Nestle's Marketing Crisis

Marketing, February 19, 2004 | Go to article overview

Nestle's Marketing Crisis


Despite award-winning advertising, Nestle has lost focus, sales and market share.

'Nestle Rowntree is a business in crisis.' It would be a damning judgment from any industry observer, but is all the more so when it comes from the mouth of the company's new managing director, Chris White.

The company has lost focus, sales and market share, claims White, and its award-winning advertising - led by its award-winning former marketing director Andrew Harrison - has failed in its primary task of encouraging consumers to buy more products.

The figures back White's claims in no uncertain terms. Key brands slumped last year, according to Information Resources. Sales of the company's best seller, Kit Kat, fell 5.4% from nearly pounds 123m in 2002 to just over pounds 116m by the end of 2003; Aero was rocked by a 10% drop to pounds 58m; and Kit Kat Chunky sales plummeted 18% to pounds 50.5m.

So what is White, who took up the role in December, going to do about it? He lays out a far-reaching strategy that will be allied with the launch of line variants - including new Double Cream products due on-shelf within two months.

Out goes the custom of concentrating marketing efforts on ten brands; in comes a tighter focus on three or four drive brands - including top seller Kit Kat. 'The difference between us and a company such as Cadbury,' says White, 'is that it can focus on the Cadbury brand with the variants underneath, whereas our consumers' relationships with Nestle are through our brands. So our challenge is to push individual brands, rather than all our brands.'

Out too go the separate operational and customer marketing functions, replaced by a streamlined department that reports to sales - placing a premium on end results.

That's not all on White's agenda. Products that predict, rather than respond to, consumer trends are to be introduced. And overseas brands are to be imported as limited editions for a short-term sales boost without involving set-up costs - a lemon cheesecake Kit Kat is said to be on its way from Japan.

The company also plans a move into markets that have experienced stronger growth than confectionery in the past couple of years - notably the savoury and healthy snack sectors.

Role model aspirations

White has set out his stall to turn Nestle Rowntree into a European flagship and a role model for Nestle companies globally within the next two years.

He plans to grow the company's market share from 17.9% to 20% and mount a stronger challenge to Cadbury and Masterfoods (Mars).

To that end, he says, the company's culture must become 'more aggressive and performance-based'. This may even mean the name Rowntree is dropped because of its associations with the 'old' regime.

White is particularly scathing about last year's much-vaunted backing of Pop Idol, which he sees as an example of a failure to deliver against significant investment. 'It didn't sell more products as it didn't give consumers another reason to buy. Sponsorship raises awareness, but people are already aware of our brands,' he says. Last week he sacked M&C Saatchi, the agency responsible for the idents.

While creative work may be moved between agencies, there are unlikely to be more departures from the roster, partly because of time constraints and partly because the agencies - Lowe and J Walter Thompson - 'have been pretty good so far in terms of demonstrating commitment to the kind of things we are talking about'.

The watchword for all new advertising - and JWT started shooting a Kit Kat campaign last week - will be 'rational'. 'We need to give consumers a reason to buy a product today,' says White. 'Our challenge is to make advertising that will get more people to buy more product at a higher price, to make more money for ourselves and our retail customers.'

Contributing to that goal of boosting sales will be the merger of the company's marketing functions and the creation of a consumer communication department to act as a bridge between the brand group, sales function and agencies. …

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