Nestle: Baby Formula Case Study

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International Marketing Jr. year.

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  • Cost in US $GDP per Capita in Thousands% under Int Poverty Line; $2/dayClean WaterAustrailia21.2540.80100Singapore29.560.52100S. Africa182.631.386Malaysia15.1515.8094India15.513.76884Egypt7.256.615.597Fiji15.054.72347Nigeria162.684.562U.S.A.23.45490100
  • Nestle: Baby Formula Case Study

    1. 1. NESTLÉ: THE INFANT FORMULA CONTROVERSY Mark Zatta Section: D01
    2. 2. Nestle • Headquartered in Vevey, Switzerland • 1866 the first European condensed milk factory opened in • • • • Cham, Switzerland, by Anglo-Swiss Condensed Milk Company Now: Largest food company; revenue 2013: 9th most profitable corporation; 1st in 2011 (Financial Times Global 500) Operations in over 100 countries Over 8,000 brands
    3. 3. Products • Coffee and tea • Ice Cream • Beverages • Cereal • Baby food • Chocolate • Seasonings • • • • • • Soups and sauces Frozen foods Pet food Cosmetics Supplements Life insurance
    4. 4. Sales and Revenues
    5. 5. Products
    6. 6. Geography
    7. 7. Segment Revenue
    8. 8. Acquistions
    9. 9. Background of Controversy • For over 20 years, Nestle has been directly or indirectly charged with involvement in the death of Third World infants. • The infant feeding formula allegedly is the cause for mass deaths of babies in the Third World.
    10. 10. Background of Controversy • Originating in 70s when Bristol Myers and nestle marketed 3rd world to exchange breastfeeding for formulas • Sales tactics such as using milk nurses and mothers to go into hospitals, clinics and home and instructed mothers on the benefits of using the formulas • Breastfeeding rates declined rapidly during the 1960's as baby food companies expanded their activities into developing countries • In Singapore in 1951 over 80% of 3-month-old babies were breastfed, by 1971 it was only 5%
    11. 11. The Old
    12. 12. Global Reaction • Protein Calorie group and the 27th world health assembly (1974) issued statements that breastfeeding as the way to promote good development in infants • Amendment to the International development and food assistance act (1975) • INFACT; infant formula action council boycott (1977) • WHO steps in and creates international code of marketing of breast milk substitutes (1981)
    13. 13. The WHO Code • October 1982 to adopt articles of the WHO code as Nestle policy • includes the following: • No advertising to the general public • No sampling to mothers • No „mothercraft‟ workers • No use of commission/bonus for sales • No use of infant pictures on labels • No point-of-sale advertising • No financial or material inducements to promote products • No samples to physicians except in three specific situations: a new product, a new product formulation, or a new graduate physician; limited to one or two cans of product • Limitation of supplies to those requested in writing and fulfilling genuine needs for breast milk substitutes • A statement of the superiority of breast feeding on all labels/materials • Labels and educational materials clearly stating the hazards involved in incorrect usage of infant formula, developed in consultation with WHO/UNICEF
    14. 14. • “Marketing practices that undermine breastfeeding are potentially hazardous wherever they are pursued: in the developing world, WHO estimates that some 1.5 million children die each year because they are not adequately breastfed. These facts are not in dispute.” –UNICEF 1997
    15. 15. Nestle‟s Response • Int Council of Infant Food Industries; code of ethics (1981) • Root causes for infant malnutrition and mortality in 3rd world countries: poverty, lack of food, ignorance and poor sanitation. • UNICEF Baby friendly hospital initiative (1991) • Nestle‟s Implementation of the WHO Code in defense of its marketing practices (1999) • Who Code Compliance, the healthy kids program http://www.nestle.com/asset-library/documents/r_and_d/compliance/2011-external-report-code-compliance.pdf
    16. 16. The New • Nestle is constantly creating new marketing techniques for its baby formula products • „Protect‟ logo; 120 countries • Colorful Logos • DHA & ARA; important for the brain • Billboard Effect; big displays • societal pressure on women to choose bottle feeding as an option of convenience
    17. 17. Ghana
    18. 18. Issues • Disease • Malnutrition • Clean water supply; powdered formula • Breastfeeding as issue • High prices  dilution • Supply and Demand • Ethical Issues • Exploitation
    19. 19. Price Wealth Access Comparison 120 100 80 60 40 20 0 Cost in US $ GDP per Capita in Thousands % under Int Poverty Line; $2/day Clean Water
    20. 20. Percentage of Pop. Living Under Int. Poverty Line; $2/day
    21. 21. China • Nestle does not have a website for China up. • 35 million products sold every day • More than 90% of products sold in China are locally manufactured • 2008 China Tainted Baby Formula Scanda – Melamine • Shijiazhuang maker; Nestle China • Update: Jiang Weisuo, wistleblower, murdered.
    22. 22. China ctnd. • The imported formula market in China grew roughly 9x between 2002 and 2012, and is expected to hit $13 billion by 2015. -UNICEF • However, cultural shift: 100% safe products; more natural baby feeding • Update: • Nestle cut infant formula prices in China 11 percent in response of alleged price-fixing and violation of market competition laws by manipulating retailers to sell infant formula at inflated prices
    23. 23. BabyNes • “comprehensive nutrition system.” • Crowd appeal; similar products • $250/unit Double cost of formula • Currently only in Switzerland and France
    24. 24. BabyNes
    25. 25. Nestle Nutrition: 2012 Update • Sales of CHF 7.9 billion, 6.7% organic growth, 3.0% real internal growth; 19.2% trading operating profit margin • 2012 was good particularly in emerging markets, including the BRICs and Africa, with double-digit growth in both formula and cereals • Growth in developed markets, despite low birth
    26. 26. The End.
    27. 27. Sources • http://www.nestle.com/asset- • • • • • • • • • library/Documents/Library/Documents/Financial_Statements/2012-FinancialStatements-EN.pdf http://www.babymilk.nestle.com/who-code-compliance/Pages/default.aspx http://www.babymilk.nestle.com/who-code-compliance/nestlepolicy/Pages/default.aspx http://www.nestle.com/asset-library/documents/r_and_d/compliance/2011external-report-code-compliance.pdf http://www.indexmundi.com/g/r.aspx?v=67 http://www.theguardian.com/news/datablog/2009/mar/03/access-water http://www.foxnews.com/world/2013/07/04/nestle-says-it-will-cut-some-its-infantformula-prices-in-china-after-price/#ixzz2el9mY4Gf http://www.nestle.com/assetlibrary/documents/library/documents/fact_sheets/facts-figures-nestle-china.pdf http://www.babymilkaction.org/pdfs/icifistatement81.pdf http://www.nestle.com/media/pressreleases/allpressreleases/full-year-results2012

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