Global Marketing Management Case Study: Nestlé

1. Global Marketing ManagementCase Study:Nestlé MKGT 3231-001 Fall 2013 Mrs. Tamara L. Cohen Class # 16

2. Nestlé Preparation for this class: • Read Course Pack #12 Nestlé Infant Formula Controversy • Visit Nestlé web sitewww.nestle.com ? ?

3. BOTTLE or BREAST ?

4. BACKGROUND • 1974 pamphlet “Nestlé Kills Babies” Arbeitsgruppe Dritte Welt allegation: • False advertising in LDCs encouraged mothers to use infant formula instead of breast-feeding, causing deaths and malnutrition. • Nestlé accused of unethical & immoral conduct. • Infant formula misused in LDCs • Worldwide boycott of Nestlé > 20 years • 1913 Nestlé started promoting breastfeeding as best (educational booklet) • 1982 Nestlé supports WHO code re marketing infant formula to mothers in LDCs • AIDS/HIV contracted through breast milk

6. Marketing and false advertising of infant formula in LDCs allegedly led to misuse and consequent death and malnutrition. Consumers in LDCs often poor & illiterate. Language problems. Economically deprived mothers also nutritionally deprived. Quality and quantity of their breast milk inferior. Lack of nutrition education + poor sanitation + affordable good food in LDCs. Poor women’s work schedules often don’t permit breast-feeding. Native weaning foods’ nutritional value low & contaminated at all stages of preparation. Nestlé defense that never advocated bottle over breast, evidence statement on packaging. Nestlé accused of dumping. Doctors in LDCs liberally gave out samples of formula. PROBLEMS

7. Nestlé accused of systematic WHO code violation. Worldwide boycott of Nestlé products & controversy continued for > 20 years. Boycott groups well organized, use modern political pressure, strong media coverage. The longer the controversy continues, the more costly the settlement. Infant formula use has been successful in some LDCs but not in others. Other companies sold formula in LDCs too. (Is Nestlé an appealing target because it’s so big?) What responsibility does Nestlé have to a culture it has changed? HIV / AIDS more PROBLEMS

9. High cost of marketing + training = price of social responsibility Continue no mass media advertising. Use only sales rep’s. Control/monitor distributors’ promotional activities (previous free rein over local advertising). Nestlé headquarters should closely coordinate & monitor all external PR programs. Continue advertising campaign targeting poor women who receive free formula from gov’t. This program promotes breast-feeding to under-educated audience. Publicize this! Further comprehensive nutrition + hygiene education programs, especially in rural areas. Clarify labeling on all infant products: Use graphic instructions for areas of low literacy. Develop promotional/instructional materials to help low literacy users. Dumping: Tighten up hospital administrations’ broad interpretation of “in need” to rein in providing low cost and free formula on request. Nestlé stop all free and low cost giveaways in LDCs, except for limited number of infants in need. Help get other companies to stop. Address accusations of WHO code violations. Use PR to publicize actions and defuse opposition. Deny free samples to doctors supporting substitution. Nestlé field policy includes articles of WHO code. COURSES of ACTION

10. Tighten up direct selling methods. Common practice was to use mother-craft nurses (nurses/ dieticians/midwives), dubious qualifications to advise re breast- vs bottle-feeding. Recognize successful infant formula use in LDCs where use controlled by educated missionaries and responsible gov’t agencies. Limit distribution strictly to these sorts of medical and religious groups. Initiate personal relationships with main perpetrators of boycotts. Defuse boycotts. Improve planning and monitoring of cross-cultural aspects of product introductions and community activities. Determine appropriate policy re best practices for mothers with AIDS/HIV. Breast-feeding or bottle-feeding best? Nestlé should cooperate with govt’s in each country separately to determine best approach to handling AIDS/infant formula problem. LOCALIZATION is key. more COURSES of ACTION

12. RECOMMENDATIONS • Maintain commitment to serve LDC markets despite criticism. • Continue activities and policies in support of responsible marketing in LDCs. Use proactive and constructive PR to advocate for Nestlé image. • Prioritize comprehensive nutrition + hygiene education programs, especially in rural areas. • Contribute responsibly to battle against spread of AIDS/HIV in LDCs.

13. Nestlé is a major global marketing company with dominant brands and a record of impressive aggressive growth. The company has battled negative publicity and boycotts for almost 25 years. Corporate responsibility is not only what is defined by the industry but also what is perceived by consumers. Nestlé has distinctive competencies in producing high quality foods. The right strategy is to expand geographically. Emerging markets present great opportunity. Nestlé should maintain and extend its considerable endeavors to bring its infant formula to developing countries’ markets responsibly. The company should focus its public relations efforts on the company’s multiple positive initiatives in developing countries all over the world. CONCLUSION

14. EXECUTIVE SUMMARY Nestlé Alimentana is the biggest food company in the world. The company has taken a battering over the issue of infant malnutrition and death in developing countries, due to alleged irresponsible marketing and improper use of its infant formula. Nestlé’s stated mission is to be the world's leading nutrition health and wellness company based on sound human values and principles. This company has the vision and the resources to remain committed to serving challenging markets in developing countries, while combating negative image through its own proactive public relations campaign.

15. Next class: Exam # 2 Preparation: Review PPTs & your class notes Review assigned readings Recall guest speaker’s talk Review main points of elevator speeches

16. Next-next class: Global Distribution Decisions Oct.24 Preparation: -0- Homework: -0-