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Nestle: The Infant Formula Controversy

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Kisses Joy Sia

on 20 July 2015

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Transcript of Nestle: The Infant Formula Controversy

A. Death of Third World Infants
1974 - British journalist Mike Muller published a report -Death of Third World Infants
Third World Working Group - “Nestle Kills Babies”
Nestlé, Infant Formula, & Developed Countries
Marketing Mix
Company Background
Nestlé SA
Recommendations
Nestlé
The Infant Formula Controversy
BA 236
Alcantara. Flores. Ramirez. Salazar. Sia. Taguinod.

Analysis
4Ps
PESTLE
SWOT analysis
Recommendations
Company Updates
Case Context
a Multinational Manufacturing Corp. (MNC) headquartered in Vevey, Switzerland
factories in more than 80 countries
objective: "Good Food, Good Life.
Leader in Nutrition, Health, & Wellness.
Trusted company by consistently delivering their promises
“Creating Shared Value”
Case Context
Development of Nestlé
1866
- foundation of Anglo Swiss Condensed Milk Co. by the Page Brothers of the United States
1867
- Henri Nestle infant cereal was developed
1905
- Nestlé and Anglo Swiss Condensed Milk Co. (new name after merger)
20th century
- diversification (chocolate, cheese, coffee, bottled water, petcare, ice cream
1929
- Merger with Peter, Cailler, Kohler Chocolats Suisses S.A. (Milo and Nescafe)
1947
- Nestlé Alimentana S.A. (new name after merger with Maggi)
1977
- Nestlé S.A. (new company name)

Baby foods
Bottled water
Cereals
Chocolate & Confectionery
Coffee
Culinary, chilled and frozen food
Dairy
Drinks
Food service
Healthcare nutrition
Ice cream, Extreme
Petcare

Some Products
Case Context
Issues
THE CHARGES
formula found its way to Amazon tribes - jungles of Peru
highly contaminated river as water supply
formula diluted to stretch their supply
decrease in the incidence of breast feeding
radio jingles - “white man’s powder that will make baby grow and glow”
“milk nurses” - providing samples to moms in hospitals
The Defense
“Breastfeeding is
still best for babies

vital role in proper infant nutrition as a
supplement
& as a
substitute
when a mother cannot breastfeed.
mothers in developing nations -
dietary deficiencies
work schedules
that will not permit breastfeeding
weaning foods
as either native cereal (with two basic dangers) or commercial manufactured milk formula.
real nutritional problem in the Third World -

how to supplement mother’s milk with nutritionally adequate foods when they are needed

Resolutions
1988
- Action for Corporate Accountability - call to resume Nestle boycott
1997
- Interagency Group on Breastfeeding Monitoring (IGBM) - claimed that Nestle continues to systematically violate the WHO code
2008
- International Baby Food Action Network (IBFAN) - accused Nestle and other manufacturers of violating the code or stretching the restrictions

1974
- Nestle reviewed its marketing practices
on a region-by-region basis

1977
- Third World Institute launched a boycott
against many Nestle products
1978
- Nestle banned mass media advertising
worldwide
1981
- 118 member nations of WHO endorsed a
voluntary code
1982
- Nestle formed the Nestle Infant Formula
Audit Commission (NIFAC)
More Charges
1984
- INBC suspended boycott activities;
- Nestle pledged continued support of
the WHO code
B. HIV-infected mothers
Case Context
Issues
2001
- 3.8M worldwide had contracted HIV at their mother’s breast, 90% from developing countries

concerns
switch to the bottle just to be safe
or continue to breastfeed to avoid being stigmatized

2004
- demand for infant formula in South
Africa outstripped supply as HIV-infected
mothers made the switch to formula

Point of
View
President/CEO of Nestlé
Flow of Discussion
Case context
Company Background
Development of Nestle
Market expansion
Issues
Assumptions
Problem Statement
POV
One of Nestlé’s oldest products.
Principal product until the early 1900s.
Safe in developed countries where:
1. high quality drinking water is available
2. bottles & preparation equipment can be effectively sterilized
3. increased risk of illness can be treated
Western Europe maternity leave legislation empowers women who wish to stay at home and breastfeed their babies in first 6 months
Powerful regulatory agencies such as FDA in the develop countries
Enabled nursing mothers to maintain employment outside the home; helpful, if not essential, in combating poverty.
Problem
A. How should Nestle respond to the following:
1. bad publicity or issues of different organization
2. HIV/AIDS issues

B. What could Nestle have done in marketing their infant formula to 3rd world countries/LDCs? What should other companies do to protect themselves in the future?

Assumptions
1. All developing countries have the same characteristics in terms of resources, information dissemination, etc.

2. HIV/AIDS- affected mothers may transfer the virus to their babies through breastfeeding.
Market Expansion
The ANSOFF Matrix
Nestle sought entry into NEW MARKETS with their EXISTING PRODUCTS
market
development
strategy


New geographical market

New market segments

New users for products
Expanding into new market with existing products . It may be:
4Ps
PRODUCT
PROMOTION
PRICE
PLACE
Strong association with country of origin, making it “aspirational”
As a supplement for infant nutrition v breast milk substitute
Still not as nutritious as breast milk
Powder form, must be mixed with water

INFANT FORMULA
free samples given out to nursing moms
mainstream ads
promotion to doctors and nurses
promoted infant formula as “substitute” for breast milk
lack of product education efforts
expensive for third world market causing them to stretch supply
hospitals and clinics
widespread distribution
sales representatives

PESTLE Analysis
POLITICAL
and LEGAL
ECONOMIC
SOCIAL
TECHNOLOGICAL
ENVIRONMENTAL
WHO Code
Nestle boycott
Consultations with WHO and UNICEF
Audit commission to ensure the company’s compliance with the code
purchasing power in the developing countries
vs.
purchasing power in the developed countries
Education Level
HIV Concerns
Access to clean water
SWOT Analysis
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
1. Address bad publicity
product features
Fund research
on infant feeding
Continue
strict compliance to the WHO Code
Suspend consumer advertising
& direct sampling for moms
Continue efforts on
social responsibility
by sponsoring events for healthy pregnancy, int'l medical & nutrition conferences, and events like celebrating Family Day
Become involved w/the
Baby-Friendly Hospital Initiative
Keep its internal
Nestlé instructions to Nestlé employees updated and up to standards
to avoid any more problems.
Provide sufficient
education towards Third World consumers
about healthy pregnancy
Continue Nestlé’s
stand against giving up breastfeeding
and that
breast milk is still best for babies
2. To address issues with HIV
Recommendations
Prevention of HIV-infection during breastfeeding by recommending that
if a patient has HIV, formula should be used
Partnership with government to sell milk at
discounted prices to HIV positive mothers
Provide
education on HIV
Tie-up with
medical providers/health authorities
Partner with government health agencies to
promote awareness

3. What could Nestle have done to avoid the accusations?
Recommendations
Used
global market model
, adapt strategies that are cost effective and culturally appropriate
Conducted more intensive research
prior to entering a new market
Made
advertisements more informative
for the local market
Developed
health education
programs
Promoted breastfeeding and been more clear that infant formula is only
supplementary

Did
not distribute samples
to hospitals
Tied-up with medical experts on
properly informing
the nursing moms
Segmented & Targeted
the new markets and
Positioned
their products properly

Recommendations
4. How other companies can prevent a similar concern and to protect itself in the future
Understand the
local culture
of the nation/geography
Practice
ethical and social responsibility
Work with
local government
and any
national health organization
Market products with
different approaches in different societies
Educate the local
with adequate information about their product to avoid misuse
One size doesn't fit all
Market leadership
Strong brand
Financial stability
R&D capability
lack of foresight/planning
smeared image
Valid need for a nutritional substitute to breastfeeding
Growing population
Findings on HIV transmission via breast milk

Rivals/Competitors
Continuous negative attacks and accusations from various groups

scientific findings on breast milk superiority
Rural vs Urban communities
Company Updates
Nestle has now promised to drop its “natural start” claim in accordance with International Code Article 9.2 which states that “Neither the container nor the label should have pictures or text which may idealize the use of infant formula.
In the Philippines, statutory warnings are required on labels in English and Filipino and prohibit claims.

Nestle recommends that breast milk is the optimal feeding choice
Q&A
Full transcript