Doubling R&D expenditure during a recession is not a route chosen by many firms. Nestle, however, is doing just that in its attempt to transform its image. Today, Nestle is known primarily for its chocolate and other sweets. Execs, however, are working to make it the world's leading health, nutrition, and wellness firm. Nestle is currently working on developing "functional foods," which claim health benefits.
Nestle's reasons are fairly clear--they want to move away from low-margin products which have been a victim to consumers' switch to private labels, to high-margin products and services. However, this move is not without risk--research costs are huge, consumers are unpredictable, and Nestle's image in other products could be damaged, just to name a few potential problems. Will this really work, or is it just a marketing gimmick? Only time will tell.
3 comments:
I think what Nestle is attempting to create in terms of creating a "healthier" image of there products is a great step forward. It will be very interesting to see how consumers respond to such a change, considering Nestle is best known for chocolate, ice-cream and sugary snacks, and whether or not consumers truly believe that Nestle is transforming itself into the world's leading health, nutrition and "wellness" firm. On the other hand, Nestle is at somewhat of an advantage because as mentioned in the article , few of it's rivals have deep enough pockets necessary to invest in such research and development which could benefit Nestle in a major way.
By diversifying their market this may help Nestle bring in more profits. Nestle will give their customers the best of both words in their original product as well as their new healthier product.
It's a unique concept to think of a firm so typified by a certain group of products to want to switch to drastically. However, in the recession the world is experiencing, it seems necessary to think of new and different ways for creating and marketing products. Nestle could prove to be an example for other businesses, and I will be very curious to see how this turns out for them.
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