Nestlé

• Date Founded: 1866
• Industry: Food and beverage
• Corporate Headquarters: Vevey, Switzerland
• Type: Public

Overview

Nestlé S.A., headquartered in Vevey, Switzerland, is the world’s largest manufacturer of packaged food and beverage products. It sells a broad range of items, including baby food, chocolates, quick-cooking noodles, frozen entrees, ice cream, breakfast cereals, and pet food. The company also produces powdered and liquid beverages, including infant formula, instant coffee, condensed milk, bottled water, and offers other products through its large number of subsidiaries.

Nestlé’s history can be traced back to two companies founded in Switzerland at about the same time: the Anglo-Swiss Condensed Milk Company in 1866 and Farine Lactée Henri Nestlé in 1867. Farine Lactée was founded by German pharmacist Henri Nestlé, who created a substitute for breast milk he called Farine Lactée. The high rate of infant mortality at that time was caused in part by the inability of some babies to nurse. Farine Lactée was designed to provide a nutritious substitute for breast milk.

The two rival companies merged in 1905, and this development was a major milestone in establishing the combined company as a multinational powerhouse. Now known by the name of one of the founders, Nestlé had a presence in almost two hundred countries in the 2020s. Its hundreds of factories produce products for thousands of brands, some developed internally, while others were brought into the company via strategic acquisitions. Some of its best-known brands include Kit Kat chocolate bars, Nescafé coffee, Dreyer’s ice cream, Gerber baby food, Nespresso coffee, Toll House cookie dough, and Purina pet foods. Despite its strong profits and international brand recognition, the company has also been criticized for its business practices, environmental record, and tolerance of forced labor in its supply chains.

History

Advances in the science of preserving food in the early nineteenth century led to businesses that implemented new methods to create safe, convenient, and easy-to-transport foods. Condensed milk and infant formula were the first products made by the two rival companies that ultimately merged to form what is now known as Nestlé S.A. Following the merger in 1905, the company opened seven factories across Europe. When World War I began in 1914, however, production in Europe became more difficult. Thus, Nestlé decided to buy factories in areas of the world less affected by the war, such as the United States, Latin America, and Australia. While the Great Depression and World War II led to ups and downs for Nestlé, the company generally adapted to the times and prospered. Introducing instant coffee, Nescafé, in the late 1930s and instant tea, Nestea, in the early 1940s helped support Nestlé’s success. Both products were immensely popular.

Merging with and acquiring other companies has historically characterized Nestlé’s business strategy. For example, Alimentana S.A., which made Maggi soups, bouillon, and seasonings merged with Nestlé in 1947. Nestlé continued to acquire other companies in the food business. It began to diversify in 1974 when it purchased a large stake in the cosmetics company L’Oréal, and it continued the process in 1977 by purchasing pharmaceutical company Alcon Laboratories.

Throughout the 1980s and 1990s, Nestlé continued to expand and make major acquisitions. It purchased companies that manufactured milk, chocolate, coffee, frozen food, mineral water, pet food, and other products. In 1991, Nestlé partnered with the Coca-Cola Company to market Nescafé and other coffee products using Coca-Cola’s worldwide distribution network. Later in the 1990s, the company sought to focus more on food than on the cosmetics and healthcare industries, which had not grown significantly. Peter Brabeck-Letmathe became CEO of Nestlé in 1997, and he initially emphasized internal growth for the company before focusing once again on acquisitions. The company paid $600 million in 2006 to acquire Jenny Craig, Inc., the weight-loss company. The acquisition was not a success, and Nestlé sold Jenny Craig in 2013. In 2007, Nestlé acquired Gerber, the iconic US baby food brand, from Novartis for over $5 billion, further strengthening its position in the baby food market. Three years later, the company bought Kraft Foods’ North American frozen pizza business for over $3 billion.

In January 2018, as the share of sales from the company's US confectionery remained stagnant or in decline in large part due to greater demand for healthier food options, Nestlé sold this part of its business to the Italian company Ferrero for $2.8 billion in favor of focusing more on aspects such as bottled water and pet products. Indeed, by April of that year, the company reported greater profits from its pet care brands in terms of its US businesses as American consumers seemed to be investing more money in their pets.

The company continued to adapt to changing market conditions and consumer preferences in the early 2020s. It acquired other brands, particularly those in the health food and supplements sector, including vitamin manufacturer Bountiful Company in 2021 and plant-based food producer Puravida in 2022. Meanwhile, Nestlé also shifted away from some other longstanding parts of its business. For example, in early 2021, Nestlé completed the $4.3 billion sale of its water-bottling operations, including Poland Spring and other regional bottled water brands, to a private equity firm. Through the early and mid-2020s, Nestlé continued its strong economic performance, but the company was criticized for achieving this goal through the cost inflation of their products, with prices for the company’s products increasing over 10 percent.

Impact

By the twenty-first century, Nestlé had become one of the most recognized food brands in the world, offering a diverse selection of products through its brand name and subsidiaries.

A key part of Nestlé’s stated mission is nutrition, health, and wellness. Although many of its products are high in sugar and fat, the company is also developing others that meet consumers’ tastes for healthier, more nutritious food. In early 2015, the company announced it was planning to remove artificial dyes and flavors from many of its candies. Nestlé also founded its own Institute of Health Sciences, which researches nutrition. The company uses scientific innovations to create new products; an example is a lactose-free infant formula with a probiotic that helps infants with diarrhea. In 2014, Nestlé announced the creation of Nestlé Skin Health S.A., a subsidiary specializing in scientifically tested dermatology products. Three years later, the company acquired Sweet Earth, a plant-based food manufacturer.

Despite these endeavors, Nestlé has been involved in several controversies, including many in the twenty-first century. In the 1970s, the company was criticized for the way it marketed infant formula to parents in developing countries. The formula was touted as being more beneficial to infants than breast milk. Advertisements did not stress the importance of preparing the formula with clean water. The product was comparatively expensive for many consumers, some of whom diluted the powder to make it last longer. Nestlé was accused of not educating parents on proper product use, and as a consequence, many newborn babies suffered from malnutrition and the ingestion of polluted water, leading to several deaths.

Furthermore, the Indian government’s food safety agency reported in May 2015 that Nestlé’s popular Maggi noodles contained unsafe levels of lead. The product was pulled from shelves while an investigation took place. Yet another controversy in 2017 was that Nestlé Waters North America continued bottling water sourced in California, despite the years-long drought in that region. At the time, Nestlé was accused of wasting 30 percent of the water it drew from California. The company's production of bottled water continued to face criticism into the 2020s amid recurring droughts in parts of the US and concerns about plastic pollution, though Nestlé's sale of most of its bottled water brands in 2021 shifted some of the future responsibility away from the company.

In addition to these scandals, Nestlé's labor practices have also come under scrutiny, particularly those related to the company's cocoa production on its West African plantations. In 2005, the company faced a lawsuit related to the use of child labor in its cocoa supply chains, filed by the International Labor Rights Fund on behalf of three Malian children who had worked as enslaved child laborers on cocoa plantations, though Nestlé denied having any "ethical responsibility" for its suppliers' labor practices. Despite mounting criticism and legal pressure, in 2019, Nestlé revealed that it was still unable to certify that all of its products were free of enslaved child labor, and in 2021, was included alongside many other food corporations in a class-action lawsuit from formerly enslaved child laborers in Mali. A federal judge dismissed the lawsuit in 2022. The company faced other labor controversies throughout the early twenty-first century; for example, it was accused of carrying out anti-union activities in Colombia during this time, and in 2015, the company admitted that its seafood supply chains in Thailand included forced labor.

In 2024, Nestlé was criticized following an investigation that revealed the company’s Cerelac and Nido infant formula and cereal products contained added sugar and honey in some markets. In low-income countries like Senegal and South Africa, some products contained six grams of sugar, but in higher-income nations like Switzerland, the labels on the same products claimed they contained “no sugar added.” In one cereal sold in the Philippines, a Cerelac cereal marketed for children between one and six months, contained 7.3 grams of sugar. Experts warned that this practice was unethical and ignored international nutrition guidelines for children and infants.

Bibliography

Armstrong, Kenneth. "Nestlé Water Bottling Operations Sold to Equity Firm for $4.3 billion." Guelph Today, 17 Feb. 2021, www.guelphtoday.com/local-news/nestle-water-bottling-operations-sold-to-equity-firm-for-43-billion-3436091. Accessed 20 Dec. 2024.

Balch, Oliver. "Mars, Nestlé and Hershey to Face Child Slavery Lawsuit in US." The Guardian, 12 Feb. 2021, www.theguardian.com/global-development/2021/feb/12/mars-nestle-and-hershey-to-face-landmark-child-slavery-lawsuit-in-us. Accessed 20 Dec. 2024.

Biswas, Asit K. Creating Shared Value: Impacts of Nestlé in Moga, India. Springer International, 2014.

Gretler, Corinne. "Nestle Gets Boost from U.S. Consumers Spending More on Pets." Bloomberg, 19 Apr. 2018, www.bloomberg.com/news/articles/2018-04-19/nestle-first-quarter-sales-get-boost-from-u-s-rebound. Accessed 20 Dec. 2024.

Kowitt, Beth. "Special Report: The War on Big Food." Fortune, 21 May 2015, fortune.com/2015/05/21/the-war-on-big-food. Accessed 20 Dec. 2024.

Naidu, Richa. “Nestle Beats Quarterly Sales Estimates With Price Hikes.” Reuters, 25 Apr. 2023, www.reuters.com/business/retail-consumer/nestle-beats-quarterly-sales-estimates-prices-rise-sharply-2023-04-25. Accessed 20 Dec. 2024.

"Nestlé Agrees to Sell U.S. Confectionery Business to Ferrero." Nestlé, 16 Jan. 2018, www.nestle.com/media/pressreleases/allpressreleases/nestle-agrees-to-sell-us-confectionery-business-ferrero. Accessed 20 Dec. 2024.

Thornton, Jacqui. “Nestlé Accused of Double Standards over Added Sugar in Baby Products Sold in Poorer Countries.” BMJ (Clinical Research Ed.), vol. 385, 2024, p. q898, doi:10.1136/bmj.q898. Accessed 20 Dec. 2024.

"Travel Through Our History Timeline." Nestlé, www.nestle.com/about/history/nestle-company-history. Accessed 20 Dec. 2024.

Schwarz, Friedhelm. Nestlé: The Secrets of Food, Trust, and Globalization. Translated by Maya Anyas, Key Porter, 2002.

Stempel, Jonathan. “Hershey, Nestle, Cargill Win Dismissal in U.S. of Child Slavery Lawsuit.” Reuters, 28 June 2022, www.reuters.com/business/hershey-nestle-cargill-win-dismissal-us-child-slavery-lawsuit-2022-06-28. Accessed 30 Apr. 2023.