Swiss food giant Nestlé has said that moving into emerging markets is “integral” to its long-term growth strategy.
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The “Nestlé model” for growth, as defined by former CEO Peter Brabeck-Letmathe, consists of year-on-year organic growth of 5-6% and improved margins across all regions. Last year, the company posted organic growth of 5.9%.
Current CEO Paul Bulcke has indicated that the world’s largest food group intends to continue to deliver the Nestlé model over the next ten years.
“Emerging markets are a very important growth driver for us,” a spokesperson for Nestlé told just-food today (19 June). “They are an integral part of our business.”
In 2007 emerging markets accounted for 34% of Nestlé’s sales. Bulcke has said he wants emerging markets to account for 50% of sales over the next ten years.
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By GlobalData“China, India and Russia are growing very fast. These are the most important emerging markets for us,” Nestlé’s spokesperson commented.
However, Nestlé ruled out the possibility of large-scale acquisitions being used as a means to grow market share in these regions.
“In terms of acquisitions, we are on-track with our strategy of moving from a commodity food company to a science-based health and wellness group. We have made some big acquisitions in this area… and these are now very well settled. Our focus has moved to organic growth,” Nestlé said.
“This is not to say we have ruled out smaller acquisitions,” the spokesperson added.
Nestlé revealed that its strategy to drive growth in emerging markets was to launch “popularly positioned products” that are tailored to the needs of any given market.
Popularly positioned products are products aimed at lower income consumers in developing countries.
In order to meet the needs of local consumers these products will often have a special nutritional profile. For example, Nestlé said, in remote areas of Brazil people commonly have an iron deficiency. Nestlé therefore offers foods that have been fortified with iron.
Additionally, the company has adapted price and size as “sometimes consumers don’t have enough money to buy in bulk – they need to buy from day-to-day.”
Another key to Nestlé’s strategy in emerging markets is the adoption of alternative distribution and marketing channels.
“In emerging markets we don’t just deal with the big supermarkets because they aren’t always there. Instead we look to small independent operations and ‘mom and pop’ shops to distribute our foods. We have also developed new ways of marketing to consumers in emerging markets,” Nestlé revealed.
