International Marketing Jr. year.

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
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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
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Soups and sauces
Frozen foods
Pet food
Cosmetics
Supplements
Life insurance

4. Sales and Revenues

6. Products

7. Geography

8. Segment Revenue

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.

31. Sources
• http://www.nestle.com/asset-
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library/Documents/Library/Documents/Financial_Statements/2012-FinancialStatements-EN.pdf
http://www.babymilk.nestle.com/who-code-compliance/Pages/default.aspx
http://www.babymilk.nestle.com/who-code-compliance/nestlepolicy/Pages/default.aspx
http://www.nestle.com/asset-library/documents/r_and_d/compliance/2011external-report-code-compliance.pdf
http://www.indexmundi.com/g/r.aspx?v=67
http://www.theguardian.com/news/datablog/2009/mar/03/access-water
http://www.foxnews.com/world/2013/07/04/nestle-says-it-will-cut-some-its-infantformula-prices-in-china-after-price/#ixzz2el9mY4Gf
http://www.nestle.com/assetlibrary/documents/library/documents/fact_sheets/facts-figures-nestle-china.pdf
http://www.babymilkaction.org/pdfs/icifistatement81.pdf
http://www.nestle.com/media/pressreleases/allpressreleases/full-year-results2012