1.NESTL: THE INFANT FORMULA CONTROVERSY Mark Zatta Section: D01

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. Products Coffee and tea Ice Cream Beverages Cereal Baby food Chocolate Seasonings Soups and sauces Frozen foods Pet food Cosmetics Supplements Life insurance 4. Sales and Revenues 5. Products 6. Geography 7. Segment Revenue 8. Acquistions 9. Background of Controversy For over 20 years, Nestle has been directly or indirectlycharged with involvement in the death of Third World infants. The infant feeding formula allegedly is the cause for massdeaths of babies in the Third World. 10. Background of Controversy Originating in 70s when Bristol Myers and nestlemarketed 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. The Old 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. 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. Marketing practices that undermine breastfeeding arepotentially 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. Nestles Response Int Council of Infant Food Industries; code of ethics (1981) Root causes for infant malnutrition and mortality in 3rdworld countries: poverty, lack of food, ignorance and poor sanitation. UNICEF Baby friendly hospital initiative (1991) Nestles Implementation of the WHO Code in defense of its marketing practices (1999) Who Code Compliance, the healthy kids programhttp://www.nestle.com/asset-library/documents/r_and_d/compliance/2011-external-report-code-compliance.pdf 16. The New Nestle is constantly creating new marketing techniquesfor 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. Ghana 18. Issues Disease Malnutrition Clean water supply; powdered formula Breastfeeding as issue High prices dilution Supply and Demand Ethical Issues Exploitation 19. Price Wealth Access Comparison 120 10080 60 40 20 0Cost in US $ GDP per Capita in Thousands % under Int Poverty Line; $2/day Clean Water 20. Percentage of Pop. Living Under Int. Poverty Line; $2/day 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 locallymanufactured 2008 China Tainted Baby Formula Scanda Melamine Shijiazhuang maker; Nestle China Update: Jiang Weisuo, wistleblower, murdered. 22. China ctnd. The imported formula market in China grew roughly 9xbetween 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 ofalleged price-fixing and violation of market competition laws by manipulating retailers to sell infant formula at inflated prices 23. BabyNes comprehensive nutrition system. Crowd appeal; similar products $250/unit Double cost of formula Currently only in Switzerland and France 24. BabyNes 25. Nestle Nutrition: 2012 Update Sales of CHF 7.9 billion, 6.7% organic growth, 3.0% realinternal growth; 19.2% trading operating profit margin 2012 was good particularly in emerging markets, includingthe BRICs and Africa, with double-digit growth in both formula and cereals Growth in developed markets, despite low birth 26. The End. 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