Introduction
Nestle has been in the Indian market for over sixty years now and it has established itself as a domestic name in Indian households despite its Swiss origin. Although the company deals chiefly with food products (mostly ready to eat, ready to cook, and instant mix type), it has captured a humongous market share in India and is giving tough competition to Indian FMCG giants like Hindustan Unilever (HUL) and ITC. A peek into the comparative growth and revenue generation of these companies will give us an understanding of Nestle’s dominance.
Important to mention here that Nestle only offers food items in the FMCG segment while HUL and ITC have other products in their catalog such as toiletries, cooking ingredients like flour, rice, spices, incense products and many more. Still Nestle has clocked a 9% growth with just instant food and beverages which sparked my interest about what is giving Nestle such mileage over Indian brands. My research yields several reasons including Nestle’s excellence in marketing and pricing, but what grabbed my attention is the company’s brilliant understanding of its Indian audience and accordingly designed Indianization (localization) strategy. In this case study I will share that with you.
The Beginning
After India gained independence in 1947, the Indian Government focused on promoting local production to boost the economy. Nestle recognized and responded to India’s ambitions by establishing a presence in the country and inaugurating its first factory in 1961 in Moga, Punjab. The Indian Government specifically encouraged Nestle to contribute to the development of the milk economy in the region. Nestle’s involvement in Moga necessitated the introduction of its Agricultural Services, which aimed to educate, advise, and support farmers in various aspects of farming. This included enhancing milk yields through improved dairy farming methods, implementing irrigation systems, promoting scientific crop management practices, and facilitating access to bank loans. Nestle also established milk collection centers to ensure timely collection of milk from farmers and to provide fair compensation. This initiative not only streamlined the milk collection process but also fostered confidence in the local dairy business within the community. The progress made in Moga led to sustainable prosperity, transforming the region into a thriving milk district and a bustling industrial hub.
Segmented Localization
A major challenge for global brands or foreign brands is to localize their product as per the taste and expectation of the target audience. In case of a brand offering food, items this means including the popular local ingredients and aroma to the product to make it a unique offering to which the target audience can resonate. Let’s take the example of Maggie. Nestle launched Maggie in 1983 in India and in the following decades Maggie became the most popular snack among the Indian population. The first reason behind Maggie’s huge success is its quickness. As per traditional Indian cooking methods, even a nominal snack will take at least half-n-hour preparation time. Maggi offered a quick solution, to Indian mothers particularly, who are always struggling to give something quick and tasty to their children. Besides, Maggi became a huge favorite among working professionals who don’t have much time to cook. Nestle took one step further by introducing a variety of Maggie noodles to reach every segment (preference) of the Indian population. For example, there is Masala (spicy) Maggi noodles for the people who love their food spicy (which is most of the Indians). For non-vegetarian Indians there is Maggi chicken noodles and Vegetarian people can go for Veggie Masala noodles. Nestle has also considered the religious sentiments, for example a no Garlic, no Onion Maggi noodle is also available for Jain people who don’t eat any root vegetable.
Straight to the Kitchen
What makes Indian cuisine different from others? The answer is spices. But the preparation and stage wise application of these spices in food takes time. Nestle identified this gap and launched different types of Maggi masalas. These are instant mix and quickly soluble in food. But the problem was to properly introduce this product to people and educate them how to use it. Nestle came up with a unique solution and have added a recipe segment in its India website. In this segment you will find recipes of how to cook popular dishes, including quick servings to restaurant style cuisine, using Maggi masala.
Inclusive Pricing Strategy
If you go through the product offering of Nestle, particularly the most popular Maggie, Nescafe and Kitkat, you will see that these are available in all price ranges. Nestle’s understanding of Indian customers is pivotal in the company’s success. Indian customers range from low-income groups to all the way up to people with high income. Nestle’s pricing strategy aims to offer its product to people of every income level. That’s why you can find a Rs.680 ($8.15) Nescafe 200 gm bottle as well as Rs.1 ($0.012) Nescafe sachet. There are also different quantity and price offerings in between to suit the purchasing power of the customer. Similar strategy has been followed for Maggie and Kitkat, offering a small pack (low priced), medium pack (moderately priced), and family pack/large pack (high priced) to have a wide range of customers.
Conclusion
Nestle’s success in the Indian market can be largely attributed to its localization strategy and deep understanding of the diverse Indian consumer base. By offering segmented product lines catering to various taste preferences, dietary restrictions, and price points, Nestle has effectively penetrated Indian households across different socio-economic strata. The company’s initiatives like educating farmers, introducing convenient and affordable products, and providing recipes tailored to Indian cuisine have helped it establish a strong connection with the local population. Nestle’s multiple pricing strategies, ranging from premium offerings to affordable options, have enabled it to capture a wide audience and maintain a competitive edge over domestic brands. Through its inclusive and well-executed localization efforts, Nestle has successfully embedded itself into the fabric of Indian culture and emerged as a dominant player in the country’s FMCG market.
