Nestle Industry Analysis

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The confectionary Industry analysis for studying market dynamics for Nestle

Table of Contents

1.History3
2.Industry Size and Trends3
2.1.The Distribution Mix5
2.2.Share of Grocery, Petroconvenience and Route6
2.3.Export and Import Scenario6
3.Industry Characteristics6
4.Porters 5 forces7
4.1.Threat of new entrants7
4.2.Industry rivalry7
4.3.Threat of substitutes8
4.4.Bagaining power of Buyers8
4.5.Bargaining Power of suppliers8
5.Confectionary industry Threats8
6.Confectionary industry Opportunities11
7.References11

1. History

* The confectionary originated thousands of years ago, when Hippocrates used sweets as medium to propagate his medicine pre 400 BC. * In 1600’s cocoa bean was discovered in South America by the Spanish .It then became a luxury product for the consumption of the elite in Europe. * The first chocolate house was opened in London in 1657. In Europe, Nestle was founded in 1867.John Cadbury started making chocolate in England in 1831. * James Stedman was the first in Australia to set up a small confectionary factory in 1874. Nestle began its food operation in Australia in 1908. Allen’s brand goes back to 1891 and Life Savers to 1921. Mac Robertson introduced the Mars products in the late 1950’s. * A series of take overs and mergers took place as business sought economies of scale. In the 1980’s, the Australian market became a transnational market from a national one. After acquiring local firm Life Savers and Allens in 1985 and Rowntree Mackintosh globally- Nestle Confectionary Ltd in 1991. This move was to bring all brands under one banner. During 1990’s Multinationals-7.5% of the Australian Confectionary industry. * In Oct 2008, Mars Inc. Purchased Wm Wrigley Jr and thus became world’s biggest confectionary manufacturer. Although in Australia, they operate separately, Mars is Mars- responsible for chocolate and Wrigley Company for sugar confectionary and gum range.

2. Industry Size and Trends
In 2008, Australian Confectionary industry was estimated to be 3.7 billion; out of which 2.7 bililon was accounted for by Grocery, Petro convenience and Route. The rest of the 1 billion sales was issued by seasonal confectionary and channels not captured through standard tracking (mass merchandisers, fund raising , etc). The price of sugar rose by 31.5% and of cocoa by 37.9% in 2007-2008. This led to an increase in the price of products and also the trend of passing by some of the industry’s major players. The confectionary sales in 2009, was hardly affected by the global financial crisis. Although, certain sectors within the market have shown tremendous growth at the expense of others – overall per capita consumption did not change much.

($2.7 Billion)
Australian Confectionary Industry Segments

Chocolate ConfectionarySugar ConfectionaryChewing Gum
(62%)(28%) (10%)
RSV $ 1456 Million $ 936 Million $234 Million Source :AC Neilson
Key Trends:
* Premium Products
* Health Products
* Traditional Products
Key innovation areas for the industry to expand:
* No artificial colours/natural
* Organic
* Low/No, reduced sugar
* High cocoa content
* Allergen free

The testing times are ahead, for the industry as, awareness of consumption of sugars, fats and obesity issues is increasing amongst the Australians. Although, the industry has already responded by introducing low/reduced sugar versions and small serving sizes. Chocolate manufacturers are extensively promoting the health benefits of cocoa and dark chocolate and combining them with fruits, nuts etc. 2.1 The Distribution Mix

Confectionary Sales

75% Grocery 13% Traditional 12% Exported Super market merchandise (Convenience and petro convenience independent small store) (In 1980s- Grocery accounted for 35%)

Supermarket chains...
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