nestl+¬ controversy

8/2/2019 Nestl+¬ controversy

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Background

Nestlé Company started off from a single man’s idea, and developed into a giant

corporation. Nestlé’s headquarters are located in Switzerland, but the company

maintains factories and operations in almost ever country in the world. The company

has also been increasing in size each year. In addition to this increase, Nestlé is also

increasing its variety of product offerings. Nestlé’s business strategy encourages

product growth through innovation and renovation. This strategy has allowed the

company to develop different products in various fields including baby food, dairy

products, prepared foods and beverages to name a few.

The company has created Nestlé Nutrition, a global business organization designed to

strengthen the focus on their core nutrition business. Strengthening their leadership in

this market is the key element of the company’s corporate strategy. Further, Nestlé

Nutrition aims to deliver superior business performance by offering consumers trusted

science based nutrition products and services. In regards to international strategy,

Nestlé’s competitive strategies are associated mainly with foreign direct investment in

dairy and other food businesses. Nestlé aims to balance sales between low risk, low

growth countries of the developed world with high risk, potentially high growth markets

such as Africa. Nestlé also claims that it will not take unnecessary risks for the sake of

growth and will follow and respect all applicable local laws in each of its markets.

Nestlé has much strength, such as being a low cost operator, and having a research

and development team that will aid in product innovation. Also, Nestlé has health-based



products which are becoming more popular as consumers are becoming more health

conscious, such as in the U.S. A threat to the company is that some of the markets that

they are entering are already mature. For example, Danone, one of the top competitors,

has already established a leadership position in the yogurt market. Other top

competitors include ConAgra, Kraft Foods and General Mills.

Nestlé’s goal is to maintain, preferably to increase its market share and sales volume in

order to have stability in the market. (Nestlé adopts a sales oriented pricing scheme). If

Nestlé has an increase in sales volume they will have an increase in market share.

When Nestlé maintains or increases its market share, their products will be more widely

used by consumers. This will then increase share prices and stock, as Nestlé will be

seen as having a stable position when compared to competitors in the same market.

Problems and Issues

Problems with Marketing Techniques

Nestlé’s marketing tactics in promoting the use of infant formula in Third World countries

wasn’t moral. Nestlé was not acting within the boundaries of moral standards. Every

corporation must understand and realize the corporate ethics and responsibilities they

should have. The problem was that Nestlé used unqualified sales girls, the distribution

of free samples, marketed to people who were incapable to fulfill the minimum

requirements for giving formula safely to the baby, and the association of bottle-feeding

with healthy babies to promote the use of infant formula to mothers who would have

been better off breast-feeding their babies.



In many Third World countries there never should have been advertising and

promotions for infant formula because it is not safe due to unsafe water supplies and

the difficulties in keeping bottles sterile. Where water is unsafe babies are up to 25

times more likely to die if they are bottle-fed. The cost of the formulas is another

problem for some Third World families costing them up to 1/3 of their family’s weekly

income. Back in 1974 when the infant formula controversy began, in Nigeria the cost of

feeding a 3 month old infant was approximately 30% of the minimum urban wage (what

the majority earn) and by the time the infant is 6 months, the cost would have risen to

47%. This is what led some mothers to dilute the mixture up to 3 times what it ought to

be, it even led some to start using powdered milk which is not intended for infants, but is

cheaper. This leads to dehydration, malnutrition and diarrhea, known as bottle baby

disease. Instead of saving a lot of money and breast-feeding mothers were convinced

by advertisements, doctors, nurses and midwives to use formula.

Formula milk companies were donating gift bags containing baby vitamins and formula

to hospitals and midwives even after the EOC 51. Instead of midwives helping the

babies latch on to the breast after birth like they were supposed to, they were giving out

promotional gift bags. Unholy alliances existed between medical professionals and baby

food companies. As a result of these alliances, the medical professionals helped

promote baby food products while the baby food companies would provide gifts ranging

from food to sponsored events and conferences. Doctors have been known to receive

air conditioners and air fare to go places. Doctors were not explaining to mothers how



they could work and breast-fed with support, rather they were encouraging them to use

formula.

Advertisements and posters used idealistic imagery, often showing white children rather

than the ethnicity of that country, suggesting that bottle-feeding is the modern, western

way, therefore the right way of doing things. There were slogans used in Nestlé’s ads

and labeling such as ‘100% complete nutrition’ and ‘Now even closer to mothers milk’,

misleading mothers to thinking formula is as good, almost as good, or even better

than their own milk. People in places like the Philippines were known to claim from

advertisements that formula’s have vitamins which allow the baby to catch up faster with

things being taught to them, grow faster, and become more intelligent, even geniuses.

Other Problems

One of the major problems is that the marketing practices of infant formula

manufacturers, physician dominated medical systems, and the relationship between

industry and health professionals has resulted in widespread misinformation about

breast-feeding, false claims of the equivalence between breast milk and artificial

substitutes, and the devaluing of women’s knowledge about breast-feeding in general.

All of Nestlé’s infant feeding products did provide instruction leaflets in the main

languages of the country where they were sold including simple line drawings to

illustrate the method of preparing the feed. Nestlé did not take into consideration that

most Third World mothers are illiterate and the four simple line drawings by themselves

are meaningless. Nestlé’s Mother Book instructions on bottle-feeding began with “Wash



your hands thoroughly with soap each time you have to prepare a meal for baby”.

Nestlé didn’t take into consideration that many households in the Third World had no

washing facilities at all nor had an indoor kitchen.

Nestlé Issues Since the Infant Formula Controversy

Even though the link between bottle-feeding and infant diseases and deaths was

brought to public attention in the early 1960s, it was not until the publication of the

pamphlet, The Baby Killer , that the infant formula controversy gained prominence. The

pamphlet was written by Mike Muller and became available in March 1974. It raised

awareness about the problem of how the baby formula was being marketed resulting in

thousands of infant deaths. War on Want, a London based activist group concerned with

hunger and poverty and other problems of the Third World. The pamphlet claimed that

Third World babies were dying because their mothers were feeding them infant formula

that was being marketed by multinationals such as Nestlé of Switzerland and United

Kingdom’s Cow and Gate. The aftermath of the publication led to an international crisis

for Nestlé. Nestlé mismanaged the crisis while NGOs got public support for their

position by cleverly and skillfully handling the controversy.

The issue moved into a new phase when the Third World Action Group (TWAG)

translated the pamphlet in German in Switzerland and published a 32-page version in

May 1974 with a new title, Nestlé Totet Babys (Nestlé Kills Babies). Nestlé had a fast

response to this, but not a very good one; they sued all those involved with the

translation and publication of the booklet. The judge found the 30 members of TWAG



guilty of libel. Nestlé did win its lawsuit but they lost their public relations battle at the

same time. At the end of The Berne Trial the judges closing statement is, “If Nestlé S.A.

wants to be spared the accusations of immoral and unethical conduct, it will need to

change its advertising practices.”

The first Nestlé boycott in 1977 led by Infant Formula Action Coalition (INFACT)

had a large impact on Nestlé’s revenues. Their products were boycotted in the U.S.

to end the promotion of infant formula. This was a small part of the major problem which

is to improve total infant nutrition throughout the Third World that must be resolved on a

global basis if the health of babies in the developing nations is to be improved. The

boycott against Nestlé’s products and eventually those of the infant formula

manufacturers generated the largest support of consumer movement in North American

and its impact is still being felt in the industry, governments, and citizen’s action groups

around the world. The Nestlé boycott became one of the most successful consumer

boycotts in history lasting 7 years, it ended in 1984 after talks with Nestlé, WHO,

UNICEF and Muskie Commission Activist groups. It was the largest nonunion boycott in

history with over 100 organizations in 65 countries. It cost Nestlé as much as $5.8

million in lost revenue.

U.S. Senate hearings, chaired by Edward M. Kennedy, further damaged Nestlé’s

reputation and suggested the need for international consensus. Senator Kennedy asked

the World Health Organization to “convene an international conference on infant health

and nutrition”. Another problem was the disagreements between governments, the



industry, health experts, legal experts and citizen groups over key issues of the code,

like differences between educational advertising and promotional advertising,

distinctions between fee samples and free supplies, and distinguishing between

legitimate support for health service and inappropriate incentives to win brand loyalty.

Nestlé should have paid more attention to the Protein Advisory Group (PAG) issued

statement 23 which outlined the responsibilities of governments, pediatricians and the

infant formula industry. They should have also given more attention to PAG asking

manufacturers to look to marketing practices and product labeling. Nestlé did perform

an internal audit and concluded that the only charge necessary was greater emphasis

on the “primacy of breast feeding in its advertisements.”

Nestlé shouldn’t have decided that the Muskie Commission fulfilled its mandate and let

it dissolve. During the 1978 Congressional Hearings, a Nestlé Brazilian operations

manager, Ballarian, claimed that the boycott and the campaign against the infant

formula companies were really an “attack on the free world’s economic system,” led by

“a worldwide church organization with the stated purpose of undermining the free

enterprise system.” This was a mistake for Ballarian to speak out like this, and it didn’t

make Nestlé look good as far as public relations.

By late 1980s Nestlé along with other baby food companies had diverted some of the

marketing budget from public promotion to expanding the tactic of placing large

quantities of free or low cost milk in maternity facilities. Due to the inadequacy of

medical training of breastfeeding management, health officials used the supplies for



World Health Organization (WHO)

Due to the efforts of such groups as the Infant Formula Action Coalition and the

International Nestlé Boycott Committee, the growing awareness among public health

officials eventually resulted in the adoption of an infant formula marketing code by the

World Health Assembly in 1981, with the United States one of a handful of countries

casting a negative vote. The World Health Organization is charged with responsibility for

monitoring the implementation of the Code, frequently called the WHO Code. Its terms

restrict the promotion of infant formula and set out requirements for labeling all infant

formula products. It is less restrictive than regulations regarding prescription drugs, for

example, but it does forbid advertising of infant formula to the general public or the

employment of "milk nurses" to promote formula use among expectant mothers. It is

intended to serve as a model for codes to be adopted by nations as well as a guide for

company activities.

Third World Organizations (TWO)

An illustrative term being used here to reflect a group of organizations and committees

that accused Nestlé of unethical and socially irresponsible behavior. TWO believed that

Nestlé's actions were socially irresponsible and unethical. One of the their arguments

was that the consumers perceived the quality of the product as high, and were using

this over breast feeding, when in fact breast feeding was a more healthy approach. The

TWO felt Nestlé was being unethical by promoting their product as a better choice over

breastfeeding, as the consumers in these developing nations were educated enough to



make well informed decisions. Another of the TWO's agreements was that in some

countries, only polluted water was available therefore mothers would have to use

contaminated water for mixing the formula, ultimately passing the bacteria and diseases

on to the baby. Selling a product that has to be mixed with water when no healthy water

source available is socially irresponsible.

Knowledge

When Nestlé first entered these developing countries they didn’t have a multi-domestic

market orientation. They didn’t tailor their products or marketing activities to the culture

of the nations they were entering. They sold the formula in the developing countries as

they did in the US and other more developed nations. Only about 10% of products sold

in developing nations can be sold without any changes, meaning that companies

planning on entering these types of nations must do extensive research (including

diffusion research) to determine what adaption, if any, to their products and marketing

strategies has to occur in order to be successful.

In the United States and other more developed countries, formula does conform to the

values and behavior patterns of mothers. Many moms work and do not have more than

6 weeks at home with their baby. While they could pump milk and bottle feed the baby

later, this takes a lot of time. Most working mothers don’t have free time to sit around

doing this. Often women turn to formula at the point they have to go back to work. In a

society where women don’t work or they have 1-2 years at home with their children

breast feeding is more of an option. In less developed countries where many moms



don’t work, don’t have much money, and stay home with their children all day, nursing is

a necessity and formula feeding is more of a luxury.

Marketers act as change agents any time they introduce an innovative idea or product.

Nestlé’s entrance into the Third World markets and the advertising messages they

delivered started influencing the minds and behaviors of the mothers. They brought

about culture change in societies as women were shifting towards feeding their children

infant formula instead of breast milk. Since Nestlé was a change agent they had even

more responsibility when it came to the development of those societies. Prior to entering

the market, Nestlé’s plan should have included an assessment as to their best

marketing approach given the market. To determine whether the marketing approach

and promotions were socially responsible or ethical, look to the three ethical

principles: utilitarian ethics, rights of the parties, and justice or fairness. Nestlé's

actions did not optimize the benefits for all constituents. While their sales in Third World

countries benefited increased their profits, babies receiving the formula weren't more

susceptible to getting sick and being malnourished. Nestlé's actions didn't reflect

fairness or respect the rights of all parties involved. They marketed their infant formula

powder mix to societies that only had contaminated water at their disposal. They

promoted their products in a way as to infer that healthy western children drink formula.

For these reasons and others, Nestlé’s actions did demonstrate some unethical

behavior, unintended or not.

Behaving in a socially responsible way is something that will take a significant amount

of resources for a MNC that has operations in various countries. The international



marketer will have to understand all of the different societies. Acting socially responsible

quite possibly could mean different things in different markets. Therefore, the

businesses actions may be ethical in one country while the same actions and decisions

are considered unethical in another.

Businesses can not make all of their decisions based upon the operating nation's

existing laws. This is true because in some cases local laws don't exist and in some

markets certain behaviors are condoned while in others it is frowned upon. Since laws

were developed based on historical behaviors that society felt were unethical and or

socially irresponsible, businesses must operate at higher standards than dictated by the

laws in order to be considered ethical.

Companies need to understand how the cultural influences are interwoven with the

perceived value and importance a market places on their products. Products are a

bundle of utilities that the consumer receives and the culture and values of the

consumers plays a significant role in how important the product is to them. Prior to

entering these Third World markets, Nestlé should have thoroughly researched the

society and culture to determine the extent of adaption required of their products in

order to maximize the value of their products. Nestlé may have been able to offer a

different formula? If water pollution is a concern, they could sell only the ready-to-serve

formula in that nation. Maybe changing the name and/or labeling of the package to

better align themselves with the needs of the specific market would have been helpful.



Using the Product Component Model, the marketer can assess the impact of the factors

affecting the acceptance of a product, focusing on three main components: the core

component, the packaging component, and the support services component. These

components consist of the whole bundle of utilities, including all tangible and intangible

assets. In Nestlé's case, the core component was the actual powdered formula, the

packaging component included the bottle and the labeling, and the support services

could have been viewed as providing nutrition to the children. After assessing these

factors Nestlé may have discovered that it should have converted from powder formula

mix to premade formula, changing the core component. In regards to the packaging

component, Nestlé could have created labeling that would be understood by the

common person in that society. This might mean having pictures in place of words, or

clearly stating this is a second choice alternative to breast feeding. To add to the

support services component, Nestlé may have provided educational resources and or

nurses to help ensure the countries are utilizing the formula in a healthy and safe way .

Actions and Recommendations

Increasing their Social Responsibility and Ethical Behaviors

∙ Nestlé needs to do what ever it can to reposition itself as a force of good.

∙ Defense restrictions on commercial milk products will not necessarily promote more

breast-feeding because mothers may just feed their infants something else, so more

needs to be done to promote breast-feeding and Nestlé should find ways to help.



UNICEF executive Director James Grant along with other health experts have estimated

that as many as 1 million infant lives a year could be saved by the promotion of

breastfeeding, others have estimated that 10 million cases a year of malnutrition and

infectious disease are directly attributable to faulty bottle-feeding.

∙ Nestlé should find a way to become involved with the Baby-Friendly Hospital Initiative,

like sending in donations or even working with the organization to help.

∙ Nestlé should remain a member of Infant Food Manufactures (IFM).

∙ Nestlé should keep its internal Nestlé instructions to Nestlé employees updated and

up to standards to avoid any more problems.

∙ Nestlé should continue their efforts on social responsibility by sponsoring events at

international medical and nutrition conferences, and events like celebrating the

Canadian Year of the Family, and funding research on infant feeding.

∙ Nestlé should be careful with their pricing strategy and make sure they are selling their

products in third world countries for reasonable and affordable prices for the people,

and they should maybe consider selling the products for even less in these places.

∙ Nestlé also needs to learn from its mistakes and not be so neglectful and they should

respond to issues in a reasonable amount of time, because when they don’t they look

irresponsible and careless.

Recommendations Related to HIV

With the increased risk of HIV infection being spread via a mothers' milk, Nestlé has an



opportunity as a market for formula indeed exists if breast milk isn't feasible. Reach out

to the governments and the health agencies. Show them you have an international

commitment to their country. Specific to the nation, how can Nestlé help them fight in

the battle of HIV/AIDS? Can they provide testing and free samples to those positive for

HIV, as they did in one country? Maybe they can offer education on the benefits of

breast feeding and the risks as well if the mother isn’t healthy. For those not healthy

provide them with education about formula and some samples.

If a mom is HIV positive she can pass it to the baby via conception, birth, and

breastfeeding. You might be able to educate all of the people about HIV/AIDS so that

further spreading can be limited. If using condoms is a possibility for the people, maybe

provide them so that fewer women will contract HIV leading to fewer babies contracting

it from their moms. Setting up clinics for preconception, prenatal, and post-partum check

ups for the women providing them with the resources necessary to make informed

decisions about their health and their babies well being.

Nestlé should continue to offer testing and samples in less developing countries all the

while knowing how and what issues that society is facing, ensuring these efforts will

make matters better not worse. They should provide money and or prescriptions to help

those mom’s and babies infected. They should work with the governments and health

agencies to provide regular testing and condoms and education on contracting

HIV/AIDS. Educate the women on diseases that can be passed on to children

(conception, delivery, breast feeding). Educate moms/women on the benefits of breast



feeding when a mom is healthy. Offer tests for moms to determine if breast feeding is

the best option. If they are disease free, properly nourished, have enough water/food for

moms so their milk supply is healthy and plentiful. Increase the OB/GYN use. Pay for

doctor to provide checkups to the moms to help promote healthy pregnancy and

newborns.

How Could Nestlé Avoid These Accusations?

One thing that Nestlé could have done to have avoided the accusations of "killing Third

World babies" and still market their product is to develop a (global) marketing campaign

designed specific to the country, supporting breastfeeding and its benefits. Educate or

fund the education of communities about breastfeeding. Market bottle feeding and

formula as options to mom’s if they are sick, malnourished, or if the baby isn’t gaining

adequate weight. Offer testing for HIV and other contagious diseases that can be

passed from a mom to her baby via breastfeeding.

Recommendations on Protecting Themselves from Future Attacks

Learn and know the culture of the nation you are doing business in. They must ensure

that their marketing strategies and advertisements fit in with the culture and promote the

things specific to the society that are most important. Know if the country is sick. What is

the rate of HIV and other infectious diseases and can they be contracted via breast

milk? Know the culture of nations to best direct the marketing approach. A MNC must

have various marketing strategies dependent upon the characteristics of the market.

Some strategies may differ from region to region and only be able to use the same



strategies for various countries and/or regions.

Work with the government and any national health organization (example in the US

each state has a department of health). Identify their policies and beliefs. How can you

sell your products and be/remain socially responsible. If you work with a nation and get

their support you might be able to thwart attacks from the likes of the TWO. Know about

the various world organizations for example WHO, and their stance on your products

and the issues surrounding your products and the impact to their society of your

products and marketing activities.

Nestle has to make every effort to market their products in a socially responsible way,

which means different approaches in different societies. If malnourishment is a big

issue, market the formula as supplemental, only to be used in addition to breast milk in

order to ensure the baby gets all the nutrition required. In the US, the formula

commercials state that breast feeding is preferred, and there is usually a statement in

fine print at the bottom of the screen. The issue some have with this is they believe that

the people aren't as educated in developing countries therefore they don’t know or

understand the importance of breast feeding. They don’t have the same medical care as

in more affluent, developed countries.

Any products new to a social system are considered to be innovations. Obtaining

knowledge about the diffusion of these products will help to determine a successful

marketing strategy, guiding the communication of product information and attributes.



This is where Nestlé can ensure that their advertising and product labeling provide an

accurate representation of the benefits and weaknesses in feeding formula to your

infants. If they are aware that the product is going to be dispersed at a hospital upon

delivery, they can provide thorough education to the medical professionals so that they

clearly understand the product and its intended use, and can then share that info with

the new mothers.

Justification

Nestlé will favor continued sales rather than more restricted promotional methods, they

have changed their practices sufficiently to warrant cancellation of the boycott. Further,

Nestlé’s efforts to comply will probably not result in greater protection of infants as

competing companies will quickly fill the gaps, this would place Nestlé at a competitive

disadvantage that they may not be able to resist and will return to such practices. Also,

new strategies to encourage hospitals and health professionals to implement the WHO

Code will effectively control Nestlé and its competitors. A strategy that seeks national

adoption and enforcement of the WHO Code would be more reliable and fair to all

companies than the current boycott method which depends on violations coming to the

attention of leaders in affluent countries who can put forth commercial pressures on the

offending company.

Consequences

It is the business’s responsibility to perform an analysis paying careful attention to the

possible negative implications the introduction of their product may have. Otherwise, the



diffusion of their product can result in unplanned dysfunctional consequences to the

society. It is the marketer’s responsibility to develop marketing programs that will both

achieve product diffusion goals as well as avoid negative impacts to the culture. As in

the Nestlé case, its products had a negative impact on various cultures. The outcome

resulted in the company demonstrating corporate social responsibility by ensuring that

the best interests of mothers and babies are served by Nestlé employees around the

world.



References

1.Cateora, Philip R., John L. Graham. International Marketing 13th ed. New York:2007.

2.Nestlé Boycott, http://en.wikipedia.org/wiki/Nestl%C3%A9_boycott

3.www.nestle.com

4.www.jstor.org

5.http://mutinationalmonitor.org

6.www.heritage.org

7.www.babymilkaction.org

8.www.babymilk.nestle.com

9.www.breastfeeding.com

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