water or chocolate to consume from any place. The frozen foods like CPK Frozen, Hot Pockets and Sweet Earth foods save time for people with busy working schedules. Therefore, the organization focuses on people’s needs and produces goods that perfectly suit everyone. Nestle further provides safe and high-quality products to everyone regardless of their income levels. For instance, the Cerevita instant sour porridge is nutritious and affordable to clients in South-East Africa. The company also operates by building for the long term and focusing on combining global resources with local expertise to ensure value for society and shareholders (Nestle, 2022). The company intends to eliminate greenhouse emissions by 2050 and ensure that its packaging materials are fully recyclable by 2025.
How the 2008 Recession Affected Nestle
Although the 2008 recession affected many organizations adversely, Nestle remained stable, and its profitability exhibited a steady increase. Nestle identified areas that could help boost its profitability and majored in them. For instance, it increased by 69.4 percent, making its profits 18 billion Swiss Francs in 2008. The organization proved that it could sail through the recession by having its shares increase by 3.35%, which was equivalent to 1.44 Swiss Francs (Nestle 3). The main products remained marketable throughout the world, leading to an increase in the sales and profitability of the organization. This meant more consumer confidence which led to low profits for the company because they realized that their firm could supply them with the required commodities even during the hard times.
Unlike other organizations that experience declining sales and difficulties sourcing raw materials, Nestle had an easy time because of its reliance on farmers to supply raw materials to various manufacturers (Nestle 4). For example, products like the food and beverages achieved an organic growth of 8.9 %, an indication that they were highly selling during that period. However, the company had to make some decisions like selectively increasing some products inventories’ due to the increase in the cost of raw materials. This approach led to increased unmet debt to 25.8 billion, but the sales of 24.8 % of Alcon to Novartis would reduce it. Such performances revealed the company’s ability to be profitable even when facing business challenges. Another example of the positive effect was the company’s decision to re-purchase its shares
Nestle’s Financial Statements
Nestle’s reports indicate that the organization’s organic growth reached 7.5 %, while the real internal growth was 5.5 %. The pricing was 2%, and the continued momentum in retail sales greatly supported the company’s growth. During the period ended December 2021, the sales increased by 3.3 while the foreign exchange resulted in a reduction of sales by 1.3 %. The profit margin decreased by 30 points, ending up at 17.4 % (Nestle 1). The 14.9% decrease in free cash flows indicated that the firm had high capital expenditures and inventory levels. However, its portfolio management keeps progressing and was at 20%. An analysis of the financial reports showed that the organization expects an organic sales growth of approximately 5 % in 2022. The income and cash flow statement reports were as attached below.
Cashflow Statement
Summary
Nestle is a leading multinational producer of food and beverages and has been operating for more than 100 years. The company has several competitors, including Unilever, mars and Mondelezis, but it still remains profitable and popular among the customers due to the extensive research to understand its clients’ needs. Its products are usually customized to suit particular market needs. Nestle believes that ethics and compliance are crucial aspects of how organizations conduct their businesses. Nestle intends to remain ethical and conduct its businesses in the right manner even when regulatory requirements are not available. The company also participates in activities that enhance local communities’ livelihoods and eradicate poverty. Although the company has been involved in several cases of unethical practices, it strives to make the world a better place through its different initiatives. Even during the 2008 recession, Nestle remained profitable because its sales kept increasing, and indication that it has gained enough market trust.
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