Case Study-Nestle

Case Study

. In the mid-1860s, Henri Nestle experimented with various combinations of cow's milk, wheat flour and sugar. The resulting product was meant to be a source of infant nutrition for mothers who were unable to breast-feed their children.

In 1867, his formula saved the life of a prematurely born infant. Later that year, production of the formula, named Farine Lactee Nestle, began in Vevey, and the Nestle Company was formed. Henri wanted to develop his own brands and decided to avoid the easier route of becoming a private label. He also wanted to make his company a global company.Within a few months of establishing his company, Henri began to sell his products in many European countries. In the initial years, Henri restructured the organization to facilitate research, improve product quality, and develop new products.

In mid-1988, Nestle, acquired Rowntree Mackintosh PLC. Rowntree was the world's fourth largest manufacturer of chocolates and confectionery products, with well-known brands like Kit Kat, After Eight, Smarties and Rolo. The deal attracted considerable attention all over the world since several bids to acquire Rowntree were rejected. Rowntree claimed that the bids were too low for its valuable, well-recognized brands.In the end, Rowntree was acquired by Nestle for £2.5 billion, two and a half times the pre-bid price and eight times the net asset value of the company. This acquisition made Nestle the largest chocolate manufacturer in the world.

After acquireing Rowntree's brands , the major challenge before Nestle was managing them. Rowntree had a "one product, one brand" policy. The brands Kit Kat, After Eights, Smarties and Rolo were marketed with no mention of Rowntree. The brands of Rowntree were not strongly managed European brands. Before the 1980s, ‘country managers' outside the UK in several European countries managed Rowntree's business. They were free to run their units provided business objectives were met. The orientation at...