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Nestlé Ice Cream in Cuba Case Solution

Solution Id Length Case Author Case Publisher
1360 877 Words (4 Pages) Russell Walker, Kyle Bell Kellogg School of Management : KEL919
This solution includes: A Word File A Word File

While talking about the hurdles that the firms like Nestle had to encounter, we come across a good number of issues that challenged the firms in their earlier periods of operation in Cuba. One of these problems was the discouragement of the foreign investment. The reason behind this opposition was that the Cuban government seemed to address the economic and financial sovereignty of the country.  Hence, it was essential for all businesses to be approved by the Cuban regime. Furthermore, the procedure allowed the firms only to do the business for a certain fixed period of time (ten to fifteen years). In order to continue the business after that, the firms had to agree to the changed investment policies as proposed by the Cuban government. This method had significant implications for the success of a project.

Following questions are answered in this case study solution

  1. What issues faced firms like Nestle operating in Cuba historically? What did the firm face when first entering the market in the 1990s? 

  2. Has the venture been successful thus far? Develop profit estimates using case data to support your answer. 

  3. How has the operating environment in Cuba changed? 

  4. Considering the impending changes in Cuba, what should Nestle do going forward? Why? 

Case Analysis for Nestlé Ice Cream in Cuba

Soon after the fall of the Soviet Union in the 1990s, an economic crisis enveloped the Cuba, and hence it became a need of the time to amend the investment policies in order to bolster and stabilize the economic and political foundations of the country. Moreover, when Raul Castro took over in 2008, he introduced a good number of financial reforms. These reforms also presented a Foreign Investment Law that supported the investment policies of the 1990s. That was the time when Nestle found a good opportunity to make its way into the Cuban business market.

2. Has the venture been successful thus far? Develop profit estimates using case data to support your answer.

The joint venture of the Nestle experienced amazing success. The factory had a worth of $7.9, and it had the capacity of producing 12 million liters of ice cream every year. Furthermore, it produced over twenty flavors of ice cream that included classics as well as the tropical flavors. Recently in 2015, the factory was estimated to be producing 8 lakh liters of ice cream every month. The company also strengthened the chains with the suppliers by providing them equipment and agricultural knowledge.

Based on Nestle’s success in previous years and the case data, the operating profit hovers around 15-18% in Cuba region. Growth in business will cause this profit to cross 20%. In particular, ice cream business is expected to have operating profit of more than 18% in the coming years.

The table below shows the high performance of Nestle compared with the other rival companies.








$100 billion

$66 billion

$52 billion

$45 billion

$34 billion

Market cap

$252 billion

$141 billion

$123 billion

$178 billion

$63 billion







Since Cuba is part of North America so we can use the graph figures provided in case as our base assumption.

• Assumption
  • A conservative growth estimate in overall sales of Nestle has been assumed as 10% for next five years.

  • Case provides that Sales in Americas region constitute 40% of total based on 2014 results. My assumption is that sales in Cuba will also be reflecting same percentage for next 5 years of future sales.

  • Case also provides Trade Operating Profit of Americas region to be around 20% of regional sales. Based on that information my assumption is the percentage will be stable for next five years. We can use this information to project revenues for Americas Region.

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