Case

Nestle: Singled Out Again and Again

'during the first few months, the mother's milk will always be the most natural nutriment, and every mother able to do so, should herself suckle her children.'

Henri Nestle, 1869

In July 1994 the corporate affairs department at Nestle UK's headquarters in Croydon were bracing themselves for another burst of adverse publicity. At the forthcoming General Synod of the Church of England to take place at York University, aii Oxford diocesan motion would call for a continued ban on Nescafe by the Church. They also wanted the Church Commissioners to disinvcst their £1.1 million in Nestle. The Church's much publicized boycott of Nescafe first occurred, amid much ridicule, in 1991, as a protest against the use of breast milk substitutes in the Third World countries. In the aftermath of the 1991 vote, Nescafe claimed that its sales increased, although many churchgoers said they stopped using the brand-leading coffee. The 1994 protest would he one of many the company had faced from activist protesters in the last 20 years although, according to Nestle, the protesters' complaints had no foundation.

Nestle SA, whose headquarters are in Vevey, Switzerland, is the world's largest food company, with annual worldwide sales of SFr57.5 billion. The company produces in 494 factories operating in 69 countries. Numerous Nestle brands are quite familiar: Nestle's chocolates, Nesquik, Nescafe, Crosse & niackwell. Lib by, Perrier, Friskies and many others. Over 100 years ago Henri Nestle invented manufactured baby food Lto save a child's life' and the company have been suppliers ever since. Then, in the late 1970s and early 1980s, Nestle came under heavy fire from health professionals, who charged the company with encouraging Third World mothers to give up breast feeding and use a company-prepared formula. lit 1974 the British charity, War on Want, published a pamphlet, The Baby Killer, that criticized Unigate and Nestle's ill-advised marketing efforts in Africa. While War on Want criticized the entire infant formula industry, the German-based Third World Action Group issued a German 'translation' of the original pamphlet retitled Nestle Killu Babies, which singled out Nestle for 'unethical and immoral behaviour'. The pamphlets generated much publicity - the general public became both aware and concerned about the issue. Enraged at the protest, Nestle sued the activists for defamation. The two-year case kept media attention on the issue. We won the legal case, but it was a public-relations disaster,' commented a Nestle executive.

In 1977, two American social-interest groups, the Intcrfaith Center on Corporate Responsibility and the Infant Formula Action Coalition (INFACT), spearheaded a worldwide boycott against Nestle. The campaign continued despite the fact that many organizations rejected the boycott. The US United

Methodist Church concluded that the activists were guilty of 'substantial and sometimes gross misrepresentation', of 'inflammatory rhetoric', and of using 'wildly exaggerated figures'. The boycott was called off in 1984 when the activists accepted that the company was complying with an infant formula marketing code adopted by the World Health Organization (WHO). Since then, church, university, local government and other action groups periodically rediscover the controversy and create publicity by calling for a boycott.

In 1991 the main accusation was the use of sophisticated promotional techniques to persuade hundreds of thousands of poverty-stricken, poorly educated mothers that formula feeding was better for their children. One issue predominated: the donation of free or low-cost supplies of infant formula to maternity wards and hospitals in developing countries. Formula feeding is not usually a wise practice in such countries. Because of poor living conditions and habits, people cannot or do not clean bottles properly and often mix formula with impure water. Furthermore, income level does not permit many families to buy sufficient quantities of formula. Protesters particularly hit out at several industry practices, keeping Nestle as their target:

• Promotional baby booklets ignoring or de-emphasizing breast feeding.

• Misleading advertising encouraging mothers to bottle feed their babies and showing breast feeding to be old-fashioned and inconvenient.

• Gifts and samples inducing mothers to bottle feed their infants.

• Posters and pamphlets in hospitals.

• Endorsements of bottle feeding by milk nurses.

• Formula so expensive that poor customers dilute to non-nutritious levels.

The WHO code eliminates all promotional efforts, requiring companies to serve primarily as passive 'order takers'. It prohibits advertising, samples and direct contact with consumers. Contacts with professionals (such as doctors) occur only if professionals seek such contact. Manufacturers can package products with some form of visual corporate identity, but they cannot picture babies. The WHO code effectively allows almost no marketing. However, the code contains only recommended guidelines. They become mandatory only if individual governments adopt national codes through their own regulatory mechanisms,

WHO allows the donation of free or low-cost supplies of infant formulas for infants who cannot be breast-fed. However, because of protests the International Association of Infant Food Manufacturers (IFM) is working with WHO and UNICEF to secure country-by-country agreements with countries to end free and low-cost supplies. By the end of 1994, only one small developing country had not agreed to the change.

Nestle itself has a policy on low-cost supplies in developing countries, as follows:

• Where there is government agreement, Nestle will strictly apply the terms of that agreement.

• Where there is no agreement Nestle, in co-operation with others, will be active in trying to secure early government action.

• Where other companies break an agreement, Nestle will work with IFM and governments to stop the breach.

• Nestle will take disciplinary measures against any Nestle personnel or distributors who deliberately violate Nestle policy.

Nestl6 continues to sell infant formula and display the Nestle name on almost all its brands. This contrasts with some companies using furtive branding to hide common ownership. Given the repeated public relations problems that Nestle faces, why does it not take unilateral action in ending free supplies? Since the Third World infant formula market is so small compared with Nestle's worldwide interests, why bother with it? Part of the answer is in Tlenri Nestle's desire 'to save a child's life'. The European Commission's directive on baby food concludes that infant formula is 'the only processed foodstuff that wholly satisfies the nutritional requirements of infants'first four to six months of life'.

Few mothers in countries with very high infant mortality rates use anything other than breast milk. However, Kenya is probably typical of what happens when mothers do supplement breast milk with something else:

33 per cent use uji, a local food made from maize.

33 per cent use cow's milk.

28 per cent use water.

14 per cent use glucose.

11 per cent use milk powder, of which some is infant formula.

3 per cent use tea.

A study in the Ivory Coast shows the sort of problems that arise when Nestle withdraws unilaterally. Other companies replaced the supplies to the affluent private nurseries, but supplies for mothers in need collapsed. As a result, two premature babies fed on ordinary powdered milk did not survive, and the main hospital was not able to 'afford to buy enough to feed abandoned babies or those whose mothers are ill'.

QUESTIONS

1. Was and is Nestle's and the other IFM members' marketing of infant formula 'unethical and immoral'?

2. Is it the case that ethical standards should be the responsibility of organizations such as WHO and UNESCO, and that the sole responsibility of firms is to work within the bounds set?

3. Is Nestle just unlucky or did its actions precipitate its being singled out by activists? Is the activists' focus on Nestle unjust and itself dangerous? What accounts for Nestle's continuing in the infant formula market despite the protests?

4. Did Nestle benefit from confronting the activists directly in court and winning? Should firms ever confront activists directly? What other forms of action are available to the company? Should firms withdraw from legitimate markets because of the justified or unjustified actions of pressure groups?

5. The WHO code is a recommendation to government. Is it Nestles responsibility to operate according to the national legislation of any given country, or to follow WHO's recommendations to that country? Do international bodies setting international standards, such as WHO and UNICEF, have a moral responsibility to make those standards clearly understood by all parties and to demand action by national governments to enact them?

6, How should Nestle respond to the threats from the General Synod in 1994V Since Nestle claimed sales increased after the Nescafe boycott in 1991, should they just ignore the problem?

SOURCES: 'A boycott over infant formula', Business Week (23 April 1979), pp. 137-40; John Sparks, 'The Nestle controversy - anatomy of a boycott', Public Policy Education Fund, Inc. (June 1981); 'Infant formula protest teaches Nestle a tactical lesson', Marketing Nevas (10 June 1983), p, 1; Robert F. Hartley, Marketing Mistakes (Chichcster, UK: Wiley, 1986); European Commission, Commission Directive on Infant Formula and Follow-on Formula, 91/321/EEC; The Associated Press, Abidjan, Ivory Coast (16 April 1991); UNIOKF, The Store of the World's Children (1992); RBL, Survey of Baby Feeding in Kenya (1992); Philip Roller and Gary Armstrong, 'Nestle: under fire again', in id Principles of Marketing (London: Prentice Hall, 1994); Nestle, Nestle and Ilaby Milk (1994); Andrew Brown, 'Synod votes to end Nestle boycott after passion a to debate', Independent (12 July 1994), 'Church boycott of Nescafe' ends', The Times (12 July 1994); Damion Thompson, 'Synod rejects disestablishment move'. Daily Telegraph (12 July 1994); 'Clear conscience for Xescat'e drinkers'. Church 'Jtmes (17 July 1994); Sylvie Laforet and John Sautiders, 'The management of brand portfolios: how the pros do it', Journal of Advertising Rfasvarah (September-October l'>94), pp. 64-76.

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Responses

  • Sara
    Did nestle' benefit from confronting the activists directly in court and winning?
    8 years ago
  • Salla
    Is nestle just unlucky or did its action?
    8 years ago
  • Sven Schuhmacher
    Is Nestlé just unlucky or did its actions precipitate its being singled out by activists?
    4 years ago
  • zufan
    What account for Nestlé continuing in the infant formula market despite the protests?
    4 years ago
  • sonja
    Is nestle just unlucky or did its action precipitate its being single ov by activities?
    4 years ago
  • ralph washington
    Is nestle unlucky or did its actions participate its being singled out by activists ?
    3 years ago
  • Philip
    What benefits did Nestle get when they were confronted by activist?
    2 years ago

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