CASE STUDY

ON NESTLE AND THE ONGOING

INFANT FORMULA CONTROVERSY

GROUP-1
AJATSATRU ROUT(02)
BINAYAK MAHAPATRA(11)
BUSHRA AZIMA(13)
KAMAL KIRAN BEHERA(21)
PRANAB SARDAR(33)
SAILAZA PARAHARAJ(40)
SHOVAN DASH(47)
SUDHAL KUMAR SETHY(54)

1
 OBJECTIVE

To examine the ethics of Marketing



practices of nestle & discuss the role

of ethical consumption in curbing
perceived ethical violation.

2
  ANALYSIS OF THE
ORGANISATION


3
 Operations point of
view
 Due to the allegations Nestlé's had to follow the
code of conduct introduced by WHO which
governs the marketing of the infant formula.
 In 2002 it had introduce an ‘Ombudsman system’
to manage the baby milk issue by encouraging
their employees to confidentially report violations
of the code without fear of retribution
 It released dedicated reports on its economic and
social impact in Africa and Latin America
cautiously welcomed by the reporting industry
 Resource point of view
 As per the Financial Times survey 2004 the
company was rated world’s 11th most
respected company
 It is now a part owner of body shop through
its stake in L’Oreal
 It also started its own range of fair trade
coffee
 Nestle’sshare price has increased by1592
percent out performing the Morgan
Stanley’s Europien stock index by 166
percent
BACK GROUND &
HISTORY

6
 Nestle – a multinational packaged food
company
 Founded in the year 1867 by Henri Nestle
 Headquarter in Vevey, Switzerland
 Products – baby food, coffee, diary products,
breakfast cereals, ice-creams, chocolate.
 Global brand – Nescafe, Kit-Kat, Maggi, Milo
 Nestlé is the largest baby food manufacturer
in the world. For decades, as industry
leader, it has led the way in aggressively
marketing its products.
 Aggressive marketing by Nestlé and its
competitors undermined breastfeeding,
contributing to a dramatic drop in rates in
many countries.
 contd…

 In 1977, a public interest group based in Minneapolis,

INFACT USA, launched a campaign to boycott the
company’s products.
 By 1981, the boycott was international and the
momentum it gathered contributed to the creation of
the International Code. Nestlé’s public image was at an
all-time low.
 1984, with the boycott in effect in ten countries, Nestlé
promised to halt its aggressive promotion and adhere
to the International Code and the boycott was
suspended
 The boycott was reinstated in 1989
 Boycott has compelled Nestlé to change some policies,
such as the age of introduction of complementary
foods, and stops specific cases of malpractice if these
gain sufficient exposure, Nestlé continues
IDENTIFICATION OF THE
PROBLEM

9
 Beginning in the late 1970s Nestlé began to attract
global criticism for its infant-formula marketing
policies, especially those conducted in developing
countries. Public outcry peaked with the Nestlé
boycott of 1977 which (though suspended for several
years in the mid-1980s) remains in effect today. Nestlé
is the most boycotted company in the world as a
result.
 Entitled with “Baby Killer’’ in 1970 in developing
countries
 Nestlé advertised and still advertises its formula as a
risk-free substitute (or even a preferable alternative)
to breast milk, resulting in increased use and often
replacing available breast milk .
 Nestle advertised widely infant product was valuable in
its nutrients which have complete benefits for baby
from birth to one year
 Formula was contaminated in poor countries, leading to
disease in vulnerable infants. Because of the high
illiteracy rates in developing nations many mothers
are not aware of the sanitation methods needed in
the preparation of bottles

 UNICEF estimates that a non-breastfed child living in
disease-ridden and unhygienic conditions is between
six and 25 times more likely to die of diarrhoea and
four times more likely to die of pneumonia than a
breastfed child

 Many poor mothers try to save money by economizing
on the formula by using less than the recommended
dose or substituting it with other inferior alternatives
such as cow’s milk,rice water or corn starch with


ETHICAL ISSUES
INVOLVED

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The company not abiding the rules of
WHO code
The company not taking the moral
responsibility for infant mortality
Promotion agressively ignoring the
benefits of breast feeding
Lying to the fact that they were
advertising in the public ignoring the
value of breastfeeding

13


ANALYSIS OF THE CASE

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 Systemic Issues
 Political
 WHO,IBFAN
 Economical
 Operating in Developed & under-developed
 countries
 Commercial
 Free samples to mothers
 Free supplies to hospitals & clinics
 Tempting Advertisement
 Posters & pamphlets in hospitals
 Promotional booklets ignoring breastfeeding
 Incentives to milk nurses & health workers
•
15
•
 Individual Issues
Psychological
 Creation of mis-leading information
Sociological
 Illiteracy
 Low income


16
 Corporate Issues
Non-compliance of WHO code
Lobbying to prevent govt. translating
the code into legislation
Largest single source of violations of
the WHO code by IBFAN report
Undermining implementation of
measures by Government


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Nestle breaks the rules of The Code

Monitoring results
from 69 countries

2,000 rule brakes

Over 700 pictures

Nestlé is responsible
for more rule breaks
than any other
company!!
 Nestlé inappropriately
promotes
baby milk in poor countries!
 Nestlé breaks the rules in its marketing. In areas that
have a poor water supply and mothers do not have
funds to buy the products, this can be very harmful.

 Company taking full advantage of illiterate mothers


 Advertisement encouraging mothers to adopt modern

bottle feeding in place of old fashioned and
inconvenient breastfeeding
 Contd….
 This Baby Milk Action advertisement was challenged before the

UK’s Advertising Authority.

 Baby Milk Action won the case! What was said was found to be

truthful!

 Nestle on the other hand lost the case when their anti-boycott

advert was challenged by Baby Milk Action!

ASSUMPTIONS
AND
EVALUATION

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RECOMMENDATIONS AND
ALTERNATIVES

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Concerned about their sales and
profit maximization ignoring the
socio-economic factors.
Due Care theory implementation
Deontological theory
implementation
Nestle considered Breastfeeding
as its competitor with its
product

 23
The company should segment the market
on the basic of socio-economic factors
Necessary instructions to be required to
be written in local languages
Should encourage Breastfeeding at the
time of giving free samples
Give stress on communication

 Live demonstration in public

 Demonstration through media
Should promote alternative breastfeeding
for HIV/AIDS infected mothers



24
 Contd..
It should be clearly mentioned in
packages that “Breastfeeding is an
ultimate best

2% Sodium Hypochlorite can be
distributed freely with each Nestle
milk packet



 25
IMPLEMENTATION
PROCESS

26
 Contd…
 They should follow the international code
of conduct for advertisement and
promotion
 The instruction should be in the regional
language for the benefit of illiterate
mother
 It should not be made free to the
hospitals and clinics
 A product should be promoted according
to the people but which should not be
harmful to them
27

CONCLUSION

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 It is clear from the case presented that the
reputation of a company is decided not in
terms of its sales or profits maximization
but in terms of the good will it earns by
adopting morals and values in its
production ,marketing and pricing .

 The product and marketing should not violate
the societal standards

 Should not promote or undermine breast
feeding

 The organization is responsible for any
happenings or consequences in the society


 29