Nestle is a Swiss food and drink processing company. It is the world’s largest beverage company, with more than 2000 brands that produce global to local favorites. Nestle was formed by the Anglo-Swiss Milk Company in 1905 and now has a revenue of over 9,442.4 crores.
Nestle produces different products with fresh farm raw materials and has a good relationship with the farmers. They have built a strong brand image but have spent a lot on marketing. Also, they have yet to take any steps toward achieving sustainable development.
Let’s discuss its strengths and weaknesses in detail. We will also look at the strategies that make them a market leader.
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The SWOT analysis of Nestle
Being a global brand, Nestle has grown even more in the past 4 years. Let’s look at the company’s strengths in our SWOT analysis of Nestle.
Good relationships with farmers
Good relationships with farmers have enabled Nestle to create strong farmer networks that produce high-quality crops. This gives them access to a steady supply of ingredients for their products and enables them to meet customer demands.
For example, Nestle uses coconut from more than 100,000 smallholder farms in the Philippines to produce their coconut milk products. Access to a steady supply of raw materials helps to maintain product availability.
Diverse product portfolio
Making a SWOT analysis for Nestle, we cannot ignore the huge array of products it manufactures. One of the strengths of the company is the diversity of its product portfolio. It has a wide range of products across different categories. It is able to cater to different types of customers and offer products that suit their needs and preferences. This gives the company a strong customer base and more market share.
Nestle has built a reputation for itself with its high-quality products and strong brand presence in the market. Over the years, the company has successfully built a strong brand image in the minds of consumers. It has managed to earn the trust of its customers and has become a household name in many countries.
The strong branding has helped to attract new customers and also to retain existing ones.
The next step in our SWOT Analysis of Nestle is, of course, the company’s weaknesses.
High Operating Expenses
The largest factor undermining the financial performance of the company is its high operating expenses. The company spends a lot on marketing its products and other expenses related to operations and maintenance. It also incurs significant costs in developing new products. These expenses increase the cost of production and reduce the company’s profitability.
Dependence on developed markets
Due to the ever-increasing demand for its products in developed countries, Nestle relies on these countries for its revenues and profitability.
Most of the company’s revenue comes from North America and Europe. Developing new markets is crucial to the success of the company as it would provide a new source of revenue and increase its global footprint. However, this has not been successful so far, and the company has not been able to expand into new markets effectively.
Nestle is a multinational food and beverage company that ranks among the top 10 food companies in the world. It does so by exploiting the resources of local communities in developing countries to manufacture and sell its products in the developed world.
This results in environmental damage in these countries as local resources are exploited without considering the environmental consequences. This gets the company a lot of bad publicity in the developed world and affects its brand image adversely.
We look at its opportunities in the other half of our SWOT Analysis of Nestle. The company has to take action on these opportunities to cement it as a market leader for years to come.
Expansion into new markets
Although Nestle has been successful in generating revenues from developed countries, it still has not succeeded in expanding into new markets.
New markets offer significant opportunities for the company to grow and expand its operations internationally. If the company can successfully venture into new markets and generate substantial revenue from them, it will be able to diversify its business operations and improve its bottom line.
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Increased focus on R&D
Technical innovation enables companies to develop new and improved products that have the potential to appeal to a larger customer base. Even though Nestle has a Research and Development Department that conducts R&D activities, it does not have a dedicated research and development unit for particular product lines or products. Focusing on R&D can give Nestle a much-needed edge, especially in developing markets.
Reduction in energy consumption and greenhouse gas emissions
Reducing energy use and greenhouse gas emissions is an important measure towards achieving sustainable development. This not only helps the planet but also leads to cost savings for the company in the long run.
Our SWOT Analysis of Nestle cannot be complete without examining things that pose a threat to the company.
Currently, the global economy is facing an uncertain macroeconomic environment characterized by declining commodity prices and volatile exchange rates, volatility in equity markets, and low economic growth rates. Given the uncertain economic scenario, the global economic outlook remains weak, which is likely to affect the performance of companies in the food and beverage industry, including Nestle. The company will have to deal with a challenging business environment in the current global economic scenario.
Growing competition in the food and beverage industry
Developing countries currently represent an attractive market for international players as they offer growth opportunities in non-mature markets with still-untapped potential.
This presents a threat to Nestle’s dominance in the market as its local competitors can gain a strong foothold in these markets and pose a significant threat to its market share and profitability.
Consumer backlash over increasing prices
Customer backlash because of rising prices has hit the food and beverages industries hard in the past years. Implementing anti-dumping duties on certain imported goods has also led to a rise in consumer prices in many developed markets. This has led to a decline in consumer spending on discretionary items such as food, beverages, and personal care products, which has affected the profit margins of many companies in the industry.
Rising raw material costs
Raw materials account for most of the total manufacturing cost of finished goods. An increase in raw materials prices can adversely affect the company’s profitability by lowering its profit margins.
The company will also have to pass on this increase in the cost of raw materials to its customers through higher product prices, reducing its sales volume and profit margins.
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Frequently Asked Questions
What is a SWOT analysis?
A SWOT analysis is a technique for systematically listing and evaluating the strengths, weaknesses, opportunities, and threats that you may encounter in a business situation.
Nestle is the world’s largest food and beverage company, with operations in over 190 countries. Nestle has built a reputation for itself with its high-quality products and strong brand presence, and the company has managed to earn the trust of its customers and become a household name. The SWOT Analysis of Nestle reveals a lot of interesting things.
Expanding into new markets would provide a new source of revenue and increase its global footprint. The global economy is facing an uncertain macroeconomic environment characterized by declining commodity prices and volatile exchange rates. Nestle will have to deal with a challenging business environment in the current global economic scenario. Rising raw material costs and consumer backlash are likely to affect the company’s profitability adversely.