Comparing International Strategies of Nestle and Kraft Foods in Emerging Countries
NESTLE’S GLOBAL STRATEGY FOR PENETRATING INTO EMERGING MARKETS
Nestle is one of the world’s largest global food companies. It has over 500 factories in 76 countries, and sells its products in 193 nations. Only 1% of sales and 3% of employees are located in its home country, Switzerland. Having reached the limits of growth and profitable penetration in most Western markets, Nestle turned its attention to emerging markets in Eastern Europe, Asia, and Latin America for growth. Many of these countries are relatively poor, but the economies are growing quickly. Thus a consumer base capable of buying many Nestle products will develop over the next couple of decades.
In general the company’s strategy has been to enter emerging markets early before its competitors and build a substantial customer base by selling products which suit the local population such as infant formula, milk, and noodles. Nestlé narrows down its market share to many small niche markets, as opposed to general or one for all strategies. Nestlé keeps the goal of commanding the niche markets by gaining at least 85% of market share in every food product it launches. For example, by pursuing such a strategy, Nestlé has taken as much as 85 percent of the market for instant coffee in Mexico, 66 percent of the market for powdered milk in the Philippines, and 70 percent of the market for soups in Chile. As the income level rises in each niche market, Nestlé introduces an upscale version of the same brand to increase its profit level. Although Nestlé has become a global brand, it uses local identity to gain exposure in local markets. The company owns 8500 brands but only 750 of them are known internationally.
Customization is the key to Nestlé’s global brand identity rather than universalism, which means Nestlé, uses global brand identity but, from the internal point of view, it uses local ingredients and other technologies that resonate with the local environment and brand name that is known globally.
Nestle is one of the world’s largest global food companies. It has over 500 factories in 76 countries, and sells its products in 193 nations. Only 1% of sales and 3% of employees are located in its home country, Switzerland. Having reached the limits of growth and profitable penetration in most Western markets, Nestle turned its attention to emerging markets in Eastern Europe, Asia, and Latin America for growth. Many of these countries are relatively poor, but the economies are growing quickly. Thus a consumer base capable of buying many Nestle products will develop over the next couple of decades.
In general the company’s strategy has been to enter emerging markets early before its competitors and build a substantial customer base by selling products which suit the local population such as infant formula, milk, and noodles. Nestlé narrows down its market share to many small niche markets, as opposed to general or one for all strategies. Nestlé keeps the goal of commanding the niche markets by gaining at least 85% of market share in every food product it launches. For example, by pursuing such a strategy, Nestlé has taken as much as 85 percent of the market for instant coffee in Mexico, 66 percent of the market for powdered milk in the Philippines, and 70 percent of the market for soups in Chile. As the income level rises in each niche market, Nestlé introduces an upscale version of the same brand to increase its profit level. Although Nestlé has become a global brand, it uses local identity to gain exposure in local markets. The company owns 8500 brands but only 750 of them are known internationally.
Customization is the key to Nestlé’s global brand identity rather than universalism, which means Nestlé, uses global brand identity but, from the internal point of view, it uses local ingredients and other technologies that resonate with the local environment and brand name that is known globally.