Nestle Purina Power Point(withVideo)

Jason Atherton

David Friedman

Viktoryia Stackle

Xinwei Xin

Headquartered in St. Louis, MO

Founded in 1894 as Purina Mills

Merged with Nestle in 2001

Leader in pet food sales in the U.S.

Operates in over 100 countries

Parent company Subsidiary Global Retail Sales

Mars Inc. Mars Petcare 14.7

Nestle SA Nestle Purina Petcare 14.1

Colgate-Palmolive Co. Hill’s Pet Nutrition 3.4

Procter& Gamble Co. P&G Pet Care 3.3

Del Monte Food Co. N/A 2

Others 22

The size of industry 59.5

Global Pet Food Industry Size for 2010 ( USD in billions)

45.12

51.5

53

59.5

40

45

50

55

60

65

2007 2008 2009 2010

U.S

. Do

llars

in

Bil

lio

ns

($)

Time Span

Global Dog and Cat Food Sales

IndustryTotal

25%

24%

6%5%

3%

37%

Global Market Share 2010

Mars. Inc

Nestle Purina

Colgate-Palmolive

Procter & Gamble

Del Monte

Others

Differentiation via Quality

Dog food and treats

Cat food and treats

High-tech headquarters in St. Louis, MO

Virtual reality technology

Efficient Assortment Solution

Top notch tracking system

69% female

25% 45-54 years-old

92% Caucasian

66% have no kids

28% income of $100-150K

53% with some college education

Distributes to: 65% of Purina products sold in the Americas

28% in Europe

7% in Asia, Oceania and Africa

Headquarters in St. Louis, MO

Over 20 factories in U.S.

4 in Canada

6 in Latin America

9,850 employees

On-site quality assurance labs and staff

Tracking system

Ingredient screening

Eco-friendly materials

Wide variety of emerging global markets

Sales are not fazed by the economy

Low production costs

Community support

Intense competition

High regulations on food quality

Leadership position based on “trust” and “quality”

Extensive products/brands portfolio

Efficient production and shipping methods

Best work-life balance

17 consecutive years of revenue growth

High reputation in the community

At Nestle Purina PetCare, we offer top of the line dog food, cat food and pet care products for those

who seek the best for their pets. We deliver to grocery and pet stores across the Americas,

Europe and the Asia-Pacific region. With continuous growth, we strive to become the

leader in the global market.

Customers

Associates

Stockholders

Suppliers

Communities

Company Profit

Margin

ROA Inventory

Turnover

Quick

Ratio

Debt to

Assets

Nestle Purina 28.05% 27.57% 13.8% 1.03% 43.93%

P & G 16.13% 10% 12.4% 0.51% 52.07%

Colgate-

Palmolive

14.15% 19.72% 12.7% 0.67% 74.79%

Del Monte 6.53% 5.70% 5.1% 0.73% 57.39%

Strengths Weaknesses

• Top-notch ingredient screening for best quality

• Lean and efficient production process

• State-of-the-art technology• High brand awareness• Globally known parent

company• High employee morale• Unmatched r & d capabilities

• Factories concentrated only in the Americas

• Too much focus on developed markets

• Several pet food recalls• Limited distribution channels

Opportunities Threats

• Increasing pet ownership in emerging markets

• Increasing number of empty nesters

• Global awareness of pet health and wellness

• Rising disposable income globally

• Growing amount of skilled young professionals around the world

• Product safety and quality concerns

• Rising price of commodities• Growing number of foreign and

domestic competitors• Emergence of cheaper private

label products• Cultural barriers in foreign

countries

New entrants-Moderate to high threat

Suppliers-Low to moderate bargaining power

Buyers-Moderate bargaining power

Substitutes-Low

Rivalry-Very high

Performance:

No manufacturing facilities to support Europe, Asia, Oceania and Africa more cost effectively

Opportunity:

Fast growth of emerging markets and changing sociocultural views

Threat:

Increasing number of private label companies with lower prices and newer niche-oriented

products

Consumer confidence is increasing

Unemployment rates are decreasing

Emerging markets will continue to grow

Lifestyles, attitudes and perceptions around the world will continue to change

Government will continue forcing regulations

Technology around the world will continue booming

Open a manufacturing facility in Latvia to increase profitability 8% by 2017

Increase sales by 4.5% by expanding into Latvia, Romania, South Korea and Thailand by 2015

Expand manufacturing plants to developing countries to cut costs and increase profitability

Expand international sales by entering new emerging and developed markets to increase global market share and narrow the gap with Mars, Inc.

Open a manufacturing facility in Latvia to increase profitability by 8% by the end of 2017

R & D

Basic research on building and location costs

$500,000

Building and equipping the factory

$60M

Conducted by Nestle Purina

Human Resources

Recruiting and training$250,000

Wages$2.15M (annually)

Benefits$537,500 (annually)

Information Systems

Use of existing systems with minor adaptations

$100,000

Finance

60% debt financing

20% equity

20% cash reserves

Marketing

None required

Market Research

Research on size of the market and costs

$500,000

Action Plan 1

Pro Income Statement Before Strategy (in millions)

2012 2013 2014 2015 2016 2017

1.0% 1.0% 1.0% 1.0% 1.0%

Sales $14,100.00 $14,241.00 $14,383.41 $14,527.24 $14,672.52 $14,819.24

Cost of good sold $5,295.24 $5,348.19 $5,401.67 $5,455.69 $5,510.25 $5,570.91

Gross profit $8,804.76 $8,892.81 $8,981.74 $9,071.55 $9,162.27 $9,248.33

General and Administrative expense

$3,245.28 $3,277.73 $3,310.51 $3,343.62 $3,377.05 $3,410.82

EBIT $5,559.48 $5,615.07 $5,671.23 $5,727.94 $5,785.22 $5,837.51

Interest income $13.80 $13.94 $14.08 $14.22 $14.36 $14.50

Interest expense $64.32 $64.96 $65.61 $66.27 $66.93 $67.60

EBT $5,508.96 $5,564.05 $5,619.69 $5,675.89 $5,732.65 $5,784.41

Tax(25%) $1,377.24 $1,391.01 $1,404.92 $1,418.97 $1,433.16 $1,446.10

EAT(net profit) $4,131.72 $4,173.04 $4,214.77 $4,256.92 $4,299.48 $4,338.31

Pro Income Statement After Strategy (in millions)

2012 2013 2014 2015 2016 2017-1% 0 2% 5% 8%

Sales $14,100.00 $14,241.00 $14,383.41 $14,527.24 $14,672.52 $14,819.24 Cost of good sold $5,295.24 $5,380.29 $5,508.97 $5,509.26 $5,455.29 $5,402.45 Gross profit $8,804.76 $8,860.71 $8,874.44 $9,017.98 $9,217.23 $9,416.79 General and Administrative expense

$3,245.28 $3,277.73 $3,310.51 $3,343.62 $3,377.05 $3,410.82

R&D $0.00 $60.50 $0.50 $0.50 $0.50 $0.50 HR $0.00 $0.0000 $2.9375 $2.6875 $2.6875 $2.6875 Info System $0.00 $0.10 $0.00 $0.00 $0.00 $0.00 Market Research $0.00 $0.50 $0.00 $0.00 $0.00 $0.00

EBIT $5,559.48 $5,521.88 $5,560.49 $5,671.18 $5,836.99 $6,002.78 Interest income $13.80 $13.94 $14.08 $14.22 $14.36 $14.50 Interest expense $64.32 $64.96 $65.61 $66.27 $66.93 $67.60 EBT $5,508.96 $5,470.85 $5,508.96 $5,619.13 $5,784.42 $5,949.68 Tax(25%) $1,377.24 $1,367.71 $1,377.24 $1,404.78 $1,446.10 $1,487.42 EAT(net profit) $4,131.72 $4,103.14 $4,131.72 $4,214.35 $4,338.31 $4,462.26

PROS CONS

Significant decrease in costs

Easier access to developing markets

Increased production capacity

Local technology and know-how

Lower profitability for the first couple years

Potential increase of contaminants

Safety concerns

Cost Of Reversibility

Irreversible costs$950,000

Cost of building the facilityEstimated $20M

Severance package cost$180,000(One month avg. salary)

2013 2014 2015 2016 2017

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

R & D

Market

Research

ISYS

Plant

Construction

Equipment

Recruiting

/Training

Increase sales by 4.5% by expanding into Latvia, Romania, South Korea and Thailand by the end of

2015

R & D

None required

Finance

60% debt

20% equity

20% cash reserve

Human Resources

Recruiting and training 35 agents

$200,000

Wages$485,000(annually)

Benefits$121,250(annually)

Info Systems

Use of existing

Market Research

Research on:

Market size

Segments

Purchasing power

Pet acceptance

$1M

Pro Income statement before strategy(in millions)

2012 2013 2014 2015

0.5% 0.5% 0.5%

Sales $14,100.00 $14,170.50 $14,241.35 $14,312.56

Cost of good sold $5,295.24 $5,321.72 $5,348.32 $5,375.07

Gross profit $8,804.76 $8,848.78 $8,893.03 $8,937.49


$3,245.28 $3,261.51 $3,277.81 $3,294.20

EBIT $5,559.48 $5,587.28 $5,615.21 $5,643.29

Interest income $13.80 $13.87 $13.94 $14.01

Interest expense $64.32 $64.64 $64.96 $65.29

EBT $5,508.96 $5,536.50 $5,564.19 $5,592.01

Tax(25%) $1,377.24 $1,384.13 $1,391.05 $1,398.00

EAT(net profit) $4,131.72 $4,152.38 $4,173.14 $4,194.01

Pro Income statement after strategy(in millions)

2012 2013 2014 20151.5% 3.0% 4.5%

Sales $14,100.00 $14,311.50 $14,523.00 $14,734.50

Cost of good sold $5,295.24 $5,321.72 $5,348.32 $5,375.07

Gross profit $8,804.76 $8,989.78 $9,174.68 $9,359.43


$3,245.28 $3,261.51 $3,277.81 $3,294.20

HR $0 $0.503125 $0.60625 $0.85

Market Research $0 $1 $0 $0

Marketing $0 $90.0048 $90.0048 $90.0048

EBIT $5,559.48 $5,726.77 $5,896.26 $6,064.38

Interest income $13.80 $13.87 $13.94 $14.01

Interest expense $64.32 $64.64 $64.96 $65.29

EBT $5,508.96 $5,676.00 $5,845.23 $6,013.10

Tax(25%) $1,377.24 $1,419.00 $1,461.31 $1,503.27

EAT(net profit) $4,131.72 $4,257.00 $4,383.92 $4,509.82

Marketing in Europe

Target consumer: 30+

Latviansonline.com

Hockey games in Latvia

Soccer games in Romania

Subway stations

TV

$50,480,000

Marketing in Asia

Target consumer: 30+

Soccer games in South Korea

Muay Thai fights in Thailand

Bus and subway stations

TV

$40M

PROS CONS

Narrow the gap with Mars

Improve global brand recognition

Local agents know-how

Local brand loyalty

Cross cultural risk

Political and economical threat

Possible competitors’ cost advantage in price

Cost of Reversibility

Irreversible costs$1.2M

Marketing cost$90,004,800

Severance package cost$17,835

2013 2014 2015

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Market

Research

Recruiting

and Training

Marketing

TV Ads

Subway

Banners

Sporting

Events

Online

Pursue action plan 1 to establish a production facility for future execution of action plan 2

Implementation of plan 1 allows for higher long term profits

52-week high: $57.25

52-week low: $43.50

Present price: $56

Market cap: 184.8B

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Nestle Purina Power Point(withVideo)

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