Executive Summary
Nestle is the leading manufacturer of coffee, which is the most consumed hot beverage across the world. The production of coffee involves agricultural cultivation and value-addition processes of manufacturing.
Small-scale farmers in developing countries who sell their produce through wholesalers, intermediaries, and farmers’ cooperatives are the major cultivators of coffee. Nestle UK is a leading manufacturer and an established value-adding company that provides a market opportunity to coffee farmers, but it faces intense competition from Procter & Gamble, Sara Lee, and Kraft (Biswas-Tortajada & Biswas, 2015).
However, some of the challenges affecting coffee production are price fluctuations and corporate social responsibility. Fairtrade Foundation and Oxfam actively participate in ensuring success in coffee business for all stakeholders (Raynolds & Bennett, 2015). Nestle UK plans to diversify its product line but faces market demand challenges of product certification. However, to enhance market penetration and the expansion of the market share, the company ought to comply with the demands of the target consumer segment through product certification with Fairtrade Foundation.
Case Analysis
Despite its wide global use, Nestle and other market players continue to face diverse growth challenges due to price fluctuations, corporate social responsibility, and crop production. The largest coffee production involves small-scale farmers selling their agricultural produce in the form of green beans to proficient value-adding trade partners through wholesalers, middlemen, and farmers’ cooperatives.
Nestle UK is one of the value-adding and coffee producing retail traders, which faces major market competition from other companies such as Procter & Gamble, Sara Lee, and Kraft. The issues affecting coffee growth sustenance include poverty in developing countries, poor coffee prices, inappropriate market conditions, and fluctuating market prices. Several bodies formed to protect coffee farmers through certification on corporate social responsibility include Fairtrade Foundation, UtzKapeh, and the Rainforest Alliance.
Additionally, support for small-scale coffee farmers’ welfare includes event organizations and the establishment of coffee outlets in foreign markets by Oxfam and donations from university students. However, Nestle management has a divergent view on the concept of corporate social responsibility.
According to Marrianne (2016), Nestle management holds that corporate social responsibility is an institutional culture aimed at improving social conditions not pegged on product prices alone. In this view, Nestle approached corporate social responsibility through technical assistance to farmers by coffee agronomists, direct purchases of coffee from farmers, and the provision of programs for the improvement of nutrition. The growing market of ethical coffee category requires product certification.
Nestle UK experiences the challenge to certify the product with Fairtrade Foundation holding different beliefs on corporate social responsibility. Certification is beneficial for it increases the penetration of products and expands the market share (Ritzer & Dean, 2015). Moreover, product certification creates a positive market perception of Nestlé’s contribution to social development, which significantly enhances the company’s brand and customer loyalty.
Identification and Evaluation of Alternatives
- Certify Partners’ blend with Fairtrade Foundation to increase earnings of farmers, offer a flexible stance on corporate social responsibility approach, and promote the growth and sustainability of Nestlé.
- Stick to Nestlé’s work culture on corporate social responsibility and sell Partners’ blend without Fairtrade certification but risk negative perception from the target consumers and experience low sales.
- Sell Partners’ blend without certification and engage more vigorous efforts in promotions with product packaging of Nestlé’s contribution to coffee farmers’ corporate social development
- Postpone the release of Partners’ blend for a period and engage Fairtrade Foundation in consideration of Nestlé’s work culture and beliefs related to social contribution.
- Release Partners’ blend without certification pending consideration by Fairtrade Foundation on acknowledging Nestlé’s approach to social contribution.
Decision, Course of Action, and Implementation
Nestle ought to certify Partners’ blend with Fairtrade Foundation and make the approach to corporate social responsibility flexible. Success in business requires flexible approaches to enhance the creation of strategic solutions (Hacioglu, Dincer, & Alayoglu, 2016). Moreover, certification will augment sales and increase the market share as the target consumer segment has a high concern for social responsibility and a contribution to social development.
References
Biswas-Tortajada, A., & Biswas, A. (2015). Sustainability in coffee production: Creating shared value chains in Colombia. New York, NY: Routledge
Hacioglu, U., Dincer, H., & Alayoglu, N. (2016). Global business strategies in crisis: Strategic thinking and development. New York, NY: Springer.
Marrianne, O. (2016). Analyzing the relationship between corporate social responsibility and foreign direct investment. Hershey, PA: IGI Global.
Raynolds, L., & Bennett, E. (2015). Handbook of research on fair trade. Cheltenham, UK: Edward Elgar Publishing.
Ritzer, G., & Dean, P. (2015). Globalization: A basic text. New York, NY: John Wiley & Sons.