nestl

right Nestl S.A. or Socit des Produits Nestl S.A. (SWX:NESN), headquartered in Vevey, Switzerland, is the world's biggest food and beverage company. Nestl's existing products extend from mineral waters to baby food to coffee and dairy products.

History

Nestl was founded in 1866. In the 1860s Henri Nestl, a pharmacist, developed a food for babies who were unable to breastfeed. His first success was a premature infant who could not tolerate his own mother's milk or any of the usual substitutes. People quickly recognized the value of the new product, after Nestl's new formula saved the child's life, and soon, Farine Lacte Henri Nestl was being sold in much of Europe. In 1905 Nestl 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, Nestl's production had more than doubled. After the war, government contracts dried up and consumers switched back to fresh milk. However, Nestl's management responded quickly, streamlining operations and reducing debt. The 1920s saw Nestl's first expansion into new products, with chocolate the company's second most important activity Nestl 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, Nescaf, which was a staple drink of the US military. Nestl's production and sales rose in the wartime economy. The end of World War II was the beginning of a dynamic phase for Nestl. 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'Oral in 1974. In 1977, Nestl made its second venture outside the food industry by acquiring Alcon Laboratories Inc. In 1984, Nestl's improved bottom line allowed the company to launch a new round of acquisitions, the most important being American food giant Carnation. The first half of the 1990s proved to be favorable for Nestl: 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 July, Nestl merged its U.S. ice cream business into Dreyer's, and in August, a $2.6 bn acquisition was announced of Chef America, Inc.

Business

Management

The executive board includes:

Peter Brabeck-Letmathe, CEO
Frits Van Dijk, EVP, Chairman, and CEO of Nestl Waters
Michael W. O. Garrett, EVP of Asia, Oceania, Africa, Middle East divisions
Ed Marra, EVP of Strategic Business units and Marketing
Francisco Castaer, EVP of Pharmaceutical and Cosmetic Products, Liaison with L'Oral, Human Resources
Paul Bulcke, EVP of Americas divisions
Wolfgang H. Reichenberger, EVP of Finance
Chris Johnson, Deputy EVP of Information System and Logistics
Lars Olofsson, EVP of Europe divisions
Luis Cantarell, Deputy EVP of Nutrition Strategic Business units
Werner J. Bauer, EVP of Research and Development

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

Nestl holds 26.4% of the shares of L'Oral, the world's leading company in cosmetics and beauty. The Laboratoires Inneov is a joint venture in nutritional cosmetics between Nestl and L'Oral . Galderma is another joint veture in dermatology between Nestl and L'Oral. Others include Cereal Partners Worldwide, Beverage Partners Worldwide (formerly CCNR), and Dairy Partners Americas.

Criticisms

Business Practices

Like many multinational companies, since the 1980s, it has attracted criticism, for example by the World Health Organization and UNICEF, for its business and marketing practices in third world countries. In Nestl's case, 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. Nestl allegedly has violated and regularly continued to violate the widely agreed-upon International Code of Marketing Breast-milk Substitutes. This has led to a boycott coordinated by the International Nestl Boycott Committee, informed by monitoring conducted by the International Baby Food Action Network http://www.ibfan.org (see below). In 2002 the company was criticized for its intention to seek 2m compensation from the Ethiopian government, for a company that had been nationalized in 1975 by the Marxist Mengistu regime. To put that in context, compare that figure with the turnover of Nestle and then the GDP of Ethiopia, the 159th country of 164 http://www.nationmaster.com/red/graph-T/eco_hum_dev_ind&int=-1 by the UN's Human Development Index.

Boycott

The Nestl boycott was launched on July 4, 1977 in the United States, from where it has spread rapidly. It was prompted by concern about the company's marketing of breastmilk substitutes, which campaigners claim contributes to the unnecessary death and suffering of babies, especially in developing countries. Nestl's perceived marketing strategy was first written about in New Internationalist magazine in 1973 and in a booklet called The Baby Killer published by the British non-governmental organisation War on Want in 1974. Nestl attempted to sue the publisher. After a two-year trial, the court found in favour of Nestl and fined the group 300 Swiss francs because Nestl could not be held responsible for the infant deaths 'in terms of criminal law'. The widespread publicity led to the launch of the boycott in Minneapolis, USA. In May 1978, the US Senate held a public hearing into the promotion of breastmilk substitutes in developing countries and joined calls for a Marketing Code. This was developed under the auspices of the World Health Organisation and UNICEF and adopted by the World Health Assembly in 1981 as the International Code of Marketing of Breastmilk Substitutes. The Code covers infant formula and other milk products, foods and beverages, when marketed or otherwise represented to be suitable as a partial or total replacement of breastmilk. It bans the promotion of breastmilk substitutes and gives health workers the responsibility of advising parents. It limits manufacturing companies to the provision of scientific and factual information to health workers and sets out labelling requirements. In 1984, boycott coordinators met with Nestl and accepted the company's undertaking that it would abide by the Code, but the coordinators were not satisfied with Nestl's subsequent action and the boycott was relaunched in 1988. The boycott is now coordinated by the International Nestl Boycott Committee, the secretariat for which is the UK group Baby Milk Action. Company practices are monitored by the International Baby Food Action Network (IBFAN), which consists of more than 200 groups in over 100 countries. In July 1999, the UK Advertising Standards Authority upheld complaints against the company brought by Baby Milk Action and published a ruling against a Nestl anti-boycott advertisement in which the company claimed to market infant formula 'ethically and responsibly'. In November 2000 the European Parliament invited IBFAN, UNICEF and Nestl to present evidence to a Public Hearing before the Development and Cooperation Committee. Evidence was presented by the IBFAN group from Pakistan and UNICEF's legal officer commented on Nestl's failure to bring its policies into line with the World Health Assembly Resolutions. Nestl declined an invitation to attend, though it sent a representative of the auditing company it had commissioned to produce a report on its Pakistan operation. In parallel with the boycott, campaigners work for implementation of the Code and Resolutions in legislation and claim that 60 countries have now introduced laws implementing most or all of the provisions. Nestl is sometimes targeted for other aspects of its operations. A Brazilian group called Citizens for Water (Cidadania pelas Aguas) has called a boycott of Nestl in Brazil over the company's extraction of water from an aquifer in So Loureno. Some also boycott Nestl coffee and chocolate products in favour of Fair Trade alternatives.

Main Brands

Brands are categorized by their targeted markets and sorted by profit rank (highest first). Not all brands are listed here as the brands vary by country. (For example: Nestle does business with Nabisco/Christie in Canada, but not in the USA)