Topic

Forecasting of Nestle
 Introduction

Nestle is a Swiss transnational food and drink company headquartered in Vevey, Vaud,

Switzerland. It is the largest food company in the world, measured by revenues and other
metrics, since 2014. It ranked No. 64 on the Fortune Global 500 in 2017 and No. 33 on the
2016 edition of the Forbes Global 2000 list of largest public companies.

Nestlé’s products include baby food, medical food, bottled water, breakfast cereals, coffee
and tea, confectionery, dairy products, ice cream, frozen food, pet foods, and snacks. Nestle
has 447 factories, operates in 194 countries, and employs around 339,000 people. It is one of
the main shareholders of L'Oreal, the world's largest cosmetics company.

Nestle was formed in 1905 by the merger of the Anglo-Swiss Milk Company, established in
1866 by brothers George and Charles Page, and Farine Lactee Henri Nestle. The company
grew significantly during the First World War and again following the Second World War,
expanding its offerings beyond its early condensed milk and infant formula products.

Nestle` is the biggest food company in the world, with a market capitalisation of roughly
231 billion Swiss francs, which is more than US$247 billion as of May 2015.

In 2014, consolidated sales were 91.61 billion and net profit was 14.46 billion. Research and
development investment was 1.63 billion. According to a 2015 global survey of online
consumers by the Reputation Institute, Nestle has a reputation score of 74.5 on a scale of
1–100.
 Types of Forecasting

Demand Forecasting

The Nestle team wanted the ability to sense demand signals associated with sales promotions,
price, advertising, in-store merchandising and economic factors to better understand what
things influence consumers to buy their products. Once they were able to measure that
mathematically, they wanted to be able to use that information to run ‘what-if’ scenarios to
shape future demand.

Using our technology today, when Nestlé’s sales and marketing people get together and want
to run a sales promotion, say a buy-one-get-one-free that they ran in the past, our system then
calculates the unit lift that was associated with that particular promotion in the past and tells
them whether it was significant in driving incremental demand, or unit demand. Once it does
that it then goes out to the financial system and determines whether or not it actually made
any money.

Technological forecasting

Nestle has developed itself as a world leader in a large number of different technologies.
Fermentation and probiotics, extrusion, foam booster technology, malt extraction, portion
dispensing, system etc. Are some technologies used by nestle they conduct forecasting for
more technologies that enable the development of safe, nutritious food and beverages while
keeping on the tusp of new developments in food science and technology.

Economic forecasting

Economic indicator such as rates of inflation and exchange play a great part in the
establishment of any business. By understanding the specific countries rates in employment,
inflation and exchange, nestle can determine whether they can maximize their profits after the
likes of employment costs, currency exchanges and taxes. With the increase and decrease of
economic indicator the sales of nestle varies. E.g. the decrease in inflation increases the sales
so nestle have to forecast inflation rate over the coming period.

Strategic importance of forecasting

Supply chain management

Supply chain management is a well established, recognized stream and process at nestle who
leads global demand planning performance and statistical forecasting at nestle corporate
headquarters. Nestle collaborate with the commercial teams to develop the demand forecast
and also with suppliers around the world to ensure responsibly sourced material.

Human Resource

At nestle the hiring, training and laying off workers all depend on anticipated demand. People
with qualities life dynamism, realism, pragmatism, hard work, honesty and trust worthiness
are looked for.

Capacity

If the capacity is not forecasted properly it can result in shortages, loss of customers and
decrease in market share. For example, In winter season they forecast the demand of juices
for coming summers properly. They don’t stop the production of juices in winters but they
produce and store in inventory to avoid shortage of their products in coming season.

Steps in forecasting

 Determine the use of forecast

Nestle wants to forecast future demands.
 Select the item to be forecasted
To forecast future demand nestle use pervious sales data.

 Determine the time horizon of forecast

Nestle develop yearly forecast.

 Select the forecasting model

Nestle uses moving averages, naive approach and other qualitative models.

 Gathered the data needed to make forecast

Forecasting team of nestle employs specific people to survey markets every season.
Nestle uses SAS to take help to collect data for making forecast.

 Making the forecast

They forecast by using their forecasting tools.

 Validate and implement the result

At nestle, forecast are reviewed on seasonally basis to make sure that the model and
data are valid.