Food Corporation Case Study

Abstract

The giants of the food industry affect the lives of millions of people all around the world. Their products are most widely consumed and sold in different countries; thus, the significance of such companies in terms of global economy, environment, and society is immense. One of such big enterprises is Nestle. It started in Switzerland in the late 19th century as producer of the milk powder, but nowadays it is the largest company in the world’s food industry that determines the fate of millions of people. At the same time, due to some scandals, it is one of the most ambiguous companies in the world. Despite the company’s work on the development of its positive image, its history is full of various norms violations. The present research aims at evaluating Nestle in terms of its impact on the major aspects of sustainability: the society, the world economy, and the environment.

Nestle Case Study

The peculiarity of the modern world is the vivid industrialization of the food industry. Huge corporations control the sphere of nutrition around the globe, absorbing small companies and introducing dramatic changes in the economies of many countries. The impact of these giants on the society and life on Earth cannot be overestimated. They determine the branding trends, care for the nutrition of billions of people, and seriously affect the issue of the sustainability. Speaking of the most influential food corporations, it is impossible to ignore Nestle. This transnational food and drink company of Swiss origin is known as the biggest and the most powerful corporation in its sphere. It has a great influence on the modern world and its development. However, it also became an object of many scandals related to the question of sustainability and corporate morality. Such state of affairs gives an opportunity to evaluate Nestle as the most influential and the most ambiguous food company in the world.

Brief History of Nestle and Growth of its Influence

The company’s predecessor, Lactee Henri Nestle, was founded in 1860s by the Swiss pharmacist Henri Nestle. It was initially oriented on creation of milk powders. Later on, it started producing its most popular product – the milk chocolate. In 1905, Lactee Henri Nestle merged with Anglo-Swiss Condensed Milk Company (Schwarz, 2006). Soon, it became a giant of the food industry with factories in Germany, Spain, USA, and Britain. Furthermore, Nestle starts its expansion on the Asian and Australian market. The need in the company’s products rises after the World War I. However, it soon comes to decline, causing some serious losses. A very significant moment appeared in 1930s – the “invention of Nescafe, the world’s first wide spread instant coffee” (“The History of Nestle,” n.d.). It became the trademark’s main product.

The beginning of the Second World War brought the company some economic decline. However, Nestle later activated in the countries of the so-called Third World. As a result, after the end of the war, the company became even more wealthy and powerful than before. The food company started incorporating the strategy of product diversification. It has simply bought some other giants of the food market and set up for the production of the frozen foods, canned food, etc. The 1985 was characterized by “the largest takeover in the food industry to date…” (“The History of Nestle,” n.d.). It was the moment when the company acquired Carnation. This move just emphasized the significance of the company, and the following decades also brought Nestle the moments of great success. For instance, the company acquired San Pellegrino, Ralston Purina, and some less notable yet still quite successful corporation of the food market. Nowadays, the scales of Nestle operation are difficult to measure as it dominates on the whole variety of food markets in different countries of the world.

The Economic Impact of Nestle on the World

Being a business giant present in almost any corner of the world, Nestle determines the course of the economic development in the whole industry, as well as produces an immeasurable effect on the overall economic situation on the planet. According to the 2017 Nestle annual report, the company has approximately 323,000 employees and its products are sold in 189 countries. The same report indicates the amount of total group salaries and social welfare expenses paid by the observed company equals to approximately 17 billion of Swiss francs (“Annual Review,” 2017). Such impressive numbers presuppose the fact that Nestle gives many thousands of working places for the people who struggle to earn the living. The indicated amount of money makes the difference and gives an opportunity to bring considerable reductions to the levels of poverty in many countries.

In addition, the activity of Nestle is profitable for many states, as the company brings the host countries billions by means of buying local enterprises, privatizing or renting the territories for the factories, etc. According to the above-mentioned report, Nestle has a purpose “to enhance quality of life and contribute to a healthier future” (“Annual Review,” 2017, p. 5). Actually, the company makes important steps in order to live up to this purpose. It participates in many significant social collaborations. For instance, the initiative “Nestle Needs YOUth” implies training and giving opportunities to the young people from different countries. The company firmly believes in the importance of proper education of the youth all around the world in order to achieve a more sustainable future. Such initiatives also create more opportunities for the development of countries by creating the qualified human resources.

Generally, all of the above-mentioned actions characterize Nestle in a positive way. The impact of the company on the world economy has more pros than cons. Of course, such great corporations as Nestle create monopolies and make it more difficult for the smaller enterprises to find their places on the market; however, everything is according to the laws of the great business. Even by absorbing smaller food companies such as Ralston Purina, the observed food giant brings them to the new level and aids their development. The impact of the company on the economies of separate countries has already been discussed – new working places, sources of income, and more possibilities to develop. After all, 17 billion of Swiss francs spent on salaries and social welfare definitely made some impact. Overall, Nestle’s impact on the world’s economy can be evaluated as positive.

Nestle and the Environment

When it comes to environmental sustainability, Nestle’s operations appear to be not as bright as they may seem. Globalization made some negative impact on the company. With larger scales, it becomes more difficult to utilize the waste. For example, “according to Greenpeace, Nestle failed to obey the regulations in China and discharged huge waste in rivers and lakes there” (Saya & Saya, 2016). It also took part in cutting the rainforests on the island of Sumatra (Nelsen, 2017). Another serious scandal with this company appeared in California, where Nestle had been illegally pumping water from San Bernardino National Forest for around ten years. Even in the situation when the water resources of California were endangered, the company refused to change the source of water. Furthermore, Nestle is known for the scandalous position of its chairman, Peter-Brabeck Lemathe, who is very skeptical about the opinion that water is the universal human right. Basically, this figure denied one of the main principles of the humanity. Though there is a possibility to say that his words were misinterpreted, the ravenous water policy of Nestle proves that profits are more important for Lemathe than the fate of many thousands starving people. There is also an information concerning the illegal water pump conducted by the company in some other parts of the planet. For instance, it some believe that in Brazil, the food giant keeps pumping water without any legal permission (Andrei, 2017).

Speaking of the environmentally illegal actions, it is impossible to omit the situation that appeared with the bottled water in China. While in Europe and the USA, the standards of control over the factories are high, the companies do not allow themselves any serious environmental violations. However, in China, with all its labor force and standards of quick productivity, much less attention is paid to such regulations. There appeared an information that Nestle sells water from the Chinese rivers and lakes in bottles. Considering that “about 70 percent of China’s lakes and rivers have been polluted by industrial facilities such as power and chemical plants and paper and textile factories,” it is possible to say that the company sells polluted product, which goes against any principles of fair business and environmental sustainability (Doherty, 2013). This situation is just another point that highlights the fact that Nestle has different standards of quality for different parts of the world, and they totally depend on the standards of control and the level of the environmental concern in the given country.

Nevertheless, Nestle still aims at creating the vision of being a company that cares for the environment. For instance, it sells water in the eco-friendly plastic bottles. In addition, “Nestle” displays the orientation on the ecological sources of the renewable energy. “As a matter of fact, Nestle Mexico obtains 85% of its electricity from wind power” (Saya & Saya, 2016). Such actions improve the public image of the company, and are often emphasized by the food giant, contrary to its scandalous issues, which often remain unknown for the majority of people. However, some of the above-mentioned events show the real face of Nestle – a ravenous and profit-oriented organization, ready to forget about the importance of sustainability and environmental care in any situation, which is beyond the public eye.

Nestle and Social Concerns

As for the social responsibility of Nestle, the company had produced some positive impact on the coffee production in China and Vietnam. The experts sent from the Swiss company introduced serious changes in the agriculture of these states, turning them into large centers of the coffee production (Saya & Saya, 2016). In addition, the above mentioned initiative oriented on the development of the youth as well as some less prominent charity initiatives of Nestle contribute to the development of the positive public image of the company. These actions can be evaluated as parts of the deliberate branding strategy of the company, which aims to show the people that Nestle is a progressive business giant, which cares for the society and seeks to contribute in its development at any cost. This strategy is also the company’s way of rehabilitation for some great scandals that occurred throughout its history.

The most prominent ones occurred in the late 1970s. It was built around the company’s strategy of “selling infant formula to poor communities in the South” (Fridell, 2007, p. 238). The company was selling artificial substitutes for breast milk in some impoverished countries, which turned out harmful for the newborn children and could even lead to their malnutrition and death. The product was spread by the company’s workers dressed as nurses, who gave the mothers samples “to get them “hooked on” infant formula” (Saya & Saya, 2016). Many people considered such policy of the company to be a real crime, which led to the boycott of their production in many countries. It was a serious strike for the international image of Nestle, which made it one of the most hated companies in the world.

To make the things worse, even nowadays there are some serious scandals concerning the violations of the social norms by Nestle. For instance, Fair Labor Association informs the company uses the child labor in the West Africa. Despite all the assurances and even signed contracts, there is an information that the company still keeps using children as workers on its farms. Such issue can be rather harmful for the developing countries, in which it occurs. First, early labor may have a negative impact on the further development of the children, which in turn is negative for the future of the whole country. Second, such practice gives the people of the developing countries an idea that child labor is normal, and thus, enhances the further spreading of it.

Evidently, considering some unethical in the social terms decisions of the company, Nestle appears as a business giant with some really negative impact on the developing countries. Unethical decisions while developing and distributing the products show that profit is more important for this company than morality. Such affairs serve just other examples of the facts that in the areas where there are less regulations and control, Nestle can ignore principles in order to achieve maximum profit. Some social campaigns in this case play the role of the stalking-horse developed in order to hide the real essence of the company behind various charitable initiatives.

Conclusion

Overall, Nestle is one of the biggest and the most influential food companies in the world. Its influence cannot be overestimated. Such a successful company introduces serious changes in the market. This impact can be evaluated as rather positive, as the company contributes to the development of various economies and creates thousands of working places worldwide. At the same time, it has shown its ignorance to the environmental issues, as well as its readiness to act against social and moral norms in order to gain profits. Thus, the general impact of Nestle on the society and the environment can be evaluated as negative. Such state of affairs creates the negative image of the company. Of course, it already plays an immense role on the world market, but the refusal to apply unethical practices would make Nestle less hated and even more successful. It would be useful for the company to emphasize the difference between its previous immoral practice and the new policy of transparency and adherence to the norms. The whole marketing strategy should be based on this shift. Such approach will definitely make the company more visible and will attract more people to its product.