Dairy Foods Columnists

Nestle's DSD Model Opens New Retail Channels

December 12, 2011
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Much like the rest of the beverage industry, retailers and distributors of dairy beverage products are faced with the challenge of having to meet the needs of increasingly discerning consumers who are short on time and constantly on the go. Key issues — like the reduction of spoilage, transportation and storage costs and the ease of access to products — are significant industry-wide challenges for all distributors.

To address these challenges, many retailers have created direct-store-distribution (DSD) models to help ensure the efficient and convenient delivery of products to consumers. Here at Nestlé, our DSD model, which launched in 2009, has ensured the availability of Nestlé products wherever and whenever consumers want them, thereby allowing the company to continue broadening its distribution base into non-traditional, alternative locations.

Recent DSD sales successes within non-traditional channels such as military bases, colleges, universities and recreational centers, demonstrate DSD’s substantial potential of expanding the availability and convenience of our DSD beverages (including Nesquik and Nestlé Aguas Frescas) to previously untapped audiences.

It is also important for all beverage companies to invest in technology and operational processes that will enable the wider and more efficient distribution of products. Back in 2009, Nestlé invested resources toward designing a state-of-the-art manufacturing facility in Anderson, Ind., which is now the first in the United States to receive approval from the U.S. Food and Drug Administration for PET (polyethylene terephthalate) aseptic production capabilities. (See “Nestlé LEEDs the Way,” January 2011, page 104.) It’s been an essential investment as aseptic production is a key enabler of the DSD model, which allows distributor partners and customers to save on refrigeration costs during distribution and storage.

For example, the technological capabilities of the Anderson facility, which produces the entire Nesquik ready-to-drink line, allows shelf-stable Nesquik to be stored up to 105 days without refrigeration. Of course, the entire line is made with real milk, but the aseptic treatment process (which uses ultra-high temperatures) kills both milk-borne and spoilage organisms.

The aseptic treatment that supports the DSD portfolio demonstrates significant benefits for retailers and distributors by increasing the potential for rising category sales without taking up valuable refrigerator space. This helps retailers and distributors to free up back room storage and lower their transportation and storage costs.

At Nestlé, we believe in addressing these industry-wide challenges by working closely with our distribution network partners. DSD distributors have extensive networks of accounts that they service with a variety of beverages. Because they also have an established history of building and supporting beverage brands, working with these distributors allows consumers to access Nesquik and other beverages in the DSD portfolio at a growing number of trusted locations. Nesquik now has access to more stores than at any point in the brand’s history.

In 2012, we look forward to fostering and strengthening our existing distribution partnerships and hope that other beverage companies will adopt and enhance their own DSD models to effectively address the needs of retailers and distributors and ultimately, our dairy beverage consumers. n

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