Nestlé The Infant Formula Controversy：雀巢婴儿配方奶粉的争议é

Nestl: The Infant Formula Controversy Global Marketing (MKT 690)Professor Goodwin AriguzoPresented by: Jillian DeSousa Kerri Levesque Aziza Akilah Williams August 6th, 2008BackgroundNestl Company started off from a single man’s idea, and developed into a giant corporation. Nestl’s headquarters are located in Switzerland, but the company maintains factories and operations in almost ever country in the world. The company has also been increasing in size each year. In addition to this increase, Nestl is also increasing its variety of product offerings. Nestl’s business strategy encourages product growth through innovation and renovation. This strategy has allowed the company to develop different products in various fields including baby food, dairy products, prepared foods and beverages to name a few.The company has created Nestl Nutrition, a global business organization designed to strengthen the focus on their core nutrition business. Strengthening their leadership in this market is the key element of the company’s corporate strategy. Further, Nestl Nutrition aims to deliver superior business performance by offering consumers trusted science based nutrition products and services. In regards to international strategy, Nestl’s competitive strategies are associated mainly with foreign direct investment in dairy and other food businesses. Nestl aims to balance sales between low risk, low growth countries of the developed world with high risk, potentially high growth markets such as Africa. Nestl also claims that it will not take unnecessary risks for the sake of growth and will follow and respect all applicable local laws in each of its markets.Nestl has much strength, such as being a low cost operator, and having a research and development team that will aid in product innovation. Also, Nestl has health-based products which are becoming more popular as consumers are becoming more health conscious, such as in the U.S. A threat to the company is that some of the markets that they are entering are already mature. For example, Danone, one of the top competitors, has already established a leadership position in the yogurt market. Other top competitors include ConAgra, Kraft Foods and General Mills.Nestl’s goal is to maintain, preferably to increase its market share and sales volume in order to have stability in the market. (Nestl adopts a sales oriented pricing scheme). If Nestl has an increase in sales volume they will have an increase in market share. When Nestl maintains or increases its market share, their products will be more widely used by consumers. This will then increase share prices and stock, as Nestl will be seen as having a stable position when compared to competitors in the same market.Problems and IssuesProblems with Marketing TechniquesNestl’s marketing tactics in promoting the use of infant formula in Third World countries wasn’t moral. Nestl was not acting within the boundaries of moral standards. Every corporation must understand and realize the corporate ethics and responsibilities they should have. The problem was that Nestl used unqualified sales girls, the distribution of free samples, marketed to people who were incapable to fulfill the minimum requirements for giving formula safely to the baby, and the association of bottle-feeding with healthy babies to promote the use of infant formula to mothers who would have been better off breast-feeding their babies.In many Third World countries there never should have been advertising and promotions for infant formula because it is not safe due to unsafe water supplies and the difficulties in keeping bottles sterile. Where water is unsafe babies are up to 25 times more likely to die if they are bottle-fed. The cost of the formulas is another problem for some Third World families costing them up to 1/3 of their family’s weekly income. Back in 1974 when the infant formula controversy began, in Nigeria the cost of feeding a 3 month old infant was approximately 30% of the minimum urban wage (what the majority earn) and by the time the infant is 6 months, the cost would have risen to 47%. This is what led some mothers to dilute the mixture up to 3 times what it ought to be, it even led some to start using powdered milk which is not intended for infants, but is cheaper. This leads to dehydration, malnutrition and diarrhea, known as bottle baby disease. Instead of saving a lot of money and breast-feeding mothers were convinced by advertisements, doctors, nurses and midwives to use formula.Formula milk companies were donating gift bags containing baby vitamins and formula to hospitals and midwives even after the EOC 51. Instead of midwives helping the babies latch on to the breast after birth like they were supposed to, they were giving out promotional gift bags. Unholy alliances existed between medical professionals and baby food companies. As a result of these alliances, the medical professionals helped promote baby food products while the baby food companies would provide gifts ranging from food to sponsored events and conferences. Doctors have been known to receive air conditioners and air fare to go places. Doctors were not explaining to mothers how they could work and breast-fed with support, rather they were encouraging them to use formula.Advertisements and posters used idealistic imagery, often showing white children rather than the ethnicity of that country, suggesting that bottle-feeding is the modern, western way, therefore the right way of doing things. There were slogans used in Nestl’s ads and labeling such as ‘100% complete nutrition’ and ‘Now even closer to mothers milk’, misleading mothers to thinking formula is as good, almost as good, or even better than their own milk. People in places like the Philippines were known to claim from advertisements that formula’s have vitamins which allow the baby to catch up faster with things being taught to them, grow faster, and become more intelligent, even geniuses.Other ProblemsOne of the major problems is that the marketing practices of infant formula manufacturers, physician dominated medical systems, and the relationship between industry and health professionals has resulted in widespread misinformation about breast-feeding, false claims of the equivalence between breast milk and artificial substitutes, and the devaluing of women’s knowledge about breast-feeding in general. All of Nestl’s infant feeding products did provide instruction leaflets in the main languages of the country where they were sold including simple line drawings to illustrate the method of preparing the feed. Nestl did not take into consideration that most Third World mothers are illiterate and the four simple line drawings by themselves are meaningless. Nestl’s Mother Book instructions on bottle-feeding began with “Wash your hands thoroughly with soap each time you have to prepare a meal for baby”. Nestl didn’t take into consideration that many households in the Third World had no washing facilities at all nor had an indoor kitchen.Nestl Issues Since the Infant Formula ControversyEven though the link between bottle-feeding and infant diseases and deaths was brought to public attention in the early 1960s, it was not until the publication of the pamphlet, The Baby Killer, that the infant formula controversy gained prominence. The pamphlet was written by Mike Muller and became available in March 1974. It raised awareness about the problem of how the baby formula was being marketed resulting in thousands of infant deaths. War on Want, a London based activist group concerned with hunger and poverty and other problems of the Third World. The pamphlet claimed that Third World babies were dying because their mothers were feeding them infant formula that was being marketed by multinationals such as Nestl of Switzerland and United Kingdom’s Cow and Gate. The aftermath of the publication led to an international crisis for Nestl. Nestl mismanaged the crisis while NGOs got public support for their position by cleverly and skillfully handling the controversy.The issue moved into a new phase when the Third World Action Group (TWAG) translated the pamphlet in German in Switzerland and published a 32-page version in May 1974 with a new title, Nestl Totet Babys (Nestl Kills Babies). Nestl had a fast response to this, but not a very good one; they sued all those involved with the translation and publication of the booklet. The judge found the 30 members of TWAG guilty of libel. Nestl did win its lawsuit but they lost their public relations battle at the same time. At the end of The Berne Trial the judges closing statement is, “If Nestl S.A. wants to be spared the accusations of immoral and unethical conduct, it will need to change its advertising practices.”The first Nestl boycott in 1977 led by Infant Formula Action Coalition (INFACT) had a large impact on Nestl’s revenues. Their products were boycotted in the U.S. to end the promotion of infant formula. This was a small part of the major problem which is to improve total infant nutrition throughout the Third World that must be resolved on a global basis if the health of babies in the developing nations is to be improved. The boycott against Nestl’s products and eventually those of the infant formula manufacturers generated the largest support of consumer movement in North American and its impact is still being felt in the industry, governments, and citizen’s action groups around the world. The Nestl boycott became one of the most successful consumer boycotts in history lasting 7 years, it ended in 1984 after talks with Nestl, WHO, UNICEF and Muskie Commission Activist groups. It was the largest nonunion boycott in history with over 100 organizations in 65 countries. It cost Nestl as much as $5.8 million in lost revenue.U.S. Senate hearings, chaired by Edward M. Kennedy, further damaged Nestl’s reputation and suggested the need for international consensus. Senator Kennedy asked the World Health Organization to “convene an international conference on infant health and nutrition”. Another problem was the disagreements between governments, the industry, health experts, legal experts and citizen groups over key issues of the code, like differences between educational advertising and promotional advertising, distinctions between fee samples and free supplies, and distinguishing between legitimate support for health service and inappropriate incentives to win brand loyalty.Nestl should have paid more attention to the Protein Advisory Group (PAG) issued statement 23 which outlined the responsibilities of governments, pediatricians and the infant formula industry. They should have also given more attention to PAG asking manufacturers to look to marketing practices and product labeling. Nestl did perform an internal audit and concluded that the only charge necessary was greater emphasis on the “primacy of breast feeding in its advertisements.”Nestl shouldn’t have decided that the Muskie Commission fulfilled its mandate and let it dissolve. During the 1978 Congressional Hearings, a Nestl Brazilian operations manager, Ballarian, claimed that the boycott and the campaign against the infant formula companies were really an “attack on the free world’s economic system,” led by “a worldwide church organization with the stated purpose of undermining the free enterprise system.” This was a mistake for Ballarian to speak out like this, and it didn’t make Nestl look good as far as public relations.By late 1980s Nestl along with other baby food companies had diverted some of the marketing budget from public promotion to expanding the tactic of placing large quantities of free or low cost milk in maternity facilities. Due to the inadequacy of medical training of breastfeeding management, health officials used the supplies for routine bottle feeding of newborns, which sabotaged the successful establishment of breast-feeding.It wasn’t until 1996 that Nestl stopped providing health institutions with free supply of infant formula in many parts of the world, but the practice still remained in some regions, such as the Middle East in response to government requests for such free supplies. In 1993 Baby Milk Action launched a campaign on the issue that the labels on Nestl products in Malawi were not written in the national language. In 1994 the Government of Malawi asked Nestl to label products in Chchewa the national language. Nestl didn’t agree to take action until four years later in 1997, after it was raised from the floor of the Shareholders AGM.PerspectivesNestl Nestl approached its product sales and marketing activities in developing countries the same way that it did in developed, more affluent countries. The consumers’ behaviors, patterns, and needs were not the same. Nestl faced a lot of scrutiny and even had boycotts to deal with because their approach in less developed nations. There were environmental issues, like the availability of only polluted water to mix the powdered formula with. There were cultural issues like the fact that many women in these countries were with their babies all day as they didn’t have a job or career to attend to. They didn’t account for the economic issues impacting the nations. Nestl needed a systematic approach to identify what about their products needed adaption.World Health Organization (WHO) Due to the efforts of such groups as the Infant Formula Action Coalition and the International Nestl Boycott Committee, the growing awareness among public health officials eventually resulted in the adoption of an infant formula marketing code by the World Health Assembly in 1981, with the United States one of a handful of countries casting a negative vote. The World Health Organization is charged with responsibility for monitoring the implementation of the Code, frequently called the WHO Code. Its terms restrict the promotion of infant formula and set out requirements for labeling all infant formula products. It is less restrictive than regulations regarding prescription drugs, for example, but it does forbid advertising of infant formula to the general public or the employment of "milk nurses" to promote formula use among expectant mothers. It is intended to serve as a model for codes to be adopted by nations as well as a guide for company activities.Third World Organizations (TWO) An illustrative term being used here to reflect a group of organizations and committees that accused Nestl of unethical and socially irresponsible behavior. TWO believed that Nestls actions were socially irresponsible and unethical. One of the their arguments was that the consumers perceived the quality of the product as high, and were using this over breast feeding, when in fact breast feeding was a more healthy approach. The TWO felt Nestl was being unethical by promoting their product as a better choice over breastfeeding, as the consumers in these developing nations were educated enough to make well informed decisions. Another of the TWOs agreements was that in some countries, only polluted water was available therefore mothers would have to use contaminated water for mixing the formula, ultimately passing the bacteria and diseases on to the baby. Selling a product that has to be mixed with water when no healthy water source available is socially irresponsible.Knowledge When Nestl first entered these developing countries they didn’t have a multi-domestic market orientation. They didn’t tailor their products or marketing activities to the culture of the nations they were entering. They sold the formula in the developing countries as they did in the US and other more developed nations. Only about 10% of products sold in developing nations can be sold without any changes, meaning that companies planning on entering these types of nations must do extensive research (including diffusion research) to determine what adaption, if any, to their products and marketing strategies has to occur in order to be successful.In the United States and other more developed countries, formula does conform to the values and behavior patterns of mothers. Many moms work and do not have more than 6 weeks at home with their baby. While they could pump milk and bottle feed the baby later, this takes a lot of time. Most working mothers don’t have free time to sit around doing this. Often women turn to formula at the point they have to go back to work. In a society where women don’t work or they have 1-2 years at home with their children breast feeding is more of an option. In less developed countries where many moms don’t work, don’t have much money, and stay home with their children all day, nursing is a necessity and formula feeding is more of a luxury.Marketers act as change agents any time they introduce an innovative idea or product. Nestl’s entrance into the Third World markets and the advertising messages they delivered started influencing the minds and behaviors of the mothers. They brought about culture change in societies as women were shifting towards feeding their children infant formula instead of breast milk. Since Nestl was a change agent they had even more responsibility when it came to the development of those societies. Prior to entering the market, Nestl’s plan should have included an assessment as to their best marketing approach given the market. To determine whether the marketing approach and promotions were socially responsible or ethical, look to the three ethical principles: utilitarian ethics, rights of the parties, and justice or fairness. Nestls actions did not optimize the benefits for all constituents. While their sales in Third World countries benefited increased their profits, babies receiving the formula werent more susceptible to getting sick and being malnourished. Nestls actions didnt reflect fairness or respect the rights of all parties involved. They marketed their infant formula powder mix to societies that only had contaminated water at their disposal. They promoted their products in a way as to infer that healthy western children drink formula. For these reasons and others, Nestl’s actions did demonstrate some unethical behavior, unintended or not.Behaving in a socially responsible way is something that will take a significant amount of resources for a MNC that has operations in various countries. The international marketer will have to understand all of the different societies. Acting socially responsible quite possibly could mean different things in different markets. Therefore, the businesses actions may be ethical in one country while the same actions and decisions are considered unethical in another.Businesses can not make all of their decisions based upon the operating nations existing laws. This is true because in some cases local laws dont exist and in some markets certain behaviors are condoned while in others it is frowned upon. Since laws were developed based on historical behaviors that society felt were unethical and or socially irresponsible, businesses must operate at higher standards than dictated by the laws in order to be considered ethical.Companies need to understand how the cultural influences are interwoven with the perceived value and importance a market places on their products. Products are a bundle of utilities that the consumer receives and the culture and values of the consumers plays a significant role in how important the product is to them. Prior to entering these Third World markets, Nestl should have thoroughly researched the society and culture to determine the extent of adaption required of their products in order to maximize the value of their products. Nestl may have been able to offer a d。