Dotcoms might still capture the global headlines, but the real story of eBusiness transformation is among old-school players. Multinationals such as Nestle are striving to transform themselves into New Economy players – and succeeding.
Nestle has outperformed its annual growth target for 2001.
Confirming its position as one of Europe’s strongest performers during turbulent economic times, Swiss consumer goods giant Nestle has posted a 15.9% rise in 2001 net income on a 4% rise in sales. The company is confident it will deliver a continued positive trend” in 2002.
Nestle, the only European industrial company to retain an AAA Moody’s credit rating, underlined its achievement of 4.4% real internal sales growth for the second year running despite the sharp slowdown in the world economy. Profit growth exceeded analyst expectations, hitting 11%, although some of this may be down to one-time factors such as tax changes.
Nonetheless, Nestle is certainly doing well, in sharp contrast to several former rock solid Swiss blue chips. Specialty chemicals maker Clariant’s 2001 net profit fell $82 million, as it struggled with declining sales amid the global economic downturn. Pharma giant Roche, meanwhile, posted a 4% net profit decline to $2.8 billion.
Although increased marketing and distribution spend contributed to Nestle’s strong performance in 2001, the cost of goods sold as a proportion of sales fell from 46.8% to 44.5%. Five years ago the figure was 51.8%.
Like Wal-Mart, which has just passed Exxon Mobile to top the Fortune 500, Nestle has continually used IT advances to improve margins and decrease costs. A $200 million deal to install mySAP.com inked in June 2000 represented the largest software sale in the Enterprise Resource Planning (ERP) vendor’s history.
The ongoing Globe Business Excellence Programme is part of Nestle billion-dollar plan to become one of the world’s web-smart elite. While Silicon Valley continues to struggle, traditional companies such as Nestle are proving that back-office technology is more valuable than front-end flash.