NESCAFE - mbacasecomp.com should focus on the triple bottom line strategy – People – Planet - Profit Political / economical Coffee prices are not yet regulated in China Social

Nesting greater good NESCAFE

Porto Business School Team PBS Silvia Duarte Francisco Cudell Rui Rosas Pedro Vilas Boas

Challenge Analysis Recommendations Financials Risks & Plan

Challenge

How should NESCAFE advance in China being sustainable in accordance to CSV

principles?

Challenge


We identified the following key issues

Challenge

The industry must be sustainable 1

Traditional mind set of Chinese growers 2


Agenda

Question

Analysis

Recommendations

Financial Impact

Risks

Implementation Plan

Analysis


Who are you?

Nestle SA One of the largest corporation in the world Employs 278000 people Present in 5 continents Produces several products from coffee to milk and dairy products

Analysis


Who are you?

Nestle SA One of the largest corporation in the world Employs 278000 people Present in 5 continents Produces several products from coffee to milk and dairy products

Analysis

The sheer size of Nestle and the global brand awareness. Strategies must be aligned with its global size


What do you stand for?

Analysis

Nutrition Health Wellness

Quality Sustainability


What do you stand for?

Analysis

Nutrition Health Wellness

Quality Sustainability

NESCAFE Must continue its alignment with its key values


What drives your industry?

Analysis

Cost effectiveness

Sustainability

Social responsibility

Control in the process


What drives your industry?

Analysis

Using CSV (create share value) in order to ensure its positioning and sustainability goals

Cost effectiveness

Sustainability

Social responsibility

Control in the process


Who are the main stakeholders?

Analysis

NESCAFE

Farmers and Farmers employees Distributors

Consumers


Who are the main stakeholders?

Analysis

The delineated strategy must be aligned with the stakeholders in order to foster improvement

NESCAFE

Farmers and Farmers employees Distributors

Consumers


What does CSV Stand for?

Analysis

CSV

Create shared value Business can create wealth in a community Independent - Not limited by the firms budget Sustainability is seen as a cost in order to minimize risks and protect the company reputation Practical application Redefine products and markets Redefine Value chain Redefine broader ecosystem


Who is your target consumer?

Analysis

Both male and female Gender

Age

Social Group

From 18 years old onward

All social groups from Families to office workers

Consumers want to be aware of the production process – fair trade must be considered


Who is your Grower?

Analysis

Age

Social Group

+ 60 Years old

Family owned business


Who is your Grower?

Analysis

The typical grower is more than 60 years old, which can bring issues on the continuation of the business

Age

Social Group

+ 60 Years old

Family owned business


From the farm to the people

Analysis

Agricultural phase

Production Phase

Roasted coffee Transp. Distribution

Consumption Waste

management


From the farm to the people

Analysis

The supply chain is complex and full of players

Agricultural phase

Production Phase

Roasted coffee Transp. Distribution

Consumption Waste

management


Lets look into your market environment

Analysis

Political / economical Coffee prices are not yet regulated in China

Social Farmers are getting older Increase in global awareness concerning sustainability

Environment Crops sustainability Water and soil conservation


Lets look into your market environment

Analysis

NESCAFE should focus on the triple bottom line strategy – People – Planet - Profit

Political / economical Coffee prices are not yet regulated in China

Social Farmers are getting older Increase in global awareness concerning sustainability

Environment Crops sustainability Water and soil conservation


Lets look to your competitors

Analysis

Nestle Market share

Sustainability

Mondelez International

The master blenders


Lets look to your competitors

Analysis

Nestle is the major player in Coffee Market shares, and must maintain and continue to introduce sustainability measures

Nestle Market share

Sustainability

Mondelez International

The master blenders


Lets look into your industry

Analysis

Consumer Power Very high – new awareness on sustainable concerns


Lets look into your industry

Analysis

The consumer must always be the focus in order to thrive in the business

Consumer Power Very high – new awareness on sustainable concerns


Summing Up

Market leaders in China

Analysis

S W O T

Supply chain is complicated and generates costs

Consumers want to be aware of the of the products

Resistance to change the plantations

Recommendations


Challenge


principles?

Challenge



Challenge




Strategy

Recommendations

Profit

Planet

People

Triple Bottom Line Strategy


Supply Chain

Recommendations

Supply Coffee Seeds Growers Nestle

Nestle Control of Farming Process


What path to follow?

Recommendations

Alternative Work with coffee farmers at grassroots level



Recommendations

Alternative

Alternative

Work with coffee farmers at grassroots level

Pay higher prices for coffee beans sustainable certified



Recommendations

Alternative

Alternative

Work with coffee farmers at grassroots level

Pay higher prices for coffee beans sustainable certified

Alternative Backward integration into coffee farming


What path to follow

Alternatives Sustainability and shared good

Productivity High Profits Results

Work with Coffee farmers

++ ++ + 5

Pay Higher Prices for certification

+ - - - -2

Backward integration

+++ +++ +++ 9

Recommendations


What path to follow




++ ++ + 5


+ - - - -2


+++ +++ +++ 9

Recommendations


What path to follow




++ ++ + 5


+ - - - -2


+++ +++ +++ 9

Recommendations

Coffee Plants require 4 years to Mature

WHAT TO DO?


How to growth with CSV

Recommendations

2 Step Plan

Greater Good


Path to Follow

Recommendations

2 STEP ACTION PLAN

Pay Higher & Preparation for

Backward Farming Backward Farming

Year 1 to year 4 After year 4


Path to Follow

Recommendations

2 STEP ACTION PLAN – 1st Step

HOW From year 1 to year 4 pay higher prices for certified beans


Path to Follow

Recommendations


WHY Fostering Greater Good for growers – Fairtrade Survey in Wuhan indicates customers’ willingness to pay 22% more for cup of Fairtrade coffee vs traditional



Path to Follow

Recommendations


WHY Fostering Greater Good for growers – Fairtrade Survey in Wuhan indicates customers’ willingness to pay 22% more for cup of Fairtrade coffee vs traditional

Foster Greater Good for Growers while increasing Revenues



Path to Follow

Recommendations

WHAT From year 1 to year 4 prepare infrastructure for backward integration

HOW Long-term land lease in the Yunnan province (Pu’er) Convince local growers about benefits of replacing ancient unproductive plants by new ones



Path to Follow

Recommendations

WHAT From year 1 to year 4 prepare infrastructure for backward integration

HOW Long-term land lease in the Yunnan province (Pu’er) Convince local growers about benefits of replacing ancient unproductive plants by new ones

HOW TO CONVINCE GROWERS?



Path to Follow

Recommendations

HOW Build better houses for growers and families Create a Nestle Foundation – NEST

Childhood Services Education for Growers Family Health Care for Growers and Families Coffee Farming Institute for farming techniques training

Demonstrate that new plants will increase productivity, thus growers gain



Path to Follow

Recommendations

HOW Build better houses for growers and families Create a Nestle Foundation – NEST

Childhood Services Education for Growers Family Health Care for Growers and Families Coffee Farming Institute for farming techniques training

Demonstrate that new plants will increase productivity, thus growers gain Offer Greater Good



Path to Follow

Recommendations

WHAT Sustainable and “greener” farming and production process

HOW Growers training within NEST foundation Elaborate procedure with the best “greener” & sustainable farming practices – CSV productive workers standard Create a farming cooperative to centralize washing, soaking, drying, milling and sorting beans process – to be controlled by Nestle - CSV prosperous communities standard



Path to Follow

Recommendations

HOW Supply coffee seeds to growers – Farm new coffee plant Local follow up and support of farming process and harvest by Nestle “Coffeeologist” Use of Drones to monitor coffee farms

Close technical follow up of farm process and harvest Relief growers work load

Guarantee workers receive a living wage while farming new plants



Path to Follow

Recommendations

HOW Supply coffee seeds to growers – Farm new coffee plant Local follow up and support of farming process and harvest by Nestle “Coffeeologist” Use of Drones to monitor coffee farms

Close technical follow up of farm process and harvest Relief growers work load

Guarantee workers receive a living wage while farming new plants


Close Follow up and Control of Farm Process


Path to Follow

Recommendations

WHAT

2 STEP ACTION PLAN – 2nd Step

Produce NESCAFE with coffee beans from new Yunnan farms Market NESCAFE as a green and sustainable brand, capitalizing in environmental sustainable trend and customers willingness to pay more Increase growers earning by more fair sharing of profits (supply chain improvement and higher coffee market price)


Path to Follow

Recommendations

WHAT

2 STEP ACTION PLAN – 2nd Step

Close Follow up and Control of Farm Process

Produce NESCAFE with coffee beans from new Yunnan farms Market NESCAFE as a green and sustainable brand, capitalizing in environmental sustainable trend and customers willingness to pay more Increase growers earning by more fair sharing of profits (supply chain improvement and higher coffee market price)


Challenge


principles?

Challenge



Challenge




Strategy

Recommendations

Profit

Planet

People




Recommendations

2 Step Plan

Greater Good

Financial Impact


Coffee - global market evolution

Financials

Massive growth


Nescafe in the Chinese market

Financials

Continuous growth China internal market represents 3.5% (4th largest market)


Value Chain weight

Financials

Potential to remove intermediaries


Assumptions

Financials

Main goal is to be Sustainable in accordance to CSV principles


Investments

Financials


Investments

Financials

Investment of $ 408 million over the next 5 years


Final Result

Financials

Investment in Corporate Social Value

Clients pay up to 22% more per cup of coffee

Reduce intermediaries – improve margins by reducing purchasing costs

Reduce presence t

Risks


We identified the following risks

Risks & Plan

probability

impa

ct

1

2

Risks Mitigation

Change resistance – culture offence to remove ancient crops

Educate Train Show Results Provide examples

1

2 Foundation – the project could be seen to general public as profit oriented

Communicate clearly Social media Website conferences

Implementation Plan


Implementation Plan

Risks & Plan

evaluation implemetation

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Greater Good

Land LeaseCommunication with growers

Build houses for growersNest FoundationGrower Traing

Farming CooperativeDrones monotorization

2016 2017 2018 2019 2020

Summing Up


Challenge


principles?

Challenge


Strategy

Recommendations

Profit

Planet

People




Recommendations

2 Step Plan

Greater Good

Documents

NESCAFE - mbacasecomp.com should focus on the triple bottom line strategy – People – Planet - Profit Political / economical Coffee prices are not yet regulated in China Social