Nestlé

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Nestlé

This article is about the company. For its founder, see Henri Nestlé.

Nestlé S.A. or Société des Produits Nestlé S.A., headquartered in Vevey, Switzerland, is the world's biggest food and beverage company. Nestlé's existing products extend from mineral waters to baby food to coffee and dairy products. Its main rival is Cadbury Schweppes.

Some people in the English-speaking countries pronounce Nestlé's , matching the English verb nestles. This was the pronunciation used in company merchandising for much of the 20th century (for example, in Nestlé's Milkbar). In the Philippines, Nestlé in Nestlé Table Cream is popularly pronounced . Other common pronunciations of Nestlé among English-speakers are and .

Some of Nestlé's business practices are controversial, especially the manner in which baby milk has been marketed in developing countries, which led to the Nestlé boycott.

History

Nestlé was founded in 1866.

In the 1860s Henri Nestlé, a pharmacist, developed a food for babies who were unable to be breastfed. His first success was a premature infant who could not tolerate his own mother's milk nor any of the usual substitutes. The value of the new product was quickly recognized when his new formula saved the child's life, and soon, Farine Lactée Henri Nestlé was being sold in much of Europe.

In 1905 Nestlé merged with the Anglo-Swiss Condensed Milk Company. 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 had more than doubled.

The first Nestlé factory to begin production in the United States was opened in Fulton, Oswego County, New York. The factory however was closed in 2001, after the company decided that the cost of restoring, and updating the factory was not worth the effort. Employees of the factory were furious, and raised the company flag upside down the day the closing was announced.

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 $20 million in 1938 to $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.

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 confectionary company Rowntree Macintosh in 1988.

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 $2.6 billion acquisition was announced of Chef America, Inc.

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. ^*

Business

Management

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

Peter Brabeck-Letmathe, Chairman & CEO
Carlo Donati, 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
Paul Bulcke, EVP of Americas divisions
Paul Polman, EVP of Finance, Control, Legal, Tax, Purchasing, Export
Chris Johnson, Deputy EVP of Information System, Logistics & GLOBE
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, Andre Kudelski, Jean Pierre Meyers, Carolina Müller-Möhl, Kaspar Villiger. Secretary to the Board Bernard Daniel.

Earnings

In 2003, consolidated sales was CHF 87.979 bn and net profit was CHF 6.213 bn. Research and development investment was CHF 1.205 bn.

Sales by activity breakdown: 27% from drinks, 26% from milk and food products, 18% from ready-prepared dishes and ready-cooked dishes, 12% from chocolate, 11% from pet products, 6% from pharmaceutical products.

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 and minority interests

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

Criticisms of Nestlé's business practices

Baby milk marketing

See also: Nestlé boycott and International Code of Marketing of Breast-milk Substitutes

Since the late 1970s, Nestlé has attracted much criticism for its baby milk marketing policies in developing countries. This has centered on its apparent recommendations for nursing mothers to switch to its infant formula milk products, leading to the alleged deaths of about 1.5 million babies each year as a result of formula being mixed with contaminated water. Nestlé allegedly has violated the widely agreed-upon International Code of Marketing of Breast-milk Substitutes. This has led to a boycott coordinated by the International Nestlé Boycott Committee, informed by monitoring conducted by the International Baby Food Action Network. In 1982, Nestlé implemented the WHO Code of Marketing of Breast-Milk Substitutes in developing countries. The instructions were reviewed and refined in 1984 in consultation with the WHO, UNICEF and the International Nestlé Boycott Committee.

Nestlé itself still advertises breast milk replacements, and does use pictures of babies in its advertising. According to the report Breaking the Rules, Stretching the Rules 2004 put out by IBFAN/ICDC it is still continuing aggressive and misleading advertising tactics ^*. Nestlé has issued instructions to all its offices to ensure strict compliance with the International Code. However, the boycott still continues in some 20 countries.

Legal action against Ethiopian government

In December 2002, international aid agency Oxfam revealed that Nestlé was demanding millions of dollars in compensation from Ethiopia. The States dollar|US$" target="_blank" >^*6 million demand was issued for shares in an Ethiopian agricultural firm, which was nationalised by the Marxist Mengistu regime in 1975. Nestlé had acquired ELIDCO’s parent company, the Schweisfurth Group, ten years later. Nestlé refused the embattled Ethiopian government’s offer of a settlement worth around $1.5m; however, in the face of much public criticism, a statement was issued by Nestlé on December 23, 2002 stating that any money received in settlement would be made available for famine relief projects in the region in consultation with the International Federation of Red Cross / Red Crescent Societies.

Nestlé Purina in Venezuela

In early 2005, Nestlé Purina sold thousands of tons of contaminated animal feed in Venezuela. The local brands included Dog Chow, Cat Chow, Puppy Chow, Fiel, Friskies, Gatsy, K-Nina, Nutriperro, Perrarina and Pajarina. Over 500 dogs, cats, birds and cattle died. It was reported that it 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.

Nestlé water

In Mecosta County, Michigan, United States, a determined citizen coalition has opposed the efforts of a bottled water subsidiary of the Nestlé corporation to gain private control of important groundwater supplies. In 2001, the county licensed the company (then a Perrier subsidiary) to open a bottling plant in Stanwood, Michigan, for a fee of less than $100 a year. Operating requirements of the factory meant pumping half a million gallons of water a day from an aquifer beneath a hunting reserve. After learning about the plan, Michigan Citizens for Water Conservation launched a direct action campaign against Nestlé and sought a temporary injunction to stop the pumps while the court decided on the legality of Nestlé's use of the water. However, this injunction has not been granted.

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. In November 2005 Nestlé opposed a Swiss ban on GMOs. [http://www.planetark.com/dailynewsstory.cfm/newsid/33668/story.htm

Main products

Nestlé has a wide range of products across a number of markets including coffee, water, other beverages, ice cream, infant foods, performance and healthcare nutrition, seasonings, frozen and refrigerated foods, confectionery and pet food. Nestlé bought Rowntree Mackintosh for five of their major brands.

For a list of some of these brands, see List of Nestlé brands.

External links

Data

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