SWOT of Nestle

Nestle’s LC1 division has many strengths. Their first is that they have a great CEO, Peter Brabeck. Brabeck emphasizes internal growth, meaning he wants to achieve higher volumes by renovating existing products, and innovating new products. His explanation of renovation is that “to just keep pace in the industry, you need to change at least as fast as consumer expectations.”(Hitt, 2005) And his explanation of innovation is “to maintain a leadership position, you also need to leapfrog, to move faster and go beyond what consumers will tell you.” Brabeck has led Nestle into a position to better achieve the internal growth targets with his. Another strength that Nestle has is that they are low cost operators. This allows them to not only beat the competition by producing low cost products, but by also edging ahead with low operating costs.

The main weakness of the LC-1 division of Nestle is that they were not as successful as they thought they would be in France. The launch in France was in 1994, but since the late 1980s, Danone had already entered the market with a health-based yogurt. The second weakness is that LC-1 was positioned as too scientific, and consumers didn’t quite understand that LC-1 was a food and not a drug.

Nestle also has multiple critical resources. They have a great research and development team. James Gallagher and Andrea Pfeifer were the masterminds behind the research on the La-1 cultures in the LC-1 yogurt. They were also the two that decided on selling LC-1 as a functional food. This enabled Nestle to position the product in a way that differentiated it among the other products in the market. They also have four pillars that Brabeck, Nestle’s CEO has identified he believes will help their internal growth worldwide. These are operating excellence, innovation and renovation, product availability, and communication. One opportunity that Nestle has is that health-based products are becoming more popular in the world, including in the United States. Consumers are

becoming more health conscious, and realize that living longer isn’t only by luck and genetics. LC1 has not been introduced in the United States yet. Nestle also has an opportunity of being even a larger market leader in Germany with LC-1. Within two years of launching the product in Germany, they had captured 60% of the market. This was due to the fact that they differentiated the product, and Germans simply preferred the taste. Another opportunity of LC1 is that, because they are a market leader, they can introduce more health-based products in Germany.

A threat to Nestle is the fact that some markets they are entering are already mature. Danone had an established leadership position in the yogurt market in France. Since Danone was the first to arrive in the market, they have always been the market leader there. Also consumers in France liked the taste of LC-1, but researchers believe they did not repurchase the yogurt because they preferred the taste of Danone products better. Another threat to Nestle is that there is intense competition in the United States yogurt market. General Mills’ Yoplait division is the leader in the yogurt market in the United States. Yoplait has been the leader for years and is constantly innovating new health products.

General Mills has been a strong competitor of Nestle and they are not short of experience and strength. One strength that they have is their brand recognition. One of their main goals has been to deliver brands that consumers trust and value and they have succeeded. Another strength they have is their distribution. Yoplait is distributed to more stores in the United States than any other brand of yogurt. This is one of the reasons why they have been the market leader in yogurt for so long. Another strength that General Mills has is the fact that consumers simply know Yoplait is healthy. Yoplait is the only leading brand of yogurt to offer vitamin D and this vitamin is especially important for adult women.(Yoplait.com) It is not just a coincidence that Yoplait has vitamin D, but they have purposely added this vitamin to target female consumers.

General Mills also has some weaknesses. They fact that they are the market leader in the United States may be hindering them from innovation. They have been producing Yoplait yogurt for many years, and have offered a series of new products in the past few years in the nutrition department. Most of these products however, are very common, and are widely offered in the United States. The health food industry in the United States has been booming and General Mills does not offer enough products in the smaller niche markets. They have not entered into many unknown areas because of their success in the yogurt market.

An opportunity General Mills has is that its Yoplait division is so successful. Yoplait is the only division of General Mills that is currently earning a profit. They have a large market share over their main competitors in the yogurt market. Another opportunity that they share with Nestle is that the health-based and nutritional food market is booming. They are continually releasing and marketing new products in these markets and they will continue to do so while the market continues to yield profits.