Nestle Case Study V13

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 a US$2.6

billion acquisition was announced of Chef America, the creator of Hot Pockets. In the same time frame, Nestlé

came close to purchasing the iconic American company Hershey's, though the deal fell through. Another purchase

includes the Jenny Craig fitness firm for US$600 million.

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