Capstone Project

Fundamental Analysis of Nestle India

Submitted in partial fulfillment of the requirements for

Master of Management Studies (MMS)
Academic Year: 2020

Submitted By
Komal Mohan Naik
Roll No. 93
MMS-IV, Batch: 2018-20

Chetana’s R. K. Institute of Management and Research,

Bandra (E), Mumbai 400 051
 Declaration

I hereby declare that this report submitted in partial fulfillment of the requirement of the award
for the Master of Management Studies to Chetana’s R.K. Institute of Management and Research,
is my original work and not submitted for award of any degree or diploma fellowship or for
similar titles or prizes.

I further certify that I have no objection and grant the rights to Chetana’s R.K. Institute of
Management and Research to publish any chapter/ project if they deem fit in Journals/Magazines
and newspapers etc. without my permission.

Place : Mumbai

Date :

Name : Komal Mohan Naik

Class : M.M.S; Sem. – IV

Roll No. : B – 93

Name of the student

Komal Naik
 Acknowledgements

I would like to thank Chetana’s R.K.Institute of Management & Research for giving me an
opportunity to learn and understand about finance and research aspects.

Special thanks to my mentor Professor Meghana Patil for her precious time, efforts,
unconditional support and valuable guidance in completing this project, helping me to
understand this project better and supporting me with her expertise about the subject to make my
project worth for my own benefit and also for the overall benefit of Capstone project.

I am also grateful to Dr. Jayshree Bhakay (Director, Chetana’s R.K.Institute of Management &
Research) and my institution for giving me an opportunity to undergo this learning experience.

I’m equally thankful to my other faculty, Professor Suhas Gharat and Professor Aftab Shaikh
for their guidance.

I’m thankful to my Institute IT Lab who played a useful role in the successful completion of the
project.

Last but not the least, I take pride in thanking my family and friends for their much valued
support.

Name of the Student

Komal Naik
 Executive Summary

FMCG as a sector has always been an important factor for a Nations GDP. The sector has shown
ups and downs and has changed tremendously since its inception. This section mainly gives an
introduction to the Indian FMCG industry and the company under study- Nestle Ltd.

Delving further into this section, I also try to understand how Nestle aims to be the leader in the
food industry more specifically health, wellness and nutrition. The objectives to be studied under
this section are to get a basic overview of the Indian FMCG industry, to get a basic overview of
Nestle Ltd. and its history and also include detailed information about the products and services
provided.

This section also covers information about Board of Directors of the Nestle and shareholding
pattern of the company. Also the ethics, vision, mission, values, core beliefs of the company in
conversation are being studied.

The type of research of this section is exploratory, with secondary sources including websites,
journals, articles and annual reports of the company. The study revealed that India is a big
market for FMCG and that Nestle Ltd. is taking all the efforts possible to fulfill the demands in
the coming years. Nestle enjoys high credibility among customers because of its quality products
and loyalty and trust among its customers.
 Table of Contents

Chapter Particulars Page No.

1 Introduction
1.1 Introduction to the Industry
1.2 Major segments in FMCG Industry
1.3 FMCG sector in India
1.4 Introduction to the company

2 About the company

2.1 History
2.2 Company profile
2.3 Mission, Vision, Goals & Objectives
2.4 SWOT Analysis

3 Company Management
3.1 Directors
3.2 Principles of leadership at Nestle India

4 Organizational structure
4.1 System & organization structure
4.2 Organization chart
4.3 System Methodology & objectives
4.4 Shareholding pattern

5 Awards & Developments

Awards & Recognition

6 Conclusion

7 Annexures
Bibliography
 Chapter 1
Introduction

1.1 Introduction to the industry

Fast moving consumer goods (FMCG) are the fourth largest sector in the Indian economy. There
are three main segments in the sector – food and beverages which accounts for 19 per cent of the
sector, healthcare which accounts for 31 per cent and household and personal care which
accounts for the remaining 50 per cent.
The FMCG sector has grown from Rs 2,20,852.4 crores (US$ 31.6 billion) in 2011 to Rs
3,68,669.75 crore (US$ 52.75 billion) in 2017-18. The sector is further expected to grow at a
Compound Annual Growth Rate (CAGR) of 27.86 per cent to reach Rs 7,24,759.3 crore (US$
103.7 billion) by 2020. FMCG market is expected to grow at 9-10 per cent in 2020. FMCG urban
segment witnessed growth rate of 8 per cent whereas rural segment grew at 5 per cent in quarter
ended in September 2019; supported by moderate inflation, increase in private consumption and
rural income.
Accounting for a revenue share of around 45 per cent, rural segment is a large contributor to the
overall revenue generated by the FMCG sector in India. Demand for quality goods and services
have been going up in rural areas of India, on the back of improved distribution channels of
manufacturing and FMCG companies. Urban segment accounted for a revenue share of 55 per
cent in the overall revenues recorded by FMCG sector in India.
FMCG Companies are looking to invest in energy efficient plants to benefit the society and
lower costs in the long term. Patanjali will spend Rs 5,197.85 crore (US$ 743.72 million) in
various food parks in Maharashtra, Madhya Pradesh, Assam, Andhra Pradesh and Uttar Pradesh.
Dabur is planning to invest Rs 250-300 crore (US$ 38.79-46.55 million) in FY19 for capacity
expansion and is also looking for acquisitions in the domestic market. Tata’s are also planning to
expand its home and personal care products in FMCG sector. In FY19, ITC made more than 60
launches in the fast-moving consumer goods (FMCG) segment in India. Investment intentions
related to FMCG sector, arising from paper pulp, sugar, fermentation, food processing, vegetable
oils and vanaspati, soaps, cosmetics and toiletries industries, worth Rs 15,961 crore (US$ 2.28
billion) were implemented between January 2017 to July 2019. In 2019, RP-Sanjiv Goenka
Group to invest capital fund of Rs 103.01 crore (US$ 14.74 million) in FMCG start-ups. Nestle
plans to invest Rs 700 crore (US$ 100.16 million) to open a new plant in Sanand for Maggi. ITC
plans to invest Rs 700 crore (US$ 100 million) in food park in Madhya Pradesh.
Growing awareness, easier access, and changing lifestyles are the key growth drivers for the
consumer market. The focus on agriculture, MSMEs, education, healthcare, infrastructure and
tax rebate under the Union Budget 2019-20 is expected to directly impact the FMCG sector.
These initiatives are expected to increase the disposable income in the hands of the common
people, especially in the rural area, which will be beneficial for the sector.
1.2 Major Segments of the FMCG Industry

The major FMCG market Industry in India mainly comprises of;

Fig. 1.1 FMCG markets

 Household Care

The detergents segment is experiencing healthy annual growth rate of 10 to 11 per cent during
the past five years. The detergent market is equally dominated by the local and unorganized
players which shares decent percentage of the total volume. In urban areas, people give
preference to detergents in place of bars. Household care segment is featured by intense
competition and high level of penetration. With rapid urbanization and increasing disposable
income, introduction of the concept of small packets and sachets, the household care products
demand is growing fast. In washing powder segment, HUL is the leader with 38% of market
share. Other leading players are Proctor & Gamble, Nirma and Henkel.

 Personal Care

Personal care segment includes oral care products, skin care products and cosmetics, hair care
products, personal wash products etc. The Indian skin care and cosmetics market is very large
and valued at $274 million and is dominated by leading players like HUL, Colgate Palmolive,
Godrej Consumer and Gillette India. The coconut oil segment covers 72 per cent share in the hair
oil market. The hair care market can be divided into hair oils, hair colorants & conditioners,
shampoos, and hair gels. Marico (with Parachute) and Dabur are the leading players in the
branded coconut hair oil market. Rural people prefer to buy sachet which makes up to 40 per
cent of the total shampoo sale. Again HUL is the dominant player with around ~47 per cent
market share; P&G placed at second position with market share of around ~23 per cent.

 Food and Beverages

This segment comprises of the food processing industry- packaged foods, health beverage
industry- bread and biscuits, chocolates & confectionery, Packed Mineral Water and ice creams.
The three largest consumed2 categories of packaged foods are packed tea, biscuits and soft
drinks. Tea market dominates the Indian hot beverage market. Unorganized players enjoy the
major share of tea market. Leading players of organized tea market are HUL and Tata Tea.
Major players in food segmen2t are HUL, Amul, Dabur, Nestle, ITC and Godrej.

1.3 FMCG Sector in India:

The retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 840 billion in
2017, with modern trade expected to grow at 20 per cent - 25 per cent per annum, which is likely
to boost revenues of FMCG companies. Revenues of FMCG sector reached Rs 3.4 lakh crore
(US$ 52.75 billion) in FY18 and are estimated to reach US$ 103.7 billion in 2020. The sector
witnessed growth of 16.5 per cent in value terms between July-September 2018; supported by
moderate inflation, increase in private consumption and rural income.

The FMCG sector is expected to grow at 9-10 per cent in 2019.Rise in rural consumption to
drive the FMCG market. It contributes around 36 per cent to the overall FMCG spending. FMCG
urban segment witnessed growth rate of 8 per cent whereas rural segment grew at 5 per cent in
quarter ended in September 2019.
1.4 Introduction to the company

Nestlé S.A. is a Swiss multinational food and drink processing conglomerate corporation
headquartered in Vevey, Vaud, Switzerland. It is the largest food company in the world,
measured by revenues and other metrics, since 2014. It ranked No. 64 on the Fortune Global
500 in 2017 and No. 33 on the 2016 edition of the Forbes Global 2000 list of largest public
companies.
Nestlé has 447 factories, operates in 189 countries, and employs around 339,000 people. It is one
of the main shareholders of L'Oreal, the world's largest cosmetics company.
Nestlé was formed in 1905 by the merger of the Anglo-Swiss Milk Company, established in
1866 by brothers George and Charles Page, and Farine Lactée Henri Nestlé, founded in 1866
by Henri Nestlé. The company grew significantly during the First World War and again
following the Second World War, expanding its offerings beyond its early condensed
milk and infant formula products. The company has made a number of corporate acquisitions,
including Crosse & Blackwell in 1950, Findus in 1963, Libby's in 1971, Rowntree Mackintosh in
1988, Klim in 1998, and Gerber in 2007.
The company has seen various controversies, facing criticism and boycotts over its marketing of
baby formula as an alternative to breastfeeding in developing countries, its reliance on child
labour in cocoa production, and its production and promotion of bottled water.
 Chapter 2
About the company

2.1 History
Nestlé's origins date back to the 1860s, when two separate Swiss enterprises were founded that
would later form Nestlé. In the following decades, the two competing enterprises expanded their
businesses throughout Europe and the United States. In 1866, Charles Page (US consul to
Switzerland) and George Page, brothers from Lee County, Illinois, USA, established the Anglo-
Swiss Condensed Milk Company in Cham, Switzerland. The company's first British operation
was opened at Chippenham, Wiltshire, in 1873. In 1867 in Vevey, Switzerland, Henri
Nestlé developed milk-based baby food and soon began marketing it. In 1904, François-Louis
Cailler, Charles Amédée Kohler, Daniel Peter, and Henri Nestlé participated in the creation and
development of Swiss chocolate, marketing the first chocolate – milk Nestlé. In January 1919,
Nestlé bought two condensed milk plants in Oregon from the company Geibisch and Joplin for
$250,000. One was in Bandon, while the other was in Milwaukie. The end of World War II was
the beginning of a dynamic phase for Nestlé. Growth accelerated and numerous companies were
acquired. In 1947 Nestlé merged with Maggi, a manufacturer of seasonings and soups. Crosse &
Blackwell followed in 1950, as did Findus (1963), Libby's (1971),
and Stouffer's (1973).[23] Diversification came under Chairman & CEO Pierre Liotard-Vogt
with a shareholding in L'Oreal in 1974 and the acquisition of Alcon Laboratories Inc. in 1977 for
280 million dollars. Since 2010, Nestle has been working to transform itself into a nutrition,
health and wellness company in an effort to combat declining confectionery sales and the threat
of expanding government regulation of such foods.

Fig. Henry Nestle

2.2 Company profile

Nestle India Ltd, one the biggest players in FMCG segment, has a existence in milk & nutrition,
beverages, prepared dishes & cooking aids & chocolate & confectionery segments. The company
is unavailable in the food business. The food business incorporate product groups, such as milk
products and nutrition, beverages, prepared dishes and cooking aids, chocolates and
confectionery. Nestle India manufactures products under brand names, such as Nescafe, Maggi,
Milky bar, Milo, Kit Kat, Bar-One, Milkmaid and Nestea.

The company has also introduced products of daily utilization and use, such as Nestle Milk,
Nestle Slim Milk, Nestle Fresh ‘n’ Natural Dahl and Nestle JeeraRaita. The company’s brands
include milk products and nutrition, prepared dishes and cooking aids, beverages, and chocolates
and confectionery. Their milk products and nutrition includes Nestle Everyday Dairy Whitener,
Nestle Everyday Ghee, Nestle Milk, Nestle Slim Milk and Nestle Dahl. Beverages Include
Nescafe Classic, Nescafe Sunrise Premium, Nescafe Sunrise Special and Nescafe Cappuccino.

Nestle India is a secondary of Nestle S.A. The company has attendance across India with 7
manufacturing facilities and four branch offices extend across the region. The four branch offices
in the country help facilitate the sales and marketing of its products. They are in Delhi, Mumbai,
Chennai and Kolkata.

The company’s four factories were awarded the internationally predictable external certification
ISO 14001 for adherence to environmental processes and OSHAS 18001 for Health and Safety.
In the year 2008, the company launched Nestle Nesvita Pro-Heart Milk with Omega-3 in
Mumbai. Nestle Nesvita Pro-Heart is part of daily diet and has Omega-3 heart friendly nutrients
scientifically known to help manage cholestrol. As part of their ongoing dedication to offering
best in class nutrition products to Indian consumers, the company launched NESTLE NAN 3, a
follow-up formula for older infants. During the year, MAGGI PICHKOO Tomato Ketchup was
launched in a unique easy to handle day pack to drive affordability, taste and convenience for a
larger number of consumers.

2.3 Mission, Vision, Goals and Objectives

Mission

"Nestlé is the largest food company in the world. But, more important to them is
to be the world's leading food company”.
At Nestlé, we believe that research can help us make better food so that people live a better life.
Good Food is the primary source of Good Health throughout life. We strive to bring
consumers foods that are safe, of high quality and provide optimal nutrition to meet
physiological needs. In addition to Nutrition, Health and Wellness, Nestlé products bring
consumers the vital ingredients of taste and pleasure.

Vision

“Nestlé aim is to meet the various needs of the consumer every day by marketing and selling
food of a consistently high quality. The confidences that consumers have in our brands is a result
of our company’s many years of knowledge in marketing, research and development, as well as
continuity – consumers relate to this and feel they can trust our products”.

In particular, we envision to;

 Lead a dynamic, motivated and professional workforce – proud of our heritage and
positive about the future.
 Meet the nutrition needs of consumers of all ages – from infancy to old age, from
nutrition to pleasure, through an innovative portfolio of branded food and beverage products of
the highest quality.
 Deliver shareholder value through profitable long term growth, while continuing to play a
significant and responsible role in the social, economic, and environmental sectors of India.

Tagline

“Good food, Good life”

Henri Nestlé chose his own coat of arms to represent the company's philosophy:
a bird's nest, with a mother feeding her young. The image represents Nestlé core values: care,
family values, nutrition, healthy growth, safety and comfort. It is a guarantee of quality and a
commitment to responsibilities as a food company and experts in nutrition.
Over the years Nestlé has reaffirmed its commitment to wellness, helping consumers to live
longer, healthier, and more productive lives, no matter their age, gender or socioeconomic status.
Goals of Nestle

The main goals as described by Nestle are as follows:

“Good Food, Good Life, the key to health, nutrition and wellness. With over 140 years of
experience and expertise, we take great pride in bringing you the best products because happy,
healthy consumers are important to us. We develop our products keeping your preferences, tastes
and needs in mind. We understand that you, along with millions of other consumers, know that
you can trust our products to deliver purity, quality, convenience and nutrition. Our products are
carefully aligned to Pakistani tastes and needs. We're always trying hard to develop new products
and improve existing ones, and serve our consumers better. That's why through constant
renovation and innovation we're always testing or launching value added products and making
them available in sizes that will suit every requirement. So explore the world of health with
Nestlé products, and find out what suits your family's needs”

Objectives of Nestle

“Marketing objectives are compatible with the overall corporate objectives of nestle.
Company’s objective is to be the world’s largest and best branded food manufacturer while
insuring that nestle name is synonymous with the products of the highest quality”.

2.4 SWOT Analysis

Strengths

The company has a great support from its parent company which has a great influence all over
the world. It has huge brand strength all over the world. The brands like NESCAFE, MAGGI
and CERELAC which are generic to their product categories are very strong in the Indian
market. Around 67% of the population use Nescafe, Maggi and Cerelac for their daily uses.
Another main Strength of the company is, it continuously introduces new products in to the
market with innovative thoughts and attracts people towards it. It makes sure that its products are
manufactured with quality. There are nearly 3500 scientists in the company’s R&D department
to innovate new thoughts and ideas. It is a truly global company which is operated in 77
countries. The competition from other organisations doesn’t affect Nestle because of the low cost
and high quality it maintains. It has a very strong work force unlike the other organizations.
Weaknesses

Because of the uneven nature of the Indian market, the things get more complicated. It is very
much important to maintain good hygiene standards, talented personnel in the food industries
like Nescafe. It is very difficult to maintain these standards in the big countries like India which
has a complex supply chain management.

Opportunities

There are lots of opportunities to the company in the huge country like India. There are lots of
towns in India where the products of Nescafe are not available. It can extend to those towns and
villages and can increase its market. The company can extend its product folio by introducing
new products into the market.

As India is a huge country with lots of resources and manpower, it can be made as the export hub
to achieve better results. Everyone is becoming a health freak now days, including the United
States. So, health based products are having great opportunities in the global market.

Threats

The main threat for any organisation is its competitor. There is a huge competition among the
organisations. Nestle faces huge competition from the organised and unorganised sectors.
Moreover, the Indian government has decreased the import duty of food products, making the
things worst. The organisation does not have any threats from the small scale industries but it
will have threats from the organisations which are established with large investments and big
brand value.

The performance of FMCG sector is very less in the past 2-3 years, even though there is a decent
pace of growth in the economy of the organisation. Some of the markets in which the company is
about to enter, are already mature regarding these products.
 Chapter 3
Company Management

3.1 Directors

 Mr. Suresh Narayanan

(Chairman and Managing Director)

Mr. Suresh Narayanan joined the Board of Directors of Nestlé India Limited as Managing
Director from 1st August, 2015. Mr. Narayanan has been designated as the Chairman and
Managing Director of the Company with effect from 29th October, 2015. He is also member of
Corporate Social Responsibility Committee of the Board of Directors of the company. Mr.
Narayanan is also on the Board of Nestlé Lanka PLC and Asian Paints Limited.

 Mr. David McDaniel

(Executive Director – Finance & Control and CFO)
Mr. David McDaniel is the Executive Director - Finance & Control and Chief Financial Officer
of Nestlé India Limited. He is member of Stakeholders Relationship Committee and Risk
Management Committee of Nestlé India Limited.

 Mr. Martin Roemkens

(Executive Director – Technical)

Mr. Martin Roemkens joined the Board of Directors of Nestlé India Limited with effect from 1st
April, 2017 as a Whole-time Director. He has been designated as “Executive Director -
Technical”. Mr. Roemkens is also a member of Risk Management Committee of the Directors of
the Company.

 Ms. Rama Bijapurkar

(Independent Non-Executive Director)
Ms. Rama Bijapurkar joined the Board of Directors of Nestlé India Limited as Independent Non-
Executive Director on 1st May, 2017 to hold office for a term up to 30th April, 2022.Ms.
Bijapurkar is Chairperson of Stakeholders Relationship Committee and Member of Corporate
Social Responsibility Committee of the Company.

 Mr. Rajya Vardhan Kanoria

(Independent Non-Executive Director)

Mr. Rajya Vardhan Kanoria joined the Board of Directors of Nestlé India Limited as an
Independent Non-Executive Director on 13th May, 2014 and re-appointed for second term of
five consecutive years effective from 13th May, 2019 till 12th May, 2024. Mr. Kanoria is
Chairman of the Audit Committee and the Nomination and Remuneration Committee and also
member of Stakeholders Relationship Committee of the Board of Directors of the Company.

 Ms. Roopa Kudva

(Independent Non-Executive Director)
Ms. Roopa Kudva joined the Board of Directors of Nestlé India Limited as an Independent Non-
Executive Director on 1st January, 2019 to hold office for a term of five years.

 Dr. Rakesh Mohan

(Independent Non-Executive Director)

Dr. Rakesh Mohan joined the Board of Directors of Nestlé India Limited as Independent Non-
Executive Director on 1st May, 2016 to hold office for a term up to 30th June, 2020. Dr. Rakesh
Mohan was on Nestlé India Board earlier as an Independent Non-Executive Director from April,
2010 to October, 2012 and had relinquished office of Director of the Company consequent to his
appointment as Executive Director at the International Monetary Fund, Washington, D.C.,
United States, representing India, Sri Lanka, Bangladesh and Bhutan.

 Dr. Swati A Piramal

(Independent Non-Executive Director)
Dr. Swati A. Piramal joined the Board of Directors of Nestlé India Limited as a Non Executive
Independent Director on 2nd August, 2010. Dr. Piramal is also the Chairperson of Corporate
Social Responsibility Committee of Directors of the Company.

3.2 Principles of leadership at Nestle India

 Lead for winning

Credibility development through proper leadership style, achievement and coherent action.
Based on the nature of situation and culture of a particular environment proper leadership styles
are applied by managers in their different work units. Managers at Nestle think about a
phenomena from different perspectives in a way which leads toward innovation. Employees are
provided with the opportunity of taking risk and openness to new experiences which many times
leads to the mistakes but they are tolerate able if the mistakes are becoming the source of
learning and employees are commited to learn from them. Innovation needs experiments and not
every experiment brings favourable results, but some can entirely change the way the work was
done and managed. So all these experiments are possible when the management is ready to
tolerate the results of failures, which is the case of Nestle (Nestle-family, 2015). Management of
expectations and alignment of every action with the overall or corporate strategy of company is
the key factor of success for company and the importance of both of them is recognized on every
level by Nestle. Balanced lifestyle, good level of general and professional education, responsible
behaviour are the key characteristics of managers at Nestle which when they lead by example
shifts toward the employees on every level. All of such actions and demonstrations make it
possible to lead for winning.

 Management for results

Maintaining exposure in the situations of intense pressure while in the same time maintaining the
temperament and capacity of taking initiatives and risks is most of the times very difficult for
managers. Effectively and efficiently managing between these both extremes is the difference
between being just a manager and being a leader. Managers at Nestle are trained for managing
them. Business units at local level, regional level, corporate and global level requires synergy.
Which is the result of deep level of proactive cooperation among all of them. Leaders at Nestle
are trained for creating synergy on all levels. Change is inevitable and but managing the
consequences of change is the responsibility of a leader and the effective management results in
managing the change in a way that produces favourable results for organization like Nestle. All
the above leadership practices results in achieving business objectives in a way that the
compliance is maintained with sustainable practices.

 Grow teams and Talent

Nestle ensures personal commitment of its employees toward their work and achieving their
individual goals so that the overall goals of organization become able to meet which results in
promoting the organizational success. Company develop the leaders of tomorrow by addressing
them and allowing them to progress in the area which provides them the opportunity to expand
their capabilities on individual and group levels. For developing the leaders of tomorrow
company understands the extent to which the continuous learning and sharing of ideas in a free
manner is important. Employees can never know about their exact performance and until they

are provided with the honest and fair feedback from their managers which includes performance
appraisal in a way that respect of employee will never be shaken on any step. Doing all these
leadership practices, management at Nestle is always conscious abut maintain the exact balance
of diversity and gender prevails in the organization.

 Competing and connecting externally

Continuously looking toward the ways to satisfy the consumers in most innovative way and
attracting the new customers in a compelling way is also the part of leadership practices at
Nestle. Nestle believes in an outside in perspective for customers and inside in for the employees
of organization and seeks good business relations with all the stakeholders.

 Diversity

Nestle is always an equal opportunity employer and always appreciates diversity in organization.
The management is of the opinion that diverse employees are the reason behind such a
tremendous success of organization. Nestle has the slogan that “Our differences make us
stronger”. Company is of the opinion that the unique people with unique backgrounds bring their
unique perspectives and experiences with them. In Nestle the voice of every individual from
every background is not only heard but also appreciated. The goal of company is to attract the
best workforce from diverse backgrounds and retain them. The company believes that these
employees can create such products which are liked by the customers all over the world. Having
the diverse workforce like Nestle has not only benefits the company but also the employees and
the societies from which they belong to. Nestle has its own recruiting system which is called as
“Symposium for Diverse Leaders of Tomorrow” through which the recruitment and selection of
employees from different background is done. Furthermore Nestle also actively participates in
different MBA recruiting programs including Consortium for Graduate Study in Management
Orientation Program (CGSM OP). Through these selection programs the fresh graduates of
universities are selected on merit basis without considering the backgrounds, races from whom
they belong to. For encouraging the diversity in organization and let the employees share their
knowledge experiences and best practices Nestle has promoted many ethnic groups such as
“Nestlé Black Employees Association (NBEA)”, Nestlé Women’s Network (NWN) for
promoting the exact gender balance in the organization. Further Nestlé Hispanic Employees
Association (NHEA) is also working for the promotion of interests of Hispanic employees in
organization. The purpose of making all these associations and organizations is to gather the
employees from diverse backgrounds on a platform where they can share their experiences about
how to make the company a better place to work (NestleUSA, 2015). The company is of the
opinion that the employees from diverse backgrounds are asset for the organization and these
employees are in fact the source of competitive advantage for the company.
 Chapter 4
Organizational Structure

4.1 System and Organization Structure

A company’s organizational chart typically demonstrates relations between people within an

organization. Such relations might include managers to sub-workers, directors to managing
directors, chief executive officer to various departments, and so forth. When an organization
chart grows too large it can be split into smaller charts for separate departments within the
organization.

The different types of organization charts include:

 Hierarchical
 Matrix
 Flat (also known as Horizontal)

Nestle Company is a decentralized organization that is organized according to the matrix

structure. Nestle as a decentralized organization permits to subordinate branches to enjoy a
proportionately high-level of independence. Although it still makes major strategy decisions at
the headquarter level, daily operations are left up to subordinate branches to derive and perform.
The responsibility for operating decisions is push down to local units.

In organization structure, Complex system is a system that is comprises a large number of

entities that display a high level of nonlinear interactivity. There are number of basic
observations that have been made through the examination of complex systems, mainly using
computer simulation and the mathematic of non-linearity.

Complex systems are usually open systems. Nestle, over its long historical development from a
small village operation to the world’s leading food Company, has illustrate an excellent
capability to adjust to an ever-changing external environment, without losing its basic beliefs and
core values, so important for long-term success. Over the years to come, this capability will
continue to be challenge even more as Nestle is growing in size and complexity up to a
dimension, which demands a continuous development of its organisation and of the way in
which it run.
4.2 Organization Chart
In Organization chart, we can see that the management of Nestle is also divided into 3 types’ top-
level management, middle level of management and low-level management.

 Top Level of Management

It contains of board of directors, chief executive or managing director. The top management is
the final source of authority and it manages aims and policies for an initiative. It dedicates more
time on planning and coordinating functions.

The role of the top management can be summarized as follows:

 Top management broad policies of the enterprise and lays down the objectives.
 It issues necessary instructions for preparation of subdivision procedures, schedules,
budgets, etc.
 It prepares strategic policies & plans for the initiative.
 It appoints the executive for middle level for instance departmental managers.
 It coordinates & controls the activities of all the departments.
 It is also responsible for maintaining a contact with the outside world.
 It provides direction and guidance.
 The top management is also responsible towards the stockholders for the performance of
the initiative.

 Middle Level of Management

The branch managers and departmental managers constitute middle level. They are responsible
to the top management for the operative of their department. They devote more time to
directional and organizational functions. Their role can be highlighted as:

 They execute the plans of the organization in accordance with the policies and directives
of the top management.
 They make plans for the sub-units of the organization.
 They participate in training & employment of lower level management.
 They understand and explain policies from top-level management to lower level.
 They are also responsible for inspiring lower level managers towards better performance.

 Lower Level of Management

Lower level is also known as operative/supervisory level of management. It contains of

supervisors, superintendent section, officers etc. Their activities include –
  Assigning of jobs and tasks to various workers.
 They instruct and guide workers for day-to-day activities.
 They are responsible for the quality as well as quantity of production.
 They are also entrusted with the responsibility of maintaining good relation in the
organization.
 They communicate workers problems, suggestions, and recommendatory appeals etc to
the higher level and higher-level goals and objectives to the workers.
 They help to solve the complaints of the workers.

4.3 System Methodology and Objectives

Nestle objectives are to be known as a world leader in Nutrition, Wellness, Health, trusted by all
its stakeholders and to be referenced for financial performance in its industry. The company
believes that it is not just about size, it is also about behavior; and they recognized that trust is
earned only over a long period of time by systemically delivering on their promises. These
objective and behaviors are summarizing in the simple phrase: “Good food, Good life”, a phrase
that sums up the company business aspiration.

The Nestle road map is intended the create alignment for workers behind the unified set of
strategic priorities that will hasten the achievement of company objectives. These objective
demands from workers a mixture of long-term motivation needed to build for the future and
short-term business actions, delivering the necessary level of performance. The Nestle model is
securing the progress today and ensuring success in future:

 Achieving simplicity
 Investment of growth
 Scale benefits
 Driving performance

The Nestle road map includes three main parts:

 Competitive advantages
 Growth drivers
 Operational pillars

Nestle has its own company in many countries. The head office in Switzerland works very
closely with them, and sets the overall strategy the overall strategy, which is managed through
the strategic business units and management. Geographically, Nestle three zones (Europe; the
Americas; Asia; Oceania; Africa and the Middle East) work closely with the local markets. Their
primary role is that enablers, acting as the voice of the headquarters. All units and zones share
 Nestle vision so that everyone around the world understands the direction to take and how to get
there with common tools, common values and strategic.

This ensures that people in the world know how to act, and that there is a very strong framework
of clear references and value for fast and efficient decision-making.

4.4 Shareholding Pattern

The table below shows the shareholding pattern of Nestle India Ltd as on 31 st December, 2019:

Category of shareholder No. Of shares % of total shares

Promoter & Promoter Group (A) 6,05,15,079 62.76
Public Shareholding
Mutual Funds 29,68,080 3.08
Alternative investment Fund 1,35,627 0.14
Foreign Portfolio Investor 1,19,19,047 12.36
Financial Institutions/Banks 49,956 0.05
Insurance Companies 40,46,856 4.20
Central Government/State
Government(s) 88,063 0.09
Individuals 1,26,30,866 13.10
NBFCs 2,555 0.00
Any other
- Bodies Corporate
29,58,747 3.07
- Overseas Corporate Body
500 0.00
- NRIs
7,25,708 0.75
- Trust
65,495 0.07
- IEPF Authority MCA
90,769 0.10
- Foreign Nationals
57 0.00
- HUF
1,76,984 0.19
- Clearing Members
41,327 0.04
Total Public Shareholding (B) 3,59,00,637 37.24
Total Shareholding (A+B) 9,64,15,716 100.00
 Chapter 5
Awards & Recognitions

 Bagged ‘Employee Engagement Leadership Award’ in the category ‘Best Initiative in

Benefits for Working Mothers’ at the Employee Engagement Leadership Converge 2018.
 Featured amongst the ‘100 Best Companies for Women in India’ at the ‘Best of Best
Conference 2018’, presented by Avtar group and Working Mother Media.
 Recognized by Brand Equity, as one of the ‘Top 10 Ads of March 2018’ for MAGGI
MASALA-AEMAGIC ‘Kuch Achha Pak Raha Hai’ film.
 Won the ‘Campaign of the Month Award – All India’, by allaboutoutdoor.com for
KITKAT DESSERT DELIGHT Brownie Kubes outdoor launch.
 Won silver for ‘Nanhi Kali- Story Books Finds A Way’ in ‘Direct Marketing’ and
Bronze for NESCAFÉ RJ Rishi Campaign in ‘Consumer Products-Beverages & Drinks
Category’ at Effie Awards 2018.
 Awarded ‘Product Innovation of the year 2018’ in the Nutrition Category for NESTLÉ
CEREGROW
 Awarded ‘The Emerging Brand’ by CIMS Medica in the Health and Wellness Category
for RESOURCE Diabetic.
 Received Best Supplier Award for ‘Supply Chain – Food’ at Walmart India annual
‘Supplier Summit’
 Recognised by Confederation of Indian Industries for Food Safety; Food Testing,
Manufacturing Competitiveness and Quality Management.
 Awarded Silver by Skoch Awards for ‘Corporate Social Responsibility’ for Project
Jagriti implemented in partnership with NGO Mamta.
 Won ET NOW, CSR Leadership Awards for the commendable work in the category of
‘Concern for Health’.
 Mr. Suresh Narayanan was ranked amongst the ‘Best CEOs’ at Asia Pacific Gender
Diversity and Leadership Excellence Awards for ‘Leading on Gender Diversity’.
 Mr. Suresh Narayanan was honoured with the ‘Responsible Business Leader’ award for
successfully embedding responsible business practices across Nestlé India at Responsible
Business Summit 2018.
 Mr. Shobinder Duggal was awarded ‘The Best CFO of A MNC – Large’ by YES Bank
and Business World.
 Chapter 6
Conclusion

From the study undertaken, the following can be concluded:

 Nestlé’s decentralized structure makes it possible for each business unit to become
decision-makers for their specific business operations. For a growing business,
decentralization can facilitate the process of expansion.
For example, if expansion results in opening a new business unit in a different geographic
area, decentralization allow the new unit to operate as an independent entity, meaning it
can react more easily to the specific needs of the area, such as deciding to sell products
that appeal to the local market. But this may also lead to unlikeness in policies and action
since each manager will form his own designing.

 Company is specially focusing on rural market while making its contribution towards
CSR could be because out of India’s total population, nearly 67% lives in rural areas of
the country, which lack most basic amenities and infrastructure. So it makes sense to
provide facilities to those who are in need of those and earn goodwill. Foreign
Institutional Investors hold 12.36% out of 37.24% of public shareholding i.e., FII stake
have high confidence on the company.
 Chapter 6
Annexure

Bibliography

 https://www.nestle.in/
 https://www.nestle.com/aboutus/management
 https://www.bloombergquint.com/stock/226036/nestle-india-ltd
 https://economictimes.indiatimes.com/nestle-india-ltd/shareholding/companyid-
13330.cms
 https://www.ukessays.com/essays/management/leadership-at-nestle.php
 Executive summary

Investment decision is a very important decision of everyone’s life. Some people often get
confused as in which sector to invest in or which company will give better returns in future. To
solve this problem to an extent, I have done fundamental analysis of a company belonging to
FMCG sector i.e., Nestle India. The analysis is majorly based on the secondary data.

This part focuses on fundamental analysis of Nestle India. There are various tools to carry out
fundamental analysis of a company such as EIC Analysis or Ratio analysis. In case of EIC
analysis various factors such as how the global as well as domestic economy is performing,
whether the industry environment is favourable for the business or not, what are the internal and
external factors affecting the business of the company are considered. In case of ratio analysis,
various ratios such as profitability ratios, leverage ratios etc. are studied to draw a conclusion.

I have tried my best to keep report simple yet practically and theoretically correct.
 Table of contents

Chapter Particulars Page No.

1 Introduction
1.1 Introduction to the project
1.2 Scope of the study
1.3 Limitations of the study

2 Project details
2.1 Literature review
2.2 Research objective
2.3 Research problem
2.4 Research Methodology
2.5 Application of classroom learnings

3 Data analysis & findings

3.1 Theorotical background
3.2 E-I-C Analysis
3.3 PEST Analysis
3.4 Tools for financial analysis
3.5 Financial snapshot
3.6 Technical Analysis
3.7 Peer comparison

4 Conclusion
5 Annexures
Bibliography
 Chapter 1
Introduction

1.1 Introduction to the Project

This project is based on the fundamental analysis of a Fast Moving Consumer Goods (FMCG)
company, Nestle. It contains the information about company’s business, overall performance of
the business based on the data available such as various ratios, organizational structure of the
company, credit metrics, etc. It also analyses various economical, technological, etc. factors
affecting company’s business. The project analyses company’s strengths, weaknesses, threats
and opportunities and also projects company’s key line items in the financial statements for next
two years. It also tells how its competitors are doing through peer comparison metrics.

1.2 Scope of the study

This study provides a precise presentation of data and guidelines that will help a fresh investor as
well as a venture investor to know vital aspects of investing. This study helps the investors to
choose a considerably safer option for investment and to recognize growth opportunities in the
future. Fast moving consumer goods industry is one of the major and important industries in the
world.

Large number of foreign investors are coming and investing in the Indian Fast-moving consumer
goods sector due to its large potential growth in the future. The scope of study is limited to
analyzing financial statements and periodical reports published by the company and the
information from journals and websites.

1.3 Limitations of the study

 The study is confined to Nestle India

 External factors may adversely affect the industry as well as its share price.
E.g. Government policies, competition, tax imposition, global market, Foreign Direct
Investment/FII, etc. Hence the movement of stock price is not hundred percent
predictable.
 The present study uses ratios as an important tool of analysis which itself has a number of
limitations on its applicability.
 Chapter 2
Project Details

2.1 Literature Review

As per the project following research papers were reviewed and summaries of the same are listed
below:

 (2017) K.S.Silpa, A.S.Ambily and J Arya Mol in their research paper titled “A study on
fundamental analysis of selected IT companies listed at NSE” studied fundamental
analysis in three parts viz.,Economic analysis, Industry analysis and lastly, company
They also focused on the calculation of Intrinsic value of shares and compared with
Market value.

 (2016) J Hema and V Ariram in their research paper titled, “ Fundamental analysis with
special reference to pharmaceutical companies listed in NSE” stated that an investor
should analyze the market fundamentally and technically before investing in shares. They
also noticed growth in the pharmaceutical industry in India.

 (2009) Hemraj Verma and Prakash Tiwari in their study headed, “A Fundamental
analysis of public sector banks in India” detailed the growth of the Indian banking
industry and current performance of the bank with the help of various ratios.

 (2011) Sugandharaj Kulkarni in his research paper titled, “A study on fundamental

analysis of ONGC” explains about the relevance of fundamental analysis along with the
attempt to find the intrinsic value of the share.

 (2011) Venkatesh C K and Madhu Tyagi in their research paer titled “Fundamental
analysis as a method of share valuation in comparison with technical analysis. It also
emphasized on market capitalization and organizational structure.

 (2015)Ahmed S Wafi, Hassan Hassan and Abel Mabrouk in their learning headed,
“Fundamental analysis models in financial market” presented in third economic and
finance conference in Rome. This paper aims to find the better stock valuation model
using fundamental analysis approach.
2.2 Research Objectives

Primary objectives

 To conduct fundamental analysis of Nestle

Secondary objectives

 To know about Fast-moving consumer goods sector in India

 To check whether fundamental analysis alone can evaluate investment opportunities in
the share of the company
 To forecast the future performance of Nestle
 To recognize the suitability for investment in the long term

2.3 Research Problem

Any person who is willing to invest or is already investing his/her hard earned money in shares
and securities need to possess adequate information and knowledge about securities market, how
it works, what are the advantages and disadvantages of investing in the market, etc. investors
must be very careful while choosing the investment option and should exercise their skills,
experience and knowledge to make the most of investment opportunities available. They must
have a fair understanding about the underpricing and overpricing of shares and should be able to
identify the same.

Opportunities such as mispricing of shares, value investment where underpriced shares showing
potential to grow in future are bought, growth investment where overpriced share which are
expected to grow further in the future are bought, etc. help the investors acquire securities at
lower price and dispose them off at profit.

Therefore, having knowledge about the securities market and studying the reasons for movement
of prices of securities is essential for any investor who is willing or is already investing in
securities. In this context, the present study becomes highly essential on the following grounds:

Is the investment in listed Fast-moving consumer goods companies more rewarding or not?

Are Fast-moving consumer goods companies’ shares floating steadily?

2.4 Research Methodology

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying how research is done scientifically. It is the description,
explanation and justification of various methods of conducting research. In this, we try to
understand the various steps that are generally adopted by a researcher in studying his research
problem along with logic behind them.

Initially for approximately one and half week, the business of the company and the overall
performance of the company was studied through annual reports of the company for last five
years along with its quarterly reports. For the purpose of making analysis easy, all the annual and
quarterly financials, viz., Income statement, Balance sheet and Cash Flow statement, were
prepared in excel sheet format. Later, the study about the industry which the company belongs to
was conducted. It was very important to understand the overall performance of the industry, the
challenges it may have been facing, the opportunities and threats in the industry as it is likely to
have a direct impact on the company’s business.

All the observations were noted down carefully. Then tables showing information about various
ratios such as profitability ratios, liquidity ratios, efficiency ratios, valuation ratios, etc. were
prepared in a structured manner.

A study about the performance of the company, its ratio analysis, technical analysis and returns
earned by the investors was conducted. A metrics comparing competitors performance with the
company under study i.e., Nestle India, was prepared. Economy, Industry and company was
analysed, PEST and SWOT analysis was conducted and the conclusion was drawn.

Sources of data

The study is based on secondary data. The audited financial statements of the companies are the
main source of data.

The major data sources used in this study are:

 Annual reports of companies

 Websites
 Journals
 Magazines
  Reference books

2.5 Applications of Classroom Learnings

The classroom learnings which have helped and been useful in understanding the contents of the
project as well as in the performance of the tasks assigned are knowledge about various ratios
and their interpretation, how to analyze financial statements through subjects such as Financial
Management, Analysis of Financial statements.

Also classroom training on Microsoft Excel was used while creating financial statements and
while performing the tasks assigned such as creating database in excel.

The learnings I gained through the subject Business communication helped me communicate
well with my mentors.

The Financial Newspaper activity conducted at the institute lead me acquire basic knowledge
about market scenario like inflation, GDP, taxation, global markets, etc.
 Chapter 3
Data Analysis and Findings

3.1 Theorotical background

Fundamental analysis is the cornerstone of investing. In fact, some would say that you aren't
really investing if you aren't performing fundamental analysis. Because the subject is so broad,
however, it's tough to know where to start. There are an endless number of investment strategies
that are very different from each other, yet almost all use the fundamentals.

The goal of this tutorial is to provide a foundation for understanding fundamental analysis. It's
geared primarily at new investors who don't know a balance sheet from an income statement.
While you may not be a "stock-picker extraordinaire" by the end of this tutorial, you will have a
much more solid grasp of the language and concepts behind security analysis and be able to use
this to further your knowledge in other areas without feeling totally lost.

The biggest part of fundamental analysis involves delving into the financial statements. Also
known as quantitative analysis, this involves looking at revenue, expenses, assets, liabilities and
all the other financial aspects of a company. Fundamental analysts look at this information to
gain insight on a company's future performance. A good part of this tutorial will be spent
learning about the balance sheet, income statement, cash flow statement and how they all fit
together.

But there is more than just number crunching when it comes to analysing a company. This is
where qualitative analysis comes in - the breakdown of all the intangible, difficult-to-measure
aspects of a company. Finally, we'll wrap up the tutorial with an intro on valuation and point you
in the direction of additional tutorials you might be interested in.

When talking about stocks, fundamental analysis is a technique that attempts to determine a
security's value by focusing on underlying factors that affect a company's actual business and its
future prospects. On a broader scope, you can perform fundamental analysis on industries or
the economy as a whole. The term simply refers to the analysis of the economic well-being of a
financial entity as opposed to only its price movements.

Fundamental analysis serves to answer questions, such as:

 Is the company's revenue growing?
  Is it actually making a profit?
 Is it in a strong-enough position to beat out its competitors in the future?
 Is it able to repay its debts?

Of course, these are very involved questions, and there are literally hundreds of others you might
have about a company. It all really boils down to one question: Is the company's stock a good
investment? Think of fundamental analysis as a toolbox to help you answer this question.

Note: The term fundamental analysis is used most often in the context of stocks, but you can
perform fundamental analysis on any security, from a bond to a derivative. As long as you look
at the economic fundamentals, you are doing fundamental analysis. For the purpose of this
tutorial, fundamental analysis always is referred to in the context of stocks.

Fundamentals: Quantitative and Qualitative

You could define fundamental analysis as "researching the fundamentals", but that doesn't tell
you a whole lot unless you know what fundamentals are. As we mentioned in the introduction,
the big problem with defining fundamentals is that it can include anything related to the
economic well-being of a company. Obvious items include things like revenue and profit, but
fundamentals also include everything from a company's market share to the quality of its
management.

The various fundamental factors can be grouped into two categories: quantitative and qualitative.
The financial meaning of these terms isn't all that different from their regular definitions. Here is
how the MSN Encarta dictionary defines the terms:
Quantitative – capable of being measured or expressed in numerical terms.
Qualitative – related to or based on the quality or character of something, often as opposed to its
size or quantity.
In our context, quantitative fundamentals are numeric, measurable characteristics about a
business. It's easy to see how the biggest source of quantitative data is the financial statements.
You can measure revenue, profit, assets and more with great precision.
Turning to qualitative fundamentals, these are the less tangible factors surrounding a business -
things such as the quality of a company's board members and key executives, its brand-name
recognition, patents or proprietary technology.

Quantitative Meets Qualitative

Neither qualitative nor quantitative analysis is inherently better than the other. Instead, many
analysts consider qualitative factors in conjunction with the hard, quantitative factors. Take the
Coca-Cola Company, for example. When examining its stock, an analyst might look at the
stock's annual dividend payout, earnings per share, P/E ratio and many other quantitative factors.
However, no analysis of Coca-Cola would be complete without taking into account its brand
recognition. Anybody can start a company that sells sugar and water, but few companies on earth
are recognized by billions of people. It's tough to put your finger on exactly what the Coke brand
is worth, but you can be sure that it's an essential ingredient contributing to the company's
ongoing success.

The Concept of Intrinsic Value:

Before we get any further, we have to address the subject of intrinsic value. One of the primary
assumptions of fundamental analysis is that the price on the stock market does not fully reflect a
stock's "real" value. After all, why would you be doing price analysis if the stock market were
always correct? In financial jargon, this true value is known as the intrinsic value.
For example, let's say that a company's stock was trading at $20. After doing extensive
homework on the company, you determine that it really is worth $25. In other words, you
determine the intrinsic value of the firm to be $25. This is clearly relevant because an investor
wants to buy stocks that are trading at prices significantly below their estimated intrinsic value.

This leads us to one of the second major assumptions of fundamental analysis: in the long run,
the stock market will reflect the fundamentals. There is no point in buying a stock based on
intrinsic value if the price never reflected that value. Nobody knows how long "the long run"
really is. It could be days or years.
This is what fundamental analysis is all about. By focusing on a particular business, an investor
can estimate the intrinsic value of a firm and thus find opportunities where he or she can buy at a
discount. If all goes well, the investment will pay off over time as the market catches up to the
fundamentals.
Fundamental analysis is also known as E-I-C approach that is Economic-Industrial-company
approach.
Thus it involves 3 steps:
 Economic analysis
 Industrial analysis
 Company analysis
3.2 E-I-C Analysis
 Economic Analysis

A systematic approach to determining the optimum use of scarce resources, involving

comparison of two or more alternatives in achieving a specific objective under the given
assumptions and constraints. Economic analysis takes into account the opportunity costs of
resources employed and attempts to measure in monetary terms the private and social
costs and benefits of a project to the community or economy.

It comprises of the following:

1. Gross Domestic Product

The gross domestic product (GDP) is one the primary indicators used to gauge the health of
a country's economy. It represents the total dollar value of all goods and services produced
over a specific time period - you can think of it as the size of the economy.

Fig. India GDP

2. Savings & Investment

Saving is income not spent, or deferred consumption. Methods of saving include putting
money aside in, for example, a deposit account, a pension account, an investment fund, or
as cash. Investment is time, energy, or matter spent in the hope of future benefits actualized
within a specified date or time frame. Investment has a different meaning in finance from
that in economics.

3. Inflation
Inflation is defined as a sustained increase in the general level of prices for goods and
services. It is measured as an annual percentage increase. As inflationrises, every dollar you
own buys a smaller percentage of a good or service. The value of a dollar does not stay
constant when there is inflation.

Fig. India’s Inflation rate

4. Interest Rates
The proportion of a loan that is charged as interest to the borrower, typically expressed as an
annual percentage of the loan outstanding.
 5. Tax structures

Tax Base, Tax Rate, Proportional, Regressive, and Progressive Taxation. To calculate most
taxes, it is necessary to know the tax base and the tax rate. The tax base is the amount to
which a tax rate is applied. The tax rate is the percentage of the tax base that must be paid in
taxes.

 Industry Analysis

Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) are products
that are sold quickly and at relatively low cost. Though the profit margin made on FMCG
products is relatively small (more so for retailers than the producers/suppliers), they are
generally sold in large quantities; thus, the cumulative profit on such products can be
substantial. FMCG is probably the most classic case of low margin and high volume
business.
The Indian FMCG sector is the fourth largest sector in the economy with an estimated size of
Rs.1,300 billion. The sector has seen tremendous average annual growth of about 11% per
annum over the last decade. In India, the scenario is quite different in comparison to
developed nations where the market is dominated by few large players, whereas FMCG
market in India is highly competitive and a significant part of the market includes
unorganized players selling unbranded and unpackaged products.
Approximately 12-13 million retail stores exist across India, the large percentage of which
around 9 million are kirana stores. India FMCG sectors’ comprises of few significant
characteristics like well connected distribution network, high level of competition between
the organized and unorganized FMCG players, and low operational cost. In India, FMCG
companies have privilege of having easy availability of raw materials, cheaper labour costs
and presence across the entire value chain gives India a competitive advantage.
Products which have a swift turnover and relatively low cost are known as Fast Moving
Consumer Goods (FMCG). FMCG items are those which generally get replaced within a
year. Examples of FMCG commonly include the range of daily consumed items such as
toiletries, soap, detergents, cosmetics, oral care products, shaving products, packaged food
products and digestives as well as other non-durables such as bulbs, batteries, paper products,
glassware and plastic goods. FMCG may also include pharmaceuticals, consumer electronics,
etc.
Indian population is spreading and becoming wealthy day by day, particularly the middle
class and the rural segments, offers immense opportunity which is left untapped to FMCG
players. Growth effect will be seen from product customization in the matured product
categories like skin care, processed and packaged food, mouth wash etc. In India, many
MNCs have made their presence through their subsidiaries (HUL, Reckitt Benckiser, P&G)
 and the companies launches innovative products from their parent’s portfolio in the market
regularly to ensure the steady growth. India is a agriculture based economy and has a varied
agro-climatic condition which offers extended raw material base suitable for many FMCG
sub sections like food processing industries etc. India is one among those countries which has
the highest production of livestock, milk, spices, sugarcane, cashew, and coconut and has the
second highest production of wheat, rice, vegetables and fruits. Similarly, India has an
abundant supply of caustic soda and soda ash, the major raw materials required to
manufacture soaps and detergents, which helps companies manufacturing soaps and
detergents to grow and prosper. The easy accessibility and availability of these raw materials
gives India an additional edge over other countries.

SWOT Analysis of FMCG industry

 Strengths

• Low operational costs

• Presence of wide distribution networks and channel members in both urban and rural
areas
• Participation of well-known branded companies in FMCG sector.
• Favorable governmental Policy: Indian Government has passed the policies aimed at
attaining international competitiveness through lifting of the quantitative restrictions,
reducing excise duties, 100 per cent export oriented units can be set up by government
approval and use of foreign brand names etc.
• Foreign Direct Investment (FDI): Automatic investment approval up to 100 per cent
foreign equity or 100 per cent for NRI and Overseas Corporate Bodies investment is allowed
for most of the food processing sector except malted food, alcoholic beverages and those
reserved for small scale industries (SSI).

 Weaknesses

• Lower scope of investing in technology and achieving economies of scale, especially in

small sectors
• Low exports levels

 Opportunities

• Untouched rural market, Untapped opportunities, changing life style

 • Rising income levels and higher disposable income, resulting in increase in purchasing
power of consumers
• Large domestic market with more population of age group between 20 and 30.
• High expenditure on daily used consumer goods.
• India is the largest milk producer in the world, yet the percentage of processed milk is
very low around 15 per cent. The organized liquid milk business is in its early stage and also
possesses the potential of long-term growth. Even there is huge investment opportunities in
value-added products like desserts, puddings etc.
• Only about 10-12 per cent of output is processed and consumed in packaged form, thus
highlighting the huge potential
• With booming per capita incomes and growing awareness among rural masses, the
growth potential is huge.
• Smaller packs and sachet packing have made the product easy to buy and lower price are
also likely to drive potential up.
• Rural demand etc.

 Threats

• Liberal import policies resulting in replacing of domestic brands.

• Government Taxation policies and regulatory structure
• Rural demand is seasonal and depends upon monsoon.

 Company Analysis

Food is life, as it acts as fuel and provides nutrition to our body. From infants, to grown ups to
elders, we all need food to keep ourselves going. With rising population, there are more mouths
to feed and more bodies to be nourished. That’s why food, is not just a basic necessity but is also
basic human right.

There are many companies that are working towards providing best nutrition to their customers
by providing best quality products made from the fresh and best ingredients. These companies
have earned their reputation by being very strict in terms of their quality control and hygiene
practices followed while processing the food. One of the leaders in the food processing segment
in India is Nestle India.

Nestle India is the market leader in the FMCG segment with its main focus on food products.
Company makes food products for various categories such as milk and nutrition, prepared dishes
and cooking aids, and chocolate and confectionery.
Milk and nutrition

In this category, company makes milk based products such as condensed milk (Milkmaid),
skimmed milk (Nestle a+ slim milk), milk powder, (Everyday). Company also make baby food
under brand names such as Nestle NaN, Lactogen, Cerelac, Nestum. Company is the market
leader in the baby foods segment with 63% market share.

Prepared dishes, cooking aides

In this category, Company makes products under brand name Maggi. These products include,
Ketchup and sauces, (tomato sauce, hot and sweet sauce, tamarind sauce etc), instant noodles
(Maggi 2 minute noodles, Atta, oats, chicken flavoured noodles). Recently company went under
a huge setback, when FSSAI (Food Safety and Standards Authority of India) found lead content
beyond permissible levels and all the Maggi instant noodles were taken off the shelf. After few
months company re-launched its instant product to the market, this time with all the compliances
in place.

This had a huge setback to the company’s profitability, as company had 75% market share in
instant noodles segment. Company learned its lesson and launched an aggressive marketing
campaign which also includes launch of many new flavours of instant noodles under sub brand
name “Hot Heads” and many other Indian flavours using Indian spices.
Company now has 60% market share in the instant noodles segment and is planning to increase it
beyond the previous 75%.

Company also has cooking aids named “Maggi masala e magic” and “Maggi Bhuna Masala”, a
ready to use masala added to cook tasty vegetables.

Chocolate and confectionery:

Company also owns some of the very well known brands in the chocolates, such as Kit Kat,
Munch, Bar-one. Alpino, Milkybar. Company has also launched new variety in Munch (Munch
nuts) and Kit Kat (Kit Kat Senses, a dark chocolate)
Segment-wise Revenues:

Milk and nutrition products contribute the most to the topline of the company, this segment
includes baby food, milk and milk products. Almost 45% of the company’s revenue come from
the milk and nutrition segment. The second highest contributor to company’s revenue is the
prepared dishes and cooking aids segment. One of the top contributors of revenue in this segment
is Magi brand. This segment of the company contributes 29% to the revenue of Nestle India. The
third category is the chocolate and confectionery business which includes brands like Munch and
Kit Kat. Almost 13% of company’s revenue comes from this segment. Similarly, beverages
segment which includes, brand like Nestea and Nescafe also contributes 13% to the total revenue
of the company.

3.3 PEST Analysis

Political factors: The company’s ability to impact the government

Since Nestlé operates in more than 190 countries, any shift in regulatory environments can
massively impact operations. Multinational firms like Nestlé have a greater risk of production
bottlenecks because of governmental policies and changes. Basically, the more countries a
business operations in, the greater the chance of policy changes that may interrupt operations.
For example, the Brexit situation threw a wrench in Nestlé’s plans. The change threatens the
livelihood of production and food workers. Europe is an important market for Nestlé production
and profits. And the instability of Brexit has disrupted the entirety of the UK food supply chain.
The Brexit change has been so catastrophic that Nestlé discussed replacing production in
Newcastle and York to Poland. Since, even now, Brexit is still in the air, the company doesn’t
have faith in the future of the country. For that reasoning, it’s smarter to move operations out of
this volatile landscape.
Although political changes often affect the company, moving operations out of the country
affects the unstable environment for Britain. Losing Nestlé means a loss of over 300 jobs,
impacting the already controversial political British climate. Keep in mind, not many companies
can impact political stability, but Nestlé can.
Nestlé also has to abide by the changing of food standards and regulations. Each country has its
own set of regulations. If Nestlé doesn’t abide by them, they’ll be cut off; the products won’t be
purchasable, nor edible, in the eyes of the government.

Many food companies, like Nestlé, are experiencing problems associated with the rising costs of
ingredients. As such, many are decreasing the amount of product they offer. This is a particular
problem for chocolate. People continue to buy chocolate treats at the same (or even increased)
price, without knowing companies are shrinking the amount of product they get.
Economic factors: A surprising increase of profits after a slow year

Foreign exchange swings are an economic issue for Nestlé. As a multinational firm, the company
is easily impacted by the sway of foreign-exchange rates and prices. If the currency weakens, it
may lead to profit loss, depending on the location. It could also result in the reverse — a profit
increase. Or cheaper options for the importing or exporting of goods.
Within the last couple of years, Nestlé has been in an upswing for profit. In fact, in 2018, the
company’s profits increased by more than 40 percent. According to the company, profits
changed from $7.6 billion to $10 billion. Much of this success is thanks to three things: The
United States market, the Chinese market, and selling off its confectionery business.
This is a big difference, considering the company reported less than stellar results from 2017.
The company blamed a decrease in consumer demand in the US and Brazil. But at that time,
Nestlé’s CEO Mark Schneider held faith that company profits would increase in 2018.

Social factors: The food is adored, the company… not so much

The social environment, including the attitudes, buying behaviors, and changing demographics,
all affect a business. What’s truly affected food and beverage companies like Nestlé is the
public’s obsession with healthy eating. People want to consume less sugar and lower calorie
foods.
Nestlé knows this. If it didn’t, the company would be in a world of trouble. Nestlé is focusing on
reducing sugar, salt, and saturated fat in some of its products. This requires reformulating
existing products, but it also opens the door for new versions of classic foods and drinks Nestlé
consumers love.

Although the food is still adored, the company is held less favourably.

Over the last couple of years, Nestlé ran into controversy regarding the extraction and usage of
drinking water. Nestlé takes spring water from the land, leaving nothing or polluted water behind
in its wake. This has affected indigenous Canadian land, and locations like Flint, Mich.

When the company does pay to take this water, the price is next to nothing. Combine this with
what previous Nestlé CEO Peter Brabeck-Letmathe said about the rights to water being
“extreme”, people have become weary of Nestlé. Some are even boycotting the company,
although this can be difficult since Nestlé owns so many food products.
Technological factors: More ways to increase production and quantity

Nestlé needs to spend more money on research and development. It has more technology at its
disposal to achieve greater feats in the R&D department; social media, digital surveys, email
marketing, discounts… the list goes on.
It’s much easier to connect with audiences all over the world thanks to evolving technology. It
also means Nestlé has more options to increase production, food quality, and food availability to
consumers.
Some companies are adopting blockchain technology to have full informational access to
products — from development to delivery. This is also an option for Nestlé, as it can decrease
production time. At the moment, it’s still a costly venture, and would need to be introduced
slowly to each of Nestlé’s production lines.

PEST Analysis of Nestle - Conclusion

Nestlé is a massive company with ties to 194 countries. It has the funds and presence to impact
governments. It’s also on a profit upswing, despite the major controversies about Nestlé’s
ownership and views about water rights. The company is in the position to adopt new technology
to learn more about what their consumers want, but if they don’t clean up their public image, it
might be for nothing.

3.4 Tools for financial analysis

 Operating Profit Margin

The operating profit margin indicates the profit of the company after depreciation but
before interest and taxes are deducted from earnings.

Operating profit margin = Operating profit / Revenue

= (EBIT / Revenue) x 100

 Net Profit Margin (NPM)

Net profit margin measures the amount of profits available to shareholders after
depreciation, interest and taxes are deducted from the earnings.

Net profit margin = (Net profit / Revenue) x 100

 Earnings per share (EPS)

This ratio indicates the profits available to equity shareholders per share. This helps in
determination of market price of equity shares.

Earnings per share =Profit after tax / no. of equity shares

 Dividend per share (DPS)

The amount of profits distributed among the shareholders per share is known as DPS and
may be calculated as follows

Dividend per share = Amount declared as dividend / No. of equity shares

 Dividend Payout ratio

The dividend payout ratio is the ratio between DPS and EPS of the firm, i.e., it refers to
the proportion of the EPS which has been distributed by the company as dividends.

Dividend payout ratio = (DPS / EPS) x 100

 Price to earnings ratio (PE Ratio)

The PE Ratio indicates the expectations of the equity investors about the earnings of the
firm. The PE Ratio is one of the most widely used measures of financial analysis in
practice and is calculated as follows

PE ratio = Market price per share/ Earnings per share

 Return on Equity (ROE)

ROE examines profitability from the perspective of the equity investors by relating
profits available for equity shareholders with book value of the equity investment

Return on Equity = Net income / Shareholders’ funds

 Earning yield ratio

 The yield is defined as a rate of return on the amount invested. With the reference to
equity shares, the yield may be defined as a rate of return on market price of equity
shares.

Earning yield ratio = Earnings per share / Market price per share

 Price to Book value ratio

The book value of a share provides a floor below which the market price of a share is not
expected to fall. Shares which have lower PB ratio may be considered as a safer
investment.

Price to book value ratio = Market price per share / Book value per share

3.5 Financial snapshot

KEY FINANCIAL RATIOS OF NESTLE DEC 19 DEC 18 DEC 17 DEC 16 DEC 15

INDIA (in Rs. Cr.)

PER SHARE RATIOS

Basic EPS (Rs.) 204.28 166.67 127.07 96.10 58.42

Diluted EPS (Rs.) 204.28 166.67 127.07 96.10 58.42

Cash EPS (Rs.) 236.77 201.47 162.56 132.77 94.43

Book Value [ExclRevalReserve]/Share 200.40 381.01 354.76 312.56 292.25

(Rs.)

Book Value [InclRevalReserve]/Share 200.40 381.01 354.76 312.56 292.25

(Rs.)

Dividend / Share(Rs.) 342.00 115.00 86.00 63.00 48.50

Revenue from Operations/Share (Rs.) 1,282.81 1,171.15 1,038.12 956.63 847.89

PBDIT/Share (Rs.) 322.36 298.34 235.79 192.99 172.68

PBIT/Share (Rs.) 289.55 263.52 200.29 156.32 136.67

PBT/Share (Rs.) 277.12 251.91 190.76 149.51 84.38

Net Profit/Share (Rs.) 203.96 166.66 127.07 96.09 58.42

PROFITABILITY RATIOS

PBDIT Margin (%) 25.12 25.47 22.71 20.17 20.36

PBIT Margin (%) 22.57 22.50 19.29 16.34 16.11

PBT Margin (%) 21.60 21.50 18.37 15.62 9.95

Net Profit Margin (%) 15.89 14.23 12.24 10.04 6.88

Return on Networth / Equity (%) 101.77 43.74 35.81 30.74 19.98

Return on Capital Employed (%) 56.85 40.76 32.90 29.13 28.61

Return on Assets (%) 27.86 19.86 16.64 13.61 9.26

Total Debt/Equity (X) 0.03 0.01 0.01 0.01 0.01

Asset Turnover Ratio (%) 175.24 139.61 135.95 135.52 134.45

LIQUIDITY RATIOS

Current Ratio (X) 1.78 2.55 2.64 2.01 1.68

Quick Ratio (X) 1.18 2.03 2.03 1.43 1.12

Inventory Turnover Ratio (X) 9.64 11.70 11.09 9.78 9.96

Dividend Payout Ratio (NP) (%) 0.00 67.80 67.67 65.55 83.01

Dividend Payout Ratio (CP) (%) 0.00 56.08 52.90 47.44 51.35

Earnings Retention Ratio (%) 0.00 32.20 32.33 34.45 16.99

Cash Earnings Retention Ratio (%) 0.00 43.92 47.10 52.56 48.65

VALUATION RATIOS

Enterprise Value (Cr.) 141,349.79 105,521.18 74,219.21 57,292.48 55,674.15

EV/Net Operating Revenue (X) 11.43 9.34 7.41 6.21 6.81

EV/EBITDA (X) 45.48 36.68 32.65 30.79 33.44

MarketCap/Net Operating Revenue (X) 11.53 9.48 7.56 6.30 6.87

Retention Ratios (%) 0.00 32.19 32.32 34.44 16.98

Price/BV (X) 73.80 29.15 22.11 19.29 19.93

Price/Net Operating Revenue 11.53 9.48 7.56 6.30 6.87

Earnings Yield 0.01 0.02 0.02 0.02 0.01

3.6 Peer comparison

 Hindustan Unilever Ltd

Hindustan Unilever Limited (HUL) is India’s largest fast moving consumer goods company,
touching the lives of two out of three Indians with over 20 distinct categories in home & personal
care products and food & beverages. They endow the company with a scale of combined
volumes of about 4 million tonnes and sales of over Rs. 13,000 crores.

HUL is also one of the country’s largest exporters; it has been recognised as a Golden Super Star
Trading House by the Government of India. The Anglo-Dutch company Unilever owns a
majority stake (52%) in Hindustan Unilever Limited.HUL was formed in 1933 as Lever Brothers
India Limited and came into being in 1956 as Hindustan Lever Limited through a merger
of Lever Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and United Traders Ltd. It is
headquartered in Mumbai, India and has an employee strength of over 15,000 employees and
contributes for indirect employment of over 52,000 people. The company was renamed in June
2007 to Hindustan Unilever Limited´. In 2007, Hindustan Unilever was rated as the most
respected company in India for the past 25 years by Business world, one of India’s leading
business magazines.
 Dabur India Ltd

Dabur India Limited is a leading Indian consumer goods company with interests in Hair Care,
Oral Care, Health Care, Skin Care, Home Care and Foods. From its humble beginnings in the by
lanes of Calcutta way back in 1884 as an Ayurvedic medicines company, Dabur India Ltd has
come a long way today to become a leading consumer products manufacturer in India.

The founder, Dr.S.K.Burman, was a practicing allopathic doctor. At that time Malaria, Cholera
and Plague were the common diseases. He was a physician who brought Ayurvedic medicines to
the masses of Bengal. Initially established as a proprietary firm for the manufacture of chemicals
and ayurvedic drugs it was later on 19th November 1930 incorporated as private limited
company. Late Shri C.L.Burman, son of late Dr S.K. Burman and his son late Shri P.C.Burman
in the name of Dr S.K.Burman Pvt.Ltd. to expand the operations by setting up production
facilities at Garia and Narendrapur, West Bengal and Daburgram, Bihar. Dabur (Dr.S.K.Burman)
Pvt. Ltd. was merged with Vidogum and Chemicals Ltd. w.e.f. 1st July1985 and the
amalgamated company was renamed DABUR INDIA LIMITED.

For the past 125 years, they have been dedicated to providing nature-based solutions for a
healthy and holistic lifestyle. Through their comprehensive range of products, they cater to all
consumers, in all age groups, across all social boundaries. And this legacy has helped them
develop a bond of trust with the customers.
 Britannia Industries Ltd

Britannia is one of the best-known brands in India, one of the largest biscuit manufacturers in the
country, The Company known as Britannia Industries Ltd. today began in 1892 in a ordinary
house in Kolkata.

Britannia strode into the 21st Century as one of India’s biggest brands and the pre-eminent food
brand of the country. It was equally recognized for its innovative approach to products and
marketing: the Lagaan Match was voted India’s most successful promotional activity of the year
2001 while the delicious Britannia 50-50 Maska-Chaska became India’s most successful product
launch. In 2002, Britannia’s New Business Division formed a joint venture with Fonterra, the
world’s second largest Dairy Company, and Britannia New Zealand Foods Pvt. Ltd. was born. In
recognition of its vision and accelerating graph, Forbes Global rated Britannia ‘One amongst the
Top 200 Small Companies of the World’, and The Economic Times pegged Britannia India’s
2nd Most trusted brand. Britannia puts a lot of emphasis on its primary biscuit brands including
Tiger, Good Day, Marie, Milk Bikis, 50:50 and Treat. Biscuits make up more than 80% of the
company’s production – bread, cakes and dairy constitute the remaining 20%. Its brands are
considered to be an excellent value by India’s price-conscious consumers. BIL is the first
company to introduce the several varieties of biscuits in India, such as 50:50, glucose biscuits for
children, chocolate biscuits, butter biscuits and became the household name of the country. In
fact some of these brands are bigger than several multinationals in the food business in India.
The Tiger brand biscuit, one of the most well-known, is extremely popular among rural
consumers – with almost 50% of the brand’s value sales coming in from rural areas.
 Godrej Consumer Products Ltd

Godrej Consumer Products Ltd (GCPL) is one of the leading Fast Moving Consumer Goods
(FMCG) companies in India. The company has five product segments namely Household
Insecticides Soaps Hair Colours Liquid Detergents and Air Fresheners. The company has
manufacturing facilities at Malanpur in Madhya Pradesh Baddi in Himachal Pradesh Guwahati in
Assam and Namchi in Sikkim. The company has established a strong international presence
through a slew of acquisitions over the years. GCPL is among the largest household insecticide
and hair care players in emerging markets. In household insecticides it is the leader in India and
the second largest player in Indonesia. GCPL is the leader in serving the hair care needs of
women of African descent the number one player in hair colour in India and Sub-Saharan Africa
and among the leading players in Latin America. GCPL ranks number two in soaps in India. It is
the number one player in air fresheners and wet tissues in Indonesia.The company is among the
largest marketer of toilet soaps in the country with leading brands such as Cinthol Fairglow and
Godrej No 1. Fairglow India's first fairness soap created marketing history as one of the most
successful innovations. The company is also the leader in the hair colour category in India.
The following table shows the comparison between nestle and its competitors with respect to
profitability, market capitalisation, book value, etc. as on 20th Mar, 2020:
 Chapter 4
Conclusion

Fundamental analysis aims at finding the true worth of a security by analyzing macroeconomic,
industry scenario and company financial position and so on. An investor can make safest as well
as lucrative investment by analyzing the related variables and aim for optimum return.
Fundamental analysis suggests that no investor should buy or sell a share on the basis of the
advices of market intermediaries or the tips given by stock dealers, websites, etc. The
fundamental analysis calls upon the investor to make his buy or sell decision based on the
detailed analysis of the information available.

This study focuses on fundamental analysis using various tools which help in trading strategies
for risk reduction and maximization of returns. The objective of the study was to conduct
fundamental analysis of Nestle India.

From the industry analysis, it was found that India’s fast-moving consumer goods sector reported
a high growth rate and its profit and sales also showed increasing trend during the study period.
The SWOT analysis discloses that the strength of Fast-moving consumer goods sector in India is
the low operating cost, India being a highly populated country is an opportunity, lower scope of
investing in technology especially of small scale sectors is the major weakness and major threats
are tax and regulatory structure of our country.

The company analysis done majorly with the help of ratio analysis indicates that Nestle India is
in financially satisfactory position during the study period. Also, the profitability ratios showed
that the company is making good profits and these profits are shared with the shareholders by
way of distributing dividends. So, based on the profitability and performance of the company,
returns earned by the investors and considering the probable future of the company, the share
price of the company is expected to go up and it would be a good decision to invest in the
company.
 Chapter 5
Annexures

Bibliography

The following are the web links and references used for the study of this project

 https://trendlyne.com/equity/930/NESTLEIND/nestle-india-ltd/
 https://www.nestle.in/
 https://www.moneycontrol.com/financials/nestleindia/ratios/NI
 https://www.indiainfoline.com/company/nestle-india-ltd/peer-comparison/175
 https://www.hul.co.in/
 https://www.dabur.com/
 https://www.godrej.com/
 https://www.sec.gov/
 www.google.com
 Executive summary

This is a CSR section which tells us about the various CSR activities conducted by Nestle Ltd.
for the betterment of the society.

The aim of this study is to see how the social activities that are being carried out by the company
help the society and as well as the thrust areas of these activities. Also, to study the spending
pattern of CSR activity of the company.

The findings of this section are:

 The company undertakes CSR activity in diverse areas right from nutrition education to
adolescents to create and raise awareness regarding good nutritional practices, cooking methods
to enhance the nutritional content of foods and physical fitness among students in village
schools.
 They have implemented the Clean Drinking Water Projects and Water Awareness
Program to provide clean water. This implemented through NGO partner Enable Health Society.
 Nestle Ltd implemented Village Women Dairy Development Programme to empower the
women in Moga district of Punjab and to adopt sustainability.
 Table of contents

Chapter Particulars Page No.

1 Introduction
1.1 Meaning of CSR & its evolution
1.2 Need for CSR

2 Corporate Governance

3 CSR activities
3.1 CSR activities of Nestle India
3.2 Expenditure on CSR activities
3.3 A success story

4 Conclusion

5 Annexures
Bibliography
 Chapter 1
Introduction

1.1 Meaning of CSR & its evolution

There are many different definitions of CSR, but the most common view according to the Green
paper is, “CSR is a concept whereby companies integrate social and environmental concerns in
their business operations and in their interaction with their stakeholders on a voluntary basis.”

CSR evolved as a concept in the 1950’s when the references to social conscience among
management practitioners and theorists were noted. Carroll credits Howard R. Bowen, 1953
author of the book “Social Responsibilities of the Businessman”, as the “Father of corporate
Social Responsibility”. As early as the 1950’s businesses were beginning to be thought of as
having a responsibility to society as a whole by writers such as Keith Davis, who hypothesized
that the rewards of profit was not to be a tool for furthering divides in society between rich and
poor. By the 1970’s these divisions were becoming increasingly evident through several
examples of major corporations contempt for the environmental and societal effects of their
actions. This led to CSR, on a larger scale being seen as a serious issue for the first time and
Davis’s earlier work in the area began to show its importance. In the 1960’s Joseph W. McGuire
echoed Davis’s stance in his book Business and Society (1963), he stated, “The idea of social
responsibilities supposes that the corporation has not only economic and legal obligations but
also certain responsibilities to society which extend beyond these obligations”. The definition of
corporate social performance is one which has evolved from this time in an attempt to address
the ethical responsibilities and how business responds to changing pressures from society. This
evolution has been seen in the writings of Sethi (1975), Carroll (1979), and Wartick and Cochran
(1985), each taking the idea of corporate social performance and attempting to redefine and
refine it for the challenges which were being faced and were rapidly changing over the
subsequent decades from Davis’s time.

1.2 Need for CSR

CSR makes exceptional business sense especially when one considers the consequences that
social and environmental responsibility can have for the business. For example, businesses exist
in a reciprocal relationship with their external environments where their dealings with the larger
environment determines to a significant extent how successful they are in their quest for profits
The Resource Based View identifies the strength of this environmental relationship with the
business and how the exchange of inputs and outputs with the environment determines the
quality of business processes. It can therefore be implied that socially responsible business
practices can only be viewed as a positive asset and that recent arguments that have been made
against investing in CSR do not hold water. Given the weight of evidence now supporting CSR,
it seems logical that businesses should be embracing it wholeheartedly, rather than reluctantly
applying aspects that suit them. Promotion and explanation of corporate responsibility among the
media, businesses and customers will be necessary if the concept is to enter mainstream thinking.
This will involve changing its perception as merely another business cost. Likewise, those
advocating this method must fight to avoid its adoption as little more than a PR exercise for
companies. CSR must be widely accepted and woven tightly into the fabric of businesses if it is
to have the long-term strategic effects of producing a compassionate, socially and
environmentally conscious new capitalism.
 Chapter 2
Corporate Governance

Nestlé India Limited, is part of the Nestlé group, the leading Nutrition, Health and Wellness
Company. The Company aims to enhance the quality of life in the community, through its focus
on Nutrition, Water, Rural development and environmental sustainability. As a responsible
organisation, the Company is committed to environmental and social sustainability, through all
its operations, while complying with applicable laws, international standards and Nestlé
Corporate Business Principles. This has earned the Company the trust and respect of every
stakeholder that it comes in contact with and it has been acknowledged amongst India's most
respected companies and amongst the top wealth creators of India.

 Compliance with laws, rules and regulations

The company law at all times. Nestlé and its employees are bound by the law. Compliance with
all applicable laws and regulations must never be compromised. Additionally, employees shall
adhere to internal rules and regulations as they apply in a given situation. Those internal rules are
specific to the Company and may go beyond what is required by the law.

 Conflicts of Interest

Nestlé and its employees are bound by the law. Compliance with all applicable laws and
regulations must never be compromised. Additionally, employees shall adhere to internal rules
and regulations as they apply in a given situation. Those internal rules are specific to the
Company and may go beyond what is required by the law. A Conflict of Interest occurs when
personal interests of an employee or the interests of a third party compete with the interests of
Nestlé. In such a situation, it can be difficult for the employee to act fully in the best interests of
Nestlé. Employees shall avoid Conflicts of Interest whenever possible.

 Outside directorships and other outside activities

Nestlé’s takes pride in its reputation and considers Nestlé’s best interests also in Nestle’s outside
engagements and activities. Outside of Nestlé, no activities shall be pursued if such activities
will interfere with the employee’s responsibilities for Nestlé, or if they create risks for Nestlé’s
reputation or if they in any other way conflict with the interests of Nestlé. When in doubt about
the permissibility of an activity, employees shall consult with the HR or the Legal or Compliance
Function.

 Families and Relatives

Nestle’s hiring and people development decisions will be fair and objective. Immediate family
members and partners of employees may be hired as employees or consultants only if the
appointment is based on qualifications, performance, skills and experience and provided that
there is no direct or indirect reporting relationship between the employee and his or her relative
or partner. These principles of fair employment will apply to all aspects of the employment,
including compensation, promotions and transfers, as well as in case that the relationship
develops after the respective employee has joined the Company.

 Corporate opportunities

Nestle is always committed to advance its business. Employees shall not compete with the
Company. Nor shall they take personal advantage of business opportunities that they discover
during the course of their employment, unless the Company expressly waives its interest in
pursuing such opportunity. If employees want to pursue business opportunities that might be of
interest to the Company, they shall inform their Line Manager who will seek a management
decision as to whether or not the Company wants to pursue the opportunity.

 Insider trading

Nestle respects and follows the Insider Trading Rules when buying or selling Nestlé securities.
Nestlé prohibits the purchase and sale of Nestlé shares or securities on the basis of potentially
share price relevant information which is not yet public. Non-compliance may not only entail
disciplinary sanctions, but also result in criminal charges. When in doubt regarding the
interpretation or applicability of Nestlé’s insider trading rules, employees shall consult with the
Legal or Compliance Function.

 Antitrust and fair dealing

Nestlé believes in the importance of free competition. It is prepared to compete successfully in

today’s business environment and will always do so in full compliance with all applicable
antitrust, competition and fair dealing laws. Therefore, employees must at all times adhere to the
following rules: – Commercial policy and prices will be set independently and will never be
agreed, formally or informally, with competitors or other non-related parties, whether directly or
indirectly; – Customers, territories or product markets will never be allocated between Nestlé
and its competitors but will always be the result of fair competition; – Customers and suppliers
will be dealt with fairly.

 Confidential information

Nestle values and protects confidential information and it respects the confidential information
of others. Confidential information consists of any information that is not or not yet public
information. It includes trade secrets, business, marketing and service plans, consumer insights,
engineering and manufacturing ideas, product recipes, designs, databases, records, salary
information and any non-published financial or other data. Nestlé’s continued success depends
on the use of its confidential information and its nondisclosure to third parties. Unless required
by law or authorized by their management, employees shall not disclose confidential information
or allow such disclosure.

 Fraud, protection of company assets, accounting

Nestle insists on honesty and respects the Company’s assets and property. Employees must never
engage in fraudulent or any other dishonest conduct involving the property or assets or the
financial reporting and accounting of Nestlé or any third party. This may not only entail
disciplinary sanctions but also result in criminal charges. Nestlé’s financial records are the basis
for managing the Company’s business and fulfilling its obligations to various stakeholders.
Therefore, any financial record must be accurate and in line with Nestlé’s accounting standards.
Employees shall safeguard and make only proper and efficient use of Nestlé’s property.

 Bribery and corruption

Nestle condemns any form of bribery and corruption. Employees must never, directly or through
intermediaries, offer or promise any personal or improper financial or other advantage in order to
obtain or retain a business or other advantage from a third party, whether public or private. Nor
must they accept any such advantage in return for any preferential treatment of a third party.
Moreover, employees must refrain from any activity or behaviour that could give rise to the
appearance or suspicion of such conduct or the attempt thereof. Employees should be aware that
the offering or giving of improper benefits in order to influence the decision of the recipient,
even if he or she is not a government official, may not only entail disciplinary sanctions but also
result in criminal charges.

 Gifts, meals, entertainment

Nestle competes and does business based only on quality and competence. Employees shall not
be influenced by receiving favours nor shall they try to improperly influence others by providing
favours. Employees may only offer or accept reasonable meals and symbolic gifts which are
appropriate under the circumstances, and they shall not accept or offer gifts, meals, or
entertainment if such behaviour could create the impression of improperly influencing the
respective business relationship. When assessing the situation in light of the above, employees
shall consult the policy applicable in their Market.

 Discrimination and harassment

Nestle embraces diversity and respect the personal dignity of its fellow employees. It respects the
personal dignity, privacy and personal rights of every employee and is committed to maintaining
a workplace free from discrimination and harassment. Therefore, employees must not
discriminate on the basis of origin, nationality, religion, race, gender, age or sexual orientation,
or engage in any kind of verbal or physical harassment based on any of the above or any other
reason. Employees who feel that their workplace does not comply with the above principles are
encouraged to raise their concerns with the HR Department.

 Failure to comply

Nestle consults the Code, complies with its provisions and seeks guidance where needed. It is
each employee’s responsibility to ensure full compliance with all provisions of this Code and to
seek guidance where necessary from their Line Manager, or from the HR or the Legal or
Compliance Function. To “do the right thing” and to ensure the highest standards of integrity is
each employee’s personal responsibility that cannot be delegated. When in doubt, employees
should always be guided by the basic principles stated in the introduction to this Code. Any
failure to comply with this Code may result in disciplinary action, including the possibility of
dismissal and, if warranted, legal proceedings or criminal sanctions.

 Reporting illegal or non-compliant conduct

Nestle takes responsibility for ensuring that it will act with integrity in all situations. Employees
shall report any practices or actions believed to be inappropriate under this Code or even illegal
to their Line Managers or the appropriate members of the HR or the Legal or Compliance
function. If it is appropriate, in view of the nature of the reported matter, reports of violations
may be made directly to higher levels including the Group’s Chief Executive Officer and/or
Chief Compliance Officer. Where appropriate, complaints may be made on a confidential basis
or through employee Hotlines. All complaints shall be properly investigated. Nestlé prohibits
retaliation against any employee for such reports made in good faith, while it also protects the
rights of the incriminated person.
 Chapter 3
CSR activities

3.1 CSR Activities of Nestle India

With its CSR Policy focus areas, the Company focused its activities on creating nutrition, health
and breastfeeding awareness, providing access to clean drinking water and sanitation, supporting
development of agricultural communities while helping them reduce water use and enhancing
the livelihood of street food vendors. These initiatives are built upon the strong base of
performance in environmental sustainability, applicable laws, international standards and our
Corporate Business Principles. CSR programmes are detailed here under:

 Nestlé Healthy Kids Program:

The Nestlé Healthy Kids Programme has been developed with a focus to provide nutrition
education to adolescents. Our objective is to create and raise awareness regarding good
nutritional practices, cooking methods to enhance the nutritional content of foods and physical
fitness among students in village schools. Education is a powerful tool for ensuring that children
understand the value of nutrition and physical activity, and continue leading healthy lives as they
grow older. The Nestlé Healthy Kids Programme was launched in India on 7th April 2010, at a
Government school in the village Pattikalyana, Samalkha. It is based on a multi-partnership
approach in collaboration with six leading regional universities. This enables joint development
and regional customisation of the content for local school children.

The programme is conducted in communities around our factories, through two hour sessions
spread across six weeks, ensuring sustained nutrition training of 12 hours for each student.
Prior to the launch of the programme, a survey and pilot study was undertaken in Nestlé’s
communities around Moga in partnership with Punjab Agricultural University (PAU). The pilot
project covered 1,369 students in the Moga region from May 2009 to December 2009. Once the
pilot was successfully completed, the key learnings were used to further fine-tune the final
programme.

 Project Jagriti:
Project Jagriti, in partnership with Mamta Health Institute for Mother and Child (MAMTA),
encourages good nutrition and feeding practices, improving nutrition and health at key life stages
– adolescence to caregivers. Jagriti creates an enabling environment for the best health outcomes,
involving the health care system and stakeholders from the community. The programme focuses
on creating peer mentor support groups for counselling on healthy nutrition for pregnant and
lactating women, encouraging the early initiation of breastfeeding, exclusive breastfeeding,
improving breastfeeding practices and encouraging the uptake of public health services. The
approach involves the health care system and stakeholders from the community to create an
enabling environment for the best health outcomes.
During the years 2016 to 2018, the programme ran across 15 districts of Rajasthan, Karnataka,
Maharashtra, Chandigarh, Odisha, Uttar Pradesh, Bihar and Delhi, reaching out to 4.6 million
beneficiaries - 1.5 million direct and impacting 3.1 million beneficiaries indirectly.
 Clean Drinking Water Projects and Water Awareness Program
The quality of potable water in India is an increasingly growing concern, which, coupled with
sanitation issues, causes approximately 500 deaths of children under 5 years of age every day
due to diarrhoeal and water-borne diseases. As part of our community initiatives, we have
undertaken several programmes to provide access to clean drinking water. We implement our
community outreach directly and through our NGO partner Enable Health Society. Nestlé started
the construction of clean drinking water facilities in schools around its factories in 1999. Till
date, we have constructed 250 water tanks across 6 states, benefitting more than 140,000
students. It also carries out periodic checks to ensure that drinking water stored in the tanks
meets quality standards. In regions where the groundwater does not meet quality standards,
company partners with the NGO Enable Health Society to provide drinking water treatment
plants.

 Sanitation Facilities

Availability of basic sanitation is a serious challenge, with open defecation being a health risk
for everyone, more so for the female population. It affects the attendance of girl students in
school and often leaves them vulnerable to sanitation-related diseases. Most of the waste and
waste water generated flows untreated directly into the rivers and sea, contaminating them and
leading to further spread of diseases.
Nestlé believes that education and empowerment of girl students can benefit the quality of life in
communities. Therefore to improve access to basic sanitation facilities, Nestlé sponsors the
construction of sanitation facilities (toilets) for girl students in village schools across all its
factory locations. This has had a direct impact on the attendance of girls in village schools.
During 2017, we set up sanitation facilities in government schools across 11 states and so far has
set up 430 facilities benefitting more than 150,000 girl students.
 Water Conservation in Agriculture

India is facing a severe water crisis with the availability of potable water and ground water
drastically decreasing over the years. The agricultural sector remains the largest user of the
India’s fresh water, responsible for about 70 of water consumption. The Company launched a
water stewardship initiative with AgSRI at the -abini river Basin in Karnataka. Over the years,
the water demand in the catchment has been increasing, leading to inadequate supply. The
Company commissioned a study to understand the current water management and implement
applicable water interventions. The study found that river water discharges would continue to
deplete while the competing requirements for drinking water and irrigation increase. As
agriculture is the largest user of water from the catchment, the Company is working with AgSRI
to implement pilot projects promoting the System of Rice Intensification (SRI) and the
Sustainable Sugarcane Initiative (SSI) that trains farmers on ecologically sustainable practices to
reduce the agricultural water withdrawal from the catchment area, while improving agricultural
productivity. This makes it possible to have more yield and good income by using less seeds,
less water and fewer fertilizers besides reducing the number of laborers and expenditure.

 Project Serve Safe Food

While street food vending is an important source of informal employment for a large number of
population, a variety of constraints including lack of knowledge and skills in business, limited
training opportunities, and restricted mobility prevents street vendors from improving their
capacities. The program aims to help them improve their income by upgrading their skills and
practices, sustain their livelihoods and enter into strategic employment opportunities in new
market conditions. The training of street food vendors is conducted by NASVI and comprises
subjects such as health, hygiene, food handling, waste disposal and entrepreneurship. The
participants are also certified at the end of the training.
 Employee Volunteering Program

Employee Volunteering Programme (EVP) is an initiative launched in 2014 where a Nestlé

employee volunteers to spend a day interacting with children from government schools and
underprivileged communities to help create awareness regarding healthy eating and active
lifestyle. Till 2018, 1850 employees across 27 locations (Head Office, branches and factories)
have participated in the activities.

 Relief Efforts

The Company provided support when state of Kerala was hit by floods by supporting relief
operations. As part of the efforts, the Company supplied packaged food and beverages, including
milk, coffee and instant noodles to the people affected.
3.2 Expenditure on CSR activities

The following charts show the amount spent by the company on each of the CSR activities in
the respective year:

(Rs. in Million)
CSR Activity 2018 2017 2016 2015 2014

Nestle Healthy Kids 110.7 115.1 72.6 61.0 36.0

Programme
Project Jagriti 58.9 57.0 73.8 - -

Clean drinking water projects 25.9 38.6 53.0 22.2 21.0

& Water awareness
programme
Sanitation projects 47.9 22.4 17.8 22.0 25.0

Water conservation & 2.6 2.3 6.5 5.0 -

Environment
Livelihood enhancement for 9.9 3.6 3.1 - -
street food vendors
Employee volunteering 1.6 - - - 1.0

Relief efforts 2.5 - 5.2 6.0 -

Educate the girl child - 17.3 65.5 - -

 Cancer detection & treatment - - 1.0 - -

Breastfeeding & Nutrition - - - 80.8 1.5

awareness
Swach Bharat Kosh - - - - 50.0

3.3 A success story

Moga success- a CSR best practice

Nestlé operates today businesses in more than 80 countries. One of them is India. The history of
Nestlé’s coming in India dates to 1912 when the Swiss enterprise penetrated their market in
order to open commercial relations with that country (Nestlé India, 2011).
The commercial activity of Nestlé in India became satisfying enough but the company sought
later to do more than selling finished products. It aimed to start a production activity there. The
dream came true a few decades later, in the early 60’s when the corporation received the
permission of the Indian Government to build a dairy in a little district of Punjab named Moga.

When Nestlé came to Moga to set up its first dairy of India, the situation in that district was quite
disastrous the population was severely affected by poverty missing among others electricity,
transportation and medical care. Regarding inhabitants, most of them were illiterate due to the
lack of an effective educational system. In Moga’s villages a farmer owned around 5 acres of soil
not enough even for his own subsistence needs. Moreover, the soil of Punjab area was infertile
due to the lake of irrigation. Considering the soil poverty, farmers were unable to provide a good
nutrition for animals and thus many of them were dying of starvation. An Indian owned
averagely just a cow producing a quantity of milk enough at most for his family.
There is no doubt that Nestlé’s coming in Moga was aimed to fulfill primarily the company’s
own needs above raising the welfare of an Indian region situated so far from Switzerland.
Nevertheless, activities ran by the enterprise have been produced as a collateral effect a
consistent improvement in the daily life of Moga’s citizens: employment and standards of living
for one million people involved not only in farming but also in supplying packaging materials,
services and other goods.
In order to make its business function in India, Nestlé put in practice its whole know-how in
terms of milk business also based on previous successful experiences in UK, Germany and
Spain.
When the first Indian milk factory started its activity, the quantity of milk sourced was about 500
litters from 180 farmers. This unsatisfying situation required Nestlé’s interventions in order to
educate, advise and help Indian farmers. Thus, company representatives started giving technical
support for a better soil irrigation in order to improve cow’s nutrition and, therefore, the quality
and quantity of collected milk.
Later, chilling centers and collection points have been installed aimed at facilitating the whole
milk supplying process. Due to the range of improving measures implemented by Nestlé, the
factory buys today milk from more than 75,000 farmers in the region and the death rate of calves
dropped by 75%.
Therefore, Indian farmers of Punjab own today a larger number of cows, earning money by
selling milk to Nestlé, which also empowers them to get credit from banks in order to invest in
property extensions. Besides earning know-how about how to irrigate the soil and to better farm,
inhabitants of this region became literate, their share surpassing today 70 percent.

While engaging with rural communities, it recognized that village women are the primary
caretakers of cattle and play a significant role in dairy farming. As a result Village Woman Dairy
Development Programme – an initiative focusing on empowering village women engaged in
dairy farming was launched in Punjab. It was subsequently introduced in Haryana and Rajasthan
as well.
Cattle-rearing has often been considered as an extension or diversification of agricultural
activities for a farmer’s family. Generating additional revenues, it is often the case that the
womenfolk of the family undertake this job. This is in addition to the regular household chores.
Capitalizing on this opportunity, Nestle India initiated the programme helping rural women to
become self-reliant and self-employed.
The potential of the village womenfolk has been converted through appropriate intervention.
Their efforts have been channelized to develop a self-sustained economy. Today, Nestlé works
with around 100,000 milk farmers collecting about 300 million kilograms of quality milk every
year. It touches over 30 districts in Punjab, Haryana, Rajasthan Nestlé sources from over 2000
milk collection centers. Till date Nestlé has close to 60000 beneficiaries of Village Women
Dairy Development Programme.

Continuing to work with small farmers to make dairying a sustainable business opportunity for
them, Nestlé India initiated innovative ways of helping farmers transition to larger farms with
more cattle, improved genetics, modern facilities, mechanization and transfer of knowledge and
technology for better feed and upkeep of animals.

Education programme for women

The company has developed an education programme especially for women dairy farmers. The
objective of the programme is to empower women dairy farmers to produce clean milk and
increase milk production. Nestle is educating village women dairy farmers through an all women
training team on Good dairy practices including good feeding and breeding practices, animal
care and treatment, sustainable agricultural practices.
By supplying milk to Nestle, farmers are benefited in collection centers purchase the entire
quantity of milk, however big or small, a farmer has to sell, as long as it meets quality standards,
farmers are paid monthly, this ensures regular income which they cannot get from seasonal
crops. There is continuous demand for milk throughout the year, making it a sustainable
occupation and they are assured of a long term relationship and fair prices.

The impact

The programme has positively impacted lives of women dairy farmers and enhanced their
understanding on how to adopt sustainable dairy farming practices. Farmer training and
education has been a key focus area. Farmers are routinely brought for factory visits to educate
them regarding the milk cold chain process, thereby sensitizing them to good quality practices in
milk production.
They are being educated regarding good quality cattle feed and good quality fodder seeds. Nestlé
supports farmers with subsidized milking machines and supports the optimal use of various
costly inputs like seed, fertilizer, pesticides and water, which, can be ensured through modern
farm machinery. The Company is interested to bring breed improvement support includes
providing good quality bulls, imported Semen and Artificial Insemination (A.I.) services.

Veterinary camps

Veterinary camps are being organized for village communities, with services and medicines
being provided at subsidized rates. Farmers are taught about animal health care and farming
practices in an effort to increase awareness. Veterinary officers make farm visits to individual
farmers in order to provide services.

Encouraging Bio-gas

The company is encouraging and helping farmers to adopt technologies like Bio-gas. The
conversion of farm manure into bio-gas and its use on the farms and domestic homes helps
farmers in contributing to their energy needs, reducing fuel and electricity consumption
substantially. Farmers are taught silage making which involves the preserving of nutrients
through anaerobic decomposition of selected fodder crops like maize, pearl millet, sorghum,
oats. Benefits for the farmer include availability of good quality fodder throughout year.

Nestlé do encourages farmers to make Vermi-compost from farm manure. This enriched
fertilizer saves cost of the fertilizer for the farmer and is also a good environment practice.
Dairying at the household level has now become a domain of women. The products and income
from dairying is being controlled by women as they practice dairy farming on a small scale.
Nestlé is playing an integral role for village women empowerment and economic well-being,
providing them access to training in modern dairying and cooperative management.

Nestlé remains the favoured buyer for farmers despite growing national demand for dairy
products that has led competitors to offer better purchase prices. Nestlé’s programme of
engagement with the community has given it the social and political standing to support its
growth as a profitable enterprise. It has bolstered its credibility, reputation and thereby its market
share. Nestlé’s supplier base has grown from 4,600 farmers providing 2,000 tonnes of milk to
100,000 farmers in 2,600 villages producing more than 300,000 tonnes. By imposing higher
quality standards than other local producers, Nestlé has had a broad impact on industry and the
economy in the Punjab. As it has consistently provided support to maintain and improve those
standards, local communities have begun to demand and enforce higher standards for their own
foodstuffs. This has generated greater investment in agro-businesses and improvements in
animal and crop husbandry and farming in general. This in turn has led to the development of
ancillary services to serve the local population’s growing needs and economic means.
 Chapter 4
Conclusions

Nestle Ltd has variety of activities which are directed towards uplifting the society.

The company undertakes CSR activity in diverse areas right from Nutrition, water and sanitation,
rural development, livelihood and education for the girl child. The company continues to engage
with stakeholders including farmers, experts, NGOs and the Government and would take up such
other CSR activities in line with Government’s intent and which are important for society.

From my point of view, Nestle has put too much of focus on Nutrition. There are lots of severe
social problems like poverty, unemployment which should also get priority.
 Chapter 4
Annexure

Bibliography

 WWW.google.com
 https://esource.dbs.ie/bitstream/handle/10788/1683/mba_jaenicke_b_2013.pdf?sequence
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 https://www.nestle.in/