Nestle's Brand Management Strategies

            
 
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Case Details:

Case Code : MKTG039
Case Length : 10 Pages
Period : 1990 - 2002
Pub Date : 2002
Teaching Note : Available
Organization : Nestle SA (Nestle)
Industry : Chocolates and Confectionery
Countries : Switzerland

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"Nestle is a brand in its own right. For consumers, relevance of Nestle as a company comes first of all through contact with products that are branded Nestle. If we want to be perceived as the world's leading food company, we have to offer consumers an increasing amount of products that they can identify as Nestle's."

- Peter Brabeck Letmathe, CEO, Nestle1.

Introduction

In mid-1988, Nestle SA (Nestle), the world's largest consumer packaged foods company based in Switzerland, acquired Rowntree Mackintosh PLC (Rowntree), in the largest ever acquisition deal of a British company during that time.

Rowntree was the world's fourth largest manufacturer of chocolates and confectionery products, with well-known brands like Kit Kat, After Eight, Smarties and Rolo.

The deal attracted considerable attention all over the world since several bids2 to acquire Rowntree were rejected. Rowntree claimed that the bids were too low for its valuable, well-recognized brands.

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In the end, Rowntree was acquired by Nestle for 2.5 billion, two and a half times the pre-bid price and eight times the net asset value of the company. This acquisition made Nestle the largest chocolate manufacturer in the world.

Analysts felt that Nestle had paid 2.5 billion because of Rowntree's brands, not its past financial performance. Industry observers wondered how Nestle would manage Rowntree's brands.

Rowntree followed a "one product, one brand" policy. The brands were simply Kit Kat, After Eight, Smarties and Rolo, Rowntree was never mentioned.

Moreover, Rowntree's brands were not strongly managed European brands. In fact, according to an analyst3, Kit Kat was one of the worst cases of an over-localized brand of a company across Europe.

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1] In an interview with The McKinsey Quarterly in 1996.

2] Nestle and Jacobs Suchard, which had already acquired 15% of Rowntree's stores, were the major players in the tussle to acquire Rowntree.

3] According to Chris Macrae, author of Brand Chartering, published in 1995.

 

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