What Nestle Knows

Friday's Wall Street Journal included a remarkable story about Nestle.  In part it was remarkable because Nestle isn't necessarily a company that gets a lot of press, much less the kind of press that could fairly be classified as of the "man bites dog" variety.

The news is that, smack dab in the middle of economic calamity, Nestle is not only raising its prices but also increasing its sales and profits.   According to the Journal, Nestle has increased "the average price of its food and drinks 5.9 percent this year," while increasing its sales 3.4 percent. Nestle also "expects organic growth — which includes increases in volume and prices — to stand around 8 percent, improving a previous guidance for around 7.4 percent."

Now, Nestle isn’t raising prices just for the heck of it — the hikes are thanks to "jumps in commodity prices, including for oil, sugar and cocoa. But now that the commodity costs are starting to fall, Nestle said it doesn’t plan big price reductions, a move that analysts say should lead to higher profit margins."

Emboldened by its success, Nestle "plans to launch a new line of expensive chocolates in France and Switzerland," next month.

What does Nestle know that apparent few other companies understand?  Here's what Nestle CEO Paul Bulcke said:  "People go for value ... It is not always a question of price."  For Nestle, that means its NaturNes brand of baby food "boasts that it cooks the ingredients separately, an appeal to parents worried about sterilization," for example.

It's a simple concept, actually.  It's called putting your customers first by serving their needs.  Strange as that may sound amid the current climate of corporate greed and corruption, it is still the most basic rule of business success because when you make products that actually perform better, people are happy to pay a premium for them in good times or bad. 

This certainly is serving Nestle well at a time when so many other brands are scrambling to stay afloat by offering various and sundry discounts, promotions and quick-fix sales incentives.

It would be heartening if more companies realized that their first responsibility is to their customers, to help them solve problems and live happier lives.  It's  not about some feel-good marketing overlay; it's about making sure your brand has a meaningful place in the real lives of real people.  And that's really what relevance is all about.

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