Nestle: Baby Formula Case Study
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Nestle: Baby Formula Case Study
- 1. NESTLÉ: THE INFANT FORMULA CONTROVERSY Mark Zatta Section: D01
- 2. Nestle • Headquartered in Vevey, Switzerland • 1866 the first European condensed milk factory opened in • • • • Cham, Switzerland, by Anglo-Swiss Condensed Milk Company Now: Largest food company; revenue 2013: 9th most profitable corporation; 1st in 2011 (Financial Times Global 500) Operations in over 100 countries Over 8,000 brands
- 3. Products • Coffee and tea • Ice Cream • Beverages • Cereal • Baby food • Chocolate • Seasonings • • • • • • Soups and sauces Frozen foods Pet food Cosmetics Supplements Life insurance
- 6. Products
- 7. Geography
- 9. Acquistions
- 10. Background of Controversy • For over 20 years, Nestle has been directly or indirectly charged with involvement in the death of Third World infants. • The infant feeding formula allegedly is the cause for mass deaths of babies in the Third World.
- 11. Background of Controversy • Originating in 70s when Bristol Myers and nestle marketed 3rd world to exchange breastfeeding for formulas • Sales tactics such as using milk nurses and mothers to go into hospitals, clinics and home and instructed mothers on the benefits of using the formulas • Breastfeeding rates declined rapidly during the 1960's as baby food companies expanded their activities into developing countries • In Singapore in 1951 over 80% of 3-month-old babies were breastfed, by 1971 it was only 5%
- 12. The Old
- 15. Global Reaction • Protein Calorie group and the 27th world health assembly (1974) issued statements that breastfeeding as the way to promote good development in infants • Amendment to the International development and food assistance act (1975) • INFACT; infant formula action council boycott (1977) • WHO steps in and creates international code of marketing of breast milk substitutes (1981)
- 16. The WHO Code • October 1982 to adopt articles of the WHO code as Nestle policy • includes the following: • No advertising to the general public • No sampling to mothers • No „mothercraft‟ workers • No use of commission/bonus for sales • No use of infant pictures on labels • No point-of-sale advertising • No financial or material inducements to promote products • No samples to physicians except in three specific situations: a new product, a new product formulation, or a new graduate physician; limited to one or two cans of product • Limitation of supplies to those requested in writing and fulfilling genuine needs for breast milk substitutes • A statement of the superiority of breast feeding on all labels/materials • Labels and educational materials clearly stating the hazards involved in incorrect usage of infant formula, developed in consultation with WHO/UNICEF
- 17. • “Marketing practices that undermine breastfeeding are potentially hazardous wherever they are pursued: in the developing world, WHO estimates that some 1.5 million children die each year because they are not adequately breastfed. These facts are not in dispute.” –UNICEF 1997
- 18. Nestle‟s Response • Int Council of Infant Food Industries; code of ethics (1981) • Root causes for infant malnutrition and mortality in 3rd world countries: poverty, lack of food, ignorance and poor sanitation. • UNICEF Baby friendly hospital initiative (1991) • Nestle‟s Implementation of the WHO Code in defense of its marketing practices (1999) • Who Code Compliance, the healthy kids program http://www.nestle.com/asset-library/documents/r_and_d/compliance/2011-external-report-code-compliance.pdf
- 19. The New • Nestle is constantly creating new marketing techniques for its baby formula products • „Protect‟ logo; 120 countries • Colorful Logos • DHA & ARA; important for the brain • Billboard Effect; big displays • societal pressure on women to choose bottle feeding as an option of convenience
- 21. Ghana
- 22. Issues • Disease • Malnutrition • Clean water supply; powdered formula • Breastfeeding as issue • High prices dilution • Supply and Demand • Ethical Issues • Exploitation
- 23. Price Wealth Access Comparison 120 100 80 60 40 20 0 Cost in US $ GDP per Capita in Thousands % under Int Poverty Line; $2/day Clean Water
- 24. Percentage of Pop. Living Under Int. Poverty Line; $2/day
- 25. China • Nestle does not have a website for China up. • 35 million products sold every day • More than 90% of products sold in China are locally manufactured • 2008 China Tainted Baby Formula Scanda – Melamine • Shijiazhuang maker; Nestle China • Update: Jiang Weisuo, wistleblower, murdered.
- 26. China ctnd. • The imported formula market in China grew roughly 9x between 2002 and 2012, and is expected to hit $13 billion by 2015. -UNICEF • However, cultural shift: 100% safe products; more natural baby feeding • Update: • Nestle cut infant formula prices in China 11 percent in response of alleged price-fixing and violation of market competition laws by manipulating retailers to sell infant formula at inflated prices
- 27. BabyNes • “comprehensive nutrition system.” • Crowd appeal; similar products • $250/unit Double cost of formula • Currently only in Switzerland and France
- 28. BabyNes
- 29. Nestle Nutrition: 2012 Update • Sales of CHF 7.9 billion, 6.7% organic growth, 3.0% real internal growth; 19.2% trading operating profit margin • 2012 was good particularly in emerging markets, including the BRICs and Africa, with double-digit growth in both formula and cereals • Growth in developed markets, despite low birth
- 30. The End.
Editor's Notes
- Cost in US $GDP per Capita in Thousands% under Int Poverty Line; $2/dayClean WaterAustrailia21.2540.80100Singapore29.560.52100S. Africa182.631.386Malaysia15.1515.8094India15.513.76884Egypt7.256.615.597Fiji15.054.72347Nigeria162.684.562U.S.A.23.45490100