Case Details:
Case Code Case Length Period Pub Date Teaching Note Organization Industry Countries : : : : : MKTG039 10 Pages 1990 - 2002 2002 Available
Price:
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: Nestle SA (Nestle) : Chocolates and Confectionery : Switzerland
Themes
Brand Management
Abstract:
The case discusses Nestle's brand management strategies in detail. Nestle's brand portfolio consisted of worldwide corporate strategic brands, strategic worldwide product brands, regional strategic brands and local brands. The case also explains how Nestle was successful in developing Kit Kat from a multilocal brand to a European brand and finally a global brand.
Issues:
» Brand management strategies of a large consumer foods company with a global presence and a large portfolio of brands.
Contents:
Introduction Background Note Nestle's Branding Strategy Internationalizing the "Kit Kat" Brand Divesting Non-Strategic Brands Exhibits Page No. 1 1 3 4 6 7
Keywords:
Nestle, brand management, strategies, brand portfolio, worldwide, corporate strategic brands, strategic worldwide product brands, regional strategic brands, local brands, Kit Kat, multi-local brand, European brand , global brand Nestle is a brand in its own right. For consumers, relevance of Nestle as a company comes first of all through contact with products that are branded Nestle. If we want to be perceived as the world's leading food company, we have to offer consumers an increasing amount of products that they can identify as Nestle's." - Peter Brabeck Letmathe, CEO, Nestle1.
Introduction
In mid-1988, Nestle SA (Nestle), the world's largest consumer packaged foods company based in Switzerland, acquired Rowntree Mackintosh PLC (Rowntree), in the largest ever acquisition deal of a British company during that time. Rowntree was the world's fourth largest manufacturer of chocolates and confectionery products, with well-known brands like Kit Kat, After Eight, Smarties and Rolo. The deal attracted considerable attention all over the world since several bids2 to acquire Rowntree were rejected. Rowntree claimed that the bids were too low for its valuable, well-recognized brands. In the end, Rowntree was acquired by Nestle for £2.5 billion, two and a half times the pre-bid price and eight times the net asset value of the company. This acquisition made Nestle the largest chocolate manufacturer in the world. Analysts felt that Nestle had paid £2.5 billion because of Rowntree's brands, not its past financial performance. Industry observers wondered how Nestle would manage Rowntree's brands. Rowntree followed a "one product, one brand" policy. The brands were simply Kit Kat, After Eight, Smarties and Rolo, Rowntree was never mentioned.
Moreover, Rowntree's brands were not strongly managed European brands. In fact, according to an analyst3, Kit Kat was one of the worst cases of an over-localized brand of a company across Europe. In the mid-1860s, Henri Nestle (Henri), a merchant, chemist, and innovator experimented with various combinations of cow's milk, wheat flour and sugar. The resulting product was meant to be a source of infant nutrition for mothers who were unable to breast-feed their children. In 1867, his formula saved the life of a prematurely born infant. Later that year, production of the formula, named Farine Lactee Nestle, began in Vevey, and the Nestle Company was formed. Henri wanted to develop his own brands and decided to avoid the easier route of becoming a private label. He also wanted to make his company a global company. Within a few months of establishing his company, Henri began to sell his products in many European countries. In the initial years, Henri restructured the organization to facilitate research, improve product quality, and develop new products. In 1875, Daniel Peter, Henri's friend and neighbor, developed milk chocolate. He soon became the world's leading chocolate maker. Later, his company was acquired by Nestle. In 1905, Nestle merged with AngloSwiss Condensed Milk Company, a manufacturer of milk-based infant food. During World War I, there was a huge demand for dairy products and Nestle capitalized on this opportunity by executing military contracts of various countries involved in the war. In 1938, after eight years of research, Nestle discovered a soluble powder that revolutionized coffee drinking around the world. The product was launched under the brand name Nescafe and became an instant success.
The end of the World War II marked the beginning of a new phase of growth for Nestle. The company added many new products. In its effort to expand its operations further, Nestle merged or acquired several companies. In 1947, Nestle expanded into culinary products by merging with Alimentana, a Swiss company that produced and sold Maggi soups, spices and other food products in many countries...