Nestle RowntreeEssay Preview: Nestle RowntreeReport this essayI recommend that Nestlé acquire Rowntree. if Nestlé does not purchase Rowntree now, they will lose the opportunity to Suchard. Nestlé would lose the opportunity to quickly and effectively build the Nestlé global brand though this acquisition with a company that has such common core values and goals as Nestlé. Exhibit 1 talks about Nestlés growth strategy.
Industry AnalysisThe chocolate industry was mature with slow growth (Exhibit 2). Chocolate was the most consumed food product by value – 1987 total retail value of chocolate for worlds 8 largest markets was $19.5 billion. Block chocolate annual growth was 1%; NestlĂ© had 14% of the market in 1987. Chocolate sales were divided into three main product segments: block, countline, and boxed. Of the three product segments countline was the fastest growing. NestlĂ© had 1% of the market in countlines. Companies achieved growth through mergers and acquisitions; consolidation occurred within the marketplace, with companies looking to lower production costs through increasing their economies of scope and scale, and moving toward fewer, more-concentrated production plants. Given the growth is in Countlines, it is not surprising that NestlĂ© wants to get into this product segment (Exhibit 3).
• Index: Food & Beverage • Industry Trends/Research For years, American consumers have made a significant part of their lives using products they purchase (Food and Beverage, 2002). The average consumption rate in 2001 was 46%, so the average consumption rate for 2000 is 54%; it is probably less surprising that the average consumer of 2002 is a young, healthy adult who likes chocolate when they buy an ice cream cone, because of its less-popular flavors. The trends are mixed, with most consumers (60%) still trying to figure out what to buy when chocolate comes out of the package (Food and Beverage, 2003; Grange, 2004). While only 2% of Americans are current chocolate consumers in 2002, it is expected that by 2002, about 45% of consumers will be young adults who bought an ice cream cone (Food and Beverage, 2002). The only new trend that appears right now is the increasing use of cocoa, as some food products are being made with cocoa fat. Although the popularity of chocolate has been improving in recent years (Borst, 2007), there is not a lot of research on what consumers’ purchasing habits are like for that particular product. The current trends of cocoa on the market are also different from that for many other food staples that tend to attract millennials who are buying chocolate right off the bat (Borst, 2007). It is interesting to look at how consumers might buy products made with different ingredients and a lot of the information is gathered by looking at the consumer’s preferences for chocolate. The first thing you notice as you look at the data is the growing popularity of packaged chocolate in Europe while in the U.S. consumers are opting to taste chocolate and see a much darker and less well-liked product for what some consider to be a “pure value.” At the same time, consumers are becoming less of a taste-and-fantasy for chocolate products. There were a lot of predictions about chocolate in the United States in the 1990s about how you would likely eat a different type of chocolate such as maple meringue or the chocolate milk powder. So when you look at the data for 1991 to 2000, which include the U.S., that is when food trends begin to change so that the U.S. became more saturated. This appears to be happening at least to one part of the chocolate industry right now (Food and Beverage, 2002). An important takeaway from this observation of trends has been the fact that chocolate, as the most consuming products, is the one product category that seems to attract most shoppers. In the U.S., the three most popular chocolate brands are: Hershey’s, Peanut Butter and Milk Chocolate (Hershey, 2008), Gluten-Free Chocolate (Granola, 2008) and Spicesweetened Chocolate (Tartan, 2006). The other 3 most popular brands are Peanut Butter (Granola, 2010), Chocolate and Milk Chocolate (Granola, 2011), and Spicesweetened Chocolate (Tartan, 2006). All 3 brands are making headlines and consumers are not necessarily talking about chocolate more often (Spicesweetened Chocolate, 2013). Of the three most popular products, Peanut Butter has steadily moved from a very popular brand through to becoming the second largest chocolate brand (Tartan, 2012). Peanut Butter is now the fastest growing consumer’s product of choice (Hershey, 2012), and Hershey’s also continues to expand its footprint by offering more chocolate as of 2011. If you are looking to
NESTLEL LEADERIES, INC. INTERNATIONAL CUSTOMER SERVICE (NYSE: NESTL)
$2.19 billion
Total retail value of NestlĂ©’s (NYSE: NEAL) international competitor (Exhibit 4) is expected to reach $7.3 billion in the current fiscal year. It is expected to reach $7.3 billion per quarter for this fiscal year, or $11.7 billion per year for the entire fiscal. NestlĂ©’s global market share is expected to expand to 23%, while its estimated $22.6 billion worldwide market cap is expected to grow to 34%, or $14.3 billion per quarter. The expected growth in Total retail income from NestlĂ© to its global product segments is expected to reach 4.4% of total international revenues, which will be higher than the 1.3% projected by the market makers. In addition, the 2% increase in total global revenues represents a significant increase from the 1% projected by a market makers. Total Global Market Cap growth of 3% is expected to close to 5.7% of total global revenues in the fiscal year; this is the 1.5% increase in the global market cap value reported by the market makers. As NestlĂ© moves into international markets, its market share in international payments is forecast to increase to $6.5 billion in the current fiscal year, or $40.8 billion per quarter. In addition, approximately 70% of global prepaid revenue comes from the U.S. and is projected to total $10.1 billion by the year 2020, or $9.5 billion in the current fiscal year. The anticipated increase in prepaid revenues from U.S. companies will be significant given that they are expected to see more than double in 2016 growth from U.S. companies. The international market share for NestlĂ©’s global product segments is projected to increase to 26%, down from $3.12 billion in Q3 2016, although that increase should be slightly more than the 5%. In addition, the forecast for total prepaid revenue for NestlĂ©’s global product segments is projected to increase from approximately $7.3 billion in Q3 2016, to $14.1 billion in 2019, or about 18% of global prepaid revenue.
NESTLEL LEADERIES, INC. INTERNATIONAL CUSTOMER SERVICE (NYSE: NEAL)
$2.18 billion
Total retail value of Nestle’s global competitor (Exhibit 5) is expected to reach $8.1 billion in the current fiscal year. It is expected to reach $8.1 billion per quarter for this fiscal year, or $10 billion per quarter for the entire fiscal. Nestle’s Global market share is projected to grow to 42%, while the anticipated growth in Total retail income from Nestle to its global product segments is projected to increase from 14% of total global revenues to 42% in the current fiscal. As NestlĂ© moves into international markets, its market share in international payments is forecast to growth to 5% of total global revenues in the fiscal year, or $21 billion in the current Fiscal Year. In the current fiscal, the average net return on Nestle’s net investment is projected to be 14% for 2014 and 12% for 2015. The Net Return per Share increase is a projection that follows a quarterly schedule where the dividend of the total annual return is adjusted to the net investment per share of net investment. In the current fiscal, the net interest
NESTLEL LEADERIES, INC. INTERNATIONAL CUSTOMER SERVICE (NYSE: NESTL)
$2.19 billion
Total retail value of NestlĂ©’s (NYSE: NEAL) international competitor (Exhibit 4) is expected to reach $7.3 billion in the current fiscal year. It is expected to reach $7.3 billion per quarter for this fiscal year, or $11.7 billion per year for the entire fiscal. NestlĂ©’s global market share is expected to expand to 23%, while its estimated $22.6 billion worldwide market cap is expected to grow to 34%, or $14.3 billion per quarter. The expected growth in Total retail income from NestlĂ© to its global product segments is expected to reach 4.4% of total international revenues, which will be higher than the 1.3% projected by the market makers. In addition, the 2% increase in total global revenues represents a significant increase from the 1% projected by a market makers. Total Global Market Cap growth of 3% is expected to close to 5.7% of total global revenues in the fiscal year; this is the 1.5% increase in the global market cap value reported by the market makers. As NestlĂ© moves into international markets, its market share in international payments is forecast to increase to $6.5 billion in the current fiscal year, or $40.8 billion per quarter. In addition, approximately 70% of global prepaid revenue comes from the U.S. and is projected to total $10.1 billion by the year 2020, or $9.5 billion in the current fiscal year. The anticipated increase in prepaid revenues from U.S. companies will be significant given that they are expected to see more than double in 2016 growth from U.S. companies. The international market share for NestlĂ©’s global product segments is projected to increase to 26%, down from $3.12 billion in Q3 2016, although that increase should be slightly more than the 5%. In addition, the forecast for total prepaid revenue for NestlĂ©’s global product segments is projected to increase from approximately $7.3 billion in Q3 2016, to $14.1 billion in 2019, or about 18% of global prepaid revenue.
NESTLEL LEADERIES, INC. INTERNATIONAL CUSTOMER SERVICE (NYSE: NEAL)
$2.18 billion
Total retail value of Nestle’s global competitor (Exhibit 5) is expected to reach $8.1 billion in the current fiscal year. It is expected to reach $8.1 billion per quarter for this fiscal year, or $10 billion per quarter for the entire fiscal. Nestle’s Global market share is projected to grow to 42%, while the anticipated growth in Total retail income from Nestle to its global product segments is projected to increase from 14% of total global revenues to 42% in the current fiscal. As NestlĂ© moves into international markets, its market share in international payments is forecast to growth to 5% of total global revenues in the fiscal year, or $21 billion in the current Fiscal Year. In the current fiscal, the average net return on Nestle’s net investment is projected to be 14% for 2014 and 12% for 2015. The Net Return per Share increase is a projection that follows a quarterly schedule where the dividend of the total annual return is adjusted to the net investment per share of net investment. In the current fiscal, the net interest
NESTLEL LEADERIES, INC. INTERNATIONAL CUSTOMER SERVICE (NYSE: NESTL)
$2.19 billion
Total retail value of NestlĂ©’s (NYSE: NEAL) international competitor (Exhibit 4) is expected to reach $7.3 billion in the current fiscal year. It is expected to reach $7.3 billion per quarter for this fiscal year, or $11.7 billion per year for the entire fiscal. NestlĂ©’s global market share is expected to expand to 23%, while its estimated $22.6 billion worldwide market cap is expected to grow to 34%, or $14.3 billion per quarter. The expected growth in Total retail income from NestlĂ© to its global product segments is expected to reach 4.4% of total international revenues, which will be higher than the 1.3% projected by the market makers. In addition, the 2% increase in total global revenues represents a significant increase from the 1% projected by a market makers. Total Global Market Cap growth of 3% is expected to close to 5.7% of total global revenues in the fiscal year; this is the 1.5% increase in the global market cap value reported by the market makers. As NestlĂ© moves into international markets, its market share in international payments is forecast to increase to $6.5 billion in the current fiscal year, or $40.8 billion per quarter. In addition, approximately 70% of global prepaid revenue comes from the U.S. and is projected to total $10.1 billion by the year 2020, or $9.5 billion in the current fiscal year. The anticipated increase in prepaid revenues from U.S. companies will be significant given that they are expected to see more than double in 2016 growth from U.S. companies. The international market share for NestlĂ©’s global product segments is projected to increase to 26%, down from $3.12 billion in Q3 2016, although that increase should be slightly more than the 5%. In addition, the forecast for total prepaid revenue for NestlĂ©’s global product segments is projected to increase from approximately $7.3 billion in Q3 2016, to $14.1 billion in 2019, or about 18% of global prepaid revenue.
NESTLEL LEADERIES, INC. INTERNATIONAL CUSTOMER SERVICE (NYSE: NEAL)
$2.18 billion
Total retail value of Nestle’s global competitor (Exhibit 5) is expected to reach $8.1 billion in the current fiscal year. It is expected to reach $8.1 billion per quarter for this fiscal year, or $10 billion per quarter for the entire fiscal. Nestle’s Global market share is projected to grow to 42%, while the anticipated growth in Total retail income from Nestle to its global product segments is projected to increase from 14% of total global revenues to 42% in the current fiscal. As NestlĂ© moves into international markets, its market share in international payments is forecast to growth to 5% of total global revenues in the fiscal year, or $21 billion in the current Fiscal Year. In the current fiscal, the average net return on Nestle’s net investment is projected to be 14% for 2014 and 12% for 2015. The Net Return per Share increase is a projection that follows a quarterly schedule where the dividend of the total annual return is adjusted to the net investment per share of net investment. In the current fiscal, the net interest
Nestlés StrategyThe company had a market-oriented organization structure, building their products based on the demand and expectations of each market they were in, and believed in positioning their company in the market for the long run (Exhibit 4). Nestlés strategy dictated a clear policy on acquisitions, believing that any company acquired must either strengthen their position in existing markets or allow them to enter new fields. They believed in looking at the long-term effect of their decisions, deciding to build brands and undertake only friendly acquisitions in order to ensure that any company purchased would easily come on board. It can be easily generalized that Nestlé would be a great parent for Rowntree, given its history of acquisitions, and its success in executing the acquisitions.
Advantages of a mergerExhibit 6 talks about the chocolate industry in general, and its key market drivers. Rowntree had established itself since the 20th century with its countline & boxed products (Exhibit 5).Through a consolidation of Nestlé-Rowntree, Nestlé could save between 5 and 15% of Rowntrees fixed overhead expenses. This does not take into account any revenue synergies and cost of goods sold savings. Synergies from this deal include
Synergies: There are many similarities all along the value chain such as supplies, production methods, distribution, and marketing. Synergies would be created all along the value chain.
Purchasing could be conducted on a larger scale increasing Nestlés buying powerFactories