Is spending US$12 billion to increase sales by 3.2% a good business strategy?


According to its website, Nestle is “the leading Nutrition, Health and Wellness Company”.

It also says, “We enhance lives with science-based nutrition and health solutions for all stages of life, helping consumers care for themselves and their families.”

Personally, I like their chocolates (I have a soft spot for dark chocolate KitKats), condensed milk and milk substitutes while our pets like their range of cat and dog foods.

I’m not sure how Carnation and Coffee Mate, or for that matter chocolates enhance my life but let’s not go there. But perhaps they should add ‘and their pets’ to the above claim.

Anyway, the Swiss icon, which is now the world’s largest packaged food group, reported sales of US$89.3 billion in 2016, up 3.2% on an organic basis. Well below the 4.2% growth in 2015 and is the fourth time Nestle has missed its “Nestle Model,” that aims for 5 – 6% growth per annum.

What’s interesting is that in the years 2011 – 2014, Nestle spent a cumulative US$12 billion on advertising. Not marketing, PR, promotions or anything else, just US$3 billion a year on advertising.

That’s a huge chunk of cash. And it’s like they need to spend that amount just to stand still because growth of 3.2% is not much better than standing still. Surely there’s a better way?