The Nestle-Coralac began operations in 1866 and has since grown to become one of the
world’s leading consumer product companies. Nestle entered the Cuban market in the 1990s after
signing an agreement with the Castro regime to build an ice cream factory on the island.
Following the agreement, a joint venture emerged between the Nestle Company and Coralsa.
The Nestle-Coralac owned 60 percent while Coralsa owned 40 percent of the joint venture. This
paper will discuss the advantages and disadvantages associated with entering the Cuban market. The Nestle company
Advantages associated with entering the Cuban market
Expansion of business activities to the Cuban market helped increase sales of ice cream
and ice cream-based products. Nestle-Coralac could produce a range of flavors but it selected
only three flavors to penetrate the market dominated by the Coppelia ice cream brand. The
simplified approach used by the Nestle-Coralac ensured constant stocking of its products at local
retailers. It used its established brand in Cuba as well as other brands such as the Haagen Dazs,
Edy’s, Skinny Cow, and Dreyer’s to increase sales of ice creams and ice cream-based products.
The company reported that milk and ice cream was the second-highest selling category after
powdered beverages. The Nestle company;
The high competition in Cuba enabled Nestle-Coralac to be innovative. To effectively
manage sales in a market dominated by Coppelia ice cream, Nestle-Coralac had to come up with
a unique strategy. Nestle-Coralac focused on providing high-quality ice cream to tourists and
Cubans who had access to CUCs. The company also chose to sell its ice creams only in uniform,
half-litter containers. The Company also distributed over 1,000 Nestle-branded ice cream coolers
to retail locations then made plans to ensure that the coolers were ever clean, well-organized, and well stopped. Through this strategy, the company managed to present its high-quality image to
the Cubans.

Although financial information for companies operating in Cuba was limited, information
obtained from people working in Nestle-Coralac revealed that the company experienced steady
growth and earned huge profits. Earning profits is the major factor that companies consider
before making investment decisions. In its 2014 annual report, the company had reported a
trading operating profit of 15.5 percent. Out of the total trading operating profit, the global ice
cream business contributed 16.4 percent and the American business unit contributed 18.8
percent. The company’s projected data showed that the profits obtained from the Cuban ice
cream business would increase in the subsequent years. The Nestle company;
Entering the Cuban market opened new opportunities for Nestle-Coralac. The new
opportunities were created when the Cuban government decided to unify the country’s two
currencies. The currency unification allowed Nestle-Coralac to compete for a wider share of the
domestic Cuban ice cream market. Another opportunity was created by the Obama
administration’s decision to normalize diplomatic relations between the United States and Cuba.
The diplomatic relations increased permissible forms of travel to Cuba and liberalized imports of
small amounts of Cuban goods. It also allowed telecommunication firms from the U.S. to build
infrastructure on the island. Nestle-Coralac took this as an opportunity to access a wider market
in the United States through exports.
Disadvantages associated with entering the Cuban market
The dual currency of Cuba affected Nestle Company’s business activities. Cuba had two
forms of legal tender namely the convertible peso (CUC) and the Cuban peso (CUP). The currency system had implications not only to Nestle Company but also to all other foreign firms
in Cuba. First, all the Cuban employees were hired by a government employment agency. This
was a big challenge as wages were paid to the government agency first in CUCs and then the
agency would pay the employees in CUPs. Similarly, the issue of dual currency affected product
pricing and customer segmentation. This is because Nestle sold products only in CUCs and this
made the products unaffordable to most ordinary Cubans. The Nestle company;
Nestle-Coralac had difficulties finding reliable local suppliers for its inputs in Cuba. In
Cuba, foreign companies were only allowed to audit suppliers for quality rather than providing
them with technical assistance and training support. During the period, Cuba also experienced a
major decline in the agricultural production that saw the annual output of sugar decreased by 85
percent and that of milk by 55 percent. The shortage in supply of sugar and milk meant that
Nestle-Coralac could not operate at its full capacity and this jeopardized the company’s
production. Nestle-Coralac was at times left with no alternatives but to import some of the milk
and other inputs. Read more
Nestle-Coralac faced marketing challenges in Cuba. One of the major challenges Nestle-
Coralac experienced is that the market was dominated by a popular domestic brand, Coppelia.
The Coppelia ice cream was had a strong cultural legacy in Cuba, was also available in a wide
range of flavors and was sold at only 1 CUP per scoop so that everyone could afford it.
Additionally, the dual currency system limited the purchasing power of Cubans as it made
Nestle-Coralac’s products unaffordable to them. Moreover, Nestle-Coralac could not access
traditional forms of mass media communication for marketing as they were state-controlled and
only 3 percent of Cubans had access to the internet. Nestle-Coralac could not adjust prices to respond to changing market conditions because the government of Cuba controlled product pricing. The typical price of Nestle-Coralac ice cream was between 1.5 to 2 CUCs which is equal to about one-tenth of the average monthly state
salary in Cuba. New products, however, were not subject to the same regulations as existing
products. To gain product flexibility, Nestle-Coralac resolved to frequently create new products
and flavors. As of 2012, it was ranked as the most recognized foreign food brand in Cuba.
Overall, the company was ranked the thirteenth most recognized foreign brand in Cuba. The Nestle company;