Nestle is, quite possibly, one of the most common food & beverage brands with some of the most frequently purchased products on their shelf. Various nutrition products under the Nestle brand have been so deeply ingrained into our childhoods that these tangible products have left an intangible effect in our lives. But apart from being successful in nurturing a healthy consumer relationship, Nestle is also a global leader that’s making headways in food, nutrition, and health and wellness sector. But how did they grew competitive advantages and move up the food chain in this market? Let’s find out:
Competitive Advantages of Nestle
The following study elaborates on the competitive advantages which provided Nestle an opportunity to be more competitive in the industry.
Bolstered Research & Development
Nestle’s research and development capabilities are off the charts. Over the years, they have heavily invested in R&D division. According to their annual report, a staggering US $1.697 billion was spent on their R&D in 2015. This investment paid off in the form of 1.89% of their total revenue generation. In contrast, Nestle’s closest rival in these terms, Pepsico, only invested 1.2%. Nestle Research Center (NRC), based in Luasanne, Switzerland is the largest privately owned food nutrition research institute in the world. The company, backed up by their extensive research efforts have gained tremendous edge in market data and consumer insights compared to their close rivals. The company now knows how to capture a market and drive more sales to boost revenue earnings altogether. This has been evident in their annual report from 2019, which showed a 1.2% increase in sales from previous years.
Partnership with Big Companies
Nestle is no stranger to strategic partnerships with big companies. In 2018, they partnered with Starbucks Coffee, paying off $7.15 billion for the rights to sell Starbucks packaged coffee teas globally. The aim was to help Starbucks focus on their cafe business while Nestle takes care of sales. Another reason behind this partnership was to fend off coffee market rival competitions such as JAB Holdings. By teaming up with a renowned chain coffeshop brand, Nestle set itself apart. And through this collaboration they’ve also been able to diversify their range of products in the coffee business by introducing Starbucks branded capsules for their Nespresso and Dolce Gusto single serve coffee brewers. By offering a variety of products, they’ve successfully redefined a market while others lagged behind due to lack of innovation.
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Product Availability
When it comes to Nestle, they believe strength in diversity. Despite being their largest operational market in the world, The U.S only generates 28.5% of the company’s total revenue stream. Their second largest market, China, generates only around 8%. In contrast, companies like PepsiCo and The Coca Cola earn 56% and 46% of their respective revenues from The U.S only. Nestle’s varied types of products are operational in 189 countries worldwide. This goes to further illustrate how the company doesn’t put all their eggs in one basket. Compared to their rivals, Nestle has done an exemplary job of branching out to almost every corner of the world, ensuring product availability at a faster rate than any other market operator. Their products are more frequently available on stores than their competitors, which has given them a competitive edge. They have established product accessbility for online shopping faster than their rivals as well, in markets all over the globe.
Related Reading: Competitive Advantages of Coca-Cola
Plant Based Meals
Yes, Nestle has just recently entered the meatless meal market too, offering plant based meals for vegetarian as well as ‘flexitarian’ dieters. People have started to consume less meat and include more veggie recipes into their eating habits. Nestle seized this opportunity to penetrate an untapped market and gain competitive advantage by offering food options to a new branch of consumers. This addition is generating higher sales volumes compared to their rivals as well.
Related Reading: SWOT Analysis of NESTLE
References
- https://www.nestle.com/stories/healthy-food-meatless-meals-flexitarian-nutrition-needs
- https://www.reuters.com/article/nestle-starbucks-idUSL5N2AO5AO
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