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Nestlé S.A.

Nestlé S.A.

Avenue Nestlé 55
CH-1800 Vevey
Switzerland
(021) 924-2111
Fax: (021) 921-1885
Web site: http://www.nestle.com

Public Company
Incorporated
: 1866 as Anglo-Swiss Condensed Milk Company
Employees : 225,808
Sales : SFr 71.7 billion (US$52.09 billion) (1998)
Stock Exchanges : Basle Geneva Zurich Amsterdam Brussels Frankfurt London Paris Tokyo Vienna
NAIC : 311514 Dry, Condensed, & Evaporated Dairy Product Manufacturing; 31152 Ice Cream & Frozen Dessert Manufacturing; 311511 Fluid Milk Manufacturing; 311421 Fruit & Vegetable Canning; 311411 Frozen Fruit, Juice, & Vegetable Processing; 311412 Frozen Specialty Food Manufacturing; 31123 Breakfast Cereal Manufacturing; 311111 Dog & Cat Food Manufacturing; 31132 Chocolate & Confectionery Manufacturing from Cacao Beans; 312111 Soft Drink Manufacturing; 31193 Flavoring Syrup & Concentrate Manufacturing; 31192 Coffee & Tea Manufacturing; 311823 Dry Pasta Manufacturing; 311999 All Other Miscellaneous Food Manufacturing; 325412 Pharmaceutical Preparation Manufacturing; 32562 Toilet Preparation Manufacturing

Nestlé S.A. is the largest food company in the world. With about 500 manufacturing facilities on six continents, Nestlé has often been called the most multinational of the multinationals, largely because less than two percent of its sales are made in its home country. About 37 percent of sales are derived from the overall European market, 32 percent from the Americas, and 19 percent from Africa, Asia, and Oceania (with the remainder not geographically categorized). Nestlé S.A. is a holding company for more than 200 subsidiaries and affiliates that manufacture and sell a wide variety of products, including coffee, mineral water, chocolate and malted beverages, chocolates and confectionery, culinary and refrigerated products, dairy products, baby food, breakfast cereal, frozen foods and ice cream, pet foods, pharmaceutical products, and cosmetics.

Early History

While serving as the American consul in Zurich, Charles Page decided that Switzerland, with its abundant milk supply and easy access to the whole European market, was the perfect location for a condensed milk factory. The first canned condensed milk had been produced in the United States by Gail Borden some ten years before, and originally Page planned to produce and sell Borden Milk in the European market as a licensee. The plan fell through, however, so in 1866 he established the Anglo-Swiss Condensed Milk Company as a limited company in Cham, Switzerland.

The companys name was meant to flatter the British, to whom Page hoped to sell a great deal of his condensed milk. Anglo-Swiss first expanded its operations beyond Switzerlands borders in 1872, when it opened a factory in Chippenham, England. Condensed milk rapidly became a staple product in European cupboardsthe business downturn in 1872 and the depression of 1875 did not affect the firms sales. Charles Page died in 1873, leaving the company in the hands of his brother George and Anglo-Swisss other investors. The next year, Anglo-Swiss undertook further expansion in England by purchasing the Condensed Milk Company in London. By 1876 sales were almost four times their 1872 level.

Meanwhile, in Vevey, Switzerland, in 1867 Henri Nestlé began selling his newly developed cows -milk food for infants who could not be breast-fed. Demand for his Farine Lactée Nestlé soared; between 1871 and 1873, daily production more than doubled, from fewer than 1,000 tins a day to 2,000. Nestlés goal was to bring his baby food within everyones reach, and he spared no effort in trying to convince doctors and mothers of its benefits. But while his energy and good intentions were nearly endless, his financial resources were not. By 1873, demand for Nestlés product exceeded his production capabilities, resulting in missed delivery dates. At 61, Nestlé was running out of energy, and his thoughts turned to retirement. Jules Monnerat, a former member of parliament who lived in Vevey, had long eyed the business, and in 1874 Nestlé accepted Monnerats offer of SFr 1 million. Thus, in 1875, the company became Farine Lactée Henri Nestlé with Monnerat as chairman.

In 1877 Nestlé faced a new competitor when the Anglo-Swiss Condensed Milk Companyalready the leading manufacturer of condensed milk in Europedecided to broaden its product line and manufacture cheese and milk food for babies. Nestlé quickly responded by launching a condensed milk product of its own. George Page tried to buy the competing company outright, but he was firmly told that Nestlé was not for sale. Turning his attention elsewhere, he purchased the Anglo-Swiss companys first factory in the United States in 1881. The plant, located in Middletown, New York, was built primarily to escape import duties, and it was soon successful enough to challenge Bordens supremacy in the U.S. condensed milk market. It also presented a drawback: George Page spent so much time there that Anglo-Swiss began to lose its hold on Europemuch to the delight of Nestlé. After George Pages death in 1899, the Anglo-Swiss Condensed Milk Company decided to sell its American business to Borden in 1902 so that it could concentrate on regaining market share in Europe.

Until 1898 Nestlé remained determined to manufacture only in Switzerland and export to its markets around the world. But that year the company finally decided to venture outside Switzerland with the purchase of a Norwegian condensed milk company. Two years later, in 1900, Nestlé opened a factory in the United States, and quickly followed this by entering Britain, Germany, and Spain. Early in the 1900s, Nestlé also became involved in chocolate, a logical step for a company based in Vevey, the center of the Swiss chocolate industry. Nestlé became a partner in the Swiss General Chocolate Company, the maker of the Peter and Köhler brands. Under their agreement, the chocolate company produced the first Nestlé brand milk chocolate, while Nestlé concentrated on selling the Peter, Köhler, and Nestlé brands around the world.

Nestlé and Anglo-Swiss Merged in 1905

In 1905 Nestlé and the Anglo-Swiss Condensed Milk Company finally quelled their fierce competition by merging to create the Nestlé and Anglo-Swiss Milk Company. The new firm would be run by two registered offices, one in Vevey and one in Cham, a practice it continues today. With Emile-Louis Roussy as chairman, the company now included seven factories in Switzerland, six in Great Britain, three in Norway, and one each in the United States, Germany, and Spain.

In response to an increase in import duties in Australia Nestlés second largest export marketthe company decided to begin manufacturing there in 1906 by buying a major condensed milk company, the Cressbrook Dairy Company, in Brisbane. In the next few years production and sales continued to increase as the company began to replace sales agents with subsidiary companies, particularly in the rapidly growing Asian markets.

Most of its factories were located in Europe, however, and when World War I broke out in 1914, Nestlés operations, particularly in such warring countries as Britain and Germany, were seriously affected. Although production continued in full force during the early months of the war, business soon grew more difficult. By 1916 fresh milk shortages, especially in Switzerland, meant that Nestlés factories often sold almost all of their milk supplies to meet the needs of local towns. Shipping obstacles, increased manufacturing and operating costs, and restrictions on the use of production facilities added to Nestlés wartime difficulties, as did a further decrease in fresh milk supplies due to shortages of cattle.

To deal with these problems and meet the increased demand for its products from governments supplying their troops, Nestlé decided to expand in countries less affected by the war and began purchasing existing factories, particularly in the United States, where it established links with several existing firms. By 1917 Nestlé had 40 factories, and in 1918, its world production was more than double what it was in 1914. Nestlé pursued the same strategy in Australia; by 1920 it had acquired a controlling interest in three companies there. That same year, Nestlé began production in Latin America when it established a factory in Araras, Brazil, the first in a series of Latin American factories. By 1921, the firm had 80 factories and 12 subsidiaries and affiliates. It also introduced a new product that year powdered milk called Lactogen.

It did not take long for the effects of such rapid expansion to catch up with the company, however. Nestlé and Anglo-Swiss reported its first loss in 1921, to which the stock market reacted with panic, making matters worse. The company explained that the SFr 100 million loss was due to the rising prices of raw materials such as sugar and coal, and a trade depression that had caused a steady fall in consumer purchasing power, coupled with falling exchange rates after the war, which forced the company to raise prices.

Company Perspectives

Throughout its history, Nestlé culture has been formed by an abiding sense of responsibility to our consumers. Henri Nestlé created this Company s first product, Farine Lactée Henri Nestlé, out of a desire to help solve the problems of infant mortality that plagued Europe during the 19th century. In the 130 years since, we have never lost sight of the fact that our primary purpose is to help improve the quality of life for people everywhere.

To battle the storm, the company decided to reorganize both management and production. In 1922 it brought production in line with actual sales by closing some of its factories in the United States, Britain, Australia, Norway, and Switzerland. It also hired Louis Dapples, a banking expert, to put the company back in order. Dapples directed Nestlé with an iron fist, introducing stringent financial controls and reorganizing its administration. By 1923, signs of improvement were already evident, as Nestlés outstanding bank loans had dropped from SFr 293 million in 1921 to SFr 54.5 million in 1923. Meanwhile in France, Belgium, Italy, Germany, and South Africa, production facilities were expanded. By consolidating certain operations and expanding others, Nestlé was also able to widen its traditional range of products.

Overall, the late 1920s were profitable, progressive times. In addition to adding some new products of its ownincluding malted milk, a powdered beverage called Milo, and Eledon, a powdered buttermilk for babies with digestive disordersthe company bought interests in several manufacturing firms. Among them were butter and cheese companies, as well as Sarotti A.G., a Berlin-based chocolate business that began manufacturing Nestlé, Peter, Cailler, and Köhler chocolate. In 1928, under the direction of Chairman Louis Dapples, Nestlé finally merged with Peter, Cailler, Kohler, Chocolats Suisses S.A. the resulting company of a 1911 merger between the Swiss General Chocolate Company and Cailler, another leading firmadding 13 chocolate plants in Europe, South America, and Australia to the growing firm.

Expanded During the Great Depression

Nestlé was becoming so strong that it seemed even the Great Depression would have little effect on its progress. In fact, its U.S. subsidiary, Nestlés Food Company Inc. of New York, barely felt the stock market crash of 1929. In 1930 Nestlé created new subsidiaries in Argentina and Cuba. Despite the Depression, Nestlé added more production centers around the world, including a chocolate manufacturer in Copenhagen and a small factory in Moravia, Czechoslovakia, to manufacture milk food, Nescao, and evaporated milk. Factories were also opened in Chile and Mexico in the mid-1930s.

While profits were down 13 percent in 1930 over the year before, Nestlé faced no major financial problems during the Depression, as its factories generally maintained their output and sales were steady. Although Nestlés New York-based subsidiary, renamed Nestlés Milk Products Company, was more affected than those in other countries, U.S. sales of milk products were steady until 1931 and 1932, when a growing public frugality began to cause trouble for more expensive but established brands such as Nestlés. Profit margins narrowed, prices dropped, and cutthroat competition continued until 1933, when new legislation set minimum prices and conditions of sales.

The markets, such as the United States, that were among the first to feel the effects of the Depression were also the first to recover from it. The Depression continued in Switzerland, however. Nestlé products manufactured there could no longer compete on international markets since Swiss currency exchanges were made especially difficult from the early 1930s, when many major countries devalued their currencies, until 1936, when Switzerland finally did likewise. The company decided to streamline production and close several factories, including its two oldest, in Cham and Vevey.

Decentralization efforts begun during the Depression continued to modify the companys structure gradually. By 1936, the industrial and commercial activity of the Nestlé and Anglo-Swiss Condensed Milk Company itself was quite limited in comparison with the considerable interests it had in companies manufacturing and selling its products. More than 20 such companies existed on five continents. In effect, the firm had become a holding company. Consequently, the Nestlé and Anglo-Swiss Condensed Milk Company Limited was established to handle production and marketing on the Swiss market; the parent company officially became a holding firm, called the Nestlé and Anglo-Swiss Holding Company Ltd.; and a second holding company, Unilac Inc., was created in Panama by a number of Nestlés overseas affiliates.

Nescafe Instant Coffee Debuted in 1938

In 1937 Louis Dapples died, and a new management team, whose members had grown up with the organization, took over. It included Chairman Edouard Muller, formerly managing director; Carl J. Abegg, vice-chairman of the board; and Maurice Paternot, managing director. In 1938 Nestlé introduced its first nonmilk product: Nescafe. The revolutionary instant coffee was the result of eight years of research, which had begun when a representative of the Brazilian Coffee Institute asked Louis Dapples if Nestlé could manufacture coffee cubes to help Brazil use its large coffee surplus. Although coffee crystals and liquid extracts had been tried before, none had satisfactorily preserved a coffee taste.

Nestlés product took the form of a soluble powder rather than cubes, allowing users to control the amount of coffee they used. Although Nestlé originally intended to manufacture Nescafe in Brazil, administrative barriers were too great, so Nescafe was first manufactured in Switzerland. Limited production capacity meant that it was launched without the elaborate marketing tactics usually used for products with such potential.

Nescafe quickly acquired a worldwide reputation, however, after it was launched in 1939 in the United States, where it did exceptionally well. Nestea, a soluble powdered tea, also made a successful debut in the early 1940s.

World War II had a dire effect on Nestlé. In 1939 profits plummeted to $6 million, compared to $20 million the year before. As in the last war, the company was plagued by food shortages and insufficient supplies of raw materials. To wage its own battle against the war, the company decided to split its headquarters at Vevey and transfer part of the management and executive team to an office in Stamford, Connecticut, where it could better supervise distant markets. Nestlé continued under control of dual managements until 1945.

But the war was not all bad for Nestlé. When the United States became involved in 1941, Nescafe and evaporated and powdered milk were in heavy demand from American armed forces. Nestlés total sales jumped from $100 million before the war to $225 million in 1945, with the greatest increase occurring in North America, where sales went from $14 million to $60 million. With the end of the war, Nestlés European and American branches were able to discuss future plans without fear of censorship, and the company could begin to face the challenge of rebuilding its war-torn subsidiaries. Nestlé also relaunched Nescafe and baby foods and began to research new products extensively. Researchers focused on the three areas Nestlé considered most likely to affect the food industrys future: an increase in world population, rising standards of living in industrialized countries, and the changing social and economic conditions of raw-material-producing countries.

Postwar Expansion Through Merger and Acquisition

In 1947 Nestlé merged with Alimentana S.A., the manufacturer of Maggi seasonings, bouillon, and dehydrated soups, and the holding company changed its name to Nestlé Alimentana Company. Edouard Muller became the first chairman of Nestlé Alimentana, but he died in 1948, before the policies he helped formulate put the company on the road to a new future. Carl Abegg assumed leadership of the board.

In 1950 Nestlé acquired Crosse and Blackwell, a British manufacturer of preserves and canned foods. Nestlé hoped its $24 million investment would serve as a marketing outlet for Maggi products, but the plan was less than successful, primarily because Crosse and Blackwell could not compete in the United Kingdom with H.J. Heinz Company. Similar setbacks occurred in 1963, when Nestlé acquired Findus frozen foods in Scandinavia for $32 million. Although the company performed well in Sweden, it encountered difficulties in other markets, where the British-Dutch giant Unilever reigned. While parts of the Findus operation eventually became profitable, Nestlé merged its German, Italian, and Australian Findus branches with Unilever. The development of freeze-drying in 1966 led to Tasters Choice, the first freeze-dried coffee, as well as other instant drinks.

In 1971 Nestlé acquired Libby, a maker of fruit juices, in the United States, and in 1973 it bought Stouffers, which took Nestlé into the hotel and restaurant field and led to the development of Lean Cuisine, a successful line of low-calorie frozen entrees. Nestlé entered the nonfood business for the first time in 1974 by becoming a major shareholder in the French company LOreal, a leading cosmetics company. Nestlé diversified further in 1977 with the acquisition of Alcon Laboratories, a Fort Worth, Texas, pharmaceutical company that specialized in ophthalmic products. Then, two years later, Nestlé purchased Burton, Parsons and Company Inc., an American manufacturer of contact lens products. The company adopted its present name Nestlé S.A.in 1979.

Faced Boycott in Late 1970s and Early 1980s

The 1970s saw Nestlés operations in developing countries increase considerably. Of Nestlés 303 manufacturing facilities, the 81 factories in developing nations contributed 21 percent of Nestlés total production. In the mid-1970s, however, the firm faced a new problem as a result of its marketing efforts in these countries, when a boycott against all Nestlé products was started in the United States in 1977. Activists claimed that Nestlés aggressive baby food promotions made mothers in developing countries so eager to use Nestlés formula that they used it any way they could. The poverty-stricken areas had high rates of illiteracy, and mothers, unable to read and follow the directions, often mixed the product with local polluted water or used an insufficient amount of the expensive formula, unwittingly starving their infants. Estimates of Nestlés losses as a result of the boycott, which lasted until the early 1980s, ranged as high as $40 million.

In 1981 Helmut Maucher became managing director of Nestlé and made this controversy one of his top priorities. He met with boycott supporters and complied with the World Health Organizations demands that Nestlé stop promoting the product through advertising and free samples. His direct confrontation of the issue contrasted with Nestlés earlier low-profile approach and was quite successful in allaying its critics fears.

Series of Major Acquisitions in the Later 1980s

Maucher also reduced overhead by turning over more authority to operating units and reducing headquarters staff. In addition, he spearheaded a series of major acquisitions. In 1985 Nestlé acquired Carnation, a U.S. manufacturer of milk, pet, and culinary products, for $3 billion, at the time one of the largest acquisitions in the history of the food industry. This was followed in 1985 by the acquisition of Hills Brothers Inc., the third largest U.S. coffee firm, which added ground roast coffee to Nestlés product line. In the late 1980s, as food companies around the world prepared for the integration of the European Community in 1992, Nestlé continued to make major acquisitions. In 1988 the company paid £2.55 billion (US$4.4 billion) for Rowntree Mackintosh PLCa leading British chocolate manufacturermarking the largest takeover of a British company by a foreign one to date. That same year Nestlé also purchased the Italian pasta maker Buitoni SpA.

Capital expenditures reached SFr 2.8 billion in 1991. Half was devoted to installation improvements, including data processing and automation, particularly in North America and Europe. The other half was spent expanding plants, primarily in Latin America and the Far East, areas where products were often based on local raw materials, tastes, and habits. That year Nestlé made 31 acquisitions, also adding a new factory in the Peoples Republic of China. Among the companies purchased were Aleo Drumstick, a U.S. ice cream manufacturer with many European activities; Indra, a Swedish frozen-food maker; La Campiña, a Mexican evaporated milk producer; and 97 percent of Intercsokolàdé, a Hungarian chocolate maker. The latter was Nestlés first venture into the newly opened markets of Eastern Europe.

In September 1991 Nestlé and The Coca-Cola Company formed a 50-50 joint-venture, Coca-Cola Nestlé Refreshment Company, to produce and distribute concentrates and bases for the production of ready-to-drink coffee and tea beverages. With an initial capitalization of $100 million the products, to be sold under the Nescafe and Nestea brand names, would be marketed worldwide save for Japan, primarily through Coca-Cola international network of businesses.

Nescafé, sold in more than 100 countries by 1991, was launched in the Republic of KoreaCoca-Cola and Nestlés first joint endeavoras was Nescafé Cappuccino in Europe. Hills Bros. Perfect Balance, a 50 percent-decaffeinated coffee, began selling in the United States, as did Nestea in cans at the beginning of 1992. By early 1992, a joint venture allowed the company to obtain a majority interest in Cokoladovny, a Czechoslovakian chocolate and biscuit producer. In addition, Nestlé in 1992 battled for and won, with a bid of $2.3 billion in cash, the French mineral water producer Source Perrier, though European regulators forced Nestlé to sell off some Perrier brands. That same year Nestlé took nearly full control of another mineral water concern, Vittel; Nestlé had acquired a 30 percent stake in Vittel in 1969, a move marking the companys first foray into mineral water.

Reemphasis on Core Food Area in Later 1990s

As the 1990s continued, Nestlé recommitted itself to its core food products area, never having been able to grow its healthcare and cosmetics sectors into significant parts of the overall business. The company sold off some of its health and beauty interests, retaining Alcon and the minority holding in LOreal it still hoped to gain full control of the latter, which was privately controlled. Nestlé made other divestments as well, including Wine World Estates, a group of northern California wineries (sold in 1995); canned beans and pasta operations in Canada, a fresh meat business in Germany, and cold meat operations in Sweden (1996); Contadina canned tomato products in the United States, Sarotti chocolate and Dany sandwiches in Germany, and Locatelli brand cheeses in Italy (1997); and Libby canned meat products, which were sold to International Home Foods for $126 million in 1998.

Acquisitions in the mid-to-late 1990s centered around mineral water, ice cream, and pet foods. In 1993 Nestlé purchased mineral water brands in the United States (Deer Park and Utopia) and Italy (Vera and San Bernardo), as well as ice cream brands in Italy, the Philippines, and South Africa. Added in 1994 were the Alpo pet food company in the United States and Warnke ice creams in Germany; the company also gained a majority stake in chocolate maker Goplana S.A. in Poland. Still further expansion of the ice cream sector came in 1995 with the purchase of Conelsa, the leader in the Spanish market; the chilled dairy products division of Pacific Dunlop in Australia; and Dolce S.A.E., the leading maker of ice cream in Egypt. That year Nestlé also acquired Ortega, a leading brand of Mexican food products in the United States. In 1997 Nestlé entered the Canadian ice cream market through the purchase of Ault and Dairy World, giving the company a 40 percent market share. In early 1998 Nestlé took full control of the San Pellegrino mineral water group and acquired Klim milk powders and Cremora coffee creamers from Borden Brands International. Also in 1998 the company secured the number two position in the European pet food market, trailing only Mars, through the £715 million (US$1.2 billion) purchase of the Spillers pet food business of Dalgety PLC.

Despite all of this activity, Nestlés acquisition pace slowed during the late 1990s as the company shifted toward organic growth starting in 1996. The numerous acquisitions had enabled Nestlé to gain a presence in various product areas in various countries. The company now had fewer countries and products that it wished to add to its portfolio. Other reasons for the shift to organic growth included the increasing price of acquisitions and antitrust concerns. Meanwhile, in June 1997 Peter Brabeck-Letmathe was named chief executive, taking over the day-today management of Nestlé from Maucher. In September 1998 Nestlé announced that Maucher would retire as chairman by the spring of 2000, being replaced by Rainer Gut, then chairman of the Credit Suisse Group.

Nestlés aggressive marketing of infant formula once again became an issue in 1997 when a report called Cracking the Code was issued by the Interagency Group on Breastfeeding Monitoring (IGBM), which had conducted research in Bangladesh, Poland, South Africa, and Thailand. The IGBM concluded that several companies, including Nestlé, were in violation of the World Health Organizations International Code of Marketing of Breastmilk Substitutes, which had been adopted in 1981. According to the report Nestlés code violations included supplying pregnant women and health workers with materials that promoted formula feeding but did not emphasize the superiority of breastfeeding over formula, and distributing free samples. Nestlé countered by calling the report biased and flawed, and by eliciting a response critical of Cracking the Code from an independent marketing research consultant.

At the dawn of the 21st century, Nestlé, after more than 130 years in business, had about 500 factories in more than 78 countries, boasted sales exceeding SFr 70 billion, and was the undisputed leader in the food industry worldwide. Its portfolio included more than 8,500 brands. The company had set a goal of achieving four percent underlying sales growth each year, but failed to meet this target for 1998, largely because of economic downturns in southeast Asia, Latin America, and Eastern Europe. Although the worldwide economic difficulties led to questions about Nestlés short-term prospects, the company seemed certain to maintain its preeminent position over the long haul.

Principal Subsidiaries

EUROPE: Nestlé Deutschland AG (Germany; 97.2%); Blaue Quellen Mineral- und Heilbrunnen AG (Germany; 90.6%); Trinks GmbH (Germany; 90.6%); Alcon Pharma GmbH (Germany); Alois Dallmayr Kaffee OHG (Germany; 48.6%); Heimbs & Sohn GmbH & Co. KG (Germany; 48.6%); Azul Kaffee GmbH & Co. KG (Germany; 48.6%); Nähr-Engel GmbH (Germany; 97.22%); Vittel Mineralwasser GmbH (Germany); Österreichische Nestlé GmbH (Austria); Nestlé Belgilux S.A. (Belgium); Perrier Vittel Belgilux S.A. (Belgium); Alcon-Couvreur S.A. (Belgium); Nestlé Sofia A.D. (Bulgaria; 99%); Nestlé Danmark A/S (Denmark); Premier Is A/S (Denmark); Nestlé España S.A. (Spain); Productos del Café S.A. (Spain); Davigel España S.A. (Spain); EYCAM Perrier S.A. (Spain); Alcon-Cusi S.A. (Spain); Helados y Congelados S.A. (Spain); Compania del Frio Alimentario S.A. (Spain); Compania Avidesa S.A. (Spain; 99.43%); Alimentos Congelados S.A. (Spain); Soumen Nestlé Oy (Finland); Nestlé France S.A.; France Glaces-Findus S.A.; Chambourcy S.A. (France; 99.9%); Herta S.A. (France); Davigel S.A. (France; 99.9%); Perrier Vittel France S.A.; S.A. des Eaux Minérales de Ribeauvillé (France; 98.3%); Société Conditionnement et Industrie S.A. (France; 77.9%); Eau Minérale Naturelle de Plancoët Source Sassay S.A. (France); Nestlé Coffee Specialties France S.A.; Nestlé Clinical Nutrition S.A. (France); Laboratoires Alcon S.A. (France); Nestlé Dairy Industry S.A.I. (Greece; 85.4%); Alcon Laboratories Hellas E.P.E. (Greece); Nestlé Italiana S.p.A. (Italy; 99.9%); SO.GE.AM S.p.A. (Italy); SO.GE.PLAST S.p.A. (Italy); Alcon Italia S.p.A. (Italy); Nestlé Hungaria Kft (Hungary); A/S Nestlé Norge (Norway); Nestlé Nederland B.V. (Netherlands); Alcon Nederland B.V. (Netherlands); Goplana S.A. (Poland; 76.97%); Nestlé Polska Sp. zo.o. (Poland); Naleczowianka Spolka zo.o. (Poland; 33.3%); Winiary S.A. (Poland; 83.28%); Nestlé Portugal S.A.; Longa Vida S.A. (Portugal); Sociedade das Aguas de Pisoes Moura S.A. (Portugal); Nestlé (Ireland) Ltd.; Nestlé Food S.r.o. (Czech Republic); Nestlé UK Ltd.; Perrier Vittel UK Ltd.; Buxton Mineral Water Company Ltd. (U.K.); Alcon Laboratories (U.K.) Ltd.; CU. Rossiya (Russia; 93.21%); Nestlé Zhukovsky Ice Cream LLC (Russia; 80.48%); Nestlé Food LLC (Russia); Nestlé Food S.r.o. (Slovakia; 99.9%); Svenska Nestlé AB (Sweden); Jede AB (Sweden); Zoégas Kaffe AB (Sweden); Société des Produits Nestlé S.A.; Nestlé Suisse S.A.; Frisco-Findus AG (99.8%); Perrier Vittel Suisse S.A.; Alcon Pharmaceuticals Ltd.; Nestlé World Trade Corporation; Food Ingredients Specialities S.A.; Nestlé Coffee Specialties S.A.; Nestlé Türkiye Gida Sanayi A.S. (Turkey). AFRICA: Nestlé (South Africa) (Pty) Ltd.; Alcon Laboratories Pty Ltd. (South Africa); Nestlé Cameroun (Cameroon; 99.6%); Nestlé Côte dIvoire (Ivory Coast; 80.9%); Dolce S.A.E. (Egypt); Industrie du Froid S.A.E. (Egypt); Société des eaux minérales Vittor S.A.E. (Egypt; 88.5%); Nestlé Gabon (90%); Nestlé Ghana Ltd. (51%); Nestlé Guinée (Guinea; 99%); Nestlé Foods Kenya Ltd.; Nestlés Products (Mauritius) Ltd.; Nestlé Maroc S.A. (Morocco; 93.4%); Nestlé Foods Nigeria PLC (57%); Nestlé Sénégal; Nestlé Tunisie (Tunisia; 59.2%); Nestlé Zimbabwe (Pvt) Ltd. AMERICAS: Nestlé Argentina S.A.; Alcon Laboratorios Argentina S.A.; Nestlé Bolivia S.r.l.; Nestlé Indus-trial e Comercial Ltda. (Brazil); Companhia Produtora de Alimentos (Brazil); Tostines Industrial e Comercial Ltda. (Brazil); Perrier Vittel de Brasil Ltda. (Brazil); Alcon Laboratorios do Brasil S.A. (Brazil); Nestlé Canada, Inc.; Midwest Food Products, Inc. (Canada; 50%); Laura Secord, Inc. (Canada); The Perrier Group of Canada Ltd.; Alcon Canada, Inc.; Nestlé Chile S.A. (99.5%); Alcon Laboratorios Chile Limitada; Nestlé de Colombia S.A.; Laboratorios Alcon de Colombia S.A.; Nestlé Costa Rica S.A.; Nestlé El Salvador S.A.; Nestlé Ecuador S.A. (74.7%); Neslandia S.A. (Ecuador); Nestlé USA, Inc.; Nestlé USA - Food Division, Inc.; Nestlé USA - Beverage Division, Inc.; Food Ingredient Specialities, Inc. (U.S.A.); Great Spring Waters of America, Inc. (U.S.A.); Nestlé Puerto Rico, Inc. (U.S.A.); Alcon Laboratories, Inc. (U.S.A.); Alcon (Puerto Rico), Inc. (U.S.A.); Nestlé Guatemala S.A.; Nestlé Hondurena S.A. (Honduras); Nestlé-JMP Jamaica Ltd.; Cremo Ltd. (Jamaica); Compañáa Nestlé S.A. de C.V. (Mexico); Alimentos Findus S.A. de C.V. (Mexico); Industrias Alimenticias Club S.A. de C.V. (Mexico); Manantiales La Asuncion, S.A. de C.V. (Mexico); Alcon Laboratorios S.A. de C.V. (Mexico); Productos Nestlé (Nicaragua) S.A.; Nestlé Panami S.A.; Nestlé Caribbean, Inc. (Panama); Nestlé Perú S.A. (93.1%); DOnofrio S.A. (Peru; 80.6%); Sociedad Dominicana de Conservas y Alimentos S.A. (Dominican Republic; 75.7%); Compañía Dominicana de Alimentos Lácteos S.A. (Dominican Republic); Helados Nestlé S.A. (Dominican Republic); Nestlé Trinidad and Tobago Ltd.; Nestlé del Uruguay S.A.; Nestlé Venezuela S.A.; Chocolates Nestlé S.A. (Venezuela); Caramelos Royal C.A. (Venezuela). ASIA: Saudi Food Industries Co. Ltd. (Saudi Arabia; 51%); Nestlé Bangladesh Ltd. (60%); Nestlé Ice Cream L.L.C. (United Arab Emirites; 49%); Nestlé Hong Kong Ltd.; Nestlé Dairy Farm Hong Kong Ltd.; Nestlé India Ltd. (51%); P.T. Nestlé Indonesia (57.6%); P.T. Nestlé Confectionery Indonesia; P.T. Nestlé Asean (Indonesia) (60%); P.T. Supmi Sakti (Indonesia; 97%); OSEM Investments Ltd. (Israel; 39.7%); Nestlé Japan Ltd.; Nestlé-Mackintosh K.K. (Japan; 66%); Perrier Japon K.K. (Japan); Alcon Japan Ltd.; Nestlé Jordan Trading Co. Ltd. (49%); Nestlé Kuwait General Trading Co. W.L.L. (49%); Société pour lExportation des Produits Nestlé S.A. (Lebanon); Nestlé (Malaysia) Bhd. (52.7%); Nestlé Foods (Malaysia) Sdn. Bhd. (51%); Nestlé Products Sdn. Bhd. (Malaysia; 51%); Malaysia Cocoa Manufacturing Sdn. Bhd. (51%); Nestlé Asean (Malaysia) Sdn. Bhd. (60%); Nestlé Cold Storage (Malaysia) Sdn. Bhd. (51%); Milkpak Ltd. (Pakistan; 56.2%); Nestlé Philippines, Inc.; Nestlé Foods Korea Ltd.; Nestlé Shuangcheng Ltd. (Peoples Republic of China; 90%); Nestlé Dongguan Ltd. (Peoples Republic of China; 60%); Maggi Dongguan Ltd. (Peoples Republic of China); Nestlé Tianjin Ltd. (Peoples Republic of China); Nestlé Qingdao Ltd. (Peoples Republic of China); Nestlé Dairy Farm Tianjin Ltd. (Peoples Republic of China; 75%); Nestlé Dairy Farm Qingdao Ltd. (Peoples Republic of China); Nestlé Dairy Farm Guangzhou Ltd. (Peoples Republic of China; 60%); Nestlé Singapore (Pte) Ltd.; Nestlé Asean Singapore (Pte) Ltd. (60%); Nestlé Lanka Ltd. (Sri Lanka; 90.8%); Nestlé Taiwan Ltd.; Nestlé Distributors Ltd. (Taiwan); Foremost Foods (Taiwan) Ltd.; Alcon Pharmaceuticals Ltd. (Taiwan); Nestlé Products Thailand, Inc.; Nestlé Asean (Thailand) Ltd. (60%); Quality Coffee Products Ltd. (Thailand; 49%); Nestlé Foods (Thailand) Ltd.; Nestlé Trading (Thailand) Ltd. (49%); Nestlé Manufacturing (Thailand) Ltd.; Nestlé Ice Cream (Thailand) Ltd. (46.3%); Nestlé Vietnam Ltd.; Long An Mineral Water Joint Venture Company (Vietnam; 42.7%). OCEANIA: Nestlé Australia Ltd.; Petersville Australia Ltd.; Nestlé Echuca Pty Ltd. (Australia); Alcon Laboratories (Australia) Pty Ltd.; Nestlé (Fiji) Ltd. (67%); Nestlé Nouvelle-Calédonie S.A. (New Caledonia); Nestlé New Zealand Ltd.; Nestlé (PNG) Ltd. (Papua New Guinea); Nestlé Polynesia S.A. (French Polynesia).

Further Reading

Hall, William, Leading Swiss Banker to Be Nestlé Chairman, Financial Times, September 21, 1998, p. 26.

_____, Maucher Keeps His Claws in Nestlé, Financial Times, May 7, 1997, p. 26.

_____, Strength of Brands Is Key to Success, Financial Times, November 30, 1998, p. SII.

Harrisson, Pierre, LEmpire Nestlé, Lausanne, Switzerland: Editions P.-M. Favre, 1983, 493 p.

Heer, Jean, Nestlé: 125 Years, 1866-1991, Vevey, Switzerland: Nestlé, 1991.

_____, World Events, 1866-1966: The First Hundred Years of Nestlé, Vevey, Switzerland: Nestlé, 1966.

Interagency Group on Breastfeeding Monitoring, Cracking the Code, UK Committee for UNICEF, 1997.

Maucher, Helmut, Leadership in Action: Tough-Minded Strategies from the Global Giant, New York: McGraw-Hill, 1994, 160 p.

Nestlé Consolidating Its Chocolate Production, New York Times, February 5, 1993.

Oram, Roderick, Nestlés Portfolio of Possibilities, Financial Times, August 8, 1996, p. 24.

_____, Sweet Success for a Strong Leader, Financial Times, September 19, 1995, p. 53.

Rapoport, Caria, Nestlés Brand Building Machine, Fortune, September 19, 1994, pp. 147-48, 150, 154, 156.

Rohwedder, Cacilie, Nestlé Goes on Investment Diet, Limiting Its Expansion: Emphasis Shifts to Strengthening Core Food Products in European Market, Wall Street Journal, September 27,1994, p. B6.

Steinmetz, Greg, and Tara Parker-Pope, All Over the Map: At a Time When Companies Are Scrambling to Go Abroad, Nestlé Has Long Been There, Wall Street Journal, September 26, 1996, p. R4.

Templeman, John, Stewart Toy, and Dave Lindorff, Nestlé: A Giant in a Hurry, Business Week, March 22, 1993, pp. 50-51, 54.

Urry, Maggie, and William Hall, Nestlé Buys Spillers for £715m, Financial Times, February 5, 1998, p. 21.

Anne C. Hughes

updated by David E. Salamie

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Nestlé S.A.

Nestlé S.A.

Avenue Nestlé 55
CH-1800 Vevey
Switzerland
(021) 924-2526
Fax: (021) 921-1885

Public Company
Incorporated: 1866 as Anglo-Swiss Condensed Milk Company
Employees: 218,000
Sales: SFr 54.50 billion (US$36.22 billion)
Stock Exchanges: Zurich Geneva Paris Frankfurt Dusseldorf Amsterdam Vienna London Tokyo Brussels Basle
SICs: 2066 Chocolate and Cocoa Products; 2023 Dry, Condensed, and Evaporated Dairy Products; 2024 Ice Cream and Frozen Desserts; 2026 Fluid Milk; 2064 Candy & Other Confectionery Products; 2043 Cereal Breakfast Foods; 2037 Frozen Fruits, Fruit Juices & Vegetables; 2038 Frozen Specialties; 2087 Flavoring Extracts and Flavoring Syrups; 2095 Roasted Coffee; 2834 Pharmaceutical Preparations; 2048 Dog and Cat Food

Nestlé is the largest food company in the world. With more than 400 manufacturing facilities on five continents, Nestlé has often been called the most multinational of the multinationals, largely because only 2 percent of its sales are made in its home country. Nestlé S.A. is a holding company for some 200 operating units that manufacture and sell a wide variety of products, including coffee, juices, chocolate and malted beverages, chocolates and confectionery, culinary and refrigerated products, dairy products, baby food, frozen foods and ice cream, pet foods, and pharmaceutical products.

While serving as the American consul in Zurich, Charles Page decided that Switzerland, with its abundant milk supply and easy access to the whole European market, was the perfect location for a condensed milk factory. The first canned condensed milk had been produced in the United States by Gail Borden some ten years before, and originally Page planned to produce and sell Borden Milk in the European market as a licensee. The plan fell through, however, so in 1866 he established the Anglo-Swiss Condensed Milk Company as a limited company in Cham, Switzerland.

The companys name was meant to flatter the British, to whom Page hoped to sell a great deal of his condensed milk. Anglo-Swiss first expanded its operations beyond Switzerlands borders in 1872, when it opened a factory in Chippenham, England. Condensed milk rapidly became a staple product in European cupboardsthe business downturn in 1872 and the depression of 1875 did not affect the firms sales. Charles Page died in 1873, leaving the company in the hands of his brother George and Anglo-Swisss other investors. The next year, Anglo-Swiss undertook further expansion in England by purchasing the Condensed Milk Company, in London. By 1876 sales were almost four times their 1872 level.

Meanwhile, in Vevey, Switzerland, in 1867 Henri Nestlé began selling his newly developed cows-milk food for infants who could not be breast fed. Demand for his Farine Lactee Nestlé soared; between 1871 and 1873, daily production more than doubled, from fewer than 1,000 tins a day to 2,000. Nestlés goal was to bring his baby food within everyones reach, and he spared no effort in trying to convince doctors and mothers of its benefits. But while his energy and good intentions were nearly endless, his financial resources were not. By 1873, demand for Nestlés product exceeded his production capabilities, resulting in missed delivery dates. At 61, Nestlé was running out of energy, and his thoughts turned to retirement. Jules Monnerat, a former member of parliament who lived in Vevey, had long eyed the business, and in 1874 Nestlé accepted Monnerats offer of SFr 1 million. Thus, in 1875, the company became Farine Lactee Henri Nestlé with Monnerat as chairman.

In 1877 Nestlé faced a new competitor when the Anglo-Swiss Condensed Milk Companyalready the leading manufacturer of condensed milk in Europedecided to broaden its product line and manufacture cheese and milk food for babies. Nestlé quickly responded by launching a condensed milk product of its own. George Page tried to buy the competing company outright, but he was firmly told that Nestlé was not for sale. Turning his attention elsewhere, he purchased the Anglo-Swiss Companys first factory in the United States in 1881. The plant, located in Middletown, New York, was built primarily to escape import duties, and it was soon successful enough to challenge Bordens supremacy in the American condensed milk market. It also presented a drawback: George Page spent so much time there that Anglo-Swiss began to lose its hold on Europemuch to the delight of Nestlé. After George Pages death in 1899, the Anglo-Swiss Condensed Milk Company decided to sell its American business to Borden in 1902 so that it could concentrate on regaining market share in Europe.

Until 1898 Nestlé remained determined to manufacture only in Switzerland and export to its markets around the world. But that year the company finally decided to venture outside Switzerland with the purchase of a Norwegian condensed milk company. Two years later, in 1900, Nestlé opened a factory in the United States, and quickly followed this by entering Britain, Germany, and Spain. Early in the 1900s, Nestlé also became involved in chocolate, a logical step for a company based in Vevey, the center of the Swiss chocolate industry. Nestlé became a partner in the Swiss General Chocolate Company, the maker of the Peter and Kohler brands. Under their agreement, the chocolate company produced the first Nestlé brand milk chocolate, while Nestlé concentrated on selling the Peter, Kohler, and Nestlé brands around the world.

In 1905 Nestlé and the Anglo-Swiss Condensed Milk Company finally quelled their fierce competition by merging to create the Nestlé and Anglo-Swiss Milk Company. The new firm would be run by two registered offices, one in Vevey and one in Cham, a practice it continues today. With Emile-Louis Roussy as chairman, the company now included seven factories in Switzerland, six in Great Britain, three in Norway, and one each in the United States, Germany, and Spain.

In response to an increase in import duties in AustraliaNestlés second-largest export marketthe company decided to begin manufacturing there in 1906 by buying a major condensed milk company, the Cressbrook Dairy Company, in Brisbane. In the next few years production and sales continued to increase as the company began to replace sales agents with subsidiary companies, particularly in the rapidly growing Asian markets.

Most of its factories were located in Europe, however, and when World War I broke out in 1914, Nestlés operations, particularly in such warring countries as Britain and Germany, were seriously affected. Although production continued in full force during the early months of the war, business soon grew more difficult. By 1916 fresh milk shortages, especially in Switzerland, meant that Nestlés factories often sold almost all of their milk supplies to meet the needs of local towns. Shipping obstacles, increased manufacturing and operating costs, and restrictions on the use of production facilities added to Nestlés wartime difficulties, as did a further decrease in fresh milk supplies due to shortages of cattle.

To deal with these problems and meet the increased demand for its products from governments supplying their troops, Nestlé decided to expand in countries less affected by the war and began purchasing existing factories, particularly in the United States, where it established links with several existing firms. By 1917, Nestlé had 40 factories, and in 1918, its world production was more than double what it was in 1914. Nestlé pursued the same strategy in Australia; by 1920 it had acquired a controlling interest in three companies there. That same year, Nestlé began production in Latin America when it established a factory in Araras, Brazil, the first in a series of Latin American factories. By 1921, the firm had 80 factories and 12 subsidiaries and affiliates. It also introduced a new product that yearpowdered milk called Lactogen.

It didnt take long for the effects of such rapid expansion to catch up with the company, however. Nestlé and Anglo-Swiss reported its first loss in 1921, to which the stock market reacted with panic, making matters worse. The company explained that the SFr 100 million loss was due to the rising prices of raw materials such as sugar and coal, and a trade depression that had caused a steady fall in consumer purchasing power, coupled with falling exchange rates after the war, which forced the company to raise prices.

To battle the storm, the company decided to reorganize both management and production. In 1922 it brought production in line with actual sales by closing some of its factories in the United States, Britain, Australia, Norway, and Switzerland. It also hired Louis Dapples, a banking expert, to put the company back in order. Dapples directed Nestlé with an iron fist, introducing stringent financial controls and reorganizing its administration. By 1923, signs of improvement were already evident, as Nestlés outstanding bank loans had dropped from SFr 293 million in 1921 to SFr 54.5 million in 1923. Meanwhile in France, Belgium, Italy, Germany, and South Africa, production facilities were expanded. By consolidating certain operations and expanding others, Nestlé was also able to widen its traditional range of products.

Overall, the late 1920s were profitable, progressive times. In addition to adding some new products of its ownincluding malted milk, a powdered beverage called Milo, and Eledon, a powdered buttermilk for babies with digestive disordersthe company bought interests in several manufacturing firms. Among them were butter and cheese companies, as well as Sarotti A.G., a Berlin based chocolate business that began manufacturing Nestlé, Peter, Cailler, and Kohler chocolate. In 1928, under the direction of Chairman Louis Dapples, Nestlé finally merged with Peter, Cailler, Kohler, Chocolats Suisses S.A.the resulting company of a 1911 merger between the Swiss General Chocolate Company and Cailler, another leading firmadding 13 chocolate plants in Europe, South America, and Australia to the growing firm.

Nestlé was becoming so strong that it seemed even the Depression would have little effect on its progress. In fact, its U.S. subsidiary, Nestlés Food Company Inc. of New York, barely felt the stock market crash of 1929. In 1930 Nestlé created new subsidiaries in Argentina and Cuba. Despite the Depression, Nestlé added more production centers around the world, including a chocolate manufacturer in Copenhagen and a small factory in Moravia, Czechoslovakia, to manufacture milk food, Nescao, and evaporated milk. Factories were also opened in Chile and Mexico in the mid-1930s.

Although profits were down 13 percent in 1930 over the year before, Nestlé faced no major financial problems during the Depression, as its factories generally maintained their output and sales were steady. Though Nestlés New York-based subsidiary, renamed Nestlés Milk Products Company, was more affected than those in other countries, U.S. sales of milk products were steady until 1931 and 1932, when a growing public frugality began to cause trouble for more expensive but established brands like Nestlés. Profit margins narrowed, prices dropped, and cut-throat competition continued until 1933, when new legislation set minimum prices and conditions of sales.

The markets, such as the United States, that were among the first to feel the effects of the Depression were also the first to recover from it. The Depression continued in Switzerland, however. Nestlé products manufactured there could no longer compete on international markets since Swiss currency exchanges were made especially difficult from the early 1930s, when many major countries devalued their currencies, until 1936, when Switzerland finally did likewise. The company decided to streamline production and close several factories, including its two oldest, in Cham and Vevey.

Decentralization efforts begun during the Depression continued to modify the companys structure gradually. By 1936, the industrial and commercial activity of the Nestlé and Anglo-Swiss Condensed Milk Company itself was quite limited in comparison with the considerable interests it had in companies manufacturing and selling its products. More than 20 such companies existed on five continents. In effect, the firm had become a holding company. Consequently, the Nestlé and Anglo-Swiss Condensed Milk Company Limited was established to handle production and marketing on the Swiss market; the parent company officially became a holding firm, called the Nestlé and Anglo-Swiss Holding Company Ltd.; and a second holding company, Unilac Inc., was created in Panama by a number of Nestlés overseas affiliates.

In 1937 Louis Dapples died, and a new management team, whose members had grown up with the organization, took over. It included Chairman Edouard Muller, formerly managing director; Carl J. Abegg, vice-chairman of the board; and Maurice Paternot, managing director. In 1938 Nestlé introduced its first non-milk product: Nescafe. The revolutionary instant coffee was the result of eight years of research, which had begun when a representative of the Brazilian Coffee Institute asked Louis Dapples if Nestlé could manufacture coffee cubes to help Brazil use its large coffee surplus. Although coffee crystals and liquid extracts had been tried before, none had satisfactorily preserved a coffee taste.

Nestlés product took the form of a soluble powder rather than cubes, allowing users to control the amount of coffee they used. Although Nestlé originally intended to manufacture Nescafe in Brazil, administrative barriers were too great, so Nescafe was first manufactured in Switzerland. Limited production capacity meant that it was launched without the elaborate marketing tactics usually used for products with such potential.

Nescafe quickly acquired a worldwide reputation, however, after it was launched in 1939 in the United States, where it did exceptionally well. Nestea, a soluble powered tea, also made a successful debut in the early 1940s.

World War II had a dire effect on Nestlé. In 1939 profits plummeted to $6 million, compared to $20 million the year before. As in the last war, the company was plagued by food shortages and insufficient supplies of raw materials. To wage its own battle against the war, the company decided to split its headquarters at Vevey and transfer part of the management and executive team to an office in Stamford, Connecticut, where it could better supervise distant markets. Nestlé continued under control of dual managements until 1945.

But the war was not all bad for Nestlé. When the United States became involved in 1941, Nescafe and evaporated and powdered milk were in heavy demand from American armed forces. Nestlés total sales jumped from $100 million before the war to $225 million in 1945, with the greatest increase occurring in North America, where sales went from $14 million to $60 million. With the end of the war, Nestlés European and American branches were able to discuss future plans without fear of censorship, and the company could begin to face the challenge of rebuilding its war-torn subsidiaries. Nestlé also re-launched Nescafe and baby foods and began to research new products extensively. Researchers focused on the three areas Nestlé considered most likely to affect the food industrys future: an increase in world population, rising standards of living in industrialized countries, and the changing social and economic conditions of raw-material-producing countries.

In 1947 Nestlé merged with Alimentana S.A., the manufacturer of Maggi seasonings, bouillon, and dehydrated soups, and the holding company changed its name to Nestlé Alimentana Company. Edouard Muller became the first chairman of Nestlé Alimentana, but he died in 1948, before the policies he helped formulate put the company on the road to a new future. Carl Abegg assumed leadership of the board.

In 1950 Nestlé acquired Crosse and Blackwell, a British manufacturer of preserves and canned foods. Nestlé hoped its $24 million investment would serve as a marketing outlet for Maggi products, but the plan was less than successful, primarily because Crosse and Blackwell could not compete in the United Kingdom with HJ. Heinz Company. Similar setbacks occurred in 1963, when Nestlé acquired Findus frozen foods in Scandinavia for $32 million. Although the company performed well in Sweden, it encountered difficulties in other markets, where the British-Dutch giant Unilever reigned. While parts of the Findus operation eventually became profitable, Nestlé merged its German, Italian, and Australian Findus branches with Unilever. The development of freeze-drying in 1966 led to Tasters Choice, the first freeze-dried coffee, as well as other instant drinks.

In 1971 Nestlé acquired Libby, a maker of fruit juices, in the United States, and in 1973 it bought Stouffers, which took Nestlé into the hotel and restaurant field and led to the development of Lean Cuisine, a successful line of low-calorie frozen entrees. Nestlé entered the nonfood business for the first time in 1974 by becoming a major shareholder in the French company LOreal, a leading cosmetics company. Nestlé diversified further in 1977 with the acquisition of Alcon Laboratories, a Forth Worth, Texas, pharmaceutical company that specialized in ophthalmic products. Then, two years later, Nestlé purchased Burton, Parsons and Company Inc., an American manufacturer of contact lens products. The company also adopted its present name in 1979Nestlé S.A.

The 1970s saw Nestlés operations in developing countries increase considerably. Of Nestlés 303 manufacturing facilities, the 81 factories in developing nations contributed 21 percent of Nestlés total production. In the mid-1970s, however, the firm faced a new problem as a result of its marketing efforts in these countries, when a boycott against all Nestlé products was started in the United States in 1977. Activists claimed that Nestlés aggressive baby food promotions made mothers in developing countries so eager to use Nestlés formula that they used it any way they could. The poverty-stricken areas had high rates of illiteracy, and mothers, unable to read and follow the directions, often mixed the product with local polluted water or used an insufficient amount of the expensive formula, unwittingly starving their infants. Estimates of Nestlés losses as a result of the boycott, which lasted until the early 1980s, ranged as high as $40 million.

In 1981 Helmut Maucher became managing director of Nestlé and made this controversy one of his top priorities. He met with boycott supporters and complied with the World Health Organizations demands that Nestlé stop promoting the product through advertising and free samples. His direct confrontation of the issue contrasted with Nestlés earlier low-profile approach and was quite successful in allaying its critics fears.

Maucher also reduced overhead by turning over more authority to operating units and reducing headquarters staff. In addition, he spearheaded a series of major acquisitions. In 1985 Nestlé acquired Carnation, a U.S. manufacturer of milk, pet, and culinary products, for $3 billion, at the time one of the largest acquisitions in the history of the food industry. This was followed in 1985 by the acquisition of Hills Brothers Inc., the third-largest American coffee firm, which added ground roast coffee to Nestlés product line. In the late 1980s, as food companies around the world prepared for the integration of the European Economic Community in 1992, Nestlé continued to make major acquisitions. In 1988 the company paid £2.55 billion for Rowntree Mackintosh PLCa leading British chocolate manufacturermarking the largest takeover of a British company by a foreign one to date. That same year Nestlé also purchased the Italian pasta maker Buitoni SpA.

Capital expenditures reached SFr 2.8 billion in 1991. Half was devoted to installation improvements, including data processing and automation, particularly in North America and Europe. The other half was spent expanding plants, primarily in Latin America and the Far East, areas where products were often based on local raw materials, tastes, and habits. That year Nestlé made 31 acquisitions, also adding a new factory in the Peoples Republic of China. Among the companies purchased were Alco Drumstick, a U.S. ice cream manufacturer with many European activities; Indra, a Swedish frozen-food maker; La Campiña, a Mexican evaporated-milk producer; and 97 percent of In-tercsokoládé, a Hungarian chocolate maker.

In September of 1991 Nestlé and the Coca-Cola Co. formed an equally split joint-venture concern, Coca-Cola Nestlé Refreshment Company, to produce and distribute concentrates and bases for the production of ready-to-drink coffee and tea beverages. With an initial capitalization of $100 million, the products, to be sold under the Nescafe and Nestea brand names, would be marketed worldwidewith the exception of Japanprimarily through Coca-Colas international network of busi-

Nescafé, sold in more than 100 countries by 1991, was launched in the Republic of KoreaCoca-Cola and Nestlés first joint endeavoras was Nescafe Cappuccino in Europe. Hills Bros. Perfect Balance, a 50 percent-decaffeinated coffee, began selling in the United States, as did Nestea in cans at the beginning of 1992. By early 1992, a joint venture allowed the company to obtain a majority interest in Cokoladovny, a Czechoslovakian chocolate and biscuit producer. In addition, Nestlé battled for and won, with a bid of $2.3 billion in cash, the French mineral water producer Source Perrier. The company had also set its sights on acquiring the balance of the LOreal cosmetics company in order to make it a wholly owned subsidiary. Nestlé S.A. reported a 17 percent increase in profits for the first 6 months of 1992.

A series of geographical efforts to form more or less integrated economic blocs in coming years should bode well for a company as multinational as Nestlé. A single European Community market; the extension of the North American Free Trade Agreement (NAFTA) to Mexico; the Treaty of Asunción, which should organize a free trade area and coordination of Latin American sector policies; integrated economic union among some Southeast Asia countries; and, in general, a more receptive attitude in many countries toward investment by foreign businesses may indeed help Nestlé increase sales and manufacturing efficiency, as well as achieve economies of scale.

With 438 factories in 63 countries and sales of more than SFr 50 billion on its 125th anniversary, Nestlé is the undisputed leader in the food industry. Its long history of international operations should stand it in good stead, but the giant will have to stay nimble to maintain its place as trade barriers crumble in Europe and its competition grows large and strong enough to challenge Nestlé around the world.

Principal Subsidiaries

Alcon Canada, Inc.; Carnation Foods Company Ltd. (Canada; 50%); Clintec Nutrition Company (Canada; 50%); Laura Secord, Inc. (Canada); Nestlé Canada, Inc.; Alcon Laboratories, Inc. (U.S.A.); Clintec Nutrition Company (U.S.A.; 50%); L. J. Minor Corporation (U.S.A.); Nestlé Beverage Company (U.S.A.); Nestlé Brands Foodservice Company (U.S.A.); Nestlé Dairy Systems, Inc. (U.S.A.); Nestlé Food Company (U.S.A.); Nestlé Puerto Rico, Inc. (U.S.A.); Nestlé Refrigerated Food Company (U.S.A.); Nestlé Trading Corporation (U.S.A.); Owen/Galderma Laboratories, Inc. (U.S.A.; 50%); Stouffer Foods Corporation (U.S.A.); Stouffer Hotel Company (U.S.A.); Stouffer Restaurant Company (U.S.A.); Sunmark, Inc. (U.S.A.); Wine World, Inc. (U.S.A.); Alcon Laboratorios Argentina S.A.; Nestlé Argentina S.A.; Alcon Laboratorios do Brasil S.A. (Brazil); Companhia Produtora de Alimentos (Brazil); Industria de Sorvetes Ltda. (Brazil; 50%); Nestlé Industrial e Comercial Ltda. (Brazil); Centenario S.A. (Chile; 99.5%); Nestlé Chile S.A. (99.7%); Productos Alimenticios Savory S.A.I.C. (Chile); Nestlé de Colombia S.A.; Productos Nestlé (Costa Rica) S.A.; Productos Nestlé (El Salvador) S.A.; Nestlé Ecuador S.A. (74.7%); Productos Nestlé (Guatemala) S.A.; Nestlé Hondurena S.A. (Honduras); Nestlé-JMP Jamaica Ltd.; Alcon Laboratorios S.A. de C.V. (Mexico); Alimentos Findus S.A. de C.V. (Mexico); Café Continental S.A. de C.V. (Mexico); Compañía Nestlé S.A. de C.V. (Mexico); Industrias Alimenticias Club S.A. de C.V. (Mexico); Productos Alimenticios La Campiña S.A. de C.V. (México); Productos Carnation S.A. de C.V. (México); Productos Nestlé (Nicaragua) S.A.; Nestlé Caribbean, Inc. (Panama); Nestlé Panamá S.A.; Nestlé Perú S.A. (89.3%); Sociedad Dominicana de Conservas y Alimentos S.A. (Dominican Republic; 70%); Nestlé Trinidad and Tobago Ltd. (80.6%); Caramelos Royal C.A. (Venezuela); Chocolates Nestlé S.A. (Venezuela); Nestlé Venezuela S.A.; Saudi Food Industries Co. Ltd. (Saudi Arabia; 51%); Nestlé China Ltd. (Hong Kong); Nestlé India Ltd. (40%); P.T. Food Specialties Indonesia (57%); Alcon Japan Ltd.; Buitoni Japan K.K. (70%); Nestlé K.K. (Japan); Nestlé-Mackintosh K.K. (Japan; 66%); Société pour lExportation des Produits Nestlé S.A. (Lebanon); Nestlé (Malaysia) Sdn. Bhd. (51%); Malaysia Cocoa Manufacturing Sdn. Bhd. (49%); Milkpak Ltd. (Pakistán; 40%); Nestlé Philippines, Inc. (55%); Nestlé Foods Co. Ltd. (Republic of Korea; 99.1%); Nestlé Korea Ltd. (72%); Nestlé Shuangcheng Ltd. (Peoples Republic of China; 64%); Nestlé Singapore (Pte) Ltd.; Ceylon Nutritional Foods Ltd. (Sri Lanka; 52%); Nestlé Lanka Ltd. (Sri Lanka; 93.7%); Anping Distributors Ltd. (Taiwan); Nestlé Products (Thailand), Inc.; Nestlé (South Africa) (Pty) Ltd.; Société Camerounaise de Produits Alimentaires, Diététiques et Autres CAMAD-Nestlé (Cameroon); Compagnie Africaine de Preparations Alimentaires CAPRAL-Nestlé (Ivory Coast; 70.7%); NOVALIM-Nestlé (Ivory Coast; 92.2%); Industrie du Froid S.A.E. (Egypt; 86%); Société Gabonaise de Produits AlimentairesSOGAPRAL (Gabon; 90%); Nestlé Ghana Ltd. (45%); Nestlé Foods Kenya Ltd. (87.5%); Nestlés Products (Mauritius) Ltd.; Nestlé Foods Nigeria PLC (40%); Nestlé Senegal; Nestlé Tunisie (Tunisia; 59.2%); Nestlé Zimbabwe (Pvt) Ltd.; Alcon Laboratories (Australia) Pty Ltd.; Friskies Pet Care Pty Ltd. (Australia); Nestlé Australia Ltd.; Nestlé Confectionery Ltd. (Australia); Nestlé New Zealand Ltd.; Food Specialties (PNG) Ltd. (Papua New Guinea); Alcon Pharma GmbH (Germany); Alois Dallmayr Kaffee oHG (Germany; 48.6%); Blaue Quellen Mineral-und Heilbrunnen AG (Germany; 90.6%); Clintec-Salvia GmbH (Germany; 50%); Heimbs & Sohn GmbH & Co. KG (Germany; 48.6%); Nestlé Deutschland AG (Germany; 97.2%); Trinks GmbH (Germany; 90.6%); Vit-tel Mineralwasser GmbH (Germany; 52.5%); Nestlé (Ireland) Ltd.; Alcon Laboratories (U.K.) Ltd.; Cereal Partners U.K. (50%); Gray, Dunn & Co. Ltd. (U.K.); Multisnack Ltd. (U.K.); Rowntree Mackintosh Ltd. (U.K.); The Nestlé Co. Ltd. (U.K.); Indra AB (Sweden); Lars Jónsson AB (Sweden; 50%); Svenska Nestlé AB (Sweden); Zoégas Kaffe AB (Sweden; 90.8%); Alcon Pharmaceuticals Ltd.; Dyna S.A.; Food Ingredients Specialties S.A.; Frisco-Findus AG (98.7%); Frismat AG; Leisi AG Nahrungsmittelfabrik; Maggi AG; Nespresso S.A.; Nestlé World Trade Corporation; Société des Produits Nestlé S.A.; Thomi & Franck AG; Nestlé Prodalim Gida Mamulleri Imalat Ve Pazarlama Anonim Sirketi (Turkey; 97.2%); Österreichische Nestlé GmbH (Austria); Alcon-Couvreur N.V. (Belgium); Friskies Service Merchandising S.A. (Belgium); Nestlé Belgilux S.A. (Belgium); Refrifood Benelux S.A. (Belgium); Vittel Import S.A. (Belgium; 52.5%); Nestlé Danmark A/S (Denmark); Alcon Iberhis S.A. (Spain); Derivados Lácteos y Alimenticios S.A. (Spain); Granja Castelló S.A. (Spain; 50%); Productos del Café S.A. (Spain); Sociedad Nestlé AEPA (Spain); Nestlé-Findus Oy (Finland); Cereal Partners France (50%); Chambourcy S.A. (France; 99.9%); Clintec Nutrition Clinique S.A. (France; 50%); Davigel S.A. (France; 99.9%); France Glaces-Findus S.A.; Gloria S.A. (France); Herta S.A. (France); Laboratoires Alcon S.A. (France); Loumidis S.A. (Greece); Nestlé Hellas S.A.I. (Greece; 51%); Nestlé-Rowntree S.A. (France); Société de Produits Alimentaires et Diététiques, SOPAD-Nestlé S.A. (France); Société Genérale des Eaux Minerales de Vittel S.A. (France; 52.5%); Source Perrier (France); Alcon Italia S.p.A. (Italy); Berni Industrie Alimentari S.p.A. (Italy); Clintec S.r.l. (Italy; 50%); Nestlé Italiana S.p.A. (Italy); Intercsokoládé Kft (Hungary; 97.1%); A/S Nestlé Norge (Norway); Artland Nederland B.V. (Netherlands); Nestlé Ne-derland B.V. (Netherlands); COMCAFE Comercial de Café, Ltda. (Portugal); Nestlé Portugal S.A.

Further Reading

Heer, Jean, World Events 1866-1966: The First Hundred Years of Nestlé, Vevey, Switzerland, Nestlé, 1966; Historical Highlight, Vevey, Switzerland, Nestlé, 1991; Nestlé Annual Report, 1991; Heer, Jean, Nestlé: 125 Years, 1866-1991, Verey, Switzerland, Nestlé, 1991; Nestlé Consolidating its Chocolate Production, New York Times, February 5, 1993; Templeman, John, Stewart Toy, and Dave Lindorff, Nestlé: A Giant in a Hurry, Business Week, March 22, 1993.

updated by Anne C. Hughes

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Nestlé S.A.

Nestlé S.A.

CH-1800
Vevey
Switzerland
(021) 510-112

Public Company
Incorporated: 1866 as Anglo-Swiss Condensed Milk Company
Employees: 197,722
Sales: SFr40 billion (US$26.64)
Stock Index: Zurich Geneva Basel Berne Lausanne St. Gall Paris Frankfurt Dusseldorf Amsterdam Vienna

Nestlé is the largest food company in the world. With about 400 manufacturing facilities on five continents, Nestlé has often been called the most multinational of the multinationals, largely because only 2% of its sales are made in its home country. Nestlé S.A. is a holding company for some 200 operating units that manufacture and sell a wide variety of products, including tea, coffee, dairy products, baby food, frozen foods and ice cream, pet foods, pharmaceutical products, and cosmetics.

While serving as the American consul in Zurich, Charles Page decided that Switzerland, with its abundant milk supply and easy access to the whole European market, was the perfect location for a condensed milk factory. The first canned condensed milk had been produced in the United States by Gail Borden some ten years before, and originally Page planned to produce and sell Borden Milk in the European market as a licensee. The plan fell through, however, so in 1866 he established the Anglo-Swiss Condensed Milk Company as a limited company in Cham, Switzerland.

The companys name was meant to flatter the British, to whom Page hoped to sell a great deal of his condensed milk. Anglo-Swiss first expanded its operations beyond Switzerlands borders in 1872, when it opened a factory in Chippenham, England. Condensed milk rapidly became a staple product in European cupboardsthe business downturn in 1872 and the depression of 1875 didnt even affect the firms sales. Charles Page died in 1873, leaving the company in the hands of his brother George and Anglo-Swisss other investors. The next year, Anglo-Swiss expanded in England again by purchasing the English Condensed Milk Company, in London. By 1876, sales were almost four times their 1872 level.

Meanwhile, in nearby Vevey, in 1867 Henri Nestle began selling his newly developed cows-milk food for infants who could not be breast fed. Demand for his Farine Lactée Nestlé soared; between 1871 and 1873, daily production more than doubled, from fewer than 1,000 tins a day to 2,000. Nestlés goal was to bring his baby food within everyones reach, and he spared no effort in trying to convince doctors and mothers of its benefits. But while his energy and good intentions were nearly endless, his financial resources were not. By 1873, demand for Nestlés product exceeded his production capabilities, resulting in missed delivery dates. At 61, Nestlé was running out of energy, and his thoughts turned to retirement. Jules Monnerat, a former member of parliament who lived in Vevey, had long eyed the business, and in 1874 Nestlé accepted Monnerats offer of SFrl million. Thus, in 1875, the company became Farine Lactée Henri Nestlé with Monnerat as chairman.

In 1877, Nestlé faced a new competitor when the Anglo-Swiss Condensed Milk Companyalready the leading manufacturer of condensed milk in Europedecided to broaden its product line and manufacture cheese and milk food for babies. Nestlé quickly responded by launching a condensed milk product of its own. George Page tried to buy the competing company outright, but he was firmly told that Nestlé was not for sale. Turning his attention elsewhere, he purchased the Anglo-Swiss Companys first factory in the United States in 1881. The plant, located in Middletown, New York, was built primarily to escape import duties, and it soon was successful enough to challenge Bordens supremacy in the American condensed milk market. It also presented a drawback: George Page spent so much time there that Anglo-Swiss began to lose its hold on Europemuch to the delight of Nestlé. After George Pages death in 1899, the Anglo-Swiss Condensed Milk Company decided to sell its American business to Borden in 1902 so that it could concentrate on regaining market share in Europe.

Until 1898, Nestlé remained determined to manufacture only in Switzerland and export to its markets around the world. But that year the company finally decided to venture outside Switzerland with the purchase of a Norwegian condensed milk company. Two years later, in 1900, Nestlé opened a factory in the United States, and quickly followed this by entering Britain, Germany, and Spain. Early in the 1900s, Nestlé also became involved in chocolate, a logical step for a company based in Vevey, the center of the Swiss chocolate industry. Nestlé became a partner in the Swiss General Chocolate Company, the maker of the Peter and Kohler brands. Under their agreement, the chocolate company produced the first Nestlé brand milk chocolate, while Nestlé concentrated on selling the Peter, Kohler, and Nestlé brands around the world.

In 1905, Nestlé and the Anglo-Swiss Condensed Milk Company finally quelled their fierce competition by merging to create the Nestlé and Anglo-Swiss Milk Company. The new firm would be run by two registered offices, one in Vevey and one in Cham, a practice it continues today. With Emile-Louis Roussy as chairman, the company now included seven factories in Switzerland, six in Great Britain, three in Norway, and one each in the United States, Germany, and Spain.

In response to an increase in import duties in AustraliaNestlés second-largest export marketthe company decided to begin manufacturing there in 1906 by buying a major condensed milk company, the Cressbrook Dairy Company, in Brisbane. In the next few years production, and sales, continued to increase as the company began to replace sales agents with subsidiary companies, particularly in the rapidly growing Asian markets.

But most of its factories were located in Europe, and when World War I broke out in 1914, Nestlés operations, particularly in warring countries like Britain and Germany, were seriously affected. Although production continued in full force during the early months of the war, business soon grew more difficult. By 1916 fresh milk shortages, especially in Switzerland, meant that Nestlés factories often sold almost all of their milk supplies to meet the needs of local towns. Shipping obstacles, increased manufacturing and operating costs, and restrictions on the use of production facilities added to Nestlés wartime difficulties, as did a further decrease in fresh milk supplies due to shortages of cattle.

To deal with these problems and meet the increased demand for its products from governments supplying their troops, Nestlé decided to expand in countries less affected by the war and began purchasing existing factories, particularly in the United States, where it established links with several existing firms. By 1917, Nestlé had 40 factories, and in 1918, its world production was more than double what it was in 1914. Nestlé pursued the same strategy in Australia; by 1920 it had acquired a controlling interest in three companies there. That same year, Nestlé began production in Latin America when it established a factory in Araras, Brazil, the first in a series of Latin American factories. By 1921, the firm had 80 factories and 12 subsidiaries and affiliates. It also introduced a new product that yearpowdered milk called Lactogen.

It didnt take long for the effects of such rapid expansion to catch up with the company, however. Nestlé and Anglo-Swiss reported its first loss in 1921, to which the stock market reacted with panic, making matters worse. The company explained that the SFrl00 million loss was due to the rising prices of raw materials such as sugar and coal, and a trade depression that had caused a steady fall in consumer purchasing power, coupled with falling exchange rates after the war, which forced the company to raise prices.

To battle the storm, the company decided to reorganize both management and production. In 1922 it brought production in line with actual sales by closing some of its factories in the United States, Britain, Australia, Norway, and Switzerland. It also hired Louis Dapples, a banking expert, to put the company back in order. Dapples directed Nestlé with an iron fist, introducing stringent financial controls and reorganizing its administration. By 1923, signs of improvement were already evident, as Nestlés outstanding bank loans had dropped from SFr293 million in 1921 to SFr54.5 million in 1923. Meanwhile in France, Belgium, Italy, Germany, and South Africa, production facilities were expanded. By consolidating certain operations and expanding others, Nestlé was also able to widen its traditional range of products.

Overall, the late 1920s were profitable, progressive times. In addition to adding some new products of its own, including malted milk; a powdered beverage called Milo; and Eledon, a powdered buttermilk for babies with digestive disorders, the company bought interests in several manufacturing firms. Among them were butter and cheese companies, as well as Sarotti A.G., a Berlin based chocolate business which began manufacturing Nestlé, Peter, Cailler, and Kohler chocolate. In 1928, under the direction of Chairman Louis Dapples, Nestlé finally merged with Peter, Cailler, Kohler, Chocolats Suisses S.A. (the resulting company of a 1911 merger between the Swiss General Chcolate Company and Cailler, another leading firm) adding 13 chocolate plants in Europe, South America, and Australia to the growing firm.

Nestlé was becoming so strong that it seemed even the Depression would have little effect on its progress. In fact, its U.S. subsidiary, Nestlés Food Company Inc. of New York, barely felt the stock market crash of 1929. In 1930 Nestlé created new subsidiaries in Argentina and Cuba. In spite of the Depression, Nestlé added more production centers around the world, including a chocolate manufacturer in Copenhagen and a small factory in Moravia, Czechoslovakia to manufacture milk food, Nescao, and evaporated milk. Factories were also opened in Chile and Mexico in the mid-1930s.

Although profits were down 13% in 1930 over the year before, Nestlé faced no major financial problems during the Depression, as its factories generally maintained their output and sales were steady. Although Nestlés New York-based subsidiary (which had changed its name to Nestlés Milk Products Company) was more affected than those in other countries, U.S. sales of milk products were steady until 1931 and 1932, when a growing public frugality began to cause trouble for more expensive but established brands like Nestlés. Profit margins narrowed, prices dropped, and cut-throat competition continued until 1933, when new legislation set minimum prices and conditions of sales.

The markets, like the United States, that were among the first to feel the effects of the Depression were also the first to recover from it. The Depression continued in Switzerland, however. Because currency exchanges to and from Switzerland were especially difficult between the early 1930s, when many major countries devalued their currencies, and 1936, when Switzerland finally did too, Nestlé products manufactured there could no longer compete on international markets. The company decided to streamline production and close several factories, including its two oldest, in Cham and Vevey.

Decentralization efforts begun during the Depression continued to modify the companys structure gradually. By 1936, the industrial and commercial activity of the Nestlé and Anglo-Swiss Condensed Milk Company itself was quite limited in comparison with the considerable interests it had in companies manufacturing and selling its products. More than 20 such companies existed on five continents. In effect, the firm had become a holding company. Consequently, the Nestlé and Anglo-Swiss Condensed Milk Company Limited was established to handle production and marketing on the Swiss market; the parent company officially became a holding firm, called the Nestlé and Anglo-Swiss Holding Company Ltd.; and a second holding company, Unilac Inc., was created in Panama by a number of Nestlés overseas affiliates.

In 1937, Louis Dapples died and a new management team, whose members had grown up with the organization, took over. It included Chairman Edouard Muller, formerly managing director; Carl J. Abegg, vice chairman of the board; and Maurice Paternot, managing director. In 1938, Nestlé introduced its first non-milk product: Nescafe. The revolutionary instant coffee was the result of eight years of research, which had begun when a representative of the Brazilian Coffee Institute asked Louis Dapples if Nestlé could manufacture coffee cubes to help Brazil use its large coffee surplus. Although coffee crystals and liquid extracts had been tried before, none had satisfactorily preserved a coffee taste.

Nestlés product took the form of a soluble powder rather than cubes, allowing users to control the amount of coffee they used. Although Nestlé originally intended to manufacture Nescafe in Brazil, administrative barriers were too great, so Nescafe was first manufactured in Switzerland. Limited production capacity meant that it was launched without the elaborate marketing tactics usually used for products with such potential.

Nescafé quickly acquired a worldwide reputation, however, after it was launched in 1939 in the United States, where it did exceptionally well. Nestea, a soluble powered tea, also made a successful debut, in the early 1940s.

World War II, not surprisingly, had a dire effect on Nestlé. In 1939, profits plummeted to $6 million, compared to $20 million the year before. As in the last war, the company was plagued by food shortages and insufficient raw material supplies. To wage its own battle against the war, the company decided to split its headquarters at Vevey and transfer part of the management and executive team to an office in Stamford, Connecticut, where it could better supervise distant markets. Nestlé continued under control of dual managements until 1945.

But the war was not all bad for Nestlé. When the United States entered the war in 1941, Nescafe and evaporated and powdered milk were in heavy demand from American armed forces. By the end of the war, Nestlés total sales had jumped from $100 million before the war to $225 million in 1945, with the greatest increase occurring in North America, where sales went from $14 million to $60 million. With the end of the war, Nestlés European and American branches were able to discuss future plans without fear of censorship, and the company could begin to face the challenge of rebuilding its war-torn subsidiaries. Nestlé also re-launched Nescafe and baby foods and began to research new products extensively. Researchers focused on the three areas Nestlé considered most likely to affect the food industrys future: an increase in world population, rising standards of living in industrialized countries, and the changing social and economic conditions of raw-material-producing countries.

In 1947, Nestlé merged with Alimentana S.A., the manufacturer of Maggi seasonings, bouillon, and dehydrated soups, and the holding company changed its name to Nestlé Alimentana Company. Edouard Muller became the first chairman of Nestlé Alimentana, but he died in 1948, before the policies he helped formulate would put the company on the road to a new future. Carl Abegg assumed leadership of the board.

In 1950, Nestlé acquired Crosse and Blackwell, a British manufacturer of preserves and canned foods. Nestlé hoped its $24 million investment would serve as a marketing outlet for Maggi products, but the plan was less than successful, primarily because Crosse and Blackwell could not compete in the United Kingdom with H.J. Heinz. Similar setbacks occurred in 1963, when Nestlé acquired Findus frozen foods in Scandinavia for $32 million. Although the company performed well in Sweden, it encountered difficulties in other markets, where the British-Dutch giant Unilever reigned. While parts of the Findus operation eventually became profitable, Nestlé merged its German, Italian, and Australian Findus branches with Unilever. The development of freeze-drying in 1966 led to Tasters Choice, the first freeze-dried coffee, as well as other instant drinks.

In 1971, Nestlé acquired Libby, a maker of fruit juices, in the United States, and in 1973 it bought Stouffers, which took Nestlé into the hotel and restaurant field and led to the development of Lean Cuisine, a successful line of low-calorie frozen entrees. Nestlé entered the nonfood business for the first time in 1974 by becoming a major shareholder in the French company LOreal, today the largest cosmetic company in the world. Nestlé moved further into nonfood fields in 1977, when it acquired Alcon Laboratories, a Forth Worth, Texas pharmaceutical company that specializes in ophthalmic products, as well as Burton, Parsons and Company Inc., an American manufacturer of contact lens products acquired two years later. Also in 1979 the company adopted its present nameNestlé S.A.

The 1970s saw Nestlés operations increase considerably in developing countries. Of Nestlés 303 factories, the 81 factories in developing countries contributed 21% of Nestlés total production. But in the mid-1970s, the firm faced a new problem as a result of its marketing efforts in developing countries, when a boycott against all Nestlé products was started in the United States in 1977. Activists claimed that Nestlés aggressive baby food promotions made mothers in developing countries so eager to use Nestlés formula that they used it any way they could. Due to poverty and illiteracy, this often meant mixing the formula with local, polluted water or trying to make the expensive supplies last longer by using an insufficient amount of formula, eventually starving their infants. Estimate of Nestlés losses as a result of the boycott, which lasted until the early 1980s, range as high as $40 million.

In 1981 Helmut Maucher became managing direct of Nestlé and made this controversy one of his first projects. He met with boycott supporters and complied with the World Health Organizations demands that Nestlé stop promoting the product through advertising and free samples. His direct confrontation of the issue contrasted with Nestlés earlier low-profile approach and was quite successful in allaying its critics fears.

Maucher also reduced overhead by turning over more authority to operating units and reducing headquarters staff. In addition, he spearheaded a series of major acquisitions. In 1984 Nestlé acquired Carnation, a U.S. manufacturer of milk, pet, and culinary products, for $3 billion, at the time one of the largest acquisitions in the history of the food industry. This was followed in 1985 by the acquisition of Hills Brothers Inc., the third-largest American coffee firm, which added ground roast coffee to Nestlés product line. In the late 1980s, as food companies around the world prepared for the integration of the European Economic Community in 1992, Nestlé continued to make major acquisitions. In 1988 it acquired Rowntree PLC, a leading British chocolate manufacturer, for £2.55 billion, the largest takeover of a British company by a foreign one to date. Also that year it acquired the Italian pasta maker Buitoni SpA.

With factories in 60 countries and sales of SFr40 billion, Nestlé is the undisputed leader in the food industry. Its long history of international operations should stand it in good stead, but the giant will have to stay nimble to maintain its place as trade barriers crumble in Europe and its competition grows large and strong enough to challenge Nestlé around the world.

Principal Subsidiaries

Nestlé Enterprises Ltd. (Canada); Alcon Canada, Inc.; Carnation Foods Company Ltd. (Canada); Nestlé Foods Corp. (U.S.A.); Cains Coffee Co. (U.S.A.); Stouffer Foods Corporation (U.S.A); Stouffer Restaurant Co. (U.S.A.); Alcon Laboratories, Inc. (U.S.A.); Dermatological Products of Texas Inc. (U.S.A.); Beech-Nut Nutrition Corporation (U.S.A); Nestlé Trading Corporation (U.S.A.); Wine World, Inc. (U.S.A.); Paul F. Beich Co., Inc. (U.S.A.); Hills Bros. Coffee Inc. (U.S.A.); Carnation Company (U.S.A.); Nestlé Beich, Inc. (U.S.A.); Stouffer Hotel Co. (U.S.A.); Pasta & Cheese, Inc. (U.S.A.); LJ. Minor Corp. (U.S.A.); S.A. Nestlé de Productos Alimenticios (Argentina); Companhia Produtora de Alimentos S.A. (Brazil); Alcan Laboratorios do Brasil S.A.; Nestlé Industríale Comercial Ltda. (Brazil); Nestlé Chile, S.A.; Productos Alimenticios Savory S.A.I.C. (Chile); Nestlé de Colombia S.A.; Productos Nestlé (Costa Rica) S.A.; Productos Nestlé (El Salvador) S.A.; Indeca S.A.(E1 Salvador); Productos Nestlé (Guatemala) S.A.; Nestlé Hondurena S.A.(Honduras); Nestlé Jamaica Ltd.; Compania Nestlé S.A. de C.V. (Mexico); Alimentos Findus S.A. de C.V. (Mexico); Industrias Alimenticias Club S.A. de C.V. (Mexico); Productors Carnation S.A. de C.V. (Mexico); Productos Nestlé (Nicaragua) S.A.; Nestlé Panama S.A.; Nestlé Caribbean, Inc. (Panama); Compania Peruana de Alimentos S.A. (Peru); Nestlé Puerto Rico, Inc.; Sociedad Dominicana de Conservas y Alimentos S.A. (Dominican Republic); Trinidad Food Products Ltd.; Nestlé Venezuela S.A.; Venepastas C.A. (Venezuela); Saudi Food Industries Co. Ltd.; Nestlé Foods Co. Ltd. (South Korea); Nestlé China Ltd. (Hong Kong); Food Specialities Ltd. (India); P.T. Food Specialities Indonesia; Nestlé K.K. (Japan); Alcon Japan Ltd. (Japan); Societe pour lExportation des Produits Nestlé S.A. (Lebanon); Nestlé (Malaysia) Sdn. Bhd.; Malaysia Cocoa Manufacturing, Sdn. Bhd.; Nestlé Philippines, Inc.; Nestlé Singapore (Pte) Ltd.; Ceylon Nutritional Foods Ltd. (Sri Lanka); Nestlé Lanka Ltd. (Sri Lanka); Anping Distributors Ltd. (Taiwan); Nestlé (Thailand) Ltd.; Thai Soluble Coffee Company Ltd.; Carnation Manufacturing Co. (Thailand) Ltd.; Food and Nutritional Products (Pty) Ltd. (South Africa); Societe Camerounaise de Produits Alimentaires, Dietetiques et Autres CAM AD-NESTLé (Cameroon); Compagnie Africaine de Preparations, Alimentaires CAPRAL-NESTLÉ (Ivory Coast); NOVALIM-NESTLÉ (Ivory Coast); Societe Gabonaise de Produits Alimentaires (SOGAPRAL) (Gabon); Nestlé Ghana Ltd.; Nestlé Foods Kenya Ltd.; Nestlé products (Mauritius) Ltd.; Food Specialities (Nigeria) Ltd.; Nestlé Senegal; Societe Industrielle et de Distribution des Produits Alimentaires et Dietetiques SIDPAD (Tunisia); Nestlé Zimbawe (Pvt.) Ltd.; Nestlé Australia Ltd.; Allen Life Savers Ltd. (Australia); Nestlé New Zealand Ltd.; Nestlé Deutschland A.G. (West Germany); Herta Artland Dorffler GmbH & Co. KG (West Germany); Blaue Quellen Mineralund, Heibrunnen A.G. (West Germany); Trinks GmbH (West Germany); Heil-und Mineralquellen GmbH (West Germany); Aponti GmbH (West Germany); Dr. Ritter GmbH & Co. (West Germany); Dany Snack GmbH & Co. (West Germany); Alcon Pharma GmbH (West Germany); Alois Dallmayr Kaffee oHG (West Germany); Heimbs & Sohn GmbH & Co. KG (West Germany); Nestlé (Ireland) Ltd.; The Nestlé Co., Ltd. (U.K.); Findus (U.K.) Ltd.; Chambourcy Food Cop. Ltd. (U.K.); Herta (U.K.) Ltd.; Alcon Laboratories (U.K.) Ltd.; AB Findus (Sweden); AB Kaffebonans Rosteri (Sweden); AB Zoegas Kaffe (Sweden); Societe des Produits Nestlé S.A.; Maggi A.G.; Thomi & Franck A.G.; Frisco-Findus A.G.; Dyna S.A.; Leisi A.G. Nahrungsmittelfabrik; Frismat AG; Alcon Pharmaceuticals Ltd.; Nestlé World Trade Corporation; Food Ingredients Specialities S.A.; Prodalim Gida Mamulleri (Turkey); Imalat Ve Pazarlama Anonim (Turkey); Sirketi (Turkey); Osterreichische Nestlé GmbH. (Austria); Nestlé Belgiux S.A. (Belgium); Jacky S.A. (Belgium); Carnex Service Merchandising (Belgium); Herta Belgique S.A. (Belgium); Alcon-Couvreur N.V. (Belgium); N.V. Sanpareil (Belgium); Nestlé Danmark A/S; Sociedad Nestlé AEPA (Spain); Derivados Lácteos y Alimenticios S.A. (Spain); Alcon Iberhis S.A. (Spain); Alimentos Refrigerados S.A. (Spain); Cafes La Estrella S.A. (Spain); Malaga Comercial S.A. (Spain); Productos Brasilia S.A. (Spain); Granja Castello S.A. (Spain); Solis Industrias de Alimentación S.A. (Spain); Nestlé Findus Oy (Finland); Societe de Produits Alimentaires et Dietetiques, SOPAD-Nestlé S.A. (France); Gloria S.A. (France); Guigoz France S.A. (France); Lait Mont Blanc S.A. (France); France Glaces-Findus S.A. (France); Chambourcy Roche aux Fees & Cie. (France); Laboratoires Alcon S.A. (France); Herta S.A. (France); Societe Generale des Eauz Minerales de Vittel S.A. (France); Nestlé Hellas S.A.I. (Greece); Carnation Hellas A.E.B.E. (Greece); Loumidis S.A. (Greece); Nestlé Italiana S.p.A. (Italy); Locatelli S.p.A. (Italy); Encia S.p.A. (Italy); Alcon Italia S.p.A. (Italy); A/S Nestlé-Norge (Norway); Nestlé Nederland B.V. (Netherlands); Artland Nederland B.V. (Netherlands); Nestlé Portugal S.A.; TOFA-Torrefaccao de Cafes de Portugal, s.a.r.l. (Portugal); SICAL-Sociedade Importadora de Cafes, Lda. (Portugal).

Further Reading

Heer, Jean. World Events 1866-1966: The First Hundred Years of Nestlé, Vevey, Switzerland, Nestlé, 1966.

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Nestlé S.A.

Nestlé S.A.

Contact Information:

headquarters: avenue nestlé 55 vevey, ch-1800 switzerland phone: +41-21-924-21-11 url: http://www.nestle.com

OVERVIEW

Nestlé S.A. considers itself a global company that sells food and beverage products, with minor interests in pharmaceuticals and pet food. Nestlé's markets are worldwide and encompass all sorts of brand name items from Nestea, Nescafe, Nestlé Quik, Nestlé Crunch, Milo, Lion, and other household name brands. A strong company, Nestlé has bounced back from bad crops, controversy over substandard infant formula sold to third world countries, and fluctuating consumer interest in their products. Over the years, Nestlé has prided itself on its innovation, expansion and retrenchment capabilities, always looking out at the market share and finding products that suit consumer needs at any particular time.



COMPANY FINANCES

Company sales (in Swiss francs) were at 54.5 billion in 1992. The figure rose respectably to 57.5 billion in 1993, but dropped to 57.0 billion in 1994 and to 56.5 billion in 1995. After retrenchment and regrouping, however, sales rose sharply to 69.5 billion in 1996. The following year saw a 16 percent increase, with sales reaching 69.9 billion Swiss francs in 1997.



ANALYSTS' OPINIONS

New trade barriers, and the fact the Switzerland has not become a part of the European Union, has created a threat to Nestlé's security in the region. According to Dario Jkuster, director of Choccosuisse, the association of Swiss chocolate makers of which Nestlé is a major and long-time member, "The EU barriers meant that step by step, Swiss Chocolate production is dislocated to outside Switzerland." Although Nestlé has factories in every EU country and on six other continents, the reputation of Swiss chocolate has been one of its mainstays for over 100 years. The trend to move operations from its headquarters' country may affect the reputation of Nestlé and preclude it from being a maker of Swiss chocolate, reputedly the finest in the world. In February 1992, however, the Standard & Poor's index changed Nestlé's outlook from negative to positive, proving once again that the food giant knows how to move with the times and reinvent itself to reflect new trends and situations.




HISTORY

Henri Nestlé's goal when he began work in the mid-1860s was to develop a healthy alternative food source for mothers who could not breast feed their babies, and to keep the mortality rate from malnutrition among infants down. This formula, called Farnie Lactee Henri Nestlé, was comprised of cow's milk, wheat flour, and sugar. It proved to be a valuable product for babies who were having trouble digesting their mother's milk.

Based on the success of this product, Farine Lactee was sold throughout Europe within a few years, and in 1874 Nestlé sold his company to Jules Monnerat. Monnerat in turn merged with the Anglo Swiss Condensed Milk company in 1905. He broadened the number of product lines that were offered by the expanded company. In the years before the merger, however, certain events transpired to create the basis for the Nestlé company of today. In 1875, milk chocolate was developed by Daniel Peter, a friend of Henri Nestlé; and, in Switzerland, Julius Miller developed instant pea and bean soups, which in turn led to the creation of boullion and other items that were to become the staples of the expanded Nestlé company.

In the first decades of the twentieth century, Nestlé began to consolidate its product lines. The company added chocolate to its food products and built warehouses and manufacturing sites in Australia, Singapore, Hong Kong, and Bombay. However, until the first World War, most of the production facilities were in Europe. Because of the disruptions of the war, Nestlé expanded its operations and production to the United States, where by 1918 it had 40 factories in operation.

Following troubled times in the early 1920s, Nestlé regrouped and began to develop even more product lines and make more acquisitions. By 1938, they had developed their most recognizable and popular product—instant coffee, called Nescafe. Nescafe was an instant success and was followed in the 1940s by Nestea. Chocolate became secondary to the success of these beverages.

World War II caused great shifts in the profits of Nestlé. Its increasing isolation in neutral Switzerland caused many of the executive offices to move to Stamford, Connecticut. Profits were down, and the nature of the business was forever changed by the ravages of the world war. At the war's end, Nestlé began to expand its operations into Latin America, Africa, and other developing areas to avoid product distribution interruptions in case of further global conflict. All was not lost, however, even during the war years. Nescafe became the staple drink of American servicemen throughout the world and enhanced the reputation of the instant coffee more than any planned advertising campaign could possibly have achieved. As the end of the war approached, Nestlé executives found themselves unexpectedly heading up a worldwide coffee concern, as well as a company built upon Nestlé's more traditional businesses.

The most dynamic period of Nestlé's history came at the end of World War II and lasted through the 1980s. Nestlé began to diversify through merger and acquisition to meet the world's increased food needs. Dozens of products were added to their ever-increasing line, including: Maggi soups, Stouffers prepared foods, Libby juices, Crosse and Blackwell's preserved and canned foods, and more. The company purchased L'Oreal cosmetics, pursuing the non-food item market. During this time, Nestlé even invented freeze-dried coffee, identified as the Taster's Choice brand.

FAST FACTS: About Nestlé S.A.


Ownership: Nestlé S.A. is publicly owned company traded on the Zurich Stock Exchange.

Ticker symbol: NESN

Officers: Peter Brabeck-Letmathe, CEO; Helmut O. Maucher, Chmn.

Employees: 225,808

Principal Subsidiary Companies: Some of the subsidiary companies that Nestlé operates include: Carnation, Stouffers, Rowntree, and Perrier.

Chief Competitors: Nestlé's main competition comes from other large food producing companies such as: Beatrice and General Mills.




To maintain a balance, Nestlé made its second venture outside the food industry by acquiring Alcon Laboratories, Inc., a U.S. manufacturer of pharmaceutical and ophthalmic products. The company justified its move into non-food items as meeting the needs of the entire human body. Nestlé approached the 1980s with a renewed flexibility and determination to evolve. The company's strategy for this period was twofold: to improve its financial situation through internal adjustments and divestments and to continue its policy of strategic acquisitions. With Pet Foods, mineral waters, and finally, the acquisition of the American food giant Carnation, Nestlé had become the world's leading food company.

The same period of rapid growth and acquisition found Nestlé embroiled in a worldwide scandal of selling substandard baby formula to third world and developing countries. A boycott of Nestlé products by certain lay and religious organizations began in 1977. By 1981, the World Health Organization instituted an International Code of Marketing of Breast-Milk Substitutes. The code requires that "safe and adequate nutrition, not only through the protection and promotion of breast feeding, but also through the ensurance of the proper use of breast-milk substitutes when these are necessary, and through appropriate marketing." The Code says that, "in the developing world, breast-milk substitutes should not be promoted directly to the consumer, but through the medical profession." Nestlé signed onto the code and has tried to live up to its expectations by creating an in-house "do's and don'ts" list to guide their sales staff in these issues.




STRATEGY

Nestlé's marketing strategies ensure that their products are focused on the country or society for which they are aimed. In each country where Nestlé has a factory, analysis of the eating habits and buying trends determine what products will be heavily marketed. For instance, in the United States, with its fast food consumption, two of the major organizations under the Nestlé banner are Stouffers, a frozen fast dinner company, and Carnation, noted for its milk and "Instant Breakfast" products. Nestlé has strong brands and leading global market positions in coffee and bottled water, milk products, prepared dishes, chocolate and confectionery, and ophthalmics. The size and resilience of Nestlé's cash flow are key sources of its success. With increasing contributions from faster-growing product categories and emerging markets, Nestlé has achieved improved growth in underlying volumes, market shares, and profits.




INFLUENCES

The influence of Nestlé is felt worldwide. Since World War II, people throughout the world have referred to instant coffee as "Nescafe" even when they are using another brand. Nestlé's bottled waters, such as Perrier, have reached the affluent classes of society with name recognition and preference. Nestlé's chocolate products, pet foods, and other lines are all integral parts of its influence over the eating habits of people everywhere.

CHRONOLOGY: Key Dates for Nestlé S.A.


1867:

Henri Nestlé begins selling his newly developed cow's-milk food for infants

1874:

Nestlé sells his company to Jules Monnerat

1875:

Daniel Peter develops milk chocolate

1900:

Nestlé opens a factory in the United States

1905:

Nestlé and the Anglo-Swiss Condensed Milk Company merge to create the Nestlé and Anglo Swiss Milk Company

1921:

Reports first loss

1938:

Introduces Crunch bar; develops instant coffee, Nescafe

1947:

Merges with Alimentana S.A. and changes name to Nestlé Alimentana Co

1966:

Introduces Taster's Choice

1977:

U.S. boycott of Nestlé begins

1979:

Nestlé S.A. is acquired as official name

1981:

Nestlé addresses boycott supporters and complies with World Health Organizations demands

1984:

Acquires Carnation

1992:

Launches hostile takeover bid for Source Perrier

1994:

Nestlé remains undisputed leader in industry as world's largest packaged food manufacturer, coffee roaster, and chocolate maker




CURRENT TRENDS

The pace of Nestlé's acquisition program, which had fallen in recent years and used to be funded by the group's substantial discretionary cash flows, was expected to accelerate in 1998 through the acquisition of Spillers Petfoods. These investments would continue to support the group's overall market leadership in the packaged food industry and enhance its product portfolio with the addition of faster growing, value-added categories, such as mineral water and ice cream.




CORPORATE CITIZENSHIP

Controversy has been part of Nestlé for over 20 years. It began with the claims that Nestlé was selling substandard baby formula directly to mothers in third-world countries without the benefit of a doctor or even the proper education of how the formula should be used. This began a boycott of Nestlé products in 1977 involving many concerned organizations. On January 8, 1997, the Interagency Group on Breastfeeding Monitoring (IGBM) launched a report titled, "Cracking the Code," monitoring company implementation of the World Health Organization's International Code of Marketing of Breast-Milk Substitutes, adopted in 1981 by the World Health Assembly. The report claimed that infant formula manufacturers, including Nestlé, were systematically violating the World Health Organization (WHO) Code.

Nestlé's response, both to its shareholders and the world via the Internet, was swift. It countered the report with both its own comments and an independent consultant's assessment denying the charges that it tampered with the formula, or that it sold the formula without medical supervision. The independent consultant found that the Church of England's boycott of Nestlé should end since the food giant had taken steps to assure that the baby formula was handled correctly. Nestlé, desiring to maintain its position as the world's largest food company, responded to its critics with quick action and a modification of policies in order to retain the respect of the world marketplace.




GLOBAL PRESENCE

Nestlé has strong brands and leading global market positions. It operates 489 factories worldwide that produce products for local use as well as for export. People of all ages and diverse social and religious groups throughout the world enjoy some Nestlé food or drink product. Nestlé products, more than 8,500 in all, are sold in more than 100 countries. Meeting the needs and desires of an ever-changing world requires respect for and knowledge of local values and desires. To achieve that, Nestlé has made decentralization a basic principle. It is Nestlé's policy to adapt as much as possible to local customs and circumstances, and allow decisions about products, marketing, and personnel to be made at the local level.

NESTLÉ'S PRODUCT SAFETY INCIDENT

In late 1997, Nestlé USA Inc. voluntarily decided to pull its "Nestlé Magic" product from the shelves of United States stores. The decision came after several states called for a ban on the chocolate-covered toy, which they believed posed a choking hazard for children. After an investigation, the U.S. Consumer Product Safety Commission (CPSC) announced that the chocolate-covered ball, containing a Disney toy figure, did not violate federal safety regulations. CPSC examined all 24 of the toys found inside the "magic" balls, and determined, based on the size and shape of the products, that Nestlé did not violate any of the CPSC's regulations. Although Nestlé was not found to be in any violation, the company voluntarily removed the product and resolved to keep it withdrawn it until the "FDA provides clear standards for products of that type." The decision did not effect the product's marketing in other countries globally, however, and Nestlé states that there is "no intention of withdrawing 'Nestlé Magic' from any market outside of the U.S."




EMPLOYMENT

Nestlé employs over 225,000 persons in its 489 site locations. The benefits and wages that it offers to these persons reflect the laws and customs of the nations where the plants and offices are located. Nestlé is proud of the fact that it places people first. According to its web site, "employees, people and products are more important at Nestlé than systems. Systems and methods, while necessary and valuable in running a complex organization, should remain managerial and operational aids but should not become ends in themselves. It is a question of priorities. A strong orientation toward human beings, employees and executives is a decisive, if not the decisive, component of long-term success."




SOURCES OF INFORMATION

Bibliography

"nestlé selects ortems advanced planning & scheduling package as worldwide plant scheduling standard." business wire, 26 october 1997.

"s&p revises nestlé s.a. outlook to negative; rtgs afmd." business wire, 2 april 1998.

swardson, anne. "sweet no more: trade barriers turning swiss' chocolatiers' success sour." star tribune, 22 october 1996.


For an annual report:

on the internet at: http://www.nestle.com

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. nestlé's primary sics are:

2023 dry, condensed, and evaporated dairy products

2064 candy and other confectionery products

2095 roasted coffee

5046 commercial equipment, nec

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Nestlé S.A.

Nestlé S.A.

Avenue Nestlé 55
Vevey, CH-1800
Switzerland
Telephone: 41 21 9242111
Web site: www.nestle.com

MADE LIKE NO OTHER CAMPAIGN

OVERVIEW

Given a European-sounding name by its American creator, Reuben Mattus, Häagen-Dazs reigned as the United States' top-selling superpremium ice cream during the 1980s. The ice cream's success partially resulted from its pure, unaltered ingredients and also from its decadent reputation. In the 1990s Häagen-Dazs's popularity waned as consumers identified it as an antiquated brand from the previous decade. Häagen-Dazs's fastest-growing competitor, Ben & Jerry's Homemade, marketed its superpremium ice cream as a product for everyone. Nestlé S.A., the owner of Häagen-Dazs, purchased 67 percent of Dreyer's Grand Ice Cream Holdings in 2003 and then allowed Dryer's to manage the Häagen-Dazs brand. To shed the ice cream's 1980s stigma of elitism and tout the product's all-natural ingredients, Dryer's released the "Made Like No Other" campaign.

The $5 to $10 million Häagen-Dazs advertising account was awarded to the ad agency Goodby, Silverstein & Partners in 2003. The agency broke the "Made Like No Other" campaign's first 60-second TV spot, "Anthem," in May 2004. The commercial displayed copy such as "There is a school of thought that less is more" upon minimalist images of landscapes. Further copy read, "Elegance is simplicity. This is how we make our ice cream." Two 30-second commercials, "Strawberry" and "Vanilla," aired in June 2004 with similar copy and imagery. All three spots featured the same soothing piano music and ended with the Häagen-Dazs logo above the campaign's "Made Like No Other" tagline.

The "Made Like No Other" campaign won a Gold EFFIE Award in 2005 in the Snacks/Desserts/Confections category. The campaign's debut spot, "Anthem," also collected a 2005 Bronze Clio Award for the Original Music category. The campaign's success was not limited to the advertising industry. According to the campaign brief written by a Goodby, Silverstein & Partners representative, "the advertising spurred a dramatic turnaround: sales and market share swelled as old and new audiences were won over—reminded why they loved Häagen-Dazs once more."

HISTORICAL CONTEXT

With his parents already in the ice-cream business, Reuben Mattus spent his youth formulating an ice cream made from premium, all-natural ingredients. After creating his first three flavors, vanilla, chocolate, and coffee, in 1961, Mattus named his new ice-cream brand Häagen-Dazs, a fabricated word adorned with a Germanic umlaut. Even though Häagen-Dazs's ownership shifted from the Mattus family to the Pillsbury Company during the 1980s, Häagen-Dazs sales soared and eventually spearheaded the new superpremium-ice-cream category.

In the 1990s, to fuel the brand's notoriety as a luxury item, advertisements for Häagen-Dazs employed such tag-lines as "Just perfect." The ad agency Bartle Bogle Hegarty created three-dimensional bus-shelter advertisements to introduce new flavors such as the Häagen-Dazs Malibu flavor. In 1999 Nestlé Ice Cream Company was created as a joint venture between food company Nestlé and Pillsbury, the latter being the primary owner of Häagen-Dazs. In 2002 Häagen-Dazs's advertising account was awarded to the ad agency J. Walter Thompson.

Propagating Häagen-Dazs as an ice cream reserved for the rich, in 2002 J. Walter Thompson released the "Pure Pleasure" campaign, which included the 30-second commercials "Brownies" and "Cookie Dough." Nestlé purchased 67 percent of Dreyer's stock the following year, making itself into a $1.4 billion ice-cream titan. After the stock purchase Dreyer's was still allowed to manage products with the Dreyer's name. Nestlé also relinquished Häagen-Dazs's management duties to Dreyer's. To gain back market share that Häagen-Dazs had been losing to Ben & Jerry's for more than 10 years, Dreyer's awarded the Häagen-Dazs advertising account to its own longtime ad agency, Goodby, Silverstein & Partners. The agency began crafting a campaign that ignored Häagen-Dazs's posh reputation and focused solely on the ice cream's pure ingredients.

In an interview with Adweek, Albert Kelly, the associate creative director at Goodby, Silverstein & Partners, explained the pretension that was associated with the Häagen-Dazs brand two decades earlier. "The name brought up cheesy luxury, and [people] thought of snobby hedonism in the '80s, like the guy in the ascot leaning against the Bentley. The image had become outdated."

TARGET MARKET

Goodby, Silverstein & Partners tailored the "Made Like No Other" campaign for an expansive demographic of ice-cream enthusiasts. In 2005 the campaign partnered with cable TV network Showtime for a promotion in which new Showtime subscribers would receive 12 free pints of Häagen-Dazs ice cream. Rick King, Showtime Networks' vice president of promotions and partnership marketing, explained the campaign's target market to the PR Newswire. "Almost everyone loves ice cream, so we felt this campaign would appeal to even the most difficult to reach consumer."

During the 1980s middle-class consumers were more likely to purchase cheaper ice cream from brands such as Breyers Ice Cream, owned by Kraft, or Edy's Grand Ice Cream, owned by Dreyer's. With a marketing strategy that greatly differed from that of Häagen-Dazs, the superpremium ice-cream brand Ben & Jerry's began expanding its presence to middle-class consumers in the 1990s. "It's hard to find two competitive brands neck-and-neck that are so very different in consumers' minds," Walt Freese, chief marketing officer for Ben & Jerry's, said to Advertising Age. He stated that Häagen-Dazs was assumed to be "for the chosen few" but that Ben & Jerry's was generally identified as a "super-premium for the people."

"The everyday consumer has morphed into a connoisseur in the pursuit of affordable indulgence," Joan Steuer, one of America's foremost authorities on chocolate and a leading expert on new products and food trends, explained to PR Newswire. "It is the attention to detail, the fine craftsmanship and all natural ingredients that allow Häagen-Dazs to turn a treat like ice cream into the everyday luxury consumers are demanding."

COMPETITION

Ben & Jerry's, which became Häagen-Dazs's most threatening competitor in the 1990s, branded its superpremium ice cream around fun and irreverence. It also used a large percentage of its advertising budget to sponsor socially conscious events. The strategy proved effective. From April 2003 to April 2004, Ben & Jerry's boosted its sales by 15.9 percent, while sales for Häagen-Dazs dropped 16.5 percent. Ben & Jerry's brand manager Dave Stever explained to Advertising Age that the brand's television spots had proven "inconclusive" during the 1990s. "The amount of lift or volume increases necessary to make those [TV] buys pay off is quite substantial," he said.

ICE CREAM SOCIOLOGY

Dreyer's Grand Ice Cream Holdings, Inc., the company that managed the superpremium ice cream brand Häagen-Dazs, conducted research to gain a better understanding of its core customer. One of Dreyer's surveys revealed that men preferred to eat four or more scoops of ice cream, while most women enjoyed only two. After eating the scoops, men also preferred to lick the bowl more than women did.

Instead of using TV commercials, Ben & Jerry's sponsored events such as the Rock the Vote bus tour in 2004. The tour involved musical artists performing across America and encouraging 18 to 24 year olds to vote. Ben & Jerry's also released an ice cream flavor called One Sweet Whirled, which referenced the song "One Sweet World" by the popular Dave Matthews Band. On April 27, 2004, Ben & Jerry's distributed free ice cream at Rock the Vote events in hope of increasing voter registration. In 2004 the ad agency Amalgamated, New York, created print advertisements for Ben & Jerry's that included cartoonish illustrations of the ice cream's ingredients.

MARKETING STRATEGY

Goodby, Silverstein & Partners focused on the quality of Häagen-Dazs ice cream rather than on its upper-class connotation or falsely assumed foreign heritage. The brunt of the campaign's $5 to $10 million budget went toward airing three television spots. This strategy intentionally capitalized on Ben & Jerry's resistance to making television spots. Burt Flickinger, managing director at the business consultancy Strategic Resource Group, validated the approach in Advertising Age. "Häagen-Dazs is taking the correct strategy by going to TV," Flickinger explained, "where the category has been uncharacteristically dark, especially in premium [ice cream] positioning."

The campaign's first 60-second television spot, "Anthem," first aired in May 2004. The commercial began with a white square floating before an off-white background. Dreamy piano music played while the copy, "There is a school of thought that less is more," appeared across the square image. Eleven orange umbrellas on a beach were then shown; all opened at the same time as the copy read, "that elegance is simplicity." Further tranquil images followed: one of rain falling in a puddle and another of a perfectly still pond. The copy continued, "and simple can be beautiful." The commercial then showed a shiny spoon slowly scooping into vanilla Häagen-Dazs ice cream. Text reading "This is how we make our ice cream" appeared, and the image changed to that of green plants growing beside a field of red dirt. "A composition in cream and vanilla," the spot continued, "a blueberry haiku." Similar images continued with copy that stated, "The beauty of Häagen-Dazs is what we put in but also what we leave out." The commercial did not feature any voice-overs, only the melodic piano score. It ended with the Häagen-Dazs logo appearing above the tagline "Made Like No Other."

Häagen-Dazs had originally asked its new ad agency to contemporize the brand. Jeff Goodby, the principal and co-creative director at Goodby, Silverstein & Partners, explained to Adweek that his agency's goal was to update Häagen-Dazs's past image. Previously campaigns had, he said, a "Donald Trumpish, golden-brown boudoir feeling to it. And the advertising reinforced it. Our job was to reestablish it as a terrific product."

The campaign's three spots were filmed in Spain and Malaysia. The later two 30-second spots, "Strawberry" and "Vanilla," started airing in June 2004. The first began with black-and-white images of a strawberry farm. As rain began falling upon the strawberry plants, the plant's colors began to appear. As more colors replaced the black-and-white imagery, copy read, "flavor enhanced by nature alone." The spot ended with Häagen-Dazs's logo above the campaign's tagline. The "Vanilla" spot featured a woman harvesting vanilla beans in a rainforest. The spot's copy stated, "start with the finest vanilla add nothing but cold."

OUTCOME

Prior to the campaign, according to Advertising Age, ad executives outside of Goodby, Silverstein & Partners were skeptical about the resurrection of the Häagen-Dazs brand. The magazine quoted an undisclosed executive as claiming, "Like Porsche, Häagen-Dazs has become associated with those who use the product and not the product itself." Goodby, Silverstein & Partners believed that the "Made Like No Other" campaign did in fact revitalize the Häagen-Dazs brand. Sales for Häagen-Dazs began to increase compared to the previous year. The campaign also won a Gold EFFIE Award in 2005 in the Snacks/Desserts/Confections category. The 60-second commercial "Anthem" was awarded a Bronze Clio in 2005 for the Music-Original category.

After "Made Like No Other" helped the sales of Häagen-Dazs to increase, members of the advertising industry began to view the ice-cream brand more optimistically. In mid-2004 Gary Koepke, a cofounder of the Boston ad agency Modernista!, praised the campaign in the Boston Globe. "I like the new Häagen-Dazs ad with the tagline 'made like no other.' It shows umbrellas opening on an empty beach and rain falling on a pond. It takes me by surprise. They're not showing the typical scoop of ice cream. The ad makes ice cream precious like a reward or a setting sun. It's just nice. It's different."

ROCKY ROAD

With its beginnings in a California ice-cream parlor, Dreyer's Grand Ice Cream was the brainchild business of William Dreyer and Joseph Edy. The two men created the world's first Rocky Road ice cream flavor during the Great Depression. The flavor's name commented on the financial troubles of the time.

FURTHER READING

Anderson, Mae. "May." Adweek, June 14, 2004, p. 28.

Aoki, Naomi. "Q&A Modernista Pair Discuss Messages, New Media." Boston Globe, July 11, 2004, p. C2.

DePass, Dee. "Pillsbury Vet Named to Succeed Dolan at Tennant." Minneapolis Star-Tribune, October 7, 2005, p. 1D.

Elliott, Stuart. "Accounts." New York Times, November 3, 2003, p. 13.

Emert, Carol. "Dreyer's Enters the Cold War," San Francisco Chronicle, August 28, 1999, p. D1.

Evangelista, Benny, Benjamin Pimentel, and George Raine. "Daily Digest." San Francisco Chronicle, June 8, 2005, p. C2.

Harper, Scott. "Band Funds Its Green Message." Roanoke (VA) Times & World News, April 26, 2004, p. B1.

Parpis, Eleftheria. "June." Adweek, July 19, 2004, p. 16.

Sampey, Kathleen. "Jason Gaboriau On the Spot." Adweek, April 5, 2004, p. 24.

Sarasohn, David. "Oregon's Vanishing Strawberry." Portland Oregonian, October 2, 2005, p. D1.

Solley, Sam. "Brand Health Check: Häagen-Dazs." Marketing, June 16, 2004, p. 22.

Thompson, Stephanie. "Summer Forecast: Ice Cream Marketers Chilly on Ad Spending." Advertising Age, June 10, 2002, p. 6.

――――――. "Symbol of Yuppie Greed? Häagen-Dazs Goes for Mass, Not Class." Advertising Age, March 22, 2004, p. 4.

Van Dusen, Lisa. "Keep Some 'Old' in New New York." Calgary Herald, October 9, 2005, p. A13.

Ward, Celeste. "Goodby Pulls Häagen-Dazs Back from 1980s Limbo." Adweek, June 14, 2004, p. 11.

                                           Kevin Teague

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