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Nestlé is the world's biggest food manufacturer, with almost 450 factories spread across the globe, and a portfolio that ranges from baby foods to pet care, from chocolate to mineral water, from coffee to frozen pizza. Its world-famous brands include Nescafe, Kit Kat, Maggi, Purina and Perrier, among many others. The group also controls a large shareholding in cosmetics company L'Oreal and has its own growing medical skincare division. However, aside from those sidelines, recent years have seen a greater concentration on a focused food and beverage business. In particular Nestlé has leveraged its performance in sectors such as ice cream and petfoods with an aggressive acquisition strategy, and divested businesses where it has failed to gain a leading position. At the same time, it has placed health and wellness at the forefront of its agenda, developing the widest possible range of nutritionally balanced products under the overall umbrella "Good Food, Good Life". See also Nestlé USA, Nestlé UK, Nestlé Australia, Nestlé Latin America and Nestlé Japan.
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Who handles Nestlé's advertising? Click here for agency account assignments for Nestlé. AdAge estimated global measured media expenditure of $2.93bn in 2014. In France, Kantar (in Strategies) estimated total advertising expenditure of at least E285m in 2014.
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Adbrands Weekly Update 23rd Feb 2017: Nestle reported its weakest growth for at least two decades in 2016 as a result of deflation and weak global economies. Organic growth came in at just 3.2%, only the second time in 20 years that indicator has fallen below 4% for the Swiss food giant. Reported revenues were SFr 89bn, or approx E82.1bn, and net profit fell by 6% to around E8.1bn as a result of a higher tax charge and lower income from joint ventures. Profit before tax and joint ventures was up 6%. New CEO Mark Schneider vowed to push through further efficiency measures to cut costs, but will also maintain steady growth, especially in the coffee business and health sciences. However he ruled out large acquisitions.
Adbrands Weekly Update 6th Oct 2016: This week saw completion of the transfer of the bulk of Nestle's global ice cream operations into newly created joint venture Froneri, formerly known as R&R Ice Cream Partners. The business is owned 50/50 by Nestle and R&R's private equity backers PAI Partners. It takes charge of all Nestle ice cream businesses in Europe, the Middle East (excluding Israel), Argentina, Australia, Brazil, the Philippines and South Africa as well as selected frozen foods operations (except pizza) in Europe and chilled dairy in the Philippines.
Adbrands Weekly Update 29th Sep 2016: Nestle announced further changes to its management board ahead of the departure of long-serving chairman Peter Brabeck-Lethmathe at the end of the year. The group has already announced its intended promotion of CEO Paul Bulcke to chairman and his replacement by outsider Ulf Mark Schneider. In other changes, Zone Europe head Luis Cantarell will also retire at year's end, triggering a reshuffle of managers. His role will be inherited by Nestle Waters head Marco Settembri, who will in turn by succeeded by Maurizio Patarnello, currently head of Russia & Eurasia region. At the same time, the operations of foodservice division Nestle Professional will be decentralised, with responsibility allocated to the different regional consumer products business. Current Nestle Professional global leader Martial Rolland will take over from Patarnello as head of Russia & Eurasia.
Adbrands Weekly Update 30th Jun 2016: Nestle announced a management succession. Company figurehead Peter Brabeck-Letmathe will retire at the end of this year after 50 years with the group, including the past 12 years as chairman. At the same time CEO Paul Bulcke will move up to chairman, subject to shareholder approval, and will be replaced as chief executive by Ulf Mark Schneider, currently head of medical products group Fresenius. Schneider's selection suggests a more concerted push by Nestle into health sciences in areas such as medical nutrition.
Adbrands Weekly Update 28th Apr 2016: Nestle agreed to pool most of its global ice cream operations in a new joint venture with R&R, the company which already licenses the food giant's frozen treats in several markets including the UK, Australia and South Africa. The two companies have been in talks over such a deal since October last year. The new business, to be named Froneri, will take charge of Nestle's remaining ice cream business in Europe, the Middle East, the Philippines, Argentina and Brazil. That includes Maxibon, Extreme and other impulse products, as well as the Moevenpick range. Froneri will also take over Nestle's remaining frozen foods businesses in Europe excluding pizza, and chilled dairy in the Philippines. The key ice cream markets excluded from the deal are the US and Canada, which Nestle will continue to manage itself. R&R CEO Ibrahim Najafi takes the same role in Froneri, which will be jointly owned by Nestle and R&R's private equity backers PAI.
Brands & Activities
Nestlé has maintained a strong position in the global food market, strengthening its hand in several key segments including ice cream, beverages, frozen meals, pet care and culinary products through acquisitions, or well-chosen partnerships. No rival comes close to matching its broadly diversified portfolio, and its name is almost certainly the world's best-known food and beverage brand, and probably the most trusted.
Nestlé has five operating divisions. The food businesses operate as three geographic divisions in the Americas, Europe and Asia Pacific regions, while the company's water and pharmaceuticals businesses operate as separate global units. The group's products fall into six categories. However across these, there are six main brands which between them generate more than 70% of group revenues. The biggest of all is the main Nestlé brand, used across dairy products, mineral water, confectionery and prepared foods. It alone generates sales of around SFr 45bn a year (or almost E30bn), equivalent to 40% of combined revenues. It is supported by Nescafe, Nestea, Maggi, Buitoni and Purina, which between them contributed a further SFr 30bn or so in revenues.
Beverages remains Nestlé's biggest business, and also its most profitable, contributing almost a third of operating profit. Powdered and liquid beverages excluding water generated combined revenues in 2016 of SFr 19.79bn (E18.2bn); while Nestlé Waters (Perrier, Vittel etc - see separate profile) reported additional sales of SFr 7.93bn (E7.3bn), of which SFr 7.41bn (E6.8bn) was actually water (as opposed to other soft drinks). The group was a pioneer in the creation of soluble or powdered drinks, using a process it first developed for milk. That portfolio is now dominated by Nescafe, by far the biggest soluble coffee brand worldwide. Combined sales from coffee alone, and coffee making systems, all included in the powdered and liquid beverages total, were SFr 8.88bn (E8.2bn) in 2015. Nestle is the global leader in coffee with around 23% share in 2015, according to Euromonitor. (JAB, owner of Jacob Douwe Egberts and Keurig, ranks #2 with around 15%).
In addition Nestlé is the world leader in non-coffee soluble beverages with chocolate drinks Nesquik and Nescau, and Milo chocolate malt. Nestea and other ready-to-drink chilled teas are produced by Beverage Partners Worldwide, a joint venture with Coca-Cola in Europe and Canada. Until 2014, the group also owned shelf-stable fruit juice business Juicy Juice, but this was sold off in 2014 to private equity and is now part of Harvest Hill Beverage Company. Main rivals in beverages include Danone (in bottled water); Jacobs Douwe Egberts, Kraft Heinz, Smucker, Lavazza and Tchibo (in coffee), and the Pepsi-Lipton Partnership in chilled tea.
Linked to its coffee business is the fast-growing coffee vending system Nespresso, sales of which are now around SFr 4bn. The group launched a new premium tea dispensing system, Special.T, in September 2010, but so far sales are restricted to the launch markets of France and Switzerland. The group also markets more robust coffeemaking systems for professional or office use. Jacobs Douwe Egberts and its linked company Keurig are its main rivals in consumer coffee systems; Mars has a small presence in office systems.
Sitting behind Beverages is the Milk Products & Ice Cream division, with combined revenues of SFr 14.33bn (E13.1bn) in 2016. Traditionally the core of this business is provided by shelf-stable dried powder products ranging from infant products (Nido, Nespray and others) to Coffee-Mate, or milk-based cooking products such as Carnation and La Lechera. More recently the group has introduced chilled dairy products under its shelf-stable brand names, as well as ready-to-drink flavoured milks, La Laitiere, Yoco and LC1 yogurts, fermented drink Chamyto, and low-fat concentrated milk Gloria. Nestlé enjoyed some success with the roll-out of Sveltesse as the umbrella for a wide range of wellness-oriented chilled low-fat dairy products and other other healthy dessert items.
However, in general the chilled dairy sector has been one in which Nestlé has delivered an uncharacteristically weak performance compared to rivals. In the UK, Nestlé acquired a portfolio of local yogurts in 2002 including Ski and Munch Bunch, but these still rank far behind behind Muller and Danone. In 2003, the company formed an alliance in Germany and Austria with Muller, licensing that company rights to its LC1 brand. However Nestlé's chilled dairy range has struggled to overtake the considerable overall lead already enjoyed in this sector by Danone. In 2006, the group merged all its chilled dairy operations in the UK and mainland Europe into a joint venture controlled by Lactalis of France. Nestlé's chilled dairy products are marketed in Brazil, Argentina and several other Latin American markets since 2003 by Dairy Partners Americas, a joint venture with New Zealand's Fonterra dairy cooperative.
Milk products also includes a large portfolio of breakfast cereals, which are marketed outside the US by Cereal Partners, a joint venture with General Mills. Combined sales of milk products excluding ice cream totalled SFr 10.68bn (E9.9bn) in 2015.
Ice cream had been an important growth area in recent years, with sales rising by well over 60% between 2000 and 2006, mostly through acquisition. The group's international ice cream products include the Drumstick, Maxibon, Extreme and Sin Parar novelty brands, and it also experienced considerable success with a range of low fat home-serve ice creams. In fact, in 2006, Nestlé claimed to have overtaken Unilever to become the global #1 after bolting on key regional ice cream businesses including the Moevenpick ice cream brands in Germany and Austria; and control of Haagen-Dazs and Dreyer's in the US. In 2003, Nestlé acquired rights to Moevenpick in the rest of the world (except New Zealand), and acquired Delta Ice Creams of Greece at the end of 2005 for E240m. Most of the group's regional ice cream businesses were rebranded under the Nestlé umbrella. Those that remain with separate brands include Frisco (Switzerland), Boci (Hungary), Motta (Italy), Camy (Spain) and Savory (Chile). The group became local market leader in several key markets including Spain, Switzerland, and Scandinavia; the USA, Canada, Peru, Chile and Argentina; and several Asian territories.
However after nine years of trying to break the stranglehold of Unilever and Mars in the UK, Nestlé conceded defeat in 2001, selling its operations there (the former Lyons Maid business) to R&R Foods, a leading manufacturer of own-brand supermarket ice creams. A similar strategy resulted in the sale of Peters ice cream of Australia to private equity backers in 2012. (Peters was itself subsequently acquired by R&R in 2014). South Africa ice cream followed suit in 2014, and late the following year the group began talks to offload most of its remaining operations outside the US to R&R in return for a 50% stake in the enlarged business. A deal was finally reached in April 2016 and completed in October. The new business, named Froneri, took charge of all of Nestle's remaining ice cream business in Europe, the Middle East, the Philippines, Argentina and Brazil. Froneri also controls Nestle's other frozen foods businesses in Europe, excluding pizza, as well as chilled dairy in the Philippines. The key ice cream markets excluded from the deal are the US and Canada, which Nestle continues to manage itself. Nestle reported total ice cream sales of SFr 3.95bn (E3.7bn) in 2015.
According to Euromonitor estimates, Haagen-Dazs was the #2 ice cream brand in 2015 with sales of $2.1bn. Unilever controlled the remaining six top-sellers. Nestle's biggest brand was Dreyer's/Edy's in the US, ranked #7 with sales of $773m. Drumstick (a version of Unilever's Cornetto) was the company's next biggest brand, ranked #11 with global sales of $616m. It was followed by Nestle-brand tub ice cream at $449m and Dreyer's/Edy's Outshine frozen juice and yogurt bars at $436m.
Unilever is the dominant competitor in this sector. Euromonitor estimated Nestle's global share by value of ice cream at 10.8% in 2015, to Unilever's 22.8%. R&R had 0.8% share that year, ranking 6th behind General Mills, Lotte and Mars.
Nestlé Nutrition was spun out of the Milk Products business as a separate unit in 2006. It now operates across two sectors: infant nutrition and healthcare nutrition. The largest of these is infant nutrition, operating under the overall umbrella of the Nestlé Baby brand. There are numerous sub-brands, which vary widely from market to market. They include Cerelac and Nestum infant cereals, Nan milk formula and key local brands Beba in Germany, Mucilon in Brazil, Nestlé Good Start, Lactogen and several others. NaturNes is a new brand launched in 2008, the umbrella for an extensive range of more than 40 different flavours of 100% natural fruit and vegetable purees. However the most significant brand of all is Gerber, which dominates the US baby food sector with more than 80% local share and is also present in Mexico and other Latin American markets. This was owned until 2007 by another Swiss company, Novartis. After several months of negotiation, Nestlé was able to persuade Novartis to part with the business in early 2007 for $5.5bn. In 2012, following a fiercely competitive auction, Nestle agreed to acquire Pfizer's Wyeth infant nutrition business as well, with brands including SMA, Progress, Promil and S-26, for a lavish $11.85bn, more than five times annual revenues. Some regional brands were sold to comply with regulators, and others were divested (including Alete and Milasan in Germany) in 2014 to better streamline the portfolio. Nestle was already the global leader in the milk formula sector with over 17% share (Euromonitor 2010). The addition of Pfizer increased that to just under 23%. Mead Johnson ranks #2 with over 15%, followed by Danone (13%) and Abbott (11%).
The group operates in the healthcare or medical nutrition sector under the banner of Nestlé Health Science. Older brands in the portfolio include Nutren for children, and Peptamen and Clinutren for older or geriatric patients. These were strengthened in 2006 by a separate agreement with Novartis to acquire its US medical nutrition business, including adult nutritional products Boost, Resource and Isocal, and medical dieting formula OptiFast. The purchase price was around $2.5bn. Nestlé is now the close #2 in healthcare nutrition behind Abbott.
Two other nutrition businesses have been sold. The group developed an involvement in performance nutrition in 2005 with the acquisition of sports brands such as PowerBar, Pria and Musashi. These brands were sold in 2014 to US cereal group Post Holdings. Also in 2005, Nestlé moved into a fourth sector with the acquisition of Jenny Craig, a leading brand of weight management snack bars and prepared food products, marketed mainly in North America, Australia and New Zealand. The Jenny Craig brand launched in France and the UK for the first time in 2010. However, the business failed to gain ground. The European units were later shut down and the US and Australian arms of Jenny Craig were sold in 2013.
Combined sales for Nestlé Nutrition & Health Science in 2016 were SFr 15.04bn (E13.8bn), of which around three-quarters was contributed by the infant nutrition portfolio.
Prepared Dishes & Cooking Aids encompasses a wide range of convenience foods and sauces, with combined sales in 2016 of SFr 12.15bn (E?bn). The biggest international brand in this portfolio is Maggi, encompassing frozen foods and a wide range of sauces, soups and prepared dishes. In 2004 Nestlé acquired a 49% stake in Germany's #2 frozen pizza brand, Wagner, and increased that to a controlling stake during 2005. Stouffers is the leading brand in the US frozen dinner/entree segment, supported by the Hot Pockets frozen filled sandwich range (now also marketed in Europe under the Maggi umbrella). Buitoni markets Italian cuisine, while Herta is the leading name in the chilled processed meat market in continental Europe with a wide range of charcuterie, pates, sliced meats and frankfurters. Thomy and Torchin are dressings and condiments brands in Western and Eastern Europe respectively. Winiary in Poland markets a range of local sauces and mayonnaises. In 1999 the group took an 80% stake in Totole, a leading chicken bouillon brand in China. Also that year, Nestlé sold off its Findus frozen food brand in Europe (apart from in Switzerland and Italy) to buyout fund EQT Scandinavia, but retains the Lean Cuisine prepared meals brand in Australia and in North America (as part of Stouffer's). The UK's Crosse & Blackwell ambient condiments portfolio was sold in 2002, and the remaining US sauces and preserves were divested to JM Smucker in 2004. The Ortega Mexican foods business was also sold in 2004. The group's main global rivals in culinary foods are Unilever and, to a lesser extent, Kraft Heinz. However, in 2009, some of the competition with Kraft was defused with Nestle's acquisition of its rival's extensive frozen pizza business in North America, led by DiGiorno.
Nestlé Professional is the group's food service division, supplying hotels, restaurants and other such institutions and organisations. It offers a broad range of branded Nestlé consumer products as well as specific foodservice-only products and solutions. Branded subsidiary businesses include Chef, Davigel and Minor's.
Petcare reports separately following the creation of Nestlé Purina Pet Care (see separate profile). Sales in 2016 were SFr 12.07bn (E11.1bn or $12.3bn). Rivals include Mars, Colgate-Palmolive, JM Smucker and Spectrum Brands.
Nestlé is a major manufacturer of Chocolate & Confectionery, with a leading position in several continental European markets. The group has a strategic partnership with German manufacturer Barry Callebaut to supply chocolate mass in France, Italy and Russia, and agreed an alliance in 2007 with Belgian luxury chocolatier Pierre Marcolini in 2007 to pool the latter's technical and artistic expertise with Nestlé's global marketing skills. Nestlé is the world's #3 confectioner (behind joint leaders Mars and Mondelez. Confectionery sales in 2016 were SFr 8.68bn (E8.0bn or $8.8bn). Chocolate contributed just under three-quarters of that sum, with the rest split more or less equally between sugar confectionery and biscuits. Euromonitor estimated 12.1% share of the global chocolate confectionery market in 2013.
The group markets sugar confectionery in selected markets, notably the US, UK and Australia, as well as parts of Latin America and Asia. It sells biscuits in Latin America as well as Israel and Italy. Many of the company's biggest brands derive from its UK-based division, previously Nestlé Rowntree. The two biggest confectionery lines are the Nestlé megabrand and Kit Kat. Other international products include Smarties, Lion, Quality Street, Crunch, After Eight, Willy Wonka, Fruit Pastilles (or Frutips) and Polo (or Lifesavers). Popular regional brands include Baci (a version of Hershey's Kisses), Perugina (in Italy), Cailler (in Switzerland), Rossiya (in Russia), Orion (in the Czech Rep), Caja Roja, Sao Luiz and Star. In 2007, the group acquired premium Russian chocolatier Ruzskaya Confectionery, which makes local brands Comilfo and Ruzanna. In 2011, it acquired a 60% stake in Chinese confectioner Hsu Fu Chi for around SFr 1.4bn. Nestlé owns biscuit brands Sao Luiz, Passatempo and McKay in South America, and acquired La Universal in Ecuador and Excelsia in India in 1999.
Until recently Pharmaceutical Products comprised two businesses. Alcon Laboratories was sold to pharmaceutical group Novartis in 2010. It is the world leader in ophthalmology, producing drugs Patanol/Opatanol, Travatan and Colxan, a range of contact lens cleaners (including Opti-Free), and instruments and equipment for eye surgery. Nestlé spun off a stake of around 23% in Alcon to the public in 2002. In 2008, it agreed to sell its remaining shares in the business for around $39bn. That transaction took place in two installments. Novartis acquired an initial 25% holding immediately for $11bn, and absorbed Nestlé's remaining shares in summer 2010.
Separately, Nestlé is also the single biggest shareholder in cosmetics giant L'Oreal, although it reduced its shareholding from just under 30% of equity to 23% in 2014. At the same time, L'Oreal exited a long-running pharma-based joint venture, Galderma which specialises in treatments for skin conditions, including topical acne treatments Differin and Epiduo, and Clobex for psoriasis. Nestle took full control of that business, which became the core of new division Nestlé Skin Health. (A second joint venture, Laboratoires Inneov, which marketed nutritional beauty supplements to promote healthy skin and hair was wound down in early 2015). Also in 2014, the group added to its portfolio with the acquisition for $1.4bn of a range of skin fillers from Valeant Pharmaceuticals, including Botox competitor Dysport as well as Restylane, Perlane and Sculptra. Nestle ramped up the operations of this now wholly controlled Skin Health business with the creation in 2016 of a joint venture with direct sales giant Guthy Renker to market its $1bn-selling skincare treatment Proactiv. Nestle has a 75% stake in the business.
Group revenues for 2010 (restated in 2011 as a result of a change in accounting policy) were SFr 93.0bn (E67.4bn or $89.4bn), up 2% at reported rates. That figure included just over SFr 5bn from discontinued operations, mainly Alcon. Net profit more than tripled to SFr 35.4bn as a result of a massive SFr 26bn gain from the sale of its remaining shares Alcon. On a comparable basis excluding that one-off gain, net profit from continuing operations dipped 5% to SFr 9.0bn as a result of impairments and currency fluctuation. The latter has been a major factor, with the value of the Swiss Franc rising steadily against other currencies. For 2011, the divestment of Alcon and exchange rate fluctuations caused reported revenues to slide to SFr 83.6bn (E67.9bn or $94.6bn). The group claimed comparable organic growth of 7.5%. Net profit was up 8.1% on a continuing basis to SFr 9.5bn (E7.7bn or $10.7bn). Solid growth during 2012 pushed up revenues to just below the same level as 2010 in Swiss Francs, or SFr 92.19bn (E76.5bn or $98.3bn). The group reported organic growth of just under 6%. Net profit jumped almost 13% to SFr 11.06bn (E9.2bn or $11.8bn).
For 2013, solid but slower growth, offset by accounting adjustments, resulted in revenues of SFr 92.16bn (E74.9bn or $99.4bn). Organic growth slipped back to under 5%, from almost 6% the year before. Net profit slipped to SFr 10.45bn (E8.5bn or $11.3bn).
The slowing market combined with unflattering exchange rates caused revenues to slip back in 2014 to SFr 91.6bn (E75.4bn or $100.0bn). Organic growth missed target for the second consecutive year at 4.5%. However net reported profits soared by 43% to SFr 14.5bn (E12.3bn or $16.2bn) as a result of a big gain on the sale of its L'Oreal shares and a revaluation of Galderma. Excluding exceptional items such as this, pretax profits slipped 17%, partly as a result of a large impairment charge.
Slowing growth and unflattering rates continued to affect performance in 2015. The group delivered organic growth of 4.2%, but that was below the "about 4.5%" it had forecast in October. Instead 2015 was the third successive year that the group fell short of its stated annual target of 5%-6%. Just under half of 2015's growth came from price increases, and the rest from higher sales volumes. Revenues came in at SFr 88.79bn (E83bn or $92.3bn). Without the previous year's gain from asset sales, attributable net profit plunged by more than a third to SFr 9.07bn (E8.5bn or $9.4bn). Excluding taxes and special items, operating profit was up 14% year on year.
There was another slowdown in 2016, with organic growth falling to 3.2%, the slowest rate for 20 years. Reported revenues were SFr 89.47bn (E82.1bn), while net profit fell by another 6% to SFr 8.88bn as a result of a higher tax charge and lower income from joint ventures. Profit before tax and joint ventures was up 6%.
The group's single biggest market overall is the US, contributing almost 30% of group revenues in 2016 (SFr 26.7bn or $27.1bn). It was followed by Greater China, where sales more than doubled in 2012, and continued to rise steadily until a dip in 2016 to SFr 6.54bn ($6.6bn). Other major markets are France (SFr 4.85bn or E4.5bn in 2015), Brazil (SFr 3.93bn or $4.1bn in 2015), the UK (SFr 3.0bn or £2.04bn in 2015), Germany (SFr 2.93bn or E2.7bn in 2015), and Mexico (SFr 2.75bn or $2.9bn in 2015).
Paul Bulcke replaced Peter Brabeck-Letmathe as CEO of Nestlé in 2008. Brabeck remains group chairman but will retire at the end of 2016, after 50 years with the group. At the same time, Bulcke will become chairman (subject to shareholder approval), and will be replaced as CEO by Ulf Mark Schneider, previously head of medical products group Fresenius. Luis Cantarell - currently EVP, Europe, Middle East & North Africa - will also retire, to be replaced by Marco Settembri. The latter's role as EVP and chairman & CEO, Nestlé Waters, will be taken by Maurizio Patarnello.
Other senior officers include Francois-Xavier Roger (EVP & CFO), Stefan Catsicas (EVP, innovation, technology, R&D), Chris Johnson (EVP, Nestlé Business Excellence), Laurent Freixe (EVP, Americas), Wan Ling Martello (EVP, Asia, Oceania & Africa), Heiko Schipper (deputy EVP, Nestlé Nutrition), Greg Behar (CEO, Nestlé Health Science) and Magdi Batato (EVP, operations).
Patrice Bula is Nestlé's most senior marketer, with the title of EVP, strategic business units, marketing & sales, and also Nespresso. Other top centralised marketers include Tom Buday (head of global marketing & consumer communications), Pete Blackshaw (global head of digital & social media), Nigel Conway (global head of media communications) and Pratiman Kumar (global marketing lead, strategic business units).
The Nestlé empire began with the invention of the first powdered infant formula by Swiss chemist Henri Nestlé. A process for producing dried (or "condensed") milk had been perfected in the 1850s by The Borden Milk Company of the United States. A similar process was introduced to Europe by expatriate American brothers Charles and George Page, who established their own business in Switzerland in 1866 under the name of the Anglo-Swiss Condensed Milk Company, to manufacture powdered milk mainly for the British market. A German-born scientist, Henri Nestlé, had also moved to Switzerland to experiment with the condensation process. Rather than merely preserve the shelf life of milk, his aim was to create a more nutritious food which might help reduce the high level of infant mortality in Europe caused by malnourished mothers who were unable to breast-feed. The result was a combination of powdered milk, baked cereals and sugar which he named Farine Lactée Nestlé. Introduced in 1867, it was an immediate success throughout Europe. The success of Nestlé's infant formula encouraged the Page brothers to develop a rival baby food, to which Nestlé responded with its own condensed milk powder. Nestlé himself, by then aged in his 60s, had neither the stamina nor the financial resources to maintain the business, and he quit the business in 1874, selling out to Swiss entrepreneur Jules Monnerat for SFr 1m. The two companies competed fiercely until calling a truce in 1905 and merging, initially as the Nestlé & Anglo-Swiss Condensed Milk Company.
In the mean time, another Swiss, Daniel Peter, had been experimenting with a process for making chocolate more palatable by adding milk to reduce its bitterness. Nestlé lent its assistance and expertise to the project, allowing Peter to develop the world's first milk chocolate in 1875. He established the Swiss General Chocolate to market these products under the Peter brandname, with Nestlé as a minority shareholder. The same formula was used by Nestlé to market its own branded chocolate.
Nestlé expanded rapidly during the early years of the century, establishing itself in Australia and Asia. While the First World War brought severe disruption to distribution throughout Europe, it also generated huge demand for dairy products, and Nestlé acquired several factories in the United States to fulfil lucrative government contracts. During the space of just four years, the company's production of condensed milk and chocolate doubled. But while business had boomed during the war, peace almost brought about a collapse as government contracts ended and consumers switched back to fresh milk. In 1921, as a result of the rising price of milk and other raw materials, Nestlé recorded its first loss, and the recession which followed almost killed the company. However, new chairman Louis Dapples launched a sweeping restructuring of the company, selling off unproductive factories, and consolidating the company's position in milk chocolate by taking full control of Daniel Peter's company, now Peter Cailler Kohler, following the absorption of another Swiss manufacturer a few years earlier.
Perhaps the most significant step in the development of Nestlé came in 1930 when the company was approached by the Brazilian Coffee Institute to find a way of preserving the country's huge excess production of coffee beans. The company began experimenting with similar techniques to those used for its powdered milk products. Eight years of research led to a method of drying the bean to make a long-life soluble product. Nescafe was born. World War II had an enormous impact on Nestlé. Isolated in neutral Switzerland, the group moved its senior management team to the United States. By 1945, sales had more than doubled to $225m, and the group had become a worldwide coffee concern, with factories all over the globe. Consumer demand for coffee continued to soar, and sales of instant coffee tripled during the 1950s, then quadrupled during the 1960s and early 1970s. By the end of that decade, almost half of Nestlé's profits were generated by coffee.
To balance the inexorable rise of coffee, Nestlé worked hard to develop the other sides of its business, and launched a series of acquisitions. In 1947, the group merged with Alimentana, maker of Maggi soups and seasonings, to form Nestlé Alimentana. This was followed by the acquisition of Crosse & Blackwell preserves and France Glaces ice cream in 1960, Findus Frozen Foods (1962), Libby's fruit juices (1963), Vittel mineral water (1969), and Stouffer's frozen foods (1973). It even flirted for a while with wine-making, acquiring the Beringer vineyards in the US in 1971. In 1974, Nestlé took its first steps outside the food and beverage industry, buying what was then a 49% stake in the holding company for L'Oreal cosmetics. Pharmaceutical developer Alcon Laboratories was added in 1977. By the end of that decade, food was back on the shopping list. First Chambourcy in 1979, then Carnation in 1985 for $3bn in what was then one of the world's biggest food industry takeovers. British chocolate maker Rowntree Mackintosh and Italian food company Buitoni were added in 1988.
In 1992, Nestlé launched a hostile takeover of bottled water manufacturer Perrier, following the latter's poor handling of a contamination scare. The same year it bought UK business Clarke Foods, including ice cream brand Lyons Maid, for around £30m. Petfood company Alpo joined the group in 1994, merging with the Friskies business acquired as part of Carnation. In 1998 Nestlé acquired Spillers for $1.2bn, making it Europe's #2 petfood company after Mars. At the same time the group began pulling out of raw cocoa processing, closing or selling a string of factories around the globe. Other sales included subsidiary US coffee brands Chase & Sanborn, Hills Brothers and MJB (to Sara Lee for around $280m); and various manufacturing businesses. Among acquisitions, the group acquired a majority stake in China's #1 bouillon business, Totole, in 1999; US energy and nutrition manufacturer PowerBar in early 2000, followed by the capture of US petfood business Ralston Purina for $10.3bn.
In 2001, the group agreed an alliance with Fonterra, New Zealand's largest company and the world's foremost exporter of dairy products under the New Zealand Milk and Anchor brands, to develop joint ventures in Latin America to market new milk-based food and beverage products. This was later formalised early in 2002 as Dairy Partners America (DPA). Nestlé also strengthened its position in China, agreeing a joint venture (60% controlled by Nestlé) with the shareholders of local food company Haoji to take over the latter's business. The venture, Sichuan Haoji, is China's biggest #2 manufacturer of chicken stock and pastes. Late in the year, the group invested around $61m to support the creation of a new Swiss national airline to replace collapsed operator Swissair, and also agreed to acquire Schoeller Group, the ice cream and frozen food manufacturer whose brands include Moevenpick ice cream.
In 2002 the group gave its UK portfolio an overhaul, selling its Crosse & Blackwell portfolio of ambient sweet and savoury spreads to Premier Foods. At the same time Nestlé paid £145m to acquire the Ski and Munch Bunch chilled dairy brands from Northern Foods, the UK's #2 yogurt brands behind Muller. Also that year the group merged its existing ice cream operations in the US with the region's biggest player, Dreyer's. The group also announced formation of Laboratoires Inneov, a joint venture with L'Oreal, to develop nutritional supplements designed to to improve the quality of skin, hair and nails.
In 2005, Nestlé's board appointed group CEO Peter Brabeck-Letmathe with the additional role of chairman, following the retirement of Rainer Gut. That move was greeted by fierce opposition from several large investors who supported a split role for the sake of better corporate governance. Brabeck threatened to resign from the group altogether if the dual appointment was blocked. In the end the motion was passed by a majority, but only after more than a third of shareholders voted against the combined role. Brabeck-Letmathe finally stepped down as CEO in April 2008, and was replaced by Paul Bulcke, previously EVP, Nestlé Americas. Paul Polman, formerly CFO and at one point widely considered the favourite to succeed Brabeck, replaced Bulcke as head of Nestlé Americas, but resigned from the company a few months later to become CEO of Unilever. A further shakeup of senior managers followed that announcement. Lars Olofsson, previously EVP, strategic business units & marketing, left the group in November 2008 to become CEO of Carrefour.
Last full revision 1st April 2016
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