In 1997, Peter Brabeck (Brabeck) became the CEO of Swiss Food major Nestlé SA (Nestle).
One of ambitious growth targets of Brabeck was to find ways to increase
the annual sales of SFr90 billion. However, Brabeck realised that
un-competitiveness had seeped into Nestle.
The management had no other option but to draw up a new model or split
the company. Brabeck chose to decentralise and reorganise the factories
located in different countries into regions (Zones) and also created
'strategic business units' (SBUs) to oversee the management of similar
products. The reportable business segments included, Zone Europe (ZEUR),
Zone Americas (ZAMS) and Zone Asia, Oceania and Africa (ZAOA). For Nestle, ZAOA represented 76% of world's population, of which China and India were the most populous countries. Nestle considered India
a growth engine and believed that opportunities for growth existed not
only in the rural and smaller towns but also at the top-end of the
market pyramid. In keeping with the belief, Nestle
over the last decade, focused more on the mass market and failed to tap
the opportunities at the upper end of the market. Having realised the
folly, Nestle redrew its strategy
to focus on premium end of the market. However, uncertainties like slow
economic growth and consumption contraction in the Indian market as well as in the emerging markets remained a major concern for the company.