Nestle Philippines, Inc.: The chilled business

• Main Author: Bicomong, Gertrudo R.
• Format: text
• Language: English
• Published: Animo Repository 2001
• Subjects: Food industry and trade > Philippines; Nestle Philippines; Inc.
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/3919
• Institution: De La Salle University

Chilled Dairy is a huge product category worldwide, worth more than US$ 30 billion. It includes all products that are pasteurized, require constant refrigeration, and have a shelf life not exceeding 40 days. In the Philippines, Nestle is the only local manufacturer and is spearheading the development of the young market through sizeable technical and marketing investment. The paper discusses functional strategies and issues facing the Nestle Chilled business, focusing on Sales and Marketing. SWOT and industry analysis (5-Forces Model) were the tools used to dissect the company and the industry. Since product handling is crucial to the business - given its short-life products -- the current delivery management system is also discussed. The paper ends with recommendations based on the major issues and an implementation plan. Nestle acquired 50% of the San Miguel Corporation's ice cream and chilled dairy interests in 1994, which led to the formation of the Magnolia-Nestle Corporation. When full ownership was achieved in 1998, it became known as Nestle Philippines - Ice Cream Division. Its ice cream and chilled products are manufactured in the plant along Aurora Boulevard, Quezon City. The paper is on the Chilled business only: Division assets enumerated are utilized by both Ice Cream and Chilled, but strategies and issues particular to Ice Cream are not discussed. Key issues for the Chilled business are the lack of sales focus (as compared to Ice Cream), the poor quality of service from distributor partners, and a weak direct selling system versus competition. On the side of Marketing, the issues are educating the market on product benefits and building the consumer base to spur growth. Finally, the current delivery management system poses a problem: it is not fully capable of supporting a business with huge product returns and third-party distribution such as Chilled. Part of the recommendations presented are a major organizational change, improved incentive schemes for both Nestle representatives and distributors, intensified Marketing communication efforts, and the adoption of the proper delivery management system - all of which should contribute to Chilled's target volume growth and achievement of bottom-line profitability by 2003. Due to the confidential nature of the data, the financial section of the paper does not contain completely factual figures. However, the percentages cited are correct: these are deemed sufficient to provide a meaningful financial analysis of the business and illustrate the effect of the recommendations on profitability.