Nestle is the largest company in the world for food and beverage. It is the world’s foremost company for manufacturing products on nutrition, health, and wellness. The company has about 2000 brands that range from global to local favorites. The company is in about 187 countries across the world. It is in Switzerland.
Then brand having about 2000 various brands covering over seven categories in food and beverages. The main products of the brand are powdered and liquid beverages, ice cream, milk products, and pet care products. The company owns many consumer brands like Nestea, Nescafe, Nestle, KitKat, Purina, and Vittel. Most of the brands are popular brands.
The SWOT analysis of Nestle discerns its main strengths, weakness, opportunities, and threats that helps Nestle to maintain a prominent place in the market. Read out this article, to get an understanding of where Nestle stands.
Before we begin in-depth on the SWOT analysis of Nestle, let us understand a bit of the background of the company Nestle.
The following points provide you a bit of Nestle’s background:
- The company is known with the name Nestle S.A
- Nestle was established during the year 1866 and headquarter is in Switzerland.
- The company logo is shown in Image 1.
- The industries served by the brand is food and beverage.
The SWOT analysis of Nestle highlights the strengths and its weakness to help them to improve on its operations. It also lists the opportunities that the company can take up to perform better along with the threats that the business is likely to face.
To make sure that Nestle meets the long-term competitive advantage it must address the various concerns highlighted in the SWOT analysis of Nestle.
Let us discuss on the SWOT analysis of Nestle.
Strengths in the SWOT Analysis of Nestle
- Brand Name – Nestle is the most well-known brand in the world. It has created an esteemed reputation in its sectors related to food and beverage. It provides a superior quality product that can be used for everyday needs worldwide. Most of the people make use of Nestle products is some way or the other in their daily life.
- Internationally Known Brand – Nestle has created its brand awareness and was successful in creating a successful brand image through its effective marketing and branding strategies. It has shaped an important awareness and has created an effective brand image worldwide. As per the Fortune Global 500, Nestle is amongst the largest in the world and in the 2018 list, it is ranked in the 69th
- Varied Company – Nestle has the sale of its products in about 189 countries. It has captured many large markets instead of only a few markets. It has its large markets in many established and emerging countries for its revenue generation. The brand’s leading market includes China, the US, Brazil, and France.
- Valuable Brand – As per the 2018 Forbes Global, the brand lies amongst the top as the most valuable company with regards to its revenue, assets, profits, and market value. This brand is liked by many users and its products are relished by many.
- Wide Product Portfolio – Nestle maintains about 2000 brands at the international level and has renewed about 8000 products for health considerations and nutrition. It is the biggest company that has a huge product portfolio. Its product range is so elaborate that it meets the requirement of people of all age groups.
- Firm Relationships and Popular Brands – Nestle has owned few of the world’s popular and familiar brands with names like Nescafe, Gerber, KitKat, Maggi, and Milo. Also, it has a good relationship with many other reliable and significant brands like Coca Cola, Colgate Palmolive, Loreal, and General Mills.
- Effective Research and Development System – Nestle has invested largely in Research and Development and has come up with many products for all age groups. The company has about 21 Research and Development centers and this is one of the greatest advantages of the company. The company has about 5000 employees that are involved in the Research and Development operations.
- Eco-friendly Practice – The brand has put considerable effort into the practice of environmental sustainability and innovative initiatives to improve the quality of the product. It provides various optimized and advanced solutions for water usage, waste reduction, packaging material use, and non-renewable energy use. During the year 2017, almost 253 of the Nestle factories have shown zero-waste production. It also initiated and showed a good result to maintain sustainability with customers and to keep the environment clean. The brand has also launched a free mobile app that would help people to reprocess waste packaging material properly.
- Huge Distribution System – The brand possesses a wide and expanded distribution system that not only enters the urban area but also to the rural regions. The brand has adapted to local distribution and distributed methods to execute its business effectively in the respective countries. Nestle has solid associations with retailers, suppliers, distributors, and vendors.
- Large Market Share – Nestle has within itself included well-known brands and has amounted to a large amount of market share in leading nations that includes the United States and Europe. The brand has also created proficiency to enter new markets and able to shine in it as well. The expansion into new markets has helped the company to create a new revenue stream and expand its risk in the economy to the markets that the Nestle brand operates in.
- Fluctuating Price by Retail Giants –Nestle’s grocery is attained mainly through big retail companies like Tesco, Walmart, and Kroger. When there is any price fluctuating in these retailers, it would affect the sale of Nestle to a huge extent. This is a major weakness for the brand as it affects the overall revenue of the brand.
- Organizational Structure – Nestle follows a matrix structure for its organizational structure. This means that there are many brands that come under the same umbrella group that makes it challenging for managing the enormous administration. This would include many individual brands that would arise in disharmony and conflict of interest.
- Controversies in Water Usage – Lately, the brand was suspected of using illegally pumping of millions of liters of water in about six nations where the residents were run-down of drinking water. This is yet another weakness for the brand that has affected the brand to a great extent.
- Social Criticism – The brand is so popular that it has become the main target to get into media’s attention many times. The privilege to transfer water, deceptive labeling, and a claim for chocolate making with the help of child labor and slave are few examples to land up in a weak market reputation.
- Controversy in Maggi Noodles – During the year 2015, Nestle has failed to clear the laboratory test in the India region. This has created public propaganda as many people refused to use Nestle that has made the brand lose about 80% of the market value. The brand has claimed that the product noodles do not have MSG added in it, but after testing, the product was seen that there was more lead in it. This has made people refrain from using the product and even though things are in place now, people think twice before purchasing it.
- Brands not fitting the Modern Lifestyle – Few brands like Carnation milk do not fit into the modern lifestyles and are like an old-fashion product to the customers. So, this is a weakness to the brand that would affect the brand’s image.
Opportunities in the SWOT Analysis of Nestle
- Offering Small Start-Ups for Food – Nestle seems to have a good opportunity to increase the count of the small food start-ups under this brand name. Nestle can also work together with the new start-ups for its brand promotion. This is a great opportunity for the brand to increase its revenue and its image.
- Online Shopping – Nestle sees a notable opportunity to increase its online shopping websites. It provides various online shopping services to create a pleasant and comfortable shopping experience for the customers. Even though the brand owns its online stores in some countries, the company should expand its online services to more markets, and this would provide more opportunities for the business.
- More Breakfast Cereals – The popular product of Nestle like the oats and cereals has a significant growth in the industry. Hence, getting more into this market and bringing out more products on this would be profitable for the company.
- Ready to Drink Tea and Coffee Expansion – There is always a high demand for tea and coffee always. This provides an opportunity for the brand to prepare more for this market. The company should come out with new opportunities for bringing out more products in this market.
- Partnership – Nestle partnering with other companies of goods and beverages would provide a good opportunity for increasing its profits and revenue. By partnering with other giants, it would provide a chance to come up with more products for customers.
- Faithful Labelling – For a few times, the brand has been criticized for providing false information on the nutrition elements of its products on its label. So, now there is an opportunity to progress its practices by providing reliable information and correctly label its products.
Threats in the SWOT Analysis of Nestle
- Controversy in Prohibited Rainforest Destruction – During the year 2017, Nestle was charged for being involved in the destruction of the last tract of Sumatra’s rainforest. The brand has faced a lot of criticism from the environmentalist and criticism from NGOs in this regard.
- Water Shortage – The entire production of Nestle depends on water usage. The company finds it tough to access the clean water where there is less water source due to various known reasons. These would include various conditions like climate change, an increase in population, rising demand for food and water, wastage in water, and over usage of resources. This is a great threat for the brand as it would hit its production when the water is not available to them at enough level.
- Increase in Competition – Many companies like Unilever and Mondelez provide the same kind of food like Nestle that becomes a threat of competition for the brand in the domain. It becomes tough for the brand to compete in this industry as the same kind of products is available with some other brand.
- Regulations and Prices from Government – The various regulations laid down by the government affect Nestle’s business operations. Also, when there is an increase in the goods, the company would compensate it with an increase in its product prices. When there is an increase in the product price, the sales would hit and reduce as the customers would switch to other brands where the products would be available at a lower cost.
- Large Retail House Brands – Large retailers like Kroger, Walmart, and Aldi are promoting its house brands to a large extent that are more profitable for them. House brands are being sold at a lower price and are provided more visibility on their shelves. This is a big threat to Nestle.
The SWOT analysis of Nestle mentioned in this article has emphasized the main strengths of the brand that arise from its brand name, internationally popular brand, valued brand, extensive product portfolio, well-established relation with a familiar brand, effective Research and Development system, and eco-friendly practices.
Its major weakness lies in the price fluctuations, its organizational structure, water issues, Maggi noodles issues, and social criticism. The brand’s opportunities lie in starting up small food outlets, expanding its service online, increasing its breakfast cereals, bringing out new products in tea and coffee, partnerships, and including legal labeling of its products.
It sees a major threat from the controversy related to rainforest destruction, water scarcity, an increase in competition, and varied government prices.