Case Study on Nestle

Nestls baby formula products affect the lives of innocent infants nationally and globally in a negative manner because of the organizations poor communicative methods. This wealthy company has failed to thoroughly convey messages and instructions for their products as they branched out to non-speaking countries. This is just one of many communicative failures Nestle has committed, and it is the reason why this company has experienced infamous boycotts that are worthy of research and recognition. In the following case study paper, we will comprehensively explain various topics dealing with Nestls baby formula products including the following: 1. The history and past reputation of its products that were distributed to developing countries. 2. Marketing strategies and why they were unsuccessful. 3. The demographics and statistics of its consumers and sales. 4. The current state of the company today. History and Past Reputation of Nestle Baby Formula Products This company dates back to 1867, when a Swedish merchant, chemist and inventor named Henri Nestle founded it. The Swedish-based company was the first to produce and market infant formulas to mothers who were either unable to breast-feed and/or to lighten their burdens of motherhood. Like many inventors in historical text, Henri Nestle named his company after his own last name to personify the commercial business. His main goals were to create secure and safe products that would provide nourishment for little ones born to a family environment. He strived to be recognized for producing traditional baby formula, both milk and soy-based, that would be the central element in Nestles corporate identity (Berkich, 2003). Nestles first commercially sold product was condensed milk, which was produced in Europe. Since that time, Nestle has become an oligopoly; producing other types of items that consumers may use. Aside from baby formulas, their products include the number one bottled water known as Nestle Perrier, and are the leader in instant coffee, and many of the popular candy out there today (Mantell, 2003). In addition, it is the manufacturer of cosmetics such as LOreal, eye care and nutritional supplements. Nestles contribution to this industry has made him the worlds favorite brand in over 489 factories worldwide. However, he has lost sight of providing consumers with high-quality nutritious foods for infants, especially as he began to seek success in international countries (Brabeck, 2003). Therefore, his quality image and reputation is no longer just that; rather it has become intricate according to different consumers. Like many large companies, Nestle had a vision of expanding and emerging outside of the United States. Perhaps, there was a specific reason that he branched out to countries like China, India, Russia, and Latin America. In these countries, it is culturally accepted that women are homemakers and child bearers. Therefore, women tend to stay home and

care for their many children. Maybe this led Nestle to believe that they would spend large sums of money towards baby formulas because not all women are physically capable to breast-feeding, especially after having several children. In addition, mothers sought easier and quicker methods to nourish their children. Nestls business tactics would have succeeded in these countries if he had clearly communicated effectively through his products. Marketing Strategies and Why They Were Unsuccessful Nestle is the largest food producer in the world and controls about forty percent of the global baby formula market. Interestingly enough, the baby formula market is a multibillion-dollar enterprise whose products are intended to insure the proper nurturing of precious infants, and helps lighten the burdens of motherhood. However, Nestle has created more problems for both infants and mothers by failing to successfully utilize the various media forms throughout its campaign; thus, creating poverty and disaster in third world countries. As the leading vendor of baby formula, both milk and soy-based, its annual profits exceed over $100 billion dollars. One of its main marketing strategies was the idea of expanding and branching out to emerging markets in foreign countries. However, in doing this, it failed to recognize the language barriers, economy as well as environmental hazards in each individual country. Their strategies geared towards the U.S. were successful and led to very high sales. One the other hand, the same effort was not placed forth towards their marketing campaign in third world countries. Nestle performed a poor job in marketing towards its targeted audience in these countries because they did not place equal effort as they did for the U.S. market. Nestle did several things during their campaign in third world nations.

Abstract:
Nestl was one of the most successful foodbased companies in the world. Set up by Henri Nestl in 1867, in Vevey, Switzerland, Nestl grew over the decades by acquiring smaller companies to become the largest company in Switzerland by the 1960s. Nestl's product portfolio included soluble and roast coffee, other beverages like tea and health drinks, several mineral water brands, dairy products, chocolates and confectionery, ice cream, frozen food, culinary products, breakfast cereals, infant food, pet care, pharmaceutical products and cosmetics. By the end of 2002, the company employed more than 250,000 people in 508 factories around the world. Although it was one of the most successful companies in the world, Nestl was frequently criticized for using unethical marketing

practices to promote the sales of some of its products. The company was severely condemned by health agencies around the world for its marketing of infant formula in developing countries, by conveying the message that the formula was better for babies than mothers' milk. There were also demands on the company to stop purchasing cocoa from the Ivory Coast, where bonded labor and children were used on plantations to harvest cocoa beans. Nestl also became mired in a controversy for selling genetically modified food in some Asian countries without labeling them explicitly. Pure Life, the mineral water brand the company launched in some Asian countries, was also criticized for being too high priced.

Issues:
Understand the importance and role of corporate social responsibility in a business environment Examine unethical corporate practices and their impact on a company's image and credibility

Ethiopian Controversy
In late 2002, Oxfam,2 a relief group based in London, revealed that Nestl SA (Nestl), one of the largest manufacturers of food products in the world, was claiming compensation of $6 million from Ethiopia, one of the poorest countries in the world. Nestl was making this claim because, in 1975, the then communist government of Ethiopia had nationalized a company called the Ethiopian Livestock Development Company (ELDC), without paying

compensation for nationalization. The ELDC was at the time, a subsidiary of a German group called Schweisfurth. Nestle had acquired the Group in 1986. The claim was widely reported in the media and Nestl came up for severe criticism from all quarters. People were shocked that one of the most successful companies in the world (profits in 2002 - $5.72 billion) would stoop so low as to demand compensation from a poor, needy country (per capita income in 2002 - $100). In addition, the nationalization had been undertaken by a previous government, and there seemed little reason for Nestle to rake up an old issue and demand such a huge sum. The compensation claim seemed to show that the company lacked a sense of social responsibility. Several relief agencies world over, called for a boycott of Nestl's products.

Ethiopian Controversy Contd...

However, many observers felt that this statement by Brabeck was just an eyewash, and that the company's behavior was inexcusable. This was not the first time that Nestl had been embroiled in controversy. The company had been castigated several times for using unethical marketing practices to promote its products in developing countries, for selling genetically modified foods without appropriate labeling, and for supporting the use of child labor in some places. Most of these offences by Nestl had been committed in developing countries.

Background
Henri Nestl, the founder of Nestl, was born in 1814 in Frankfurt, Germany. A merchant, chemist and innovator, he developed a formula for infant nutrition by experimentally combining cow's milk, wheat flour and sugar in different proportions. He called this concoction "Farine Lactee". The formula was meant to provide nutrition to infants whose mothers were unable to nurse them. In 1867, he fed the formula to a prematurely born infant whose mother was

seriously ill. He was able to save the life of the infant, and subsequently, Nestl's popularity soared. Later in 1867, Nestl set up a facility in Vevey, Switzerland, to produce and market the formula commercially. This was called the Nestl Company. For the new company, Henri Nestl adopted the logo of a nest with a mother bird protecting her young ones. This was in fact a graphic translation of his name, which meant 'little nest'. It was meant to convey values like security, protection, maternity and nourishment. (This symbol was later adopted as the corporate logo of Nestl). Nestl's infant formula became very popular and in 1868, he opened an office in London to match the increasing demand. By the early 1870s, he began exporting to South America and Australia, and Nestl Milk soon became popular as a food for infants, the old and the infirm. The company also diversified into related products like condensed milk and milk chocolate. In 1875, Henri Nestl sold the company for one million Francs, but company's name was retained. In 1905, Nestl bought out its main rival, Anglo-Swiss Condensed Milk and thwarted a major threat. (This company was set up in 1866. It had launched an infant formula in 1878 which competed with the one made by Nestl). Nestl grew rapidly during the First World War (1914-1918), mainly because of government contracts...

Excerpts

Nestl's Socially Irresponsible Practices

Most of the controversies that Nestl was embroiled in involved developing countries. Analysts felt that this was probably because the laws and procedures in developing countries were considerably lax than those in developed countries, where corporate crimes are detected early and the compensations to be paid can be painfully heavy. In developing countries, the public was either unaware or more tolerant towards deviations from established standards.

Infant Formula It was ironical that the biggest controversy in Nestl's history involved the product on which the company was built. Critics said that Nestl had promoted the use of infant milk formula (which many experts believed, was harmful to the health of the mother as well as the child), in developing countries, in an unethical manner. The company was criticized particularly for its promotions which implied that women in westernized countries routinely used the formula as a substitute for mother's milk. It was also alleged that Nestl subtly developed the belief that using the formula was more beneficial to the mother as well as the child. This type of promotion was in violation of the 'International Code of Marketing Breast-Milk Substitutes' of the WHO /UNICEF...

Conclusion
Corporate social responsibility became an important issue in the late 20th century and the early 2000s, as a result of increasing public awareness and a scrutiny of the activities of public companies. However, there were still several large companies which shrugged off their responsibilities towards the society, indulging in ethically questionable practices. If large companies behave unethically, it soon comes to the notice of the public and the company's image is tainted. Companies are often worse off for having behaved unethically in the interest of short term gains, as the bad publicity generated by unethical practices leads to far greater losses in the long run. Many companies have well laid out charters to govern their social responsibility and behavior, (Refer Exhibit-III for Nestl's Corporate Business Principles), but more often than not, these are only on paper. Companies like Nestl made a public show of their support to social causes, in order to divert attention fro