E-Chocolate

1.

Taking Orders






HOW IT WORKS



Since July, U.S. storeowners have had the option of ordering Nestlé

chocolates and other products via a new Web site, NestléEZOrder.

THE BENEFIT

Nestlé hopes to eliminate most of the 100,000 phoned or faxed orders a year

from mom-and-pop shops. That would reduce manual data entry and cut processing

costs by 90%, to 21 cents per order.

2. Getting Ingredients

HOW IT WORKS



Nestlé

buyers have purchased cocoa beans and other raw ingredients on a

country-by-country basis, with little info about how colleagues were buying the

same products. Now they share price info via the Net and pick suppliers that

offer the best deals.






THE BENEFIT

Nestlé has reduced the number of suppliers by as much as two-thirds and cut

procurement costs by up to 20%.






3. Making the Chocolate





HOW IT WORKS



Nestlé has traditionally processed its own cocoa butter and powder and

manufactured most of its own chocolate. The Web lets Nestlé better communicate

with suppliers, making outsourcing a more viable option.

THE BENEFIT

Last year, outside contractors in Italy and Malaysia won orders to produce

raw chocolate. Expect more such deals: Nestlé plans to sell or close a third of

its 86 chocolate plants in coming years.

4. Cutting Inventories

HOW IT WORKS



In the past, Nestlé guessed at how many KitKat or Crunch bars it might be

able to sell in a promotion. Today, electronic links with supermarkets and other

retail partners give Nestlé accurate and timely information on buying trends.

THE BENEFIT

That lets Nestlé trim inventories by 15% as it adjusts production and

deliveries to meet demand.

5. Marketing the Candy Bars

HOW IT WORKS



Nestlé spends $1.2 billion on advertising through traditional print and TV ads.
Within two years, more than 20% of that will go online.

THE BENEFIT

New marketing approaches include a chocolate-lover’s Web site with advice,

recipes, and paeans to the pleasures of chocolate. Nestlé has similar sites for

coffee, Italian food, and infant nutrition.

Divine overhaul

Some of the cash-rich, market-cap-poor companies are taking the opposite

approach. Realizing their original business plans were failures, they’ve done

180-degree turns and overhauled their strategies. Divine interVentures, for

example, went public as an incubator and started up more than 50 companies. In

February, with its stock market value lower than the $190 million in cash on its

balance sheet, Divine announced plans to remake itself into a software company–CEO

Andrew Filipowski’s area of expertise. It even changed its name to Divine. The

moves have helped a little: The stock of the Chicago outfit has climbed from its

low of $1 a share to $1.69, although that’s still well off the $9 a share at

which the company went public last July.

In December, the California company, Ventro, closed two of its online

business-to-business marketplaces–the Chemdex market that allowed companies to

buy and sell chemicals on the Net and the Promedix market for medical supplies.

Ventro then said it would change its focus to helping other companies build

marketplace sites. So far, they haven’t convinced investors that its new plan

is any more viable than its last one. Its market capitalization is still only

$50 million, even though it has a treasure trove of $235 million on its balance

sheet.

Then there are those companies that are sticking to their guns. They simply

think the stock market is unfairly punishing them and, if they perform well,

their stocks will recover. Consider Neupert at Drugstore.com. "We’ve made

a lot of changes in the last six months–laid off a substantial part of the

workforce, dramatically reduced marketing plans, and reconstructed the business

model to break even," he says. That’s why he’s confident his business

will survive, even though its stock has dropped from $67.60 in 1999 to $1.31.

Autobytel is staying the course, too. The company, with $82 million in cash

and a $41 million market valuation, expects investors will become bullish once

it hits operating profitability in the third quarter. "We are well enough

established that we aren’t taking down marketing costs, nor are we

anticipating any large-scale layoffs," says CEO Mark Lorimer. "After

all, we’re going to post profits in a few (months)."

Despite the risks, cash can be a powerful lure for potential acquirers. If a

purchase can be completed quickly, the leftover cash can help fund the

operations of the surviving company. The women’s site iVillage acquired

Women.com Networks for stock in February, partly to get its hands on its

one-time rival’s $30 million in cash. The two sites combined some operations

to reduce expenses and now should have plenty of money to make it to the third

quarter when the business is expected to begin generating cash. "The deal

that we cut with Women.com makes sure that we have enough dollars for a rainy

day," says iVillage CEO Douglas McCormick.

There may yet be a handful of deals like McCormick’s in the wings. But it’s

a treacherous market these days and potential acquirers will have to weigh the

risks carefully–before moving licketysplit. The free cash is disappearing

fast.

Pallavi Gogoi–BusinessWeek