Nestlé - A Global Company Comes Under Fire

Term Paper, 2011

24 Pages, Grade: 1,3


Table of Content

1. Introduction

2. Biography of Henri Nestlé

3. History of the Company after 1875

4. Development during the Seventies

5. Conception and Structure
5.1. Guideline
5.2. Corporate structure

6. Nestlé in Different Parts of the World
6.1. The “Old” Europe
6.2. Eastern Europe
6.3. Germany
6.4. Asia, Oceania and Africa
6.5. America

7. Variety of Products
7.1. Beverage
7.2. Milk and diet products, ice cream, cereals, baby care products
7.3. Instant products, products for the kitchen
7.4. Chocolate and Sweets
7.5. Products for Pets

8. Acquisitions and Mergers

9. Marketing through an Umbrella Brand

10. Criticism
10.1. Globalization
10.2. Artificially Produced Food

11. Nestlé on the Philippines

12. Current Issues
12.1. General Development in 2010
12.2. Investigations in India
12.3. Halal food
12.4. Medical Food

13. List of References

14. List of Tables

1. Introduction

Nestlé as a well-known and at the same time controversial company having a revenue of about 80 billion Euros, founded and headquartered in Vevey, Switzerland (Nestlé Schweiz, 2010).

Most of the people are not aware of it while consuming Nestlé products and 95% of the Japanese think it is originated there (Schwarz, 2003). Many products are already consumed in the third generation. With 449 factories in 83 countries with 278,000 employees (Nestlé Group, 2009), which is an indicator for an unusual decentralization, Nestlé is the largest food and beverage company in the world and the industry combine with the highest revenue in Switzerland and one of the 50 leading companies worldwide concerning revenue and number of employees. As a very global combine 28% of the food revenue comes from emerging countries in Latin America and Asia, 40% from Europe and 26% from the USA and Canada. Not only the size but also the globalization makes Nestlé be different than all other competitors. Owning six main brands and about 8,500 national and regional brands it gets 70% of the revenue by selling brands that rank on the first or second place in each product segment. Nescafé, as one of the main brands, is the most consumed coffee brand in the world with 3,000 cups a second and Nesquik, Milo and Nescau make Nestlé be number one in the chocolate and malt drink section.

Abbildung in dieser Leseprobe nicht enthalten

Table 1 -Distribution of Revenue 2009

All in all Nestlé is characterized by three important features: strong brands, high presence and a leading position in the markets (Schwarz, 2003).

2. Biography of Henri Nestlé

The ancestors of Henri Nestlé lived in Sulz (Wuerttemberg) and worked as glaziers. Their last name has been written in different ways, varying between Nästlin, Nästlen, Nestlin and Nestlen, later becoming Nestle. Nestle is Swabian and stands for “small nest”, which later becomes the company`s logo. Henri later changed his name from Heinrich Nestle into Henri Nestlé to make it sound more French. He was born on 10th August 1814 in Frankfurt / Main as one of 14 children.

After having finished his 4-year-apprenticeship as a pharmacist he moved to Vevey (Switzerland) in 1839, where he passed his exam to work at a pharmacy. During that time Henri Nestlé started experimenting with chemical substances and to start up his own business he bought an oil mill to produce rape oil, nut oil, fuel for oil lamps, different liqueurs and vinegar while continuing experiments with mineral water and lemonade (Lüppens, 2006).

During a stay in Frankfurt he married Clementine Therese Ehemant in 1860. They stayed without children, but adopted a girl named Emma Nestlé (Nestlé Deutschland AG, 2010).

Henri Nestlé cared a lot about health problems and a high baby death rate because of weak baby food. With the help of the chemist Justus Liebig Henri Nestlé invented a mixture called “Kindermehl” (children flour) in 1867, which consists of grain, milk and sugar. Thanks to a special drying procedure nutrients were kept. Seven years after the foundation of the children flour factory “Farine Lactée Henri Nestlé” they already sold one million cans in 18 countries of the world. In 1875 Nestlé realized the need for a big organizational change within the company (Lüppens, 2006). Exhausted and tired from work Henri Nestlé sold his entire company to his former flour supplier Pierre-Samuel Roussy for one million Swiss Francs (about 750,000 Euros) (Maucher, 1992). At the age of 61 he retired and bought the “Villa Nestlé” in Glion not far from Montreux. He finally died on 7th July 1890 at the age of 76 years. He now rests at the cemetery of Territet in Montreux (Nestlé Deutschland AG, 2010).

3. History of the Company after 1875

Nestlé was changed into a corporation on 8th March 1875 and unionized with the “Anglo Swiss Condesed Milk Co” (the first evaporated milk factory in Europe), which used to be a strong competitor before. From the beginning of the 20th century the company kept on growing constantly (Lüppens, 2006).

The reason which made the entrance into the chocolate business possible was the integration of Peter, Cailler and Kohler in 1929. This step was followed by the invention of the first instant coffee “Nescafé” in 1938.

The Great Depression and the two World Wars could not stop the growth and in 1946 Nestlé owned 107 factories on all five continents. At that time the company was specialized on five main fields: milk products, specially sugared evaporated milk, children food, chocolate and instant drinks (Schwarz, 2003).

The fusion with Maggi in 1947 changed the company`s name into “Nestlé Alimentana AG” (Lüppens, 2006).

During the 1950s the revenue of Nestlé doubled because of a great growth in the culinary product and instant drink section. Between 1960 and 1974 the company got participations in seven product sections: cans, ice cream, frozen food, refrigerated products, mineral water, restaurants and Californian wine, which made the revenue increase from 4.146 billion Swiss Francs in 1960 to 16.624 billion Swiss Francs in 1974.

Inflation and high coffee and cacao prices made the company`s growth decrease between 1975 and 1980.

After the renaming into “Nestlé AG” in 1977, Helmut Macher, the former head of Nestlé Germany took the leadership of the entire company in 1980. Later he was going to be called “Mr. Nestlé”. In 1986 he became chief executive and president of the board of directors in 1990, which would not be possible in Germany. Within four years he made the liquidity increase again to make more growth possible and reached that Nestlé became the largest food and beverage company in the world in 1996 (Schwarz, 2003).

4. Development during the Seventies

The company’s development during the Seventies has been quite significant for Nestlé. Because of the merger with the Swiss Ursina-Franck company (production of milk products, child food and culinary products) in 1971 Nestlé calculated on a great synergies, mainly in their production and sales but also concerning the export. Later this estimate was going to become true.

Another focus of the external growth at that time was on diversification apart the food sector starting with the French L’Oréal group (hair-care products, cosmetics), in which Nestlé joined with 49% in 1974. From then the way for a long range growth was prepared.

Although Nestlé had to sell quite different products now the main approach for marketing was always the same. The external growth between 1960 and 1974 was immense and the company became a welcome cooperation partner.

But also the internal growth was not bad at that time, the sales of instant coffee quadrupled during those 14 years. After the first petroleum shock and the crisis years the unemployment rates started growing, all prices were skyrocketing and while the inflation found its way into the developing countries, foreign exchange rates destabilized in the rest of the world. Finally the coffee prices quadrupled and the cacao prices trebled between 1975 and 1977 because of frosts and a high demand. This development also influenced Nestlé and made the growth decelerate.

But especially the development in the developing countries made the internal growth increase again in the second part of the Seventies. The demand of Nestlé products grew thanks to great external loans and the consequential heightened purchasing power in the countries of the Third World and Nestlé tried to expedite their activities in this region of the world.

During that time the external growth played a minor role, because the economical situation was bad for acquisitions and the prices of raw material made it be tied to the working capital.

Another important point to characterize the development during the Seventies is a geographical redistribution because of the faster growth in developing countries compared to industrial countries. The decelerating consumption development there (because of a minor growth of population and a shrinking amount of food concerning household budgets) made the economic situation deteriorate and the competition on the market becomes harder.

In the end this development ends in a radical strategy to strengthen the company’s resources: internally through an improvement of the revenue and financial situation and externally through important acquisitions.

As a result of those changes Nestlé parts with products with a low net product (e.g. Libby’s in 1982), and precludes durable losses without a prospect of improvement. The success of this method becomes visible in the company’s sales figures: while the clear profit in 1980 amounts to 683 million Francs (= 525.4 million Euros) which refers to 2.8% of the profit, in 1984 the clear profit was 1487 million Francs (1144 million Euros) – 4,8% of the at all profit. Nestlé’s bank depts decreased from 4 billion Francs in 1980 to 3 billion Francs in 1984 (Maucher, 1992).


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Nestlé - A Global Company Comes Under Fire
Stralsund University of Applied Sciences
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Laura Klöpping (Author), 2011, Nestlé - A Global Company Comes Under Fire, Munich, GRIN Verlag,


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