Nestle Swot Analysis

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The Infant Formula Controversy Nestle Alimentana ofVevey, Switzerland, one of the world’s largest food-processing companies with worldwide sales of over $8 billion, has been the subject of an international boycott. For over 20 years, beginning with a Pan American Health Organization allegation, Nestle has been directly or indirectly charged with involvement in the death of Third World infants. The charges revolve around the sale of infant feeding formula, which allegedly is the cause for mass deaths of babies in the Third World.
In 1974 a British Journalist published a report that suggested that owdered-formula manufacturers contributed to the death of Third World infants by hard-selling their products to people incapable of using them properly. The 28-page report accused the industry of encouraging mothers to give up breast feeding and use powdered milk formulas. The report was later published by the Third World Working Group, a lobby in support of less-developed countries. The pamphlet was entitled “Nestle Kills Babies,” and accused Nestle of unethical and immoral behavior.
Although there are several companies that market infant baby formula internationally, Nestle received most of the attention. This incident raises several issues important to all multinational companies. Before addressing these issues, let’s look more closely at the charges by the Infant Formula Action Coalition and others and the defense by Nestle. on the intensive advertising and promotion of infant formula. Clever radio Jingles extol the wonders of the “white man’s powder that will make baby grow and glow. “Milk nurses” visit nursing mothers in hospitals and their homes and provide samples of formula. These activities encourage mothers to give up breast feeding and resort to bottle feeding because it is “the fashionable thing to do or because eople are putting it to them that this is the thing to do. ” THE DEFENSE The following points are made in defense of the marketing of baby formula in Third World countries: . First, bottle carry states Nestle argues that the company has never advocated feeding instead of breast feeding. All its products a statement that breast feeding is best.
The company that it “believes that breast milk is the best food for The company offers as support of this statement one of Nestle’s oldest educational booklets on “Infant Feeding and Hygiene,” which dates from 1913 and encourages breast feeding.. However, the company does believe that infant formula has a vital role in proper infant nutrition as a supplement, when the infant needs nutritionally adequate and appropriate foods in addition to breast milk, and as a substitute for breast milk when a mother cannot or chooses not to breast feed.
One doctor reports, “Economically deprived and thus dietarily deprived mothers who give their children only breast milk are raising infants whose growth rates begin to slow noticeably at about the age of three months. These mothers then turn to supplemental feedings that are often harmful to children. These include herbal teas and concoctions of rice water or corn water and sweetened, condensed milk. These feedings can also be prepared with contaminated water and are served in unsanitary conditions. ” . Mothers in developing nations often have dietary deficiencies.
In the Philippines, a mother in a poor family who is nursing a child produces about a pint of milk daily. Mothers in the United States usually produce about a quart of milk each day. For both the Filipino and U. S. mothers, the milk produced is equally nutritious. The problem is that there is less of it for the Filipino baby. If the Filipino mother doesnt ugment the child’s diet, malnutrition develops. Many poor women in the Third World bottle feed because their work schedules in fields or factories will not permit breast feeding.
The infant feeding controversy has largely to do with the gradual introduction of weaning foods during the period between three months and two years. The average well-nourished Western woman, weighing 20 to 30 pounds more than most women in less-developed countries, cannot feed only breast milk beyond five or six months. The claim THE CHARGES Most of the charges against infant formulas focus on the issue of whether advertising nd marketing of such products have discouraged breast feeding among Third World mothers and have led to misuse of the products, thus contributing to infant malnutrition and death.
Following are some of the charges made: . A Peruvian nurse reported that formula had found its way to Amazon tribes deep in the Jungles of northern Peru. There, where the only water comes from a highly contaminated river-which also serves as the local laundry and toiletformula-fed babies came down with recurring attacks of diarrhea and vomiting. . Throughout thetheir supply. Some even believe thethe for Third World,many parents ilute mula to stretch bottle . One doctor reported that in a rural area, one newborn male itself has nutrient qualities and merely fill it with water.
The result is extreme . whole ofMexico, the Philippines,a Central America, and the In rural the Africa, there has been dramatic decrease in 600 weighed 7 pounds. At four months of age, he weighed 5 pounds. His sister, aged 18 months, weighed 12 pounds, what one would expect a four-month-old baby to weigh. She later weighed only 8 pounds. The children had never been breast fed, and since birth their diets were basically bottle feeding. For a four-month-old baby, one can of formula should have lasted Just under three days. The mother said that one can lasted two weeks to feed both children. ncidence of breast feeding. Critics blame the decline largely Cases 1 An Overview 601 . Weaning foods can be classified as either native cereal that Third World women can breast feed exclusively for one or two years and have healthy, well-developed children is outrageous. Thus, all children beyond the ages of five to six months require supplemental feeding. gruels of millet or rice, or commercial manufactured milk formula. Traditional native eaning foods are usually made by mixing maize, rice, or millet flour with water and then cooking the mixture.
Other weaning foods found in use are crushed crackers, sugar and water, and mashed bananas. There are twobasic dangers to the use of native weaning foods. First, the nutritional quality of the native gruels is low. Second, microbiological contamination of the traditional weaning foods is a certainty in many Third World settings. The millet or the flour is likely to be contaminated, the water used in cooking will most certainly be contaminated, and the cooking containers will e contaminated; therefore, the native gruel, even after it is cooked, is frequently contaminated with colon bacilli, staph, and other dangerous bacteria.
Moreover, large batches of gruel are often made and allowed to sit, inviting further contamination. . Scientists recently compared the microbiological contami. The real nutritional problem in the Third World is not nation of a local native gruel with ordinary reconstituted milk formula prepared under primitive conditions. They found both were contaminated to similar dangerous levels. with nutritionally adequate foods when they are needed. Finding adequate locally roduced, nutritionally sound supplements to mothers’ milk and teaching people how to prepare and use them safely are the issues.
Only effective nutrition education along with improved sanitationand goodfoodthatpeoplecan affordwillwin the fght against dietary deficiencies in the Third World. THE RESOLUTION In 1974,Nestle, aware of changing social patterns in the developing world and the increased access to radio and television there, reviewed its marketing practices on a region-by-region basis. As a result, mass media advertising of infant formula began to be phased out immediatelyin certain marketsand, by 1978,was banned worldwide y the company.
Nestle then undertook to carry out more comprehensive health education programs to ensure that an understanding of the proper use of their products reached mothers, particularly in rural areas. “Nestle fully supports the WHO [World Health Organization] Code. Nestle will continue to promote breast feeding and ensure that its marketing practices do not discourage breast feeding anywhere. Our company intends to maintain a constructive dialogue with governments and health professionals in all the countries it serves with the sole purpose of servicing mothers and the health of babies.
This quote is from Nestle Discusses the Recommended WHO bifant Formula Code. In 1977, the Interfaith Center on Corporate Responsibility in New Yorkcompiled a case against formula feeding in developing nations, and the Third World Institute launched a boycott against many Nestle products. Its aim was to halt promotion of infant formulas in the Third World. The Infant Formula Action Coalition (INFACT, successor to the Third World Institute), along with several other world organizations, successfully lobbied the World Health Organization to draft a code to regulate the advertising and marketing of infant ormula in the Third World.
In 1981, by a vote of 114 to I (three countries abstained and the United States was the only dissenting vote), 118 member nations of WHO endorsed a voluntary code. The eight-page code urged a worldwide ban on promotion and advertising of baby formula and called for a halt to distribution offTee product samples or gifts to physicians who promoted the use of the formula as a substitute for breast milk. In May 1981 Nestle announced it would support the code and waited for individual countries to pass national codes that would then be put into effect.
Unfortunately, very few such codes were forthcoming. By the end of 1983, only 25 of the 157 member nations of the WHO had established national codes. Accordingly, Nestle management determined it would have to apply the code in the absence of national legislation, and in February 1982 it issued instructions to marketing personnel that delineated the company’s best understanding of the code and what would have to be done to follow it. In addition, in May 1982 Nestle formed the Nestle Infant Formula Audit Commission (NIFAC), chaired by former Senator Edmund 1 .
Muskie, and asked the commission to review the company’s instructions o field personnel to determine if they could be improved to better implement the Nations Children’s Fund) to try to obtain the most accurate interpretation ofthe code. NIFAC recommended several clarifications for the instructions that it believed would better interpret ambiguous areas of the code; in October 1982, Nestle accepted those recommendations and issued revised instructions to field personnel. Other issues within the code, such as the question of a warning statement, were still open to debate.
Nestle consulted extensively with WHO before issuing its label warning tatement in October 1983, but there was still not universal agreement with it. Acting on WHO recommendations, Nestle consulted with firms experienced and expert in developing and field testing educational materials, so that it could ensure that those materials met the code. When the International Nestle BoycottCommittee (INBC) listed its four points of difference with Nestle, it again became a matter of interpretation of the requirements of the code.
Here, meetings held by UNICEF proved invaluable, in that UNICEF agreed to define areas of differing interpretation-in ome cases providing definitions contrary to both Nestle’s and ‘NBC’s interpretations. It was the meetings with UNICEF in early 1984 that finally led to a Joint statement by Nestle and INBC on January 25. At that time, INBC announced its suspension of boycott activities, and Nestle pledged its continued support of the WHO code.
NESTLE SUPPORTSWHO CODE The company has a strong record of progress and support in implementing the WHO code, including the following: Immediate support for the WHO code, May 1981, and testi- mony to this effect before the U. S. Congress, June 1981.. Issuance of instructions to ll employees, agents, and distributors in February 1982 to implement the code in all Third World countries where Nestle markets infant formula. Article 1 1. 3 of the WHO code, to ensure the company’s compliance with the code.
The commission, headed by . Establishment of an audit commission, in accordance with 602 Part6 Supplementary Material Edmund S. Muskie, was composed of eminent clergy and scientists. Representatives complying with World Health Organization and individual national codes on the subject. . Willingness to meet with concerned church leaders, interna. Issuance of revised nstructions to Nestle personnel, October . 1982, as recommended by the Muskie committee to clarify and give further effect to the code.
Consultation with WHO, UNICEF,and NIFAC on how to interpret the code and how best to implement specific provisions, including clarification by WHO/UNICEF of the definition of children who need to be fed breast milk substitutes, to aid in determining the need for supplies in hospitals. tional bodies, and organization leaders seriously concerned with Nestle’s application of the code. THE NEW TWISTS A new environmental factor has made the entire case more complex: As of 2001 it as believed that some 3. million children around the world had contracted the human immunodeficiency virus (HIV) at their mothers’ breasts. In affluent countries mothers can be told to bottle feed their children. However,90 percent of the child infections occur in developing countries. There the problems of bottle feeding remain. Further, in even the most infected areas, 70 percent of the mothers do not carry the virus, and breast feeding is by far the best option. The vast majority of pregnant women in developing countries have no idea whether they are infected or ot.
One concern is that large numbers of healthy women will switch to the bottle just to be safe. Alternatively, if bottle feeding becomes a badge of HIV infection, mothers may continue breast feeding Just to avoid being stigmatized. In Thailand, pregnant women are offered testing, and if found HIV positive, are given free milk powder. But in some African countries, where womenget pregnant at three times the Thai rate and HIV infection rates are 25 percent compared with the 2 percent in Thailand, that solution is much less feasible.
Moreover, the latest medical evidence ndicates that extending breastfeeding reduces the risk of breast cancer. Most recently the demand for infant formula in South Africa has outstripped supply as HIV-infected mothers make the switch to formula. Demand grew 20 percent in 2004 and the government is investigating the shortages as Nestle scrambles to’catch up with demand. The firm reopened a shuttered factory and began importing formula from Brazil. NESTLE POLICIES In the early 1970s Nestle began to review its infant formula marketing practices on a region-by-region basis.
By 1978the company had stopped all consumer advertising nd direct sampling to mothers. Instructions to the field issued in February 1982 and clarified in the revised instructions of October 1982 to adopt articles of the WHO code as Nestle policy include the following: . No advertising to the general public . No sampling to mothers . No mothercraft workers . No use of commission/bonus . No use of infant pictures on labels . No point-of-sale advertising No financial or material inducements to promote products .
Labels and educational materials clearly stating the hazards Limitation of supplies to those requested in writing and fulfilling genuine needs for breast milk ubstitutes A statement of the superiority of breast feeding on all labels/materials 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 THE ISSUES Many issues are raised by this incident and the ongoing swirl of culturalchange. Howcan a companydeal witha worldwide boycott of its products?
Why did the United States decide not to support the WHO code? Who is correct, WHO or Nestle? A more important issue concerns the responsibility of an MNC marketing in eveloping nations. Setting aside the issues for a moment, consider the notion that, whether intentional or not, Nestle’s marketing activities have had an impact on the behavior of many people. In other words, Nestle is a cultural change agent. When it or any other company successfully introduces new ideas into a culture, the culture changes and those changes can be functional or dysfunctional to established patterns of behavior.
The key issue is, What responsibility does the MNC have to the culture when, as a result of its marketing activities, it causes change in that culture? Finally,how might Nestle now participate in the battle against the spread of HIV and AIDS in developing countries? involved in incorrect usage of infant formula, developed in consultation with WHO/ UNICEF Even though Nestle stopped consumer advertising, it was able to maintain its share of the Third World infant formula market. In 1988 a call to resume the seven- year boycott was made by a group of consumer activist members of the Action for Corporate Accountability.
The group claimed that Nestle was distributing free formula through maternity wards as a promotional tactic that undermined the practice of breast feeding. The group claimed that Nestle and others, including American Home Products, have continued to dump formula in hospitals and maternity wards and that, as a result, “babies are dying as the companies are Breastfeeding Monitoring (IGBM) claimed Nestle continues to systematically violate the WHO code. Nestle’s response to these accusations is included on its Web site (see www. nestle. com for details).
The boycott focus is Taster’s Choice Instant Coffee, Coffee-mate Nondairy Coffee Creamer, Anacin aspirin, and Advil. QUESTIONS l. What are the responsibilities of companies in this or similar situations? 2. What ould Nestle have done to have avoided the accusations of “killing Third World babies” and still market its product? 3. After Nestle’s experience, how do you suggest it, or any other company, can protect itself in the future? Cases 1 An Overview 603 4. Assume you are the one who had to make the final decision on whether or not to promote and market Nestle’s baby formula in Third World countries.
Read the section titled “Ethical and Socially Responsible Decisions” in Chapter 5 (pp. 148-149) as a guide to examine the social responsibility and ethical issues regarding the marketing approach and the promotion used. Were the decisions socially responsible? Were they ethical? 5. What advice would you give to Nestle now in light ofthe new problem of HIV infection being spread via mothers’ milk? This case is an update of “Nestle in LDCs,” a case written by J. Alex Murray, University of Windsor, Ontario, Canada, and Gregory M. Gazda and Mary J. Molenaar, University of San Diego.
The case originally appeared in the fifth edition of this text. The case draws from the following: “International Code of Marketing of Breastmilk Substitutes” (Geneva: World Health Organization, 1981); INFACT Newsletter, Minneapolis, February 1979; John A. Sparks, “The Nestle Controversy-Anatomy of a Boycott” (Grove City, PA: Public Policy Education Funds); “WHO Drafts a Marketing Code,” WorldBusiness WeeklyJanuary 19, 1981, p. 8; “A Boycott over Infant Formula,” Business Week,April 23, 1979, p. 137; “The Battle over Bottle-Feeding,” WorldPress Review. January 1980, p. 4; “Nestle and the Role of Infant Formula in Developing Countries: The Resolution of a Conflict” (Nestle Company, 1985); “The Dilemma of Third World Nutrition” (Nestle SA, 1985),20 pp. ; Thomas V. Greer, “The Future of the International Code of Marketing of Breastmilk Substitutes: The Socio-Legal Context,” Inrernational Marketing Review, Spring 1984, pp. 33-41; James C. Baker, “The International Infant Formula Controversy: A Dilemma in Corporate Social Responsibility,”Journal of Business Ethics, 1985, no. 4, pp. 181-190; and Shawn Shows How to Gobble Markets,” Fortune, January 16, 1989, p. 75.
For a comprehensive and well-balanced review of the infant formula issue, see Thomas V. Greer, “International Infant Formula Marketing: The Debate Continues,” Advances in International Marketing, 1990, 4, pp. 207-225. For a discussion of the HIV Freedman and Steve Stecklow, “Bottled Up: As UNICEF Battles Baby-Formula Makers, African Infants Sicken,” WallStreet Journal, December 5, 2000; Rone Tempest, “Mass Breast-Feeding by 1,128 Is Called a Record,” Los Angele.. Times, August 4, 2002, p. 81; “South Africa: Erratic Infant Formula Supply Puts PMTCT at Risk, “All AfricalCOMTEX, August 22, 2005.
Case 1-2 Nestle The Infant Formula Incident Summary of Case and Results In response to a pamphlet entitled “Nestle Kills Babies,” published in 1974 by the Swiss consumer/activist group, Arbeitsgruppe Dritte Welt, Nestle Alimentana filed a four-count libel suit against members of the organization. The pamphlet was a reprint of an earlier one entitled “Bottled Babies,” published by a similar British group. Both alleged that false advertising had prompted mothers in LDCs to use infant fonnula instead of breast feeding, and consequently caused the deaths of thousands of children.
However, the original pamphlet had not mentioned Nestle or any of the other companies by name, and thus did not raise the issue of libel. Three of the charges, which Nestle subsequently withdrew, related to allegations made in the pamphlet about Nestle’s promotional methods in LDCs. The fourth charge, which led to a Judgment against thirteen embers of the group in June 1976, focused on the defamatory title “Nestle Kills Babies. ” In his decision, the Judge stated that the cause behind the injuries and deaths was not Nestle’s products; rather, it was the unhygienic way they were prepared by end-users.
Although Nestle won its case, the finn’s victory was diluted by (l) having to pay one third of the court costs and (2) being told by the Judge to change its marketing methods to prevent further misuse of its products. The defendants were ordered to pay $120 each in damages to Nestle and two thirds of court costs. Suggestions Companies selling consumable products (foods, beverages, hannaceuticals) to LDCs have long recognized the need to adapt their promotional techniques to their consumers who are, by and large, poor and illiterate.
In recent years, one particular group of food producers-those firms making infant formula and other milk products-has come under severe attack by various religious, consumer and governmental organizations. Criticism focuses on two issues: (l) that companies allegedly use false advertising to induce mothers to substitute fonnula for their own milk, and (2) that firms are directly responsible when misuse of their products results in illness or death. The assault was dramatized in the recent Swiss case involving Nestle Alimentana.
The responses of milk product manufacturers have ranged :from writing corporate policies on LDC marketing to organizing industry councils and holding meetings with pressure groups. But most significantly, companies have altered marketing practices in ways that other firms making consumable items should find instructive.

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