Nestlé
LC1
Nestle's Proposed Strategy
Nestlé is one of the largest and most successful food companies
in the world. It has successfully introduced many new products into
many different segments of the food and beverage industry. Nestlé
possess a product, LC1, which is innovative, fairly new in the North
American perspective, provides healthy benefits for the consumer,
while offering a new avenue for profits for Nestlé. Nestlé,
with its probiotic cultures found in its LC1 product, has an innovation
that is ripe to be introduced into the North American market. Currently
LC1 is primarily offered in Japan and Germany in the form of yogurts,
with great degrees of success. Unfortunately LC1 yogurts were unsuccessful
in a number of European markets, including France and The United
Kingdom.
A LC1 powder was introduced into the American market around 2000.
The powder was designed to be mixed into beverages and foods. It
was sold at GNC stores, primarily focusing on consumers who were
already health conscious about their eating habits. Nestlé
used print ads, a direct mailing campaign, a smaller scale campaign
targeted at health practitioners, and heavy Internet advertising
(www.herbs.org/current/nestlesup.html).
Overall Nestlé’s LC1 powder went larger unnoticed by
the US consumer, and achieved only minimal results.
In designing a strategy that would effectively place Nestlé
at the head of the probiotic industry in North America market would
require several key components. First would be to decide what areas
of the Food and Beverage industry in which we would like to introduce
Nestlé LC1 products. Second would be to educate the North
American consumers as to the benefits that the probiotics possessed
in LC1 brings. A strong marketing and advertising campaign would
accompany this. Third would be to quickly conduct all moves and
enter into each market as quickly as possible to gain maximum market
share. Fourth would be to reinvest all profits, over a predetermined
amount of time, back into operations, research and design, marketing
and advertising to solidify consumer trust, market power and market
position. In achieving these components of success we will be employing
the six principals described in the book Sun Tzu and the Art of
Business by Mark McNeily.
The first principal brought forth in the book is to “Win
All Without Fighting” or to prioritize markets and determine
competitor focus. Nestlé would need to figure out what areas
of the food and beverage industry they are already operating strongly
in and pinpoint some key products to introduce LC1 into. Nestlé
is one of the largest food companies in the world and offers a wide
range of products across many different areas of the food and beverage
industry. Nestlé should choose to incorporate LC1 into one
strong performing product in each one of its SBU’s. For instance
they could introduce it into yogurts through their Dairy SBU, cereals
in their Cereal SBU, into chocolate bars in their Confectionary
SBU, power bars through their Nutrition SBU, baby formulas through
their Baby Food SBU, pet foods through their Pet care SBU, into
ice cream through their Ice Cram SBU and into their drinks through
their Beverages SBU. Nestlé should choose one product in
each of these SBU’s to introduce to the market. This way there
is wide area of products with in different areas of the food and
beverage industry in which the LC1 product to bring a profit. So
if the LC1 does well in certain areas of the industry, but not another,
Nestlé can shift its focus from the weak product to the strong
product. Introducing it to many different products in many different
areas of the food and beverage industry gives LC1 a better chance
of achieving success. Nestlé, already begin a diversified
food and beverage company, has the benefit being able to explore
an option such as this.
Nestlé’s primary competition in introducing these
products would be General Mills. General Mills would offer competition
in some areas of the industry but perhaps could be an ally in others.
Nestlé already has joint venture with General Mills in the
cereal industry. These may prove to be beneficial to the introduction
of LC1 into a wide variety of popular cereals that the two companies
create and distribute. But, it may prove to be a hindrance if General
Mills wishes not help due to competition strains that result from
other areas of the food and beverage industry.
The second principal is to “Avoid Strength/ Attack Weakness”
or to develop attacks against competitor’s weakness. A beneficial
strength of Nestlé’s attacks is that the probiotic
market in North America is very small. In 1999 probiotics total
sales in North America were $67.2 million (www.nutraceuticalsworld.com/Sept012.htm).
Nestlé would have the benefit of being a first mover or second
mover in the industry. A primary weapon to Nestlé’s
introduction of LC1 products, with their probiotic benefits, would
be high levels of education through advertising and marketing. Nestlé
had introduced LC1 in 2000 but to little success. According to Steve
Allen, vice president, business development, Nestlé USA,
“Nestlé LC1 was too early for the U.S.; the benefits
were too general and the price/value relationship wasn’t there”
(www.nutraceuticalsworld.com/Sept012.htm). Education and consumer
understanding as to what probiotics are and the benefits they bring
is the main roadblock in LC1’s success.
According to Steve Allen: “What is holding us back in the
U.S. is that the consumer does not really have an explanation for
probiotics because there is no vehicle or preexisting knowledge
on which to build” (www.nutraceuticalsworld.com/Sept012.htm).
Because probiotic are a form of bacteria or a culture, trying to
get the North American consumer market to agree that LC1, a form
of bacteria, can help them might prove to be difficult. Nestlé
might first want to focus on athletes, mothers of small children,
senior citizens and any other health conscious area of the food
and beverage market in which to market their LC1 products. Nestlé
should highlight to them the benefits of using their LC1 products,
such as having an improved immune system or improved digestive system.
An area that limited LC1 success in other Europeans markets was
that some people viewed LC1 products as away to get better from
a sickness, or as a form of medicine. LC1 products are designed
to be a sort of body maintenance or even enhancement device and
taken regularly. Nestlé should stress the importance of LC1
products being similar to other health oriented foods like nonfat
milk or diet soda, which can and should be consumed daily.
In response to competitor attacks, Nestlé can rely on their
reputation in European and Asian markets where probiotics have being
prevalent for a number of years. LC1 has been widely popular in
countries such as Germany, Italy and Japan. Nestlé, being
a first mover in most of these markets, can highlight the fact they
were hugely responsible for the development and creation of probiotic
products and probiotic markets in the world. They were the ones
to create an example which all other in the industry to follow.
Nestlé can counter attacks on LC1 products in the North American
markets with advertising campaigns that highlight their success
in foreign markets, using real person testimonials to bolster their
positions. Nestlé might also want to employee the help of
professional athletes or movie stars to be spokesmen for their products,
in hopes of gaining consumer support.
The third principal is “Deception and Foreknowledge”
or war gaming and planning for surprise. For this I feel Nestlé
should use the implication wheel as a form of war gaming. Because
no other major food brand, including General Mills, has probiotic
products, the weakness that Nestlé would be attacking would
the lack of products that their competitors have to offer in the
probiotic market. Nestlé’s first attack should be to
educate consumers to benefits of using probiotic products. This
educational campaign should be backed with scientific support and
with examples of success from the European market. It should be
done through advertisements on television, at prime time and during
popular sports events preferably, through the newspaper coupled
with money saving coupons, and on the internet through links with
health food websites. Nestlé should highlight the fact that
while such things as obesity and fast food are slowly decreasing
the healthy and eating habits of North Americans, LC1 provides products
that are healthy, good tasting, which also help improve the body’s
functions. It would beneficial to LC1 success if popular athletes
or movie stars were hired to endorse the products.
Nestlé’s competitors may respond to these advertisements
with their advertisements that may down play or even deny the benefits
of using LC1 products. They may play off the consumer’s misconception
that all bacteria are harmful to one’s health in an attempt
to stir LC1 success. Competitors may respond with advertisements
that highlight LC1 lack of success in markets like France or in
the United States in 2000. The may wage an anti LC1 advertisement
campaign in hopes of slowing down any market share LC1 may gain
from its advertisement campaign or to support their own probiotic
products. In response, Nestlé should once again shift the
consumers focus to their successes in European markets, along with
their history in the market and the breakthroughs in research they
have found to highlight the benefits of probiotic products in the
course of their operations.
Nestlé could use Sun Tzu’s fourth principal, “Shape
Your Competition” or integrate best attacks to unbalance the
competition, to throw competitors off. Because Nestlé is
going to introduce LC1 products in several different areas of the
food and beverage industry, they could only advertise products in
one or two markets. Then as competitors design their defense in
those particular markets, Nestlé would unleash their overall
product launch across all the predetermined areas of the food and
beverage industry. This should catch competitors off guard, leaving
them unprepared to defend against the scope of Nestlés attack.
Nestlé may choose not to focus a large amount of resources
into the introduction of products into markets in which they tricked
their competitors into defend in. Nestlé should then focus
their resource in to markets where they had not previously hinted
they wished to enter into. These markets should be markets where
Nestlé already has strong performing products like their
ice cream or chocolate bar products.
This introduction of products should be done with Sun Tzu’s
fifth principal in mind which is “Speed and Preparation”
or ready your attacks and release them. All actions should be done
quickly and following a schedule. Nestlé’s initial
hints of wanting to enter into the probiotic market should be made
know to the industry about one year before actual product launch.
Nestlé, through word of mouth and small advertisement campaigns
could hint at the markets and products it was going to launch with
their LC1 probiotic benefits. This would be time would competitors
would take notice and begin mounting defensive strategies. About
six months before product launch, Nestlé should increase
the size and scope of their advertisements, including a specific
date as to the launch of LC1 enriched products. Here is when Nestlé
could start employing the help of Professional athletes or movie
stars. Nestlé should emphasizes, in their advertisements,
the universal benefits that their LC1 products will bring to all
people, along with the fact that these products taste the same as
similar products in the same category. About one month to two weeks
before product launch, Nestlé should release advertisement
revealing the full scope of the products in which they are planning
to launch. Between two weeks and product launch Nestlé should
hold a party of sorts where they would invite consumers, retailers,
distributors, and manufactures from the food and beverage industry
to sample Nestlé’s new LC1 enriched products. This
would be done to create a positive word of mouth and generate interest
within the industry. Nestlé then should release all their
LC1 enriched products simultaneously across every food and beverage
sector.
For at least a year Nestlé should closely monitor all of
its LC1 products, noting which products are performing better than
others and in what market sector. Nestlé should then reallocate
resources from poor performers or dogs in the market, possibly abandoning
certain products or markets all together, to support products that
are performing well as stars in their markets. This would follow
Sun Tzu’s final principal which deals with leadership, reinforcing
success and starving failure. Smart leaders know when to put further
assets into products and markets that are performing well and when
it would be better to retreat from them. Nestlé has a well-established
management structure that is support by a strong reputation in the
industry. This, along with the fact that Nestlé is introducing
many products into many markets gives them the edge and flexibility
to fine-tune their management, production and sale of their LC1
enriched products.
1
> LC1 Background / Dairy Division
2
> Nestlé’s Competitive Strategies
3
> Competitor Profile – General Mills
4
> SWOT Analysis
5
> Proposed Strategic Plan
6
> Sources
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