Nestlé and the problems it’s facing

Prepared For:

Mr. Mohammad Ariful Gani

Faculty, MGT-372

Section: 02

School of Business

North South University

Prepared By:

Name: ID:

Rakibul Hasan 071177030

Ahmed Imran Kabir 1030698030

Faisal Khaled Jamil 0930667530

Shafat Ahmed Jamil 1010317030

Toufique Ahmed Shishir 1020291030

Letter of Transmittal:

6th December, 2012

Mr. Mohammad Ariful Gani

Faculty, MGT-372

School of Business

North South University

Dear Sir,

In this report of “Nestle Bangladesh”, we have tried to implement our learning from this course

and tried to figure out the problems Nestle Bangladesh is confronting. We would like to thank

you for offering the opportunity to work on our desired topic. Despite many limitations, we have

tried our best to make this report accurate and reliable.

If you have any further enquiry concerning any additional information, we would be very

pleased to clarify that. Thank you.

Sincerely yours,

_________________ _________________ _________________

Rakibul Hasan Ahmed Imran Kabir Faisal Khaled Ahmed

_______________________ _________________________

Shafat Ahmed Jamil Toufique Ahmed Shishir

Acknowledgement:

One of the most pleasant parts of submitting a report is the opportunity to thank those

who have contributed to it. Unfortunately, the list of expression of thanks, no matter how

extensive is always incomplete and inadequate. These acknowledgements are no exception.

Our first thank goes to the almighty Allah for bestowing us the patience and courage to

finish this huge task within its deadline.

Thanks must go to the team members, whose unflagging patience and astounding

capacity for creative work, and long hours made the project both possible and successful under

the pressure of knocking deadline.

In addition, thanks to those sources who has given us important information and various

advises about our product.

At last, we sincerely acknowledge our debt to Mr. Mohammad Ariful Gani, our honorable

faculty, for his valuable counseling towards the improvement of the project. Without his guiding,

support and encouragement, this would have been possible.

Executive Summary:

Nestle is world’s largest health, nutrition and wellness company. Although globally it is twice in

size of its nearest FMCG (fast moving consumer goods) competitors, in Bangladesh its journey

is relatively new. But recent times it has experienced an organic growth of 40% and this trend

predicted to continue in the coming few years. Nestlé Bangladesh focus on continues excellence

of their employees for their better performance in the work at Nestlé and for the betterment of

their career. In this paper there is a complete discussion about problems Nestle Bangladesh is

confronting in its managerial styles and practices. In this term paper we found out many problem

that Nestle Bangladesh faced or facing or will face in near future. The problems that we found

out are the infant formula controversy, Environment and product safety, Palm oil and global

warming, falling under child labor, far fewer staff than actually required in terms of tasks to be

completed, significantly less customer support services than is required in terms of the number of

customers and the complexity of the services offered, The Guardians investigation of Nestlé in

Bangladesh etc. These problems are the main problems that Nestle Company is facing worldwide

as well as in Bangladesh. And in this term paper we discussed about how Nestle Company

handled those problems and what should be the other necessary steps to prevent these problems.

And we found out these problems are mainly because of the fault of managerial styles and

practices. However in these coming days Nestle Bangladesh is fixing these problems regarding

to its managerial styles and practices by taking some steps that are good for the company.

Table of Content:

Item: Page no.

1. Introduction

2. Background of Nestle and Nestle Bangladesh

3. Problems Nestle is facing

4. Problems in Nestlé’s Human Resource Management

5. The Nestle boycott.

6. Environment and product safety.

7. Human rights and Spying on critics.

8. Conclusion.

9. References.

10. Appendices.

Introduction:

Today’s Nestlé, the world's largest food and Nutrition Company, founded by the Henri Nestlé

(10 August 1814 – 7 July 1890); a German confectioner in Vevey, Switzerland in 1866. In the

food Industry Nestlé is the most trusted name with high quality products. ―Good food Good

Life‖ is the mission of Nestlé, which drives the company to provide consumers with the best

tasting and most nutritious choices in a wide range of food and beverage categories and eating

occasions. The vision of ―creating shared value‖ and the very own ―Corporate Business

Principles‖ shaped the company culture and made them a reliable investor over 86 countries of

the world. Today Nestlé employs around 280000 people and have factories or operations in

almost every country of the world with a total equity of CHF 62.60 billion.  The company seems

determined to feed the entire human race. It likes to call itself the “world’s leading nutrition,

health and wellness company.” It is also one of the world’s most controversial corporations. For

more than two decades the Nestlé name was widely associated with a controversy, including a

longstanding boycott, over its marketing of infant formula in poor countries. More recently, the

company has been one of the primary targets of the global movement against the bottled water

industry.

Background of Nestle:

Nestlé Company had started off from a single man's idea, and developed into a giant corporation.

In 1866 Henri Nestlé, a pharmacist, developed a milk food formula for infants who were unable

to tolerate their mother milk (Nestle.com). His product became a success, and it created a

demand throughout Europe. As Nestlé’s popularity grew more businesses wanted to merge and

become partners with Henri Nestlé's business. From 1866 to 1947 the Nestlé Company had gone

through several name changes. In 1905, Anglo-Swiss Condensed Milk Co. and Farine Lactee

Henri Nestlé merged, and the company’s name became Nestlé & Anglo-Swiss Condensed Milk

Co. Then in 1929, Peter-Cailler-Kohler Chocolats Suisses S.A. merged with the company. The

name was then changed to Nestlé & Anglo-Swiss Holding Co. Ltd, on November 27, 1936. In

December 1947, Co. acquired all the shares capital of the Alimentana S.A. company in exchange

for fifteen Nestlé shares and fifteen Unilac shares for each of Alimentana S.A. share, so this

point the name was at Nestlé Alimentana S.A. And then finally, the last name change that the

company would endure was in 1977, where it adopted the name Nestlé SA (Mergent Online).

Along the way Nestlé’s company remain successful, which allowed them expand to new region

and territories throughout the world, making them the world’s biggest food and beverage

company. Nestlé’s headquarters are located in Vevey, Switzerland, but the Nestlé Company has

factories or operation in almost every country in the world. Since the Nestlé case was published

in 1998, it stated that Nestlé had employed 230,000 people worldwide, with $71.7 billion in sales

(Rodgers, 2000). Now moving forward to 2003, Nestlé has increased the amount of employees to

253,000 people, with $88 billion in sales (Nestle.com). Nestlé is increasing the size of their

company year by year. In addition, to the increase in the size of the Nestlé Company; Nestlé also

has increased the variety in the different products they offer. In Nestlé’s business strategy they

encourage product growth through innovation and renovation (Nestle.com). This strategy has

allowed Nestlé to develop many different products in the various fields: baby foods, dairy

products, breakfast cereals, ice creams, chocolates and confectionery, prepared foods, beverages,

food services, bottled water, and pet care. This brings us to the main focus of our case analysis,

the dairy division, and the yogurt product LC1 that lies within that division.

Nestle in Bangladesh

Popular Nestlé brands started entering this part of the sub-continent during the British rule and

the trend continued during the pre-independence days of Bangladesh. After the independence in

1971, Nestlé World Trade Corporation, the trading wing of Nestlé S.A, sent regular dispatch of

Nestlé brands to Bangladesh through an array of indentures and agents and some of the brands

such as NESPRAY, CERELAC, LACTOGEN, and BLUE CROSS etc. became some very

common products.

Nestlé Bangladesh Limited started its commercial operation in Bangladesh in 1994. Its total

authorized capital is TK1.5 billion and total paid up capital is TK 1.1 billion. The only factory of

the company in Bangladesh is situated at Sreepur, 55 km north of Dhaka. The factory produces

the instant noodles and cereals and repacks milks, soups, beverages and infant nutrition products.

Today Nestlé Bangladesh Ltd. is a strongly positioned organization. The Company is

continuously growing through the policy of constant innovation, concentrating on its core

competencies and its commitment to high quality food to the people of Bangladesh.

Since the beginning of Nestlé’s operation in Bangladesh, the chairman of the company has been

Mr. LatifurRahman, one of the top industrialists of the country, his firm Transcom used to import

the products of Nestlé. His business house Transcom is still involved in wide range of business

like beverage, pharmaceutical, electronics, newspaper, tea export, fast food franchises etc. Still

he remains as an honorary chairman of the company although his group Transcom does not

capture any share today as Nestlé S.A. holds 100% share of this company.

In Bangladesh Nestlé’s vision is-to be recognized as the most successful food and drink company

in Bangladesh, generating sustainable, profitable growth and continuously improving results to

the benefit of shareholders and employees.

Problems Nestle is facing:

The company seems determined to feed the entire human race. It likes to call itself the “world’s

leading nutrition, health and wellness company.” It is also one of the world’s most controversial

corporations. For more than two decades the Nestlé name was widely associated with a

controversy, including a longstanding boycott, over its marketing of infant formula in poor

countries. More recently, the company has been one of the primary targets of the global

movement against the bottled water industry. The main problems Nestle is facing worldwide as

well as in Bangladesh. The problems are:

1. Problems in Human resource management of Nestle Bangladesh.

2. The Nestle boycott.

3. Environment and product safety.

4. Human rights and Spying on critics.

Problems in Human Resource management

of Nestle:

  Aging workforce and retirements

      As most of the upper level positions are filled with aged personnel and each year some of

them are going to retirement, Nestle has to go for continuous recruitment process to fill those

positions when succession is not possible and finding the right person is also a challenge as well.

    Less experienced and smaller younger generations

      Our current job market is filled with new graduates who lack experience which Nestle seeks

to maintain the standard in their workplace.

    Lack of investment in training and education

      Still most of the companies are reluctant to invest on training and development sectors to

increase the efficiency of the employees. Even though Nestle is offering its own training and

education program to its employees but to be competitive in the market and increase efficiency,

more focus on this field is mandatory.

    Mismatch between training and education outputs vs. business skill needs

      There is not enough capacity at educational institutions to keep up with corporate and student

demands, and this will only worsen as technology and innovation increase the rate at which

knowledge and skills become obsolete.

    Lack of appropriate succession planning

      It is not always possible to fill up all the positions internally but when Nestle go for

headhunting, they face challenge in finding qualified managerial talent and skilled workers.

Recruiting from a narrow pool of potential talent

      Because of rigid job descriptions and hiring requirements, Nestle recruit talent from a narrow

pool of potential talent. It may make it difficult to select the best talent from the market.

Nestle boycott:

The Nestle boycott was launched in July 7, 1977 In U.S.A in against Nestle. It then expanded

into Europe in the 1980’s. Nestle launched an infant formula which were breast milk substitutes,

particularly in poor and economically less developed countries. The formula caused suffering

and deaths to a huge population of babies. Professor Derek and his wife Patrice had a great

influence in boycotting Nestle as they established WABA (World Alliance for Breastfeeding

action).

There are four problems when poor mothers are using the formula:

The formula must normally be mixed with water; the water is often contaminated in poor

a country, which leads to disease. Due to the high illiteracy many mothers are unaware of

the sanitation needed to prepare the bottles.

Although some mothers are aware of the sanitation needs, they often don’t have the

means to perform them: fuel to boil water, electric light to enable sterilization at night.

Many mothers use less formula powder than necessary, to make the container last longer,

which creates weak solutions and inadequate nutrition.

Breast milk has many natural benefits which the formula lacks. The breastfed babies are

protected from many diseases like diarrhea, bacterial meningitis, gastroenteritis, ear

infection, and respiratory infection.

History of the boycott

Henri Nestle, the creator of the Nestle, the largest food company in the world, invented the

formula milk. They are first found guilty for undermining breast feeders. They said the

formula was as healthy as breast milk, they sampled and targeted woman. Some targeted

countries did not have clean water to mix up the formula. There was a pamphlet released

called ‘The Baby Killer’, Nestle filed a lawsuit and received a small fine.

In 1977, there was boycott for all Nestle products in US and then expanded in Europe in

1980. The world health assembly adopted the international code which Nestle agreed upon

and stopped the boycott. The Ibfan(International baby food action network) resumed the

boycott as Nestle was flooding health facilities in developing countries.

Current status of the boycott

As of 2012, the Nestle boycott is coordinated by the International Nestle boycott committee.

The international baby food action network monitors action practices. Around 60 countries

have implemented laws on it. Many universities, schools, colleges have banned sale of Nestle

products from their shops. Nestle claims that is complying with the international codes.

According to the CEO, they take good care about codes and takes disciplinary actions against

violation. They claim the allegations to be outdated or unsubstantial. Still today many

companies are aware of the ethical principles like save the children, Oxfam etc. The debate

of the infant formula still continues.

To summarize, this was a really serious issue for Nestle in international business. They

provided formula to replace breast milk killing millions of infants. The poor and developing

countries could not take it, and suffered. Nestle should comply with the International code

and not undermine breast feeding, as it vital for a baby.

Environment and product safety:

Water Controversies

After entering the bottled water business by acquiring upscale brands such as Perrier and San

Pellegrino, Nestlé began selling less expensive water in poor countries in the late 1990s. From

the start, critics charged that the ready availability of bottled water, which the company sold

under the name Nestlé Pure Life, would make the governments of those countries less inclined to

invest in the infrastructure needed for reliable public water systems. A 2005 report published by

the Swiss Coalition of Development Organizations and Action Aid raised questions about the

purity of the Pure Life water sold by the company in Pakistan.

Product Safety

In June 2009 an outbreak of E.coli food poisoning in the United States was linked to Toll House

refrigerated cookie dough produced by Nestlé at a plant in Danville, Virginia. The

company recalled all Toll House products in the country, but it came to light that the plant had

previously refused to give inspectors from the federal Food and Drug Administration (FDA)

access to internal records relating to matters such as pest control and consumer complaints.

In December 2009 the FDA sent a warning letter to Nestlé alleging that the labels on some of the

company's children's beverages contained unauthorized nutritional claims. In March 2010 Nestle

received another warning letter from the FDA.

Human rights and spying on critics:

Human rights:  

In 2005 the International Labor Rights Fund (ILRF) brought suit against Nestlé and several other

companies in U.S. federal court under the Alien Tort Claims Act, charging that they were

involved in the abuse and forced labor of child workers in the West African cocoa supply chain.

(In December 2009 Nestlé announced that it’s Kit Kat chocolate products in Britain would start

to be sold with certification from the Fair-trade Foundation.)

In 2006 ILRF sued Nestlé again in U.S. court, accusing the company with complicity in the

torture and murder of a Colombian trade union leader by paramilitary forces with which it

allegedly had a long-standing relationship.

Spying on Critics:

In 2008 a Swiss investigative news program reported that five years earlier Nestlé had used a

private security company to infiltrate the anti-globalization group Attack. The undercover agent

reportedly monitored the group’s research work on the company that led to the 2004 publication

of a critical book entitled Attac Contre L’Empire Nestlé.

Conclusion:

People have been boycotting Nestle for one reason or another ever since. They are the company

everyone loves to hate. Today, Nestle is the largest food company in the world, with more than

450 factories in more than 80 countries. They are one of a handful of companies with a presence

in every country in the world. Finally it can be said that that Nestlé Bangladesh Limited is using

and developing their strategy perfectly. By using valuable marketing tools they are creating

competitive advantage for themselves which ultimately helping them to reach their market as

well as organizational objectives. Again their continuous renovation are making them leader into

the market which leads to profit as well as customer base for their company.

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accessed 6th Dec 2012.

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Appendices:

Fig 1: The Nestle Boycott: Are you Booing Nestle this Halloween?

Fig 2: Nestle Waters First Half Bottled Water Sales Decline a Startling 38%

Fig 3: Nestle Sales jobs decreased21%

Fig 4: Peter Brabeck, CEO and board chairman at Nestlé

Fig 5: A poster against Nestle.