Nestle Case Study V11

NESTLÉ

Nestlé is a multinational food packaging organization founded and headquartered in Vevey, Switzerland. It

resulted from a merger in 1905 between the Anglo-Swiss Milk Company for milk products established in

1866 by the Page Brothers in Cham, Switzerland and the Farine Lactée Henri Nestlé Company set up in 1867

by Henri Nestlé to provide an infant food product. Several of Nestlé's brands are globally renowned, which

made the organization a global market leader in many product lines, including milk, chocolate,

confectionery, bottled water, coffee, ice cream, food seasoning and pet foods.

Nestlé was founded in 1860. Henri Nestlé, a pharmacist, developed food for babies whose mothers were

unable to breastfeed. His first success was a premature infant who could not tolerate his own mother's milk

or any of the usual substitutes. The value of the new product was quickly recognized when his new formula

saved the child's life, and soon, Farine Lactée Henri Nestlé was being sold in much of Europe.

In 1905 Nestlé merged with the Anglo-Swiss Condensed Milk Company. By the early 1900s, the

organization was operating factories in the United States, United Kingdom, Germany and Spain. The World

War I created new demand for dairy products in the form of government contracts. By the end of the war,

Nestlé's production more than doubled. After the war, government contracts dried up and consumers

switched back to fresh milk. However, Nestlé's management responded quickly, streamlining operations

and reducing debt. The 1920s saw Nestlé's first expansion into new products, with chocolate the company's

second most important activity.

Mergers and acquisitions

Nestlé felt the effects of World War II immediately. Factories were established in developing countries,

particularly Latin America. Ironically, the war helped with the introduction of the organization's newest

product, Nescafé, which was a staple drink of the US military. Nestlé's production and sales rose in the

wartime economy.

The end of World War II was the beginning of a dynamic phase for Nestlé. Growth accelerated and

companies were acquired. In 1947 came the merger with Maggi seasonings and soups. Crosse and Blackwell

followed in 1950, as did Findus (1963), Libby's (1971) and Stouffer's (1973). Diversification came with a

shareholding in L'Oréal in 1974. In 1977, Nestlé made its second venture outside the food industry by

acquiring Alcon Laboratories Inc.

The first half of the 1990s proved to be favourable for Nestlé: trade barriers crumbled and world markets

developed into more or less integrated trading areas. Since 1996, there have been acquisitions including San

Pellegrino (1997), Spillers Petfoods (1998), and Ralston Purina (2002). There were two major acquisitions in

North America, both in 2002: in June, Nestlé merged its U.S. ice cream business into Dreyer's, and in August

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