Nestlé began in Switzerland in the mid 1860s when founder Henri
Nestlé created one of the first baby formulas. Henri realized the need for a
healthy and economical product to serve as an alternative for mothers who could
not breastfeed their babies. Mothers who were unable to breastfeed often lost
their infants to malnutrition. Henri’s product was a carefully formulated
mixture of cow’s milk, flour and sugar. Nestlé’s first product was called
Farine Lactée (“cornflour gruel” in French) Henri Nestlé. The product was first
used on a premature baby who could not tolerate his mother’s milk or other
alternative products of that time. Doctors gave up on treating the infant.
Miraculously the baby tolerated Henri’s new formula and it provided the
nourishment that saved his life. Within a few years the first Nestlé product
was marketed in Europe.
In 1874 the Nestlé Company was purchased by Jules Monnerat. Nestlé
developed its own condensed milk to contend with its competitor, the
Anglo-Swiss Condensed Milk Company. The Anglo-Swiss Condensed Milk Company made
products like cheese and instant formulas. The two companies merged in 1905,
the year after Nestlé added chocolate to its line of foods. The newly formed
Nestlé and Anglo-Swiss Milk Company had factories in the United States,
Britain, Spain and Germany. Soon the company was full-scale manufacturing in
Australia with warehouses in Singapore, Hong Kong and Bombay. Most production
still took place in Europe.
The start of World War I made it difficult for Nestlé to buy raw
ingredients and distribute products. Fresh milk was scarce in Europe, and
factories had to sell milk for the public need instead of using it as an
ingredient in foods. Nestlé purchased several factories in the U.S. to keep up
with the increasing demand for condensed milk and dairy products via government
contracts. The company’s production doubled by the end of the war. When fresh
milk became available again after the war, Nestlé suffered and slipped into debt.
The price of ingredients was increasing, the economy has slowed and exchange
rates deteriorated because of the war. An expert banker helped Nestlé find ways
to reduce its debt. By the 1920s Nestlé was creating new chocolate and powdered
beverage products. Adding to the product line once again, Nestlé developed
Nescafé in the 1930s and Nestea followed. Nescafé, a soluble powder,
revolutionized coffee drinking and became an instant hit.
With the onset of the Second World War, profits plummeted.
Switzerland was neutral in the war and became increasingly isolated in Europe.
Many of Nestlé’s executive officers were transferred to offices in the U.S.
Because of distribution problems in Europe and Asia, Nestlé opened factories in
developing countries in Latin America. Production increased dramatically after
America entered the war. Nescafé became a main beverage for the American
servicemen in Europe and Asia. Total sales increased by $125 million from 1938
to 1945. Nestlé continued to prosper, merging with Alimentana S.A., a company
that manufactured soups and seasonings, in 1947. In the coming years, Nestlé
acquired Crosse & Blackwell, Findus frozen foods, Libby’s fruit juices, and
Stouffer’s frozen foods. Nescafé instant coffee sales quadrupled from 1960 to
1974, and the new technology of freeze-drying allowed the company to create a
new kind of instant coffee, which they named Taster’s Choice.
Expanding its product line outside of the food market, Nestlé
became a major stockholder in L’Oréal cosmetics in 1974. Soon after the company
suffered with increasing oil prices and the slowing growth in industrialized
countries. Foreign exchange rates decreased, in turn reducing the value of
sterling, the pound, dollar and franc. Prices of coffee beans and cocoa rose
radically, presenting further problems for Nestlé. The company decided to
venture into the pharmaceutical industry by acquiring Alcon Laboratories, Inc.
While trying to deal with unstable economic conditions and exploring its new
ventures, Nestlé faced the crisis of an international boycott. Many organized
groups began boycotting all of Nestlé’s products because they disapproved of
Nestlé marketing its baby formula in developing countries. Problems like
illiteracy and poverty caused some mothers to use less formula than
recommended. In a watered down formula, vital nutrients are lessoned.
Contaminated water presented another problem, since the formulas had to be
mixed with water. The organizations argued that the misuse of formula resulted
in the malnutrition or death of many infants in developing countries.
According to Nestlé the World Health Organization never made
statements tying infant death or malnutrition with baby formulas. The company
didn’t deny the superiority of breastfeeding and agreed that substituting
breast milk for other substances could be very dangerous. Nestlé explained that
breastfeeding and non-breastfeeding mothers in developing countries often gave
their babies whole cow’s milk, tea, corn starch, rice water or a mix of flour
and water. These alternatives were very unhealthy and a nutritional baby
formula was a better choice. Nestlé says that it has never discouraged
breastfeeding when it was possible. Nestlé agreed to follow the International
Code in developing countries in 1984, and the boycott was suspended. It resumed
several years later when the organizations believed Nestlé was sending free or
low cost baby formulas to developing countries. Nestlé said it only sent
formula to countries that allow donations for orphans, multiple births, and
babies with no access to breast milk. The company has stopped all public
advertising for formula in developing countries for almost 20 years. The
boycott continues to some extent to this day without satisfactory resolution.
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