Nestlé

Nestlé (IPA: /[nɛsle]/) is a multinational packaged food company founded and headquartered in Vevey, Switzerland and listed on the SWX Swiss Exchange with a turnover of over 87 billion Swiss francs. It originated in a 1905 merger of the Anglo-Swiss Milk Company for milk products established in 1866 by the Page Brothers in Cham, Switzerland and the Farine Lactée Henri Nestlé Company set up in 1866 by Henri Nestlé to provide an infant food product. The two world wars both affected growth: in the first, dried milk was widely used but the second caused profits to drop by around 70% though sales of the instant coffee Nescafé were boosted by the US military. After the wars growth was stimulated by acquisitions expanding its range and taking control of several well known brands, so they now include Maggi, Thomy and Nescafe, that are known globally.^[1] the company updated its corporate branding in the 1970s.

Pronunciation

Today, in English-speaking countries, "Nestlé" is most commonly pronounced IPA: /'nɛsleɪ/ (or [ˈneslæɪ] in Australia). However, the original pronunciation was IPA: /ˈnɛsəl/, as in the English verb "nestle". This pronunciation was common throughout much of the 20th century, but changes in its spoken form in advertizing influenced it to become more akin to its native sound [nɛsle], in French-Speaking Switzerland. The old pronunciation however is still used today in some regions such as the Black Country.

Nestle HQ, Vevey, Switzerland.

History

The company dates to 1867, when two separate Swiss enterprises were founded that would later form the core of Nestlé. In August of that year, Charles A. and George Page, brothers from the United States, established the Anglo-Swiss Condensed Milk Company in Cham, Switzerland. In September, in nearby Vevey, Henri Nestlé developed a milk-based baby food and soon began marketing it. In the succeeding decades both enterprises aggressively expanded their businesses throughout Europe and the United States. (Henri Nestlé retired in 1875, but the company, under new ownership, retained his name as Farine Lactée Henri Nestlé.) In 1877 Anglo-Swiss added milk-based baby foods to its products, and in the following year the Nestlé company added condensed milk, so that the firms became direct and fierce rivals.

In 1905, however, the companies merged to become the Nestlé and Anglo-Swiss Condensed Milk Company, retaining that name until 1947, when the name Nestlé Alimentana SA was taken as a result of the acquisition of Fabrique de Produits Maggi SA (founded 1884) and its holding company, Alimentana SA of Kempttal, Switzerland. Maggi was a major manufacturer of soup mixes and related foodstuffs. The company’s current name was adopted in 1977. By the early 1900s, the company was operating factories in the United States, United Kingdom, Germany and Spain. World War I created new demand for dairy products in the form of government contracts, by the end of the war, Nestlé's production more than doubled.

After the war, government contracts dried up and consumers switched back to fresh milk. However, Nestlé's management responded quickly, streamlining operations and reducing debt. The 1920s saw Nestlé's first expansion into new products, with chocolate the company's second most important activity.

Nestlé felt the effects of World War II immediately. Profits dropped from US$20 million in 1938 to US$6 million in 1939. Factories were established in developing countries, particularly Latin America. Ironically, the war helped with the introduction of the company's newest product, Nescafé, which was a staple drink of the US military. Nestlé's production and sales rose in the wartime economy.

The end of World War II was the beginning of a dynamic phase for Nestlé. Growth accelerated and companies were acquired. In 1947 came the merger with Maggi seasonings and soups. Crosse & Blackwell followed in 1950, as did Findus (1963), Libby's (1971) and Stouffer's (1973). Diversification came with a shareholding in L'Oréal in 1974. In 1977, Nestlé made its second venture outside the food industry by acquiring Alcon Laboratories Inc.

The Brazilian president, Lula da Silva, inaugurates a factory in Feira de Santana (Bahia), February, 2007.

In 1984, Nestlé's improved bottom line allowed the company to launch a new round of acquisitions, notably American food giant Carnation and the British confectionery company Rowntree Mackintosh in 1988, which brought the Willy Wonka Brand to Nestlé.

The first half of the 1990s proved to be favorable for Nestlé: trade barriers crumbled and world markets developed into more or less integrated trading areas. Since 1996 there have been acquisitions including San Pellegrino (1997), Spillers Petfoods (1998), and Ralston Purina (2002). There were two major acquisitions in North America, both in 2002: in June, Nestlé merged its U.S. ice cream business into Dreyer's, and in August a US$2.6 billion acquisition was announced of Chef America, the creator of Hot Pockets. In the same time frame, Nestlé came close to purchasing the iconic American company Hershey's, though the deal fell through.^[2] Another recent purchase includes the Jenny Craig weight loss program for US$600 million.

In December 2005 Nestlé bought the Greek company Delta Ice Cream for €240 million. In January 2006 it took full ownership of Dreyer's, thus becoming the world's biggest ice cream maker with a 17.5% market share.^[3]

In November 2006, Nestle purchased the Medical Nutrition division of Novartis Pharmaceutical for $2.5B, also acquiring in 2007 the milk flavoring product known as Ovaltine. In April 2007 Nestlé bought baby food manufacturer Gerber for $5.5 billion.^{[4] [5] [6]}

Products

Main article: List of Nestlé brands

Nestlé has a wide range of products across a number of markets including coffee (Nescafé), water, other beverages, ice cream, infant foods, performance and healthcare nutrition, seasonings, frozen and refrigerated foods, confectionery and pet food.

Business

The Nestlé Tower in Croydon. This serves as their headquarters in the United Kingdom.

Management

The executive board, a distinct entity from the board of directors, includes:

• Paul Bulcke, Nestlé CEO
• John J. Harris, EVP, Chairman, and CEO of Nestlé Waters
• Frits van Dijk, EVP of Asia, Oceania, Africa, Middle East divisions
• Lars Olofsson, EVP of Strategic Business Units and Marketing
• Francisco Castañer, EVP of Pharmaceutical and Cosmetic Products, Liaison with L'Oréal, Human Resources
• Michael Powell, EVP of United Kingdoms Division
• James Singh, EVP of Finance, Control, Legal, Tax, Purchasing, Export
• Luis Cantarell, EVP of Europe divisions
• Richard T. Laube, Deputy EVP of Nutrition Strategic Business units
• Werner J. Bauer, EVP of Research and Development, Technical, Production, Environment.

Current members of the board of directors of Nestlé are: Günter Blobel, Peter Böckli, Daniel Borel, Peter Brabeck-Letmathe, Edward George, Rolf Hänggi, Nobuyuki Idei, Andreas Koopmann, André Kudelski, Jean Pierre Meyers, Carolina Müller-Möhl, Kaspar Villiger. Secretary to the Board Bernard Daniel.

According to a 2006 global survey of online consumers by the Reputation Institute, Nestlé has a reputation score of 70.4 on a scale of 1–100.^[7]

Earnings

In 2003, consolidated sales were CHF87.979 billion and net profit was CHF6.213 billion. Research and development investment was CHF1.205 billion.

• Sales by activity breakdown: 27% from drinks, 26% from dairy and food products, 18% from ready-prepared dishes and ready-cooked dishes, 12% from chocolate, 11% from pet products, 6% from pharmaceutical products and 2% from baby milks ( which are extremely profitable).

• Sales by geographic area breakdown: 32% from Europe, 31% from Americas (26% from US), 16% from Asia, 21% from rest of the world.

Joint ventures

Nestlé holds 26.4% of the shares of L'Oréal, the world's largest company in cosmetics and beauty. The Laboratoires Inneov is a joint venture in nutritional cosmetics between Nestlé and L'Oréal, and Galderma a joint venture in dermatology with L'Oréal. Others include Cereal Partners Worldwide with General Mills, Beverage Partners Worldwide with Coca-Cola, and Dairy Partners Americas with Fonterra.

Controversy and criticism

Some of Nestlé's past and current business actions have attracted widespread criticism. The most prominent and well documented controversy concerns its methods of marketing of processed cows milk or baby formula (infant or more recently follow on formula) as a substitute for breastfeeding, to mothers across the world including developing countries. Promotion in economically disadvantaged countries is of particular concern. Nestlés activities attracted worldwide attention during the Nestlé boycott of 1977. The company's marketing and PR teams have attempted to improve the public perception of the companies activities concerns over the years, launching some Fairtrade products in the interim.^[8] and several grind-at-home Fairtrade coffees in Sweden, which led to a new round of criticism.

Marketing of formula

Main articles: infant formula and Nestlé boycott

Beginning in the late 1970s Nestlé began to attract global criticism for its infant-formula marketing policies, especially those conducted in developing countries. Public outcry peaked with the Nestlé boycott of 1977 which (though suspended for several years in the mid-1980s) it remains in effect today. Nestlé is the most boycotted company in the world as a result [[1]].

Evidence http://ethics.emory.edu/news/archives/000152.html shows that Nestlé advertised and still advertises its formula as a risk-free substitute (or even a preferable alternative) to breastmilk, resulting in increased use and often replacing available breastmilk. There is a substantial body of evidence [[2]] on the risks of the use of formula. Risks stem from the intrinsic problems of use of a non human substance as a food for the human infant, the risks of contamination of the product itself with chemical contaminants or pathogenic bacteria [[3]] or the risks of incorrect or unsafe making up or storage and use of formula in bottles. The risks of formula are much greater when used in the developing world with about 1.5 million deaths a year attributable to lack of breastfeeding [[4]]. However deaths also occur in the developed world [[5]] especially among premature infants who are at increased risk of nectrotising enterocholitis when fed with formula.

The promotion and distribution of formula, particularly in undeveloped regions, continues.^[9][10] Responding to criticism, Nestlé now labels all non-formula milk products (such as coffee creamer) with explicative warnings such as, "this product is not to be used as a breast milk substitute."^[11] The agricultural conglomerate also voiced its agreement to abide by the nonbinding International Code of Marketing of Breast-milk Substitutes established in 2004 by the World Health Assembly, though the company has faced multiple allegations of breaching this policy.^{[12][13][14][15]} The most recent evidence of malpractice came in February of 2008, to which Nestlé responded by halting distribution of one product line and shutting down the operations of an independent licensee.^[11]

Compensation from Ethiopian Government

In December 2002, the food-retailing corporation stirred up bad publicity when it demanded $6 million in compensation from the one of the world's poorest governments. Twenty years previously, the then-military Ethiopian regime had seized and nationalized a Nestlé subsidiary, and the company claimed entitlement to financial restitution under international law. ^[16]The US$6 million demand was issued for shares in an Ethiopian agricultural firm, which was nationalised by the Marxist Mengistu regime in 1975. Nestlé acquired ELIDCO’s parent company, the Schweisfurth Group, ten years later. Nestlé initially refused the Ethiopian government’s offer of a settlement worth around US$1.5 million (a figure based on the 2002 exchange rate between the dollar and the Ethiopian birr) but insisted on $6m (based on the exchange rate at the time of the nationalization). ^[17] Initially rejecting a settlement of $1.5 million, Nestlé eventually accepted this lesser amount, which it subsequently availed to famine relief projects in the region. ^[18]

Nestlé Purina in Venezuela

In early 2005, Nestlé Purina sold thousands of tons of contaminated animal feed in Venezuela^[19]. The local brands included Dog Chow, Cat Chow, Puppy Chow, Fiel, Friskies, Gatsy, K-Nina, Nutriperro, Perrarina and Pajarina. It was reported that the contamination was caused by a supplier that had stored corn used in animal food production incorrectly, which led to a proliferation of a fungus with a high quantity of aflatoxin causing hepatic problems in the animals that ate the food. On March 3 2005, the National Assembly (Venezuela's federal legislature) stated that the company Nestlé Purina was responsible for the quality standards and that compensation must be paid to the owners of the affected animals.

Bottled water

In 2001, Mecosta County, Michigan licensed the company, then a subsidiary of Perrier, to open a bottling plant in Stanwood for a fee of less than US$100 a year.^[20] Operating requirements of the factory called for pumping 500,000 gallons (1.9 million litres) of water a day from an aquifer. After learning about the plan, Michigan Citizens for Water Conservation launched a direct action campaign against Nestlé and sought a temporary injunction to halt pumping while the court heard arguments on the legality of Nestlé's use of the water. However, this injunction has not been granted. Nestlé purchased the Calistoga Water Company in 1980.

Nestlé Canada applied for a five year extension and increase in volume with respect to water bottling activities at Aberfoyle, Ontario near Guelph Ontario. In April 2008 they were granted only a two year extension and no increase in volume after a prolonged decision period and considerable opposition from area residents,^[21] led by the Wellington Water Watchers.^[22]

In 2006 Nestle began a negotiations process with the town of McCloud, California, to build one of the nation's largest bottled water plants in the US and extract water from the springs of Mt. Shasta. The contract process was protested by local groups like Protect our Waters and California Trout, which claim that Nestle neglected to study the impact on the region's ground water and grossly overstated the potential economic benefits of the proposed plant.^[23] The plan was canceled in August 2008. ^[24]

Genetically-modified organisms

In August 2004 a Greenpeace test found genetically modified organisms in Chinese Nesquik. A Chinese woman sued Nestlé since the use of GMOs in that kind of product was prohibited by local law. In December a second test was negative.^[25] In November 2005 Nestlé opposed a Swiss ban on GMOs.^[26]

Slave-labour Suppliers

In April 2006, a Forbes article reported on Nestlé's purchasing of chocolate from plantations which employed slave labour.^[27] According to the article, the International Labour Organisation, part of the UN, estimates that 284,000 child labourers work on cocoa farms in West Africa, mainly in the Ivory Coast. Mars and Hershey's are also being investigated. Global Exchange and the International Labour Rights Fund are taking Nestlé, commodities trader Archer Daniels Midland and Cargill to court in the US under the Torture Victim Protection Act and Alien Tort Claims Act.^[28][29] Nestlé signed an agreement called the Cocoa Protocol to say that it would find a way by July 2005 to certify that chocolate had not been produced by underage, indentured, trafficked or coerced labor. ^[30]

Outsourcing and Price-Fixing

Unions representing Nestle employees around the world, united in the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations (IUF) ^[31] have expressed concern over a number of workplace issues including Nestle's move toward outsourcing of its manufacturing. In October 2008, the IUF launched NestleWatch ^[32], a new web-based initiative to address these issues.

In December 2007 Nestlé was found guilty of colluding with other milk producers to fix prices in Greece.^[33]

Melamine in Chinese milk

Main article: 2008 Chinese milk scandal

See also: International Reaction to the 2008 Dairy Scandal

In late September 2008, the Hong Kong government claimed to have found melamine in a Chinese-made Nestlé milk product. The Dairy Farm milk was made by Nestlé's division in the Chinese coastal city Qingdao.^[34] Nestlé affirmed that all its products were safe and were not made from milk adulterated with melamine. On October 2, 2008 the Taiwan Health ministry announced that six types of milk powders produced in China by Nestlé contained traces of melamine. Nestlé has announced that it will begin a recall of milk products produced in China. ^{[35] [36]}

Misleading advertising claims about Maggi noodles

Main article: Maggi noodles#Health Claims Controversy

See also

• Joseph Rowntree
• Big Chocolate
• Marion Nestle, Professor of Nutrition, Food Studies, and Public Health at New York University

Footnotes

External links

• Nestlé Official website
• Article on ownership structure of Nestlé and L'Oréal
• Learn more about Nestlé and child labor in the cocoa industry
• Nestlé Baby Milk Issue Facts - Nestlé's point-of-view of the "Baby Milk" controversy
• Nestlé S.A. concentrates trading of its shares on SWX Swiss Exchange

Data

• Yahoo! - Nestlé SA Company Profile

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