Nestle The Infant Formula Controversy February 01, 2011 BA 236 Global Marketing – Prof. Benjie Sandoval 3

rd Trimester 2010-2011

De Leon, Estanislao, Gumabon, Lope, Rojas, Ronquillo Page 1 of 3

I. Problem

What could Nestlé have done to have avoided the accusations of “killing Third World babies” and still market its product?

How could marketing plans of Nestlé address the concerns of WHO and INBC? What suggestions can we give to Nestlé to avoid similar situations in the future?

II. Assumptions

The group’s assumption while doing this paper is that Nestlé did not issue precautionary

measures on using the infant formula milk when they started to market it. It is also assumed that while they understand that “the mother’s milk will always be the most natural nutriment”, they were not successful in communicating it well enough for their consumers.

III. Point of View

The group has decided to take the point of view of the consumers, most especially those who need the product and are inadvertently affected by it.

IV. Analysis SWOT Analysis Strengths

1. Nestle is a globally renowned company that has great influence on its consumers 2. It has an unconstrained volume of resources as far as marketing is concerned

Weaknesses

1. Being globally present makes them the usual target of diverse cultural and social critiques

2. Despite maintaining their market share, malicious propagandas has branded them with a bad reputation

Opportunities

1. The emerging increase of HIV cases and its reported transmission via breast feeding. 2. It is known that the milk from breast-feeding mothers from developing countries lack

sufficient nutrients to provide for their infants. This calls for a need to supplement with infant formula milk.

Threats

1. The WHO has a close watch on Nestle and is capable of crippling the company if they continue to violate the WHO Code.

2. The global market has been very complex that a universal marketing strategy cannot succeed.

S-O Strategy Nestle has an established network that it can use to address emerging problems of HIV spread and infant malnutrition. Instead of going against standing rules, they could help alleviate the threats of these breast-feeding issues and position themselves as a

Nestle The Infant Formula Controversy February 01, 2011 BA 236 Global Marketing – Prof. Benjie Sandoval 3

rd Trimester 2010-2011

De Leon, Estanislao, Gumabon, Lope, Rojas, Ronquillo Page 2 of 3

supplementary option. Resources could permit infant HIV screening and infant nutrition consultations as part of their program. S-T Strategy Nestle would have to comply with the demands of the changing markets. They cannot cut corners since the WHO is up on their tracks. They can formulate two strategies to comply with both the WHO and the opposing demands of developed and developing countries. For developed countries, strategies could feature advanced growth and nutritional recommendation. While for developing countries, proper preparation, usage and risks must be thoroughly explained. Proper nutrition for breast-feeding mothers may also be lectured. W-O Strategy Opportunities brought about by issues on relying purely on breast feeding in developing countries may be a jumping board to overcome the series of boycotts and negative publicity that Nestle receive. They should maximize this opportunity to regain demand that they have lost before. W-T Strategy The strategy mainly calls for the evasion of the hits that they have been receiving over time. It is apparent that the main culprit is that there are no specialized strategies to answer the variety of demands from different countries. They haven’t anticipated the criticism and thus, became liable to issues that are primarily due to miseducation. Nevertheless they are still accountable to their customers and the customers’ welfare should be their utmost concern. The 3Cs Model

The 3C’s model emphasizes that strategist should focus on three key factors for success. These are the company, the competitors and most importantly their consumers. To sustain competitive advantage, the company should integrate these three factors in doing their business strategy.

According to Kenichi Ohmae, “there is no doubt that a corporation’s foremost concern ought to be the interest of its customers… in the long run, the corporation that is genuinely interested in its customers is the one that will be interesting to investors”. The group believes that Nestlé focused on corporate-based strategies, it follows the first mover advantage strategy which means that the company enters in an early stage of the emerging markets. This is their way to expand, by entering into new markets for it to stay global and successful in the industry. In doing so, they were also ahead of their competitors by establishing new markets way ahead of their competitors. While these strategies can get them to the top, they should not miss out on the important factor that is, focusing more on their consumers.

Since they have ventured on introducing infant formula milk in Third World countries, before competitors such as Unilever and Abbott do so, they have also taken on a larger risk. Studies have demonstrated the difficulties and risks of bottle-feeding babies in such places. First, storage of mixed or opened formula milk will be a problem since refrigeration or even electricity is not generally available in the developing countries. Also, as mentioned in the case, lack of purified water or highly contaminated waters is common in these areas; thus, they are more likely susceptible to food contamination if they mix this with the formula powder. This could lead to diarrhea, vomiting or other diseases in formula-fed infants. Lastly, inadequate education and income, along with cultural differences, could lead to improper use of the product. Take for example the case wherein a mother has to stretch their formula milk supply by diluting it inappropriately; hence, one can of formula which should only last just under three days to feed one infant could reach up to two weeks to feed two children.

Nestle The Infant Formula Controversy February 01, 2011 BA 236 Global Marketing – Prof. Benjie Sandoval 3

rd Trimester 2010-2011

De Leon, Estanislao, Gumabon, Lope, Rojas, Ronquillo Page 3 of 3

The group believes that if Nestlé focused more on their consumers, communicating well with them, understanding their situation better and tweaking their product to make it suitable to the situation in third world countries, they could somehow have avoided the accusations of “killing Third World babies.” Environmental Analysis Framework

Another framework that could have guided Nestlé in their marketing initiatives is the Environmental Analysis Framework. This framework entails a good understanding of where the company is at the moment and where they are heading.

The group believes that it would have been a different story had Nestlé know where they will play in the market. They should be able to define well, especially to their consumers, what the purpose of their product is. From www.Nestlé.com, the emergence of nutritious and life-sustaining infant formulas was brought about by the need to providing safe alternative to breastfeeding to survive their first year of life IF a baby could not be fed at the breast. Nestlé should have stressed in the earlier stages that their product is not a breast-milk substitute that aims to eliminate breast feeding, but rather, the infant formula is a needed product only by those who have genuine need for breast milk substitutes. The infant formula should provide the best alternative rather than resorting to herbal teas and concoctions of rice water or corn water that are less nutritious and may even be harmful to children.

If this has been the basis of Nestlé in their strategy formulation or planning stage, they would not have had problems in positioning their product in the market. Their strategy implementation, that includes execution of their marketing plans, should have been aligned and in return, they can counter the accusation that they are not promoting their product over breast milk but rather simply the best alternative for those who need it.

V. Recommendations

According to Marianne Jennings, manufacturers have a duty to warn buyers when there is a foreseeable dangerous use of a product that buyers are not likely to realize is dangerous. They also have a duty to supplement the warnings. Moreover, they must also give adequate instructions to buyers on the proper use of the product.

With that being said, the group believes that Nestlé in one way or another was responsible in the improper use of their consumers of the infant formula milk. The responsibility to educate their consumers rests on them. Hence, they could have communicated properly what the product is all about, who should use the product, how it should be prepared and what the caveats of using the product are. Especially in this case that the target market of Nestlé are the developing countries, it is important for them to immerse in the market and understand their consumers’ culture.

To answer the problem statement, we recommend that Nestlé should provide proper guidelines on how to prepare the product and communicate it such that consumers can better understand it, such as translating to their dialects or proper instructions from their field team themselves.

They should also have been clear that their product was not made to outdo breast milk, but rather to augment the baby’s diet when breast feeding is not possible. Henceforth, all their marketing plans should mainly focus on their target market.