Nestlé

Market Share/Importance

Nestlé employs approximately 253,000 people in some 511 factories worldwide. Nestlé is not only Switzerland's largest industrial company, but also the world's largest food company, considerably larger of than its nearest rivals Kraft Foods Inc. and Unilever plc.^[1] With products like Perrier and Nescafé, it is the market leader worldwide in coffee and mineral water,^[2] the largest manufacturer of pet food, and is fast increasing its share of the ice cream market.

Nestlé acquired Ralston-Purina, a US pet food company, in 2001. Despite producing pet food through its subsidiary, Carnation, since 1985, this acquisition now sees it outstrip Mars as the world's largest pet food manufacturer. Not to be outdone by Unilever's acquisition of Ben and Jerry's, Nestlé's merger with US food corporation Dreyer's to form the Dreyer's Grand Ice Cream Company in 2003 has given it the number one spot in the US ice-cream market, having already bagged the Häagen Dazs, Schöller and Mövenpick brands. Globally, Nestlé is now hot on the heels of Unilever as the number one ice cream seller, a position that it seeks in every market and category in which it operates around the world.

History

In 1830, German pharmacist Heinrich Nestlé arrived in Vevey, Switzerland, to work on a substitute for breast-milk. In 1866 he launched the product onto the market, founding the company in 1867. Nestlé's own versions of its history can be viewed at: www.Nestlé.com/all_about/history/index.html and at http://www.Nestlé.co.uk/about/ (Under 'Nestlé Heritage', for Nestlé's British presence). Needless to say, however, this version doesn't give a very full explanation of the scandals which have plagued the company. The most obvious damage to Nestlé's reputation has been its unethical marketing of artificial baby milk, particularly in the global south. (See Corporate Crimes section). This started to become a major issue in the 1970s when War on Want published a report called "The Baby Killer", which was translated into German by the Berne Third World Action Group who were subsequently sued for libel, having named their version "Nestlé Kills Babies". [3]

However, as McDonalds were later to find out, suing critics tends to have a rather galvanising effect, and the publicity which came out of the case hurt Nestlé much more than the activists. In 1977 a boycott was launched, which continued until 1984, when Nestlé agreed to abide by the World Health Organization's International Code of Marketing of Breast-Milk Substitutes. However, the fact did not match up to the promises and the boycott was re-launched in 1988, continuing vigorously today.

There is, of course, much more to Nestlé than the baby milk issue. The company has attracted criticism for its use of genetically modified ingredients, and for its cocoa and coffee-buying policies, including purchasing cocoa from Ivory Coast, which has recently received heavy press coverage due to the existence of child slavery on cocoa plantations. The company has also been implicated in lobbying against vaccination of livestock during the British Foot and Mouth Disease outbreak in 2001. From environmental destruction in Brazil to the intimidation of trade unionists in Colombia, from demanding millions in compensation from hunger-stricken Ethiopia to bolstering its image through proposing donations to breast cancer charities - Nestlé is easily one of the world's most hated companies.

People

Executive Board

Peter Brabeck-LetmatheChairman of the Board & Chief Executive Officer
Francisco CastnerExecutive Vice President Pharmaceutical and Cosmetic Products, Liaison with L'Oreal, Human Resources, Corporate Affairs
Lars OlofssonExecutive Vice President, Strategic Business Units and Marketing
Werner J.Bauer Executive Vice President Technical, Production, Environment, Research and Development
Frits Van DijkExecutive Vice President Asia, Oceania, Africa and Middle East
Paul BulckeExecutive Vice President United States of America, Canada, Latin America, Caribbean
Carlo DonatiExecutive Vice President Nestle Waters
Luis CantarellExecutive Vice President Zone Europe
Paul PolmanExecutive Vice President Finance, Control, Legal, Tax, Purchasing, Export
Chris JohnsonDeputy Executive Vice President GLOBE Program, Information Systems, Strategic Supply Chain, eNestle, Group Information Security
Richard T. LaubeDeputy Executive Vice President, CEO of Nestle Nutrition

[1]

Board of Directors:

Peter Brabeck-LethmatheChairman & CEO; Chairman of Chairman's and Corporate Governance Committee Term expires: 2007
Andreas Koopmann1st Vice Chairman Term expires: 2008
Rolf Hanggi2nd Vice Chairman, Chairman of Audit Committee and Finance Committee Term expires: 2008
Edward GeorgeTerm expires: 2007
Jean-Pierre MeyersTerm expires: 2006
Peter BockliChairman of Remuneration Committee Term expires: 2008
Nobuyuki IdeiTerm expires: 2006
Andre KudelskiTerm expires: 2006
Kaspar VilligerTerm expires: 2009
Daniel BorelTerm expires: 2009
Carolina Muller-MohlTerm expires: 2009
GÃƒÂ¼nter BlobelTerm expires: 2009

[2]

Honorary Chairperson:

Helmut Oswald Maucher

[3]

Nestle and Fairtrade

Nestle have recently been given the fairtrade mark for their coffee and they are now a company who are promoting themselves as one which will be fair to those who produce the coffee and cocoa that they sell by giving the farmers a decent wage for what they produce for them.

Nestle state that they are keen to help out the farmers who are growing coffee so that they can have a better wage ad so better living conditions. It has been stated that, “As the world’s largest direct buyer of coffee, Nestlé is keen to find a lasting solution for those coffee farmers in some of the world’s poorest countries who have been adversely affected by fluctuations in the price of coffee.” [4]

With this in mind Nestle have produced a fairtrade coffee, Nescafe Partners Blend, the coffee is has been produced with fair trade products and the proceeds made from this are given back to the farmer in regions such as El Salvador and Ethiopia.

[5]

They state that they have been working with the coffee farmers for over 30 years and they want to gain and encourage sustainable development. In 2002 they set up the Sustainable Agriculture Initiative so that they can gain sustainable coffee growing. They aim to help the farmers socially, economically and environmentally in order to create a better livelihood for each of the farmers, their families and the villages they live in.

[6]

This coffee is the first Nestle product to given the fairtrade mark. This is a mark which is operated and regulated by the fairtrade foundation, and so this means that it will only be given to those organisations which can prove that they are a company who are operating a fair trade. [7]

Not only is it coffee that is being grown and sold as fairtrade but the organisation alongside this, is also working in West Africa to help farmers find sustainable ways to grow cocoa. They want to find ways for farmers to increase their incomes and have a more sustainable and prosperous future. To achieve this they are working with a number of organisations across the world in order to create stronger benefits to this area. These organisations include:

International Labour Organisation (ILO)
The US Agency for International Development (USAID)
The International Institute for Tropical Agriculture (IITA)
West African governments
farming networks.

[8]

Corporate Social Responsibility

What is Corporate Social Responsibility?:

Many organisations find that they have created and been given a poor image by the media and have been portrayed negatively so that they public now can seen them in a light which will not be useful to their business. To overcome this many organisations have tried to overcome this by setting out to change their image and either try to or become a more socially responsible company. Corporate social responsibility now means that organisations have to take responsibility for all the actions that it is involved in throughout the sale and production of their goods. Some companies make a genuine attempt at this but many simply try and mask the truth in order for the public, their consumers, to see them as a better company who have a fair trading system to both society and the environment.

Nestle and Corporate Social Responsibility:

Criticism is not a new thing to the organisation and Nestle has found that it has faced a lot of negative media in the past. “Nestlé has a serious image problem because of its on-going aggressive marketing of baby foods. Instead of making changes required to bring its practices fully into line with international marketing standards, Nestlé invests heavily in Public Relations (PR) initiatives intended to divert criticism” (baby milk action)This claim then brings into question Nestle’s fair trade work as it can then be queried as to how fair-trade Nestle actually is. It has to be asked whether the company is involved in fairtrade in order to help the farmers or if it is trying to boost is image in the public eye? The above statement does claim that it has a good pr system and so its work in the fairtrade may simply be PR spin rather than a genuine effort to create fair and sustainable trade.

Negative News reports include:

Boycott against Nestle because of baby milk advertising: It has been claimed that in 1970s women in the developing countries were encouraged to feed their babies with formula that had been mixed with unsafe water and were then encouraged to pay for formula milk once their own supply had run out due to the use of the formula milk. This has been stated to result in 1.5 million deaths.
Legal action against Ethiopian government:Nestle wanted $11 million in compension from Ethiopian Government whilst the country was in a drought, the company recieved a lot of critism and eventually stated that any money it recieved in the settlement would go to famine relief in the country.
Nestle Purina in Venezuela: 500 cats, dogs, birds and cattle died when they at food that had corn used in animal food production which was not stored correctly which created a fungus. Purina was responsible fir quality standards and compensation had to be paid.
Nestle Water
Fairtrade Coffee: In August 2004 a Greenpeace test found genetically modified organisms in Chinese Nesquik
Genetically modified organisms:
[9]

Nestle and Unfairtrade

Despite the attempts by Nestle to prove to the world that they are changing their image by becoming involved in fairtrade in order to help the farmers and become a more responsible corporation, there are still a number of concerns surrounding them. The organisation is still under a lot of scrutiny and criticisms are still being made about the company even in regards to its fairtrade attempts.

The first example comes from one group, the World Development Movement, which is a campaigning group which tackles the causes of poverty, They have said that; "The launch of a Nestle Fairtrade coffee is more likely to be an attempt to cash in a growing market... than represent the beginning of a fundamental shift in Nestle's business model." [10] Nestle are accused of trying to make more money form the fairtrade market rather than actively trying to help farmers to gain a better wage and have a more sustainable business. Fairtrade is gaining momentum and with this then Nestle is seen to be joining this for the monetary value rather than helping those they are buying from.

Concerns have been raised about the prices that the company is willing to pay for the coffee which it buys and then sells. They have been said to be “Paying prices as low as they can go - whatever the consequences for farmers - is a dangerous business strategy in the long term.” [11] They have been criticised for not caring enough about the role of the farmer and have not being paying a fair and competitive price for the coffee that they buy. In conjunction with this there has been claims made that the farmers as experiencing hardships because of a slump in the Market. The coffee that is grown in El Salvador comes from 5 smallholder farmers and they are now experiencing a severe threat to their livelihoods because of the price instability. The competition between the organisations are causing there to be an unstable market as companies like Nestle want the produce as cheap as they can get it. [12]

Looking at this further even they themselves state that; "Nestlé is very aware of the concerns that are raised about its activities in the developing world and that its reputation has been dogged by misperceptions "They find that they have had an abundance of claims and scandals attached to them and are now trying to rectify these issues. However many believe that they are involved in fairtrade in order to mask these problems and when their desire to be involved in fairtrade is looked at further it can be found that they merely trying to shed a positive image on themselves. However is fairtrade a mask that has been created by the company to enhance their poor image and bring back many of the customers that it has lost from an ongoing boycott?

The Baby Milk Action campaign has also found flaws and dishonesty in the Nestle fair-trade campaign. It has registered three complaints about the two-page advertisement.

1.Nestlé's portrayal of its involvement in coffee in El Salvador is dishonest and misleading
2.Nestlé's portrayal of its involvement in the coffee industry more generally is dishonest and misleading
3.Use of the Fairtrade mark is dishonest and misleading.

[13]