Managing Internal Growth and Nestle:The Story of LC1

Presented by:Diana Lim

The Company

Founded 1866 in Switzerland as an infant nutrition company

480 factories 276,050 employees

worldwide business volume in 2006

over $ 100 billion

Business Strategy

Encourage product growth through innovation and renovation

Internal growth strategy• Develop new products

• Renovate existing ones

Develop innovative ideas transform ideas into successful products

Internal Growth Drivers

4 pillars for would drive Nestle’s internal growth worldwide as identified by Peter Brabeck (CEO)

Operating Excellence

Innovation and Renovation

Product Availability

Communication

The Story of LC1

research team in Switzerland discovered a culture called Lactobacillus acidophilus, or La-1

contains a probiotic agent, which is living microbial feeding supplements that allow the lower intestine to function better

No immediate plan to introduce in into yogurt

The Story of LC1

James Gallagher – European coordinator for chilled products

Andrea Pfeifer – leading scientist at the Research Centre

Create a new segment on the yogurt market

Position itself as a functional food

Launch of LC1 in France

Launched 1994 Not the success that Nestle had hoped Reasons:

• LC1 arrived late; Danone already in the market

• Consumers didn’t believe it tasted better than other yogurts

• Purchased based on claims; decision not to repurchase was based on taste

• Too scientific to understand benefits

Failure

Danone’s Actimel Japan’s Yakult Both have outsold LC1

LC1 failed in France and UK – delisted LC1 Go!: introduced 1998 pulled out 2000 Nestle Brand – associated with Ice cream and

indulgent desserts Marketing Strategy

Launch of LC1 in Germany

Launched in 1995 Highly successful in Germany

• No clear market leader in Germany

• Yogurts that made health-based claims were new to the market (differentiation)

• German consumers preferred the taste of LC1

SWOT Analysis

Strengths Weakness

Strong R&D Team/ food science Late entry into market

Low cost operator Positioned as too scientific

Opportunities Threats

Health consciousness Mature markets

Introduce more health-based products in Germany

Intense competition

Reflecting on the Success of LC1

Understand technical ideas transform into marketing ideas

R&D process people must talk to business people early on in the process

Think of product concepts: “where could this scientific finding be possibly used?”

Led to the creation of Nutrition division in 1997

Restructured compensation package

Nestle’s campaign for LC1

First probiotic yogurt

Supports the body’s defenses

Special name

Special design

TV Spot

A hedgehog was introduced as a key visual

He has his spikes

TV Spot

We haven’t

TV Spot

That’s the reason why I help my body with health

food

TV Spot

Everyday

TV Spot

With this special milk

ferment

TV Spot

It’s good for my body’s

defenses

TV Spot

This is quite to my

taste

TV Spot

Nestle LC1 for daily

consumption with health

plus

Print Media

Give a scientific appearance Explain the concept of probiotic Hedgehog was part of the ad