Nestle Final

Cost Analysis

1. NESTLE INDIA LTD.
GOOD FOOD, GOOD LIFE

2. COMPANY PROFILE
Name of Company : Nestlé India Limited
Head Office: Nestle House, Jacaranda Marg, "M"
Block, DLF City, Phase II Gurgaon - 122002
(Haryana)
Registered office: M-5A,Connaught Circus, New
Delhi-110001
CMD: Mr. Martial G. Rolland
First factory set up in INDIA in 1961 at Moga,
Punjab.

4. OVERVIEW
The company’s principal activities are to
manufacture & distribute food products. Food
products include milk & nutrition, beverages,
coffee, blends, tea, cream, chocolate, cereals
& cooking aids. The company’s plants are
located at Moga, Samalkha, Nanjangud,
Choladi, Ponda, Bicholim & Pantnagar. The
products of the Company are exported to
Russia, Nepal and Bhutan.

5. PRODUCTS

6. PRODUCTS

7. Maggi Tomato Ketchup
MAGGI offers a wide range of
specialty Indian Sauces which
are relished for their unique
taste. Available in the following
delightful variants: Tomato
Ketchup, Tomato Sauce, Tomato
Chilli, Masala Chilli, Chilli Garlic,
Tamarina, Tomato Chatpat,
Tomato Pudina and the all-time-
favourite MAGGI Hot & Sweet
Sauce.

8. Maggi
Maggi was the upstad newcorner who
came in with a loud aggressive national
burst. It did not come in with one, but
with a range of sauces in order to
increase market share and axpand the
market by offering more usage
occasions, bring consumers with different
needs into the Maggi Sauces fold and
weaning away users of different brands
to Maggi. From a market share of 14%
in 1985, Maggi Sauces now enjoys a
share of about 50% of the market.
The success of Maggi can be most
importantly attributed to year-round
media activity, and the humorous "it's
different" campaign on Maggi Hot and
Sweet sauce - this campaign had such an
impact that it literally promoted the
entire range of Maggi Sauces.

9. Maggi Market Place
There has always been a presence
of good additives in the Indian
household. The traditional Indian
main meal has chutneys and pickles
as additives while the quasimeals,
where snacks or ready to eat food
is consumed, use sauce as an
additive. Prior to Maggi Sauces
launch in 1985 the scenario of the
branded and unbranded sauces
market was such that the Tomato
ketchup was most popular in the
market with 80% market leaving
the remaining 20% for others.
IMAGE : SAUCES

10. The Brand
The Maggi Sauces brand has
reallY been built by creating a
new segment in 1989-90 by
focusing on Hot and Sweet as a
new speciality sauce. The most
important aspects of Hot and
Sweet were
(i) Brand Image : Young -
Teenager, Ever changing,
humorous, unpredictable and
"whacky"
(ii) Brand Positioning : Hot and
Sweet was a tomato chilli sauce
that was different.

11. The Consumer
Profile of users and non-users
Sauce is a product that cuts across all age groups and regions and therefore broadly the
target group was All Adults with Rs. 2500/-+ MHI, in Class I+ towns.
Who buys the Product, How and When ?
Sauces follow two purchase patterns, In regular sauce households, it is purchased at the
beginning of every purchase cycle when monthly non-durable items are bought. The second
group is of those households where sauce has an occasional use, it is usually an impulse
puchase, from the local retailers and the main purchaser is the housewife with key influencers
being children.
The users can be further subdivided between Tomato Ketchup and specialty sauces such as Hot
and Sweet. Tomato Ketchup is for all members of the family (MHI : Rs. 2500+) with the larger
part of the consumption coming from children. The purchaser is however the housewife. Hot and
Sweet is targeted at the young adult, modern, with MHI : Rs. 2500+. The purchaser could be
the housewife or the male/female 'adult'.
Users attitude to category/brand
Tomato Ketchup is generally seen as fun to eat, adds flavor to all kinds of food, and is
convenient to use. Users show low involvement, low brand loyalty, are very sensitive to price,
appreciate 'premium' quality of Maggi, but are unwilling to pay very large price premium. On
the other hand for Hot and Sweet, the frequency of consumption is lower with high band
loyalty, greater involvement, less price sensitivity and the user appreciates the unique taste
and fun image of Maggi Hot and Sweet.

12. Cost Accounting
cost accounting is that part of management
accounting which establishes budget and actual cost
of operations, processes, departments or product
and the analysis of variances, profitability or social
use of funds.

13. Cost Sheet
It serves as a means of accumulating the
manufacturing costs-direct materials, direct
labor, and overhead costs-chargeable to
the job or department and as a means of
determining unit costs.

14. Methods Of Costing
Job Costing - This is done, as the name suggests, on job works which
may differ from case to case basis. By giving different job numbers and
debiting the costs on the jobs, cost of each job work can be ascertained.
 Contract or Terminal Costing - This is done for large contracts. Such
businesses need not maintain costs separately as financial accounting
will indicate the costs and expenses. In such contracting firms, the cost
sheets are maintained for individual contracts. In the absence of
expense budgets, inefficiencies are often hidden in such cost sheets.
Process Costing - This is useful when a product passes through various
processes, yielding different by products of commercial value. This is
useful in industries like refineries.

15. Methods of Costing
Standard Costing: Standard costing means assigning the expected,
budgeted costs to the goods manufactured, the goods in inventory, and
the goods sold. In other words, the amounts assigned are the costs that
should occur when manufacturing products.
Marginal Costing: It is a costing technique where only variable cost or
direct cost will be charged to the cost unit produced. Marginal costing also
shows the effect on profit of changes in volume/type of output by
differentiating between fixed and variable costs.
Activity Based Costing :Activity based costing (ABC) assigns manufacturing
overhead costs to products in a more logical manner than the traditional
approach of simply allocating costs on the basis of machine hours. Activity
based costing first assigns costs to the activities that are the real cause of
the overhead. It then assigns the cost of those activities only to the
products that are actually demanding the activities.

16. Rs (In
Thousands)
Rs (In
Thousands)
PARTICULARS
1239442Power & fuel
Add: FACTORY OVERHEAD
19150358 PRIME COST
Direct expense
2454121Direct labour
2784775Packing material consumed
13911462(1240513)Less: Closing stock
14391229Add: Purchase
760746Opening stock
Direct Raw materials:
DIRECT COST

17. 21794067 Works cost
2643709968600 Other expenses
27114 Depreciation
112682 Consumption of store & spare
parts
173762Workers training expenses
42338 General
30507 Building
49264 Plant & machinery
Maintenance & repairs:

18. 966605348579Employees Welfare
22344Insurance
173762Rate and Taxes
181615Rent
153645Staff Welfare Expenses
86660Contribution to PF and other
funds
ADMINISTRATIVE EXPENSES
21754546
(39521)424279Less: Closing Stock (WIP)
384758Opening Stock (WIP)

19. 36471832Total Sales
10990836Profit
25480996TOTAL COSTS
33304271722059Advertisement
1608368Freight Transportation and
distribution
SELLING AND DISTRIBUTION
22150569COST OF GOODS SOLD
(570582)1977141Less: Closing Stock (FG)
1406559Opening Stock (FG)
22721151COST OF PRODUCTION

20. Saving on Energy

21. THANK YOU