Assessment 3 BFW2341

Sections

Introduction+ Company background (4 min)

financial management (4 min)

sustainability (4 min)

Management (4 min)

Conclusion (4 min)

Part B we do together (look at week 10 and 11)

Do part B in Saturday ( 4:00 meeting PM 18/05/24)

Finish slides by Sunday

Dry run on Monday

Link: https://www.canva.com/design/DAGFBPwW-_8/8GdT_KmXieRv67I1Xp8L6w/edit

Instructions:

● Max 20 min

● Try to make it 3 min 30 seconds

● We all need to know all the parts

● Don’t edit slides after presentation

● For financial management, sustainability, and management, talk about the key issues and how to solve them.

● For financial management look at the balance sheet

Citations:

https://www.nestle.com/about/history/nestle-company-history

https://www.nestle.com/investors/annual-report#download

Company background (Daniel)

Nestlé Malaysia, officially known as Nestlé (Malaysia) Berhad, is a prominent player in the food and beverage industry in Malaysia. It is a subsidiary of the global Nestlé S.A. group, headquartered in Switzerland, which is one of the world’s largest food and drink companies. Nestlé Malaysia was established in 1962 and has since grown to become a leading company in the country, known for its commitment to quality and innovation. Malaysia offers a wide variety of products across multiple categories including beverages, dairy, confectionery, culinary products, and health science products. Some of its popular brands include Milo, Nescafé, Maggi, KitKat, and Nestlé Ice Cream. The company operates multiple manufacturing facilities in Malaysia, which enable it to efficiently produce and distribute its products throughout the country and also to export markets. Nestlé Malaysia places a strong emphasis on sustainability. It has initiated various environmental and social projects, focusing on areas such as water stewardship, waste management, and community engagement. Continuous innovation is a key part of Nestlé Malaysia’s strategy. The company frequently introduces new products and variations to meet changing consumer tastes and preferences. It is a dominant force in Malaysia’s food and beverage sector, with a significant share in many of the categories in which it operates.  Nestlé Malaysia is listed on the Bursa Malaysia and is known for its strong financial performance and stability, making it a key component of the Malaysian stock market. Nestlé Malaysia continues to adapt and evolve, focusing on meeting the nutritional needs of consumers while also addressing broader societal challenges such as health, sustainability, and responsible sourcing.

Name and Affiliation

Nestlé (Malaysia) Berhad.

A subsidiary of the global Nestlé S.A. group

headquartered in Switzerland.

Establishment and Growth

Established in 1962

leading company in the food and beverage industry in Malaysia.

Product Categories and Popular Brands

Product category

Beverages

Dairy

Confectionery

culinary products

health science

Example:

Milo

Nescafé

Maggi

KitKat

Nestlé

Ice Cream

Operations and Manufacturing

multiple manufacturing facilities in Malaysia

produces and distributes products throughout the country and export

Commitment to Sustainability

 strong emphasis on sustainability

Initiates various environmental and social projects (water stewardship, waste management, and community engagement) 

Innovation and Market Adaptation

innovates by introducing new products and variations

meet changing consumer tastes and preferences

Market Position and Financial Stability

Dominant force in Malaysia’s food and beverage sector.

Holds a significant market share in many categories

Listed on the Bursa Malaysia

 known for strong financial performance and stability

Future Focus

Continues to adapt and evolve to meet nutritional needs and broader societal challenges like health, sustainability, and responsible sourcing.

Nestlé S.A. is a multinational food and drink processing conglomerate corporation headquartered in Vevey, Vaud, Switzerland. It was founded in 1866 by Henri Nestlé, a German-born pharmacist. Originally, the company gained fame for developing a breakthrough infant food in 1867, which was a milk-based baby formula called "Farine Lactée." This product was created to combat the high rates of infant mortality due to malnutrition.

Over the decades, Nestlé has grown to become the largest food company in the world in terms of revenue. Its expansive portfolio includes more than 2,000 brands, ranging from global icons like Nescafé, KitKat, and Maggi to local favourites, catering to a diverse array of consumer markets. The company operates in 189 countries and runs around 413 factories across five continents.

Nestlé’s business activities encompass various product categories such as baby foods, bottled water, cereals, chocolate & confectionery, coffee, culinary, chilled and frozen food, dairy, drinks, food service, health science, ice cream, pet care, and weight management. The company’s strategy focuses heavily on innovation and diversification of its products to meet changing consumer tastes and demands for more nutritious and sustainable options.

Sustainability is a significant focus for Nestlé as it aims to lead in tackling climate change and reducing the environmental impact of its operations. The company has committed to making 100% of its packaging recyclable or reusable by 2025 and to net zero emissions by 2050.

Nestlé has also faced its share of controversies, particularly regarding its marketing of infant formula in developing countries, its environmental impact, and its practices around sourcing commodities like palm oil, cocoa, and water. These challenges have spurred various reforms and initiatives aimed at enhancing corporate governance, transparency, and ethical practices within the company.

Today, Nestlé continues to expand its market presence globally, adapting to new market trends and consumer preferences, while facing the challenges of maintaining sustainability and ethical responsibility in its operations.

● Founded: 1866 by Henri Nestlé in Vevey, Vaud, Switzerland.

● Initial Product: Farine Lactée, a milk-based infant food to combat infant mortality.

● Status: Largest food company in the world by revenue.

● Product Range: Over 2,000 brands including Nescafé, KitKat, Maggi, and more.

● Global Presence: Operates in 189 countries with approximately 413 factories across five continents.

● Product Categories: Includes baby foods, bottled water, cereals, chocolate & confectionery, coffee, culinary, chilled and frozen food, dairy, drinks, food service, health science, ice cream, pet care, and weight management.

● Innovation and Diversification: Focuses on adapting products to meet changing consumer tastes and demands for nutritious and sustainable options.

● Sustainability Goals:

● Aim to make all packaging recyclable or reusable by 2025.

● Targeting net zero emissions by 2050.

● Controversies:

● Criticism over marketing of infant formula in developing countries.

● Environmental impact concerns, particularly regarding water usage and sourcing of palm oil and cocoa.

● Corporate Governance: Initiatives for enhancing corporate governance, transparency, and ethical practices.

● Ongoing Strategy: Continues to expand global market presence, adapting to new market trends and consumer preferences while managing sustainability and ethical responsibilities.

Financial Management(Xinyu)

Sustainability (Anika)

Context:

Plastic waste has been one of Nestlé Malaysia's most pressing sustainability issues over the past three years. However, the organisation's Malaysian chief executive has stated the contrary, for the time being, that it is not yet feasible to completely eliminate plastic as a primary material for food packaging locally (Neo, 2020). 300 million tonnes of plastic waste are produced annually, with 93% of this waste being disposed of through unauthorised disposal in lower-income countries. A report identified Nestlé as being one of the world's biggest generators of plastic waste. Nestlé has been under intense pressure coming from conservation groups along with customers to minimise its use of plastic in packaging (The Edge, 2019). Like many other nations, Malaysia suffers from a lack of recycling infrastructure (Nadi et al, 2011), and based on the report, Nestlé stated that in 2022, 0.9 million plastic tons or 0.5% of all plastic packaging worldwide were used for packaging (Nestle, 2023) which means that a significant amount of plastic trash ends up in landfills or the environment. Malaysia came in fifth place for the category of those who dump 2.29 kg of plastic debris into the ocean annually and ranked 10th in global waste mismanagement (Kabilan, 2024). This releases greenhouse gases from decaying plastics, which worsens climate change, pollutes the environment, and damages marine life (Nadi et al, 2011).

Strategies to mitigate plastic waste:

To counter the ongoing sustainability issue, Nestle can opt for biodegradable plastics for packaging instead of traditional plastics currently being used, as Biodegradable plastics are designed to decompose under natural conditions unlike traditional plastics which can persist for hundreds of years and result in non-toxic residues. made from renewable raw materials, such as plant starches, corn oil, or other biological sources (Plastics Europe, 2021). Nestle needs to make R&D investments to develop packaging materials that are compostable and biodegradable. Examine environmentally friendly materials that can naturally decay without endangering the environment, such as plastic made from plants. Employ substances that decompose in industrial composting facilities, such as polylactic acid (PLA) or polyhydroxyalkanoates derived from maize starch. Liquid may be held in the form. of spheres using edible seaweed film, a naturally occurring thickening found in seaweed (Renouvo, 2023). Usually used for beverage packaging at special occasions, the material decomposes spontaneously in a few days (Grantica, 2023).

Another strategy regarding bottles of beverages and other packaging, Nestle can adopt PET that has been 100% recycled (rPET). That uses leftover material to create new uses, reducing the need for virgin plastic while encouraging the circular economy. The substance known as rPET, or polyethylene terephthalate, is frequently used to substitute virgin PET (Hoeven, 2024). Because rPET leaves a reduced carbon footprint, which is thought to be far more environmentally friendly. We can lessen our carbon footprint while contributing towards a more sustainable future through utilising recycled plastic rather than raw materials (Intco, 2022). It is more affordable to use recycled plastic. It is less expensive for manufacturers to produce than virgin plastic. Nestlé Malaysia can considerably lessen their waste of plastic and environmental effect, enhancing its market position, and comply with regulations by utilising more rPET and implementing sustainable practices (Rodrigues, 2023).

Implementation:

Based on the current Financial Report by Nestle Malaysia, with a Current packaging cost of 309,682 MYR (Nestle Malaysia, 2023) and Current Annual Revenue of 7.1 billion MYR (Nestle Malaysia, 2023) in 2023. As the material required for biodegradable packaging tends to be highly expensive (Packsize, 2023) Nestle should consider setting aside MYR 1 million for the following three years into the development and study of biodegradable materials such as polyhydroxyalkanoates (PHA) and polylactic acid (PLA). The objective of this project is to manufacture biodegradable packaging that is economically feasible by 2026. It will start in Q3 of 2024. Beginning in Q1 2025, thorough tests for biodegradability and endurance will be carried out, with certifications anticipated by Q4 2025. In order to obtain customer input and improve the packaging solutions, a pilot initiative will be launched in Q1 2026 in a few selected regions after successful testing. The financial position will rise initially due to the R&D expenses, however as technologies advance and production reaches a larger scale, the associated expenses should fall (Ehie & Olibe 2010). The value proposition for Nestle will increase as sustainable packaging options improve how people view the company. Therefore allowing Nestle to attract environmentally sensitive investors and customers through enhanced brand reputation and regulatory compliance may boost its market share along with stock value (Dilon, 2022).

In an effort to lower the need for virgin plastic, Nestlé will concentrate on using 100% recycled plastic (rPET) in bottles for beverages and other packaging. Together with a preliminary sourcing budget of MYR 5 million (estimated based on the financial statement for 2023) as rPET cost of production is higher in comparison to virgin plastics (Ogansula, 2022). The business will acquire exceptional rPET supplier agreements by the end of  2024. To take into consideration the new material, the manufacturing facilities ought to be modified (Hadley, n.d) by 2025. By the end of 2025, Nestlé plans to introduce a marketing campaign that highlights the environmental advantages of rPET packaging to advertise these environmentally friendly techniques.

Management (Ryunosuke)

Now, I will talk about the health and nutrition issue that Nestle is having.

In March 2024, Nestlé was criticised by shareholders for offering too many unhealthy products and not enough healthy products.

And according to a Nestlé spokesperson, there is no doubt that three-quarters of Nestlé's sales are due to unhealthy products. A number of Nestlé products are also below 3.5 in the HEALTH STAR RATINGS, where 5stars is the highest rating.

Let's now look at some of the problems that could arise if Nestlé continues to increase the number of unhealthy products against the wishes of its shareholders.

Firstly, it gives Nestlé a public image of being a company that is indifferent to the health and well-being of its consumers. In addition, if consumers become more health-conscious, their purchasing behaviour may change away from Nestlé products that are perceived as unhealthy, which could lead to a decrease in sales.

A loss of shareholder confidence could also lead to a decline in share price and market value.

And Nestlé could face increased regulatory scrutiny and potential legislative action aimed at curbing the sale of unhealthy products. This could include stricter labelling requirements, advertising restrictions and even taxes on unhealthy products.

And competitors responding to the growing demand for healthier products in the market may gain market share at the expense of Nestlé.

Making short-term profits is important, but to make long-term profits, products must be made in line with the wishes of shareholders and customers. For example, in the USA, one of our major markets, the national obesity rate has been rising in recent years (Fleck, 2024) and the social importance of health food is increasing year by year. Therefore, Nestlé can expect to increase the social value of the company by adopting a management policy that increases sales of existing health food products. Nestlé has already set a goal of significantly increasing sales of more nutritious products by 2030, and it is important that the company is committed to achieving this goal.

Reference

● Why us? Nestlé hits back at shareholder demands for more healthy products. (n.d.).Foodingredientsfirst.com/. Retrieved May 17, 2024, from https://www.foodingredientsfirst.com/news/why-us-nestle-hits-back-at-shareholder-demands-for-more-healthy-products.html#:~:text=According%20to%20Nestl%C3%A9%2C%2059%25%20of

● Fleck, A. (2024, March 4). Infographic: Obesity Is Rising in the U.S. Statista Daily Data. https://www.statista.com/chart/11497/obesity-in-the-us/

Conclusion(Xinyu)

In conclusion, Nestlé Malaysia, a prominent subsidiary of the global Nestlé Group, finds itself at a pivotal juncture, faced with the challenge of aligning its operations with the evolving expectations of modern consumers and conscientious stakeholders. The journey towards sustainability and health-conscious product offerings is not merely a response to market demands but a strategic imperative that could define the company's future market position and its role in the global sustainability discourse. The strategic emphasis on reducing plastic waste through the adoption of biodegradable and recycled materials showcases Nestlé Malaysia's proactive approach to environmental stewardship. This commitment not only mitigates the impact on the environment but also aligns with global trends towards sustainable business practices, setting a precedent within the industry and reinforcing the company’s dedication to ecological responsibility.

Nestlé Malaysia has already made significant strides in addressing environmental concerns, particularly in its commitment to reducing plastic waste, a pressing issue given the escalating global crisis around plastic pollution. The company's initiative to explore biodegradable packaging options reflects a forward-thinking approach to environmental stewardship. By prioritising research and development in this area and planning to implement biodegradable packaging solutions by 2026, Nestlé Malaysia is setting a benchmark for innovation in sustainable packaging within the industry. This shift not only responds to regulatory pressures and environmentalist campaigns but also resonates with the growing consumer preference for companies with strong, actionable commitments to ecological responsibility.

On the front of health and nutrition, Nestlé faces critical feedback regarding the nutritional content of its product range. With a significant portion of its revenues derived from products considered less healthy, the company's image and market share are at risk, especially as global consumers increasingly favour healthier dietary options. This shift in consumer preferences suggests a need for a strategic overhaul of product lines to introduce more health-oriented products. The inclusion of items that meet higher health standards can help Nestlé not only retain its existing customer base but also expand into new segments that prioritise health and wellness.

Furthermore, Nestlé's response to these challenges will have implications for its financial stability and investor relations. Shareholders are increasingly attuned to the risks associated with non-adaptive business models, particularly those that fail to address the growing demand for sustainability and health. By proactively diversifying its product portfolio to include healthier options and investing in sustainable packaging solutions, Nestlé Malaysia can safeguard its market valuation and enhance shareholder confidence.

Overall, if Nestlé Malaysia continues to integrate sustainability and health into its core business strategy. This integration will not only address the immediate challenges, but will also pave the way for lasting success and relevance in the global marketplace.