Business Today
Loading...

How Nestle's change in operating model proved to be a game-changer

Nestle earlier had a single strategy for the entire country. It has now divided the country into 15 consumer clusters and the idea is to offer more focussed solutions to consumers

twitter-logoAjita Shashidhar | December 26, 2019 | Updated 19:40 IST
How Nestle's change in operating model proved to be a game-changer
Nestle India to offer more focussed solutions to consumers

Nestle India is among the few FMCG companies that has bucked the consumption slowdown and reported a healthy growth over the last few quarters. In the second quarter of FY20, Nestle's revenues grew by 10.5 per cent and profits by 33.5 per cent, as opposed to the tepid growth stories of most of its peers. The company has strengthened its distribution and has launched over 60 new products over the last couple of years. Suresh Narayanan, MD & Chairman, Nestle India, attributes the recent change in its operating model as a major game-changer.

It has divided the country into 15 consumer clusters and the idea is to offer more focussed solutions to consumers. How has this made a difference? The company earlier had a single strategy for the entire country. There was a national Maggi, Nescafe or KitKat plan, and this was the cause of consumer disconnect. For, the tastes and preferences of a Maggi or Nescafe consumer in Mumbai are quite different from that of a person living in Salem in Tamil Nadu.  "Earlier, it was geography that was defining the customer and then it was defining the brand and category and then finally it would touch upon the consumer. It was painting the country with one single plan. The effort now is to look at the country from the lens of consumer first, rather than geography first," explains Narayanan.

It's not that the tastes and preferences of Indian consumers have suddenly become diverse. Narayanan says that the power of data analytics and consumer insights has enabled them to cluster and sharply target consumers.  "We are able to access the kind of consumers that are interested in our kind of categories in brands, it has helped us to amplify better, we are able to get to the target consumers and also use the right media mixes in order to amplify the presence that we have for our existing brands and also increase accountability." The company now has a more individualised plan for Tamil Nadu, Andhra Pradesh or Uttar Pradesh. For a product like coffee, analytics has helped them to target consumers based on their consumption frequency, the equity for different kinds of coffee, consumption occasion and so on. Coffee consumption down South is a daily ritual while in the North or in the East, coffee consumption usually happens outside of home. Therefore, these markets need to have different route to marketing and distribution strategies. Painting the entire country with a singular plan was just not viable.

The Nestle head honcho further explains by citing the example of the coffee consumption habits of Tamil Nadu, Andhra and Karnataka. Their instant coffee strategy in these markets was largely Tamil Nadu centric since it was their biggest market. "We were operating on a TN centric plan and applying it in Andhra and Karnataka with the hope that the Andhra and Karnataka consumer will see value in our brand. That wasn't happening and we were giving the field open to our competitors to walk through the door. Using the bar of clusters, what we have done is to get relevant with a product that is common."

Also read: Fine on Nestle India: FMCG giant defends itself, says GST benefits were passed on to consumers

This concept of creating consumer clusters is not entirely new. Hindustan Unilever has a strategy called Winning In Many Indias (WIMI), which also stems from the philosophy of many 'Indias' within India. HUL too has divided its business into clusters and has gone a step ahead by creating local brand variants. It has Bru Kannadigara, meant for its consumers in Karnataka and the idea for this also came from the insight that the coffee consumption habits in Karnataka was vastly different from that of Tamil Nadu. Like Nestle, HUL's instant coffee strategy in South was Tamil Nadu centric. Narayanan, however, is clear that he won't tamper with the product. "We don't split the product. We are using differentiated advertising, differentiated route to market, differentiated sampling and distribution."  

The strategy of offering localised solutions also encompasses use of local media. Nestle, which largely used national media vehicles to reach out to its consumers, has now started including regional media in its media plan. "We always assumed that TV would take care of whatever media exposure we wanted to raise, but the minute you look from a cluster point of view, you realise that there is a Dinamani which is important in Tamil Nadu, there is a Hindustan which is important in North, and there is also a Dainik Bhaskar. There are different relevant newspapers and we need to use those as a company," explains Narayanan.

Also read: Nestle India to invest Rs 800 crore to set up 9th Maggi factory in Gujarat; to create over 400 jobs: CMD Suresh Narayanan

Also read: Nestle India, Titan Company stocks gain ahead of their Sensex inclusion on Dec 23

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close