Nestlé: The Infant Formula Controversy

Nestlé: The Infant Formula Controversy

Global Marketing (MKT 690)

Professor Godwin Ariguzo

Presented by:

Jillian DeSousa

Kerri Levesque

Aziza Akilah Williams

August 6th, 2008

Background

Nestlé Company started off from a single man's idea, and developed into a giant corporation. Nestlé's headquarters are located in Switzerland, but the company maintains factories and operations in almost ever country in the world. The company has also been increasing in size each year. In addition to this increase, Nestlé is also increasing its variety of product offerings. Nestlé's business strategy encourages product growth through innovation and renovation. This strategy has allowed the company to develop different products in various fields including baby food, dairy products, prepared foods and beverages to name a few.

The company has created Nestlé Nutrition, a global business organization designed to strengthen the focus on their core nutrition business. Strengthening their leadership in this market is the key element of the company's corporate strategy. Further, Nestlé Nutrition aims to deliver superior business performance by offering consumers trusted science based nutrition products and services. In regards to international strategy, Nestlé's competitive strategies are associated mainly with foreign direct investment in dairy and other food businesses. Nestlé aims to balance sales between low risk, low growth countries of the developed world with high risk, potentially high growth markets such as Africa. Nestlé also claims that it will not take unnecessary risks for the sake of growth and will follow and respect all applicable local laws in each of its markets.

Nestlé has much strength, such as being a low cost operator, and having a research and development team that will aid in product innovation. Also, Nestlé has health-based products which are becoming more popular as consumers are becoming more health conscious, such as in the U.S. A threat to the company is that some of the markets that they are entering are already mature. For example, Danone, one of the top competitors, has already established a leadership position in the yogurt market. Other top competitors include ConAgra, Kraft Foods and General Mills.

Nestlé's goal is to maintain, preferably to increase its market share and sales volume in order to have stability in the market. (Nestlé adopts a sales oriented pricing scheme). If Nestlé has an increase in sales volume they will have an increase in market share. When Nestlé maintains or increases its market share, their products will be more widely used by consumers. This will then increase share prices and stock, as Nestlé will be seen as having a stable position when compared to competitors in the same market.

Problems and Issues

Problems with Marketing Techniques

Nestlé's marketing tactics in promoting the use of infant formula in Third World countries wasn't moral. Nestlé was not acting within the boundaries of moral standards. Every corporation must understand and realize the corporate ethics and responsibilities they should have. The problem was that Nestlé used unqualified sales girls, the distribution of free samples, marketed to people who were incapable to fulfill the minimum requirements for giving formula safely to the baby, and the association of bottle-feeding with healthy babies to promote the use of infant formula to mothers who would have been better off breast-feeding their babies.

In many Third World countries there never should have been advertising and promotions for infant formula because it is not safe due to unsafe water supplies and the difficulties in keeping bottles sterile. Where water is unsafe babies are up to 25 times more likely to die if they are bottle-fed. The cost of the formulas is another problem for some Third World families costing them up to 1/3 of their family's weekly income. Back in 1974 when the infant formula controversy began, in Nigeria the cost of feeding a 3 month old infant was approximately 30% of the minimum urban wage (what the majority earn) and by the time the infant is 6 months, the cost would have risen to 47%. This is what led some mothers to dilute the mixture up to 3 times what it ought to be, it even led some to start using powdered milk which is not intended for infants, but is cheaper. This leads to dehydration, malnutrition and diarrhea, known as bottle baby disease. Instead of saving a lot of money and breast-feeding mothers were convinced by advertisements, doctors, nurses and midwives to use formula.

Formula milk companies were donating gift bags containing baby vitamins and formula to hospitals and midwives even after the EOC 51. Instead of midwives helping the babies latch on to the breast after birth like they were supposed to, they were giving out promotional gift bags. Unholy alliances existed between medical professionals and baby food companies. As a result of these alliances, the medical professionals helped promote baby food products while the baby food companies would provide gifts ranging from food to sponsored events and conferences. Doctors have been known to receive air conditioners and air fare to go places. Doctors were not explaining to mothers how they could work and breast-fed with support, rather they were encouraging them to use formula.

Advertisements and posters used idealistic imagery, often showing white children rather than the ethnicity of that country, suggesting that bottle-feeding is the modern, western way, therefore the right way of doing things. There were slogans used in Nestlé's ads and labeling such as '100% complete nutrition' and 'Now even closer to mothers milk', misleading mothers to thinking formula is as good, almost as good, or even better than their own milk. People in places like the Philippines were known to claim from advertisements that formula's have vitamins which allow the baby to catch up faster with things being taught to them, grow faster, and become more intelligent, even geniuses.

Other Problems

One of the major problems is that the marketing practices of infant formula manufacturers, physician dominated medical systems, and the relationship between industry and health professionals