Nestlé S.A.

Avenue Nestlé 55
CH-1800 Vevey
Switzerland
(021) 924-2526
Fax: (021) 921-1885

Public Company
Incorporated: 1866 as Anglo-Swiss Condensed Milk Company
Employees: 218,000
Sales: SFr 54.50 billion (US$36.22 billion)
Stock Exchanges: Zurich Geneva Paris Frankfurt Dusseldorf Amsterdam Vienna London Tokyo Brussels Basle
SICs: 2066 Chocolate and Cocoa Products; 2023 Dry, Condensed, and Evaporated Dairy Products; 2024 Ice Cream and Frozen Desserts; 2026 Fluid Milk; 2064 Candy & Other Confectionery Products; 2043 Cereal Breakfast Foods; 2037 Frozen Fruits, Fruit Juices & Vegetables; 2038 Frozen Specialties; 2087 Flavoring Extracts and Flavoring Syrups; 2095 Roasted Coffee; 2834 Pharmaceutical Preparations; 2048 Dog and Cat Food

Nestlé is the largest food company in the world. With more than 400 manufacturing facilities on five continents, Nestlé has often been called “the most multinational of the multinationals,” largely because only 2 percent of its sales are made in its home country. Nestlé S.A. is a holding company for some 200 operating units that manufacture and sell a wide variety of products, including coffee, juices, chocolate and malted beverages, chocolates and confectionery, culinary and refrigerated products, dairy products, baby food, frozen foods and ice cream, pet foods, and pharmaceutical products.

While serving as the American consul in Zurich, Charles Page decided that Switzerland, with its abundant milk supply and easy access to the whole European market, was the perfect location for a condensed milk factory. The first canned condensed milk had been produced in the United States by Gail Borden some ten years before, and originally Page planned to produce and sell “Borden Milk” in the European market as a licensee. The plan fell through, however, so in 1866 he established the Anglo-Swiss Condensed Milk Company as a limited company in Cham, Switzerland.

The company’s name was meant to flatter the British, to whom Page hoped to sell a great deal of his condensed milk. Anglo-Swiss first expanded its operations beyond Switzerland’s borders in 1872, when it opened a factory in Chippenham, England. Condensed milk rapidly became a staple product in European cupboards—the business downturn in 1872 and the depression of 1875 did not affect the firm’s sales. Charles Page died in 1873, leaving the company in the hands of his brother George and Anglo-Swiss’s other investors. The next year, Anglo-Swiss undertook further expansion in England by purchasing the Condensed Milk Company, in London. By 1876 sales were almost four times their 1872 level.

Meanwhile, in Vevey, Switzerland, in 1867 Henri Nestlé began selling his newly developed cow’s-milk food for infants who could not be breast fed. Demand for his Farine Lactee Nestlé soared; between 1871 and 1873, daily production more than doubled, from fewer than 1,000 tins a day to 2,000. Nestlé’s goal was to bring his baby food within everyone’s reach, and he spared no effort in trying to convince doctors and mothers of its benefits. But while his energy and good intentions were nearly endless, his financial resources were not. By 1873, demand for Nestlé’s product exceeded his production capabilities, resulting in missed delivery dates. At 61, Nestlé was running out of energy, and his thoughts turned to retirement. Jules Monnerat, a former member of parliament who lived in Vevey, had long eyed the business, and in 1874 Nestlé accepted Monnerat’s offer of SFr 1 million. Thus, in 1875, the company became Farine Lactee Henri Nestlé with Monnerat as chairman.

In 1877 Nestlé faced a new competitor when the Anglo-Swiss Condensed Milk Company—already the leading manufacturer of condensed milk in Europe—decided to broaden its product line and manufacture cheese and milk food for babies. Nestlé quickly responded by launching a condensed milk product of its own. George Page tried to buy the competing company outright, but he was firmly told that Nestlé was not for sale. Turning his attention elsewhere, he purchased the Anglo-Swiss Company’s first factory in the United States in 1881. The plant, located in Middletown, New York, was built primarily to escape import duties, and it was soon successful enough to challenge Borden’s supremacy in the American condensed milk market. It also presented a drawback: George Page spent so much time there that Anglo-Swiss began to lose its hold on Europe—much to the delight of Nestlé. After George Page’s death in 1899, the Anglo-Swiss Condensed Milk Company decided to sell its American business to Borden in 1902 so that it could concentrate on regaining market share in Europe.

Until 1898 Nestlé remained determined to manufacture only in Switzerland and export to its markets around the world. But that year the company finally decided to venture outside Switzerland with the purchase of a Norwegian condensed milk company. Two years later, in 1900, Nestlé opened a factory in the United States, and quickly followed this by entering Britain, Germany, and Spain. Early in the 1900s, Nestlé also became involved in chocolate, a logical step for a company based in Vevey, the center of the Swiss chocolate industry. Nestlé became a partner in the Swiss General Chocolate Company, the maker of the Peter and Kohler brands. Under their agreement, the chocolate company produced the first Nestlé brand milk chocolate, while Nestlé concentrated on selling the Peter, Kohler, and Nestlé brands around the world.

In 1905 Nestlé and the Anglo-Swiss Condensed Milk Company finally quelled their fierce competition by merging to create the Nestlé and Anglo-Swiss Milk Company. The new firm would be run by two registered offices, one in Vevey and one in Cham, a practice it continues today. With Emile-Louis Roussy as chairman, the company now included seven factories in Switzerland, six in Great Britain, three in Norway, and one each in the United States, Germany, and Spain.

In response to an increase in import duties in Australia—Nestlé’s second-largest export market—the company decided to begin manufacturing there in 1906 by buying a major condensed milk company, the Cressbrook Dairy Company, in Brisbane. In the next few years production and sales continued to increase as the company began to replace sales agents with subsidiary companies, particularly in the rapidly growing Asian markets.

Most of its factories were located in Europe, however, and when World War I broke out in 1914, Nestlé’s operations, particularly in such warring countries as Britain and Germany, were seriously affected. Although production continued in full force during the early months of the war, business soon grew more difficult. By 1916 fresh milk shortages, especially in Switzerland, meant that Nestlé’s factories often sold almost all of their milk supplies to meet the needs of local towns. Shipping obstacles, increased manufacturing and operating costs, and restrictions on the use of production facilities added to Nestlé’s wartime difficulties, as did a further decrease in fresh milk supplies due to shortages of cattle.

To deal with these problems and meet the increased demand for its products from governments supplying their troops, Nestlé decided to expand in countries less affected by the war and began purchasing existing factories, particularly in the United States, where it established links with several existing firms. By 1917, Nestlé had 40 factories, and in 1918, its world production was more than double what it was in 1914. Nestlé pursued the same strategy in Australia; by 1920 it had acquired a controlling interest in three companies there. That same year, Nestlé began production in Latin America when it established a factory in Araras, Brazil, the first in a series of Latin American factories. By 1921, the firm had 80 factories and 12 subsidiaries and affiliates. It also introduced a new product that year—powdered milk called Lactogen.

It didn’t take long for the effects of such rapid expansion to catch up with the company, however. Nestlé and Anglo-Swiss reported its first loss in 1921, to which the stock market reacted with panic, making matters worse. The company explained that the SFr 100 million loss was due to the rising prices of raw materials such as sugar and coal, and a trade depression that had caused a steady fall in consumer purchasing power, coupled with falling exchange rates after the war, which forced the company to raise prices.

To battle the storm, the company decided to reorganize both management and production. In 1922 it brought production in line with actual sales by closing some of its factories in the United States, Britain, Australia, Norway, and Switzerland. It also hired Louis Dapples, a banking expert, to put the company back in order. Dapples directed Nestlé with an iron fist, introducing stringent financial controls and reorganizing its administration. By 1923, signs of improvement were already evident, as Nestlé’s outstanding bank loans had dropped from SFr 293 million in 1921 to SFr 54.5 million in 1923. Meanwhile in France, Belgium, Italy, Germany, and South Africa, production facilities were expanded. By consolidating certain operations and expanding others, Nestlé was also able to widen its traditional range of products.

Overall, the late 1920s were profitable, progressive times. In addition to adding some new products of its own—including malted milk, a powdered beverage called Milo, and Eledon, a powdered buttermilk for babies with digestive disorders—the company bought interests in several manufacturing firms. Among them were butter and cheese companies, as well as Sarotti A.G., a Berlin based chocolate business that began manufacturing Nestlé, Peter, Cailler, and Kohler chocolate. In 1928, under the direction of Chairman Louis Dapples, Nestlé finally merged with Peter, Cailler, Kohler, Chocolats Suisses S.A.—the resulting company of a 1911 merger between the Swiss General Chocolate Company and Cailler, another leading firm—adding 13 chocolate plants in Europe, South America, and Australia to the growing firm.

Nestlé was becoming so strong that it seemed even the Depression would have little effect on its progress. In fact, its U.S. subsidiary, Nestlé’s Food Company Inc. of New York, barely felt the stock market crash of 1929. In 1930 Nestlé created new subsidiaries in Argentina and Cuba. Despite the Depression, Nestlé added more production centers around the world, including a chocolate manufacturer in Copenhagen and a small factory in Moravia, Czechoslovakia, to manufacture milk food, Nescao, and evaporated milk. Factories were also opened in Chile and Mexico in the mid-1930s.

Although profits were down 13 percent in 1930 over the year before, Nestlé faced no major financial problems during the Depression, as its factories generally maintained their output and sales were steady. Though Nestlé’s New York-based subsidiary, renamed Nestlé’s Milk Products Company, was more affected than those in other countries, U.S. sales of milk products were steady until 1931 and 1932, when a growing public frugality began to cause trouble for more expensive but established brands like Nestlé’s. Profit margins narrowed, prices dropped, and cut-throat competition continued until 1933, when new legislation set minimum prices and conditions of sales.

The markets, such as the United States, that were among the first to feel the effects of the Depression were also the first to recover from it. The Depression continued in Switzerland, however. Nestlé products manufactured there could no longer compete on international markets since Swiss currency exchanges were made especially difficult from the early 1930s, when many major countries devalued their currencies, until 1936, when Switzerland finally did likewise. The company decided to streamline production and close several factories, including its two oldest, in Cham and Vevey.

Decentralization efforts begun during the Depression continued to modify the company’s structure gradually. By 1936, the industrial and commercial activity of the Nestlé and Anglo-Swiss Condensed Milk Company itself was quite limited in comparison with the considerable interests it had in companies manufacturing and selling its products. More than 20 such companies existed on five continents. In effect, the firm had become a holding company. Consequently, the Nestlé and Anglo-Swiss Condensed Milk Company Limited was established to handle production and marketing on the Swiss market; the parent company officially became a holding firm, called the Nestlé and Anglo-Swiss Holding Company Ltd.; and a second holding company, Unilac Inc., was created in Panama by a number of Nestlé’s overseas affiliates.

In 1937 Louis Dapples died, and a new management team, whose members had grown up with the organization, took over. It included Chairman Edouard Muller, formerly managing director; Carl J. Abegg, vice-chairman of the board; and Maurice Paternot, managing director. In 1938 Nestlé introduced its first non-milk product: Nescafe. The revolutionary instant coffee was the result of eight years of research, which had begun when a representative of the Brazilian Coffee Institute asked Louis Dapples if Nestlé could manufacture “coffee cubes” to help Brazil use its large coffee surplus. Although coffee crystals and liquid extracts had been tried before, none had satisfactorily preserved a coffee taste.

Nestlé’s product took the form of a soluble powder rather than cubes, allowing users to control the amount of coffee they used. Although Nestlé originally intended to manufacture Nescafe in Brazil, administrative barriers were too great, so Nescafe was first manufactured in Switzerland. Limited production capacity meant that it was launched without the elaborate marketing tactics usually used for products with such potential.

Nescafe quickly acquired a worldwide reputation, however, after it was launched in 1939 in the United States, where it did exceptionally well. Nestea, a soluble powered tea, also made a successful debut in the early 1940s.

World War II had a dire effect on Nestlé. In 1939 profits plummeted to $6 million, compared to $20 million the year before. As in the last war, the company was plagued by food shortages and insufficient supplies of raw materials. To wage its own battle against the war, the company decided to split its headquarters at Vevey and transfer part of the management and executive team to an office in Stamford, Connecticut, where it could better supervise distant markets. Nestlé continued under control of dual managements until 1945.

But the war was not all bad for Nestlé. When the United States became involved in 1941, Nescafe and evaporated and powdered milk were in heavy demand from American armed forces. Nestlé’s total sales jumped from $100 million before the war to $225 million in 1945, with the greatest increase occurring in North America, where sales went from $14 million to $60 million. With the end of the war, Nestlé’s European and American branches were able to discuss future plans without fear of censorship, and the company could begin to face the challenge of rebuilding its war-torn subsidiaries. Nestlé also re-launched Nescafe and baby foods and began to research new products extensively. Researchers focused on the three areas Nestlé considered most likely to affect the food industry’s future: an increase in world population, rising standards of living in industrialized countries, and the changing social and economic conditions of raw-material-producing countries.

In 1947 Nestlé merged with Alimentana S.A., the manufacturer of Maggi seasonings, bouillon, and dehydrated soups, and the holding company changed its name to Nestlé Alimentana Company. Edouard Muller became the first chairman of Nestlé Alimentana, but he died in 1948, before the policies he helped formulate put the company on the road to a new future. Carl Abegg assumed leadership of the board.

In 1950 Nestlé acquired Crosse and Blackwell, a British manufacturer of preserves and canned foods. Nestlé hoped its $24 million investment would serve as a marketing outlet for Maggi products, but the plan was less than successful, primarily because Crosse and Blackwell could not compete in the United Kingdom with HJ. Heinz Company. Similar setbacks occurred in 1963, when Nestlé acquired Findus frozen foods in Scandinavia for $32 million. Although the company performed well in Sweden, it encountered difficulties in other markets, where the British-Dutch giant Unilever reigned. While parts of the Findus operation eventually became profitable, Nestlé merged its German, Italian, and Australian Findus branches with Unilever. The development of freeze-drying in 1966 led to Taster’s Choice, the first freeze-dried coffee, as well as other instant drinks.

In 1971 Nestlé acquired Libby, a maker of fruit juices, in the United States, and in 1973 it bought Stouffer’s, which took Nestlé into the hotel and restaurant field and led to the development of Lean Cuisine, a successful line of low-calorie frozen entrees. Nestlé entered the nonfood business for the first time in 1974 by becoming a major shareholder in the French company L’Oreal, a leading cosmetics company. Nestlé diversified further in 1977 with the acquisition of Alcon Laboratories, a Forth Worth, Texas, pharmaceutical company that specialized in ophthalmic products. Then, two years later, Nestlé purchased Burton, Parsons and Company Inc., an American manufacturer of contact lens products. The company also adopted its present name in 1979—Nestlé S.A.

The 1970s saw Nestlé’s operations in developing countries increase considerably. Of Nestlé’s 303 manufacturing facilities, the 81 factories in developing nations contributed 21 percent of Nestlé’s total production. In the mid-1970s, however, the firm faced a new problem as a result of its marketing efforts in these countries, when a boycott against all Nestlé products was started in the United States in 1977. Activists claimed that Nestlé’s aggressive baby food promotions made mothers in developing countries so eager to use Nestlé’s formula that they used it any way they could. The poverty-stricken areas had high rates of illiteracy, and mothers, unable to read and follow the directions, often mixed the product with local polluted water or used an insufficient amount of the expensive formula, unwittingly starving their infants. Estimates of Nestlé’s losses as a result of the boycott, which lasted until the early 1980s, ranged as high as $40 million.

In 1981 Helmut Maucher became managing director of Nestlé and made this controversy one of his top priorities. He met with boycott supporters and complied with the World Health Organization’s demands that Nestlé stop promoting the product through advertising and free samples. His direct confrontation of the issue contrasted with Nestlé’s earlier low-profile approach and was quite successful in allaying its critics’ fears.

Maucher also reduced overhead by turning over more authority to operating units and reducing headquarters staff. In addition, he spearheaded a series of major acquisitions. In 1985 Nestlé acquired Carnation, a U.S. manufacturer of milk, pet, and culinary products, for $3 billion, at the time one of the largest acquisitions in the history of the food industry. This was followed in 1985 by the acquisition of Hills Brothers Inc., the third-largest American coffee firm, which added ground roast coffee to Nestlé’s product line. In the late 1980s, as food companies around the world prepared for the integration of the European Economic Community in 1992, Nestlé continued to make major acquisitions. In 1988 the company paid £2.55 billion for Rowntree Mackintosh PLC—a leading British chocolate manufacturer—marking the largest takeover of a British company by a foreign one to date. That same year Nestlé also purchased the Italian pasta maker Buitoni SpA.

Capital expenditures reached SFr 2.8 billion in 1991. Half was devoted to installation improvements, including data processing and automation, particularly in North America and Europe. The other half was spent expanding plants, primarily in Latin America and the Far East, areas where products were often based on local raw materials, tastes, and habits. That year Nestlé made 31 acquisitions, also adding a new factory in the People’s Republic of China. Among the companies purchased were Alco Drumstick, a U.S. ice cream manufacturer with many European activities; Indra, a Swedish frozen-food maker; La Campiña, a Mexican evaporated-milk producer; and 97 percent of In-tercsokoládé, a Hungarian chocolate maker.

In September of 1991 Nestlé and the Coca-Cola Co. formed an equally split joint-venture concern, Coca-Cola Nestlé Refreshment Company, to produce and distribute concentrates and bases for the production of ready-to-drink coffee and tea beverages. With an initial capitalization of $100 million, the products, to be sold under the Nescafe and Nestea brand names, would be marketed worldwide—with the exception of Japan—primarily through Coca-Cola’s international network of busi-

Nescafé, sold in more than 100 countries by 1991, was launched in the Republic of Korea—Coca-Cola and Nestlé’s first joint endeavor—as was Nescafe Cappuccino in Europe. Hills Bros. “Perfect Balance,” a 50 percent-decaffeinated coffee, began selling in the United States, as did Nestea in cans at the beginning of 1992. By early 1992, a joint venture allowed the company to obtain a majority interest in Cokoladovny, a Czechoslovakian chocolate and biscuit producer. In addition, Nestlé battled for and won, with a bid of $2.3 billion in cash, the French mineral water producer Source Perrier. The company had also set its sights on acquiring the balance of the L’Oreal cosmetics company in order to make it a wholly owned subsidiary. Nestlé S.A. reported a 17 percent increase in profits for the first 6 months of 1992.

A series of geographical efforts to form more or less integrated economic blocs in coming years should bode well for a company as multinational as Nestlé. A single European Community market; the extension of the North American Free Trade Agreement (NAFTA) to Mexico; the Treaty of Asunción, which should organize a free trade area and coordination of Latin American sector policies; integrated economic union among some Southeast Asia countries; and, in general, a more receptive attitude in many countries toward investment by foreign businesses may indeed help Nestlé increase sales and manufacturing efficiency, as well as achieve economies of scale.

With 438 factories in 63 countries and sales of more than SFr 50 billion on its 125th anniversary, Nestlé is the undisputed leader in the food industry. Its long history of international operations should stand it in good stead, but the giant will have to stay nimble to maintain its place as trade barriers crumble in Europe and its competition grows large and strong enough to challenge Nestlé around the world.

Principal Subsidiaries

Alcon Canada, Inc.; Carnation Foods Company Ltd. (Canada; 50%); Clintec Nutrition Company (Canada; 50%); Laura Secord, Inc. (Canada); Nestlé Canada, Inc.; Alcon Laboratories, Inc. (U.S.A.); Clintec Nutrition Company (U.S.A.; 50%); L. J. Minor Corporation (U.S.A.); Nestlé Beverage Company (U.S.A.); Nestlé Brands Foodservice Company (U.S.A.); Nestlé Dairy Systems, Inc. (U.S.A.); Nestlé Food Company (U.S.A.); Nestlé Puerto Rico, Inc. (U.S.A.); Nestlé Refrigerated Food Company (U.S.A.); Nestlé Trading Corporation (U.S.A.); Owen/Galderma Laboratories, Inc. (U.S.A.; 50%); Stouffer Foods Corporation (U.S.A.); Stouffer Hotel Company (U.S.A.); Stouffer Restaurant Company (U.S.A.); Sunmark, Inc. (U.S.A.); Wine World, Inc. (U.S.A.); Alcon Laboratorios Argentina S.A.; Nestlé Argentina S.A.; Alcon Laboratorios do Brasil S.A. (Brazil); Companhia Produtora de Alimentos (Brazil); Industria de Sorvetes Ltda. (Brazil; 50%); Nestlé Industrial e Comercial Ltda. (Brazil); Centenario S.A. (Chile; 99.5%); Nestlé Chile S.A. (99.7%); Productos Alimenticios Savory S.A.I.C. (Chile); Nestlé de Colombia S.A.; Productos Nestlé (Costa Rica) S.A.; Productos Nestlé (El Salvador) S.A.; Nestlé Ecuador S.A. (74.7%); Productos Nestlé (Guatemala) S.A.; Nestlé Hondurena S.A. (Honduras); Nestlé-JMP Jamaica Ltd.; Alcon Laboratorios S.A. de C.V. (Mexico); Alimentos Findus S.A. de C.V. (Mexico); Café Continental S.A. de C.V. (Mexico); Compañía Nestlé S.A. de C.V. (Mexico); Industrias Alimenticias Club S.A. de C.V. (Mexico); Productos Alimenticios La Campiña S.A. de C.V. (México); Productos Carnation S.A. de C.V. (México); Productos Nestlé (Nicaragua) S.A.; Nestlé Caribbean, Inc. (Panama); Nestlé Panamá S.A.; Nestlé Perú S.A. (89.3%); Sociedad Dominicana de Conservas y Alimentos S.A. (Dominican Republic; 70%); Nestlé Trinidad and Tobago Ltd. (80.6%); Caramelos Royal C.A. (Venezuela); Chocolates Nestlé S.A. (Venezuela); Nestlé Venezuela S.A.; Saudi Food Industries Co. Ltd. (Saudi Arabia; 51%); Nestlé China Ltd. (Hong Kong); Nestlé India Ltd. (40%); P.T. Food Specialties Indonesia (57%); Alcon Japan Ltd.; Buitoni Japan K.K. (70%); Nestlé K.K. (Japan); Nestlé-Mackintosh K.K. (Japan; 66%); Société pour l’Exportation des Produits Nestlé S.A. (Lebanon); Nestlé (Malaysia) Sdn. Bhd. (51%); Malaysia Cocoa Manufacturing Sdn. Bhd. (49%); Milkpak Ltd. (Pakistán; 40%); Nestlé Philippines, Inc. (55%); Nestlé Foods Co. Ltd. (Republic of Korea; 99.1%); Nestlé Korea Ltd. (72%); Nestlé Shuangcheng Ltd. (People’s Republic of China; 64%); Nestlé Singapore (Pte) Ltd.; Ceylon Nutritional Foods Ltd. (Sri Lanka; 52%); Nestlé Lanka Ltd. (Sri Lanka; 93.7%); Anping Distributors Ltd. (Taiwan); Nestlé Products (Thailand), Inc.; Nestlé (South Africa) (Pty) Ltd.; Société Camerounaise de Produits Alimentaires, Diététiques et Autres CAMAD-Nestlé (Cameroon); Compagnie Africaine de Preparations Alimentaires CAPRAL-Nestlé (Ivory Coast; 70.7%); NOVALIM-Nestlé (Ivory Coast; 92.2%); Industrie du Froid S.A.E. (Egypt; 86%); Société Gabonaise de Produits Alimentaires—SOGAPRAL (Gabon; 90%); Nestlé Ghana Ltd. (45%); Nestlé Foods Kenya Ltd. (87.5%); Nestlé’s Products (Mauritius) Ltd.; Nestlé Foods Nigeria PLC (40%); Nestlé Senegal; Nestlé Tunisie (Tunisia; 59.2%); Nestlé Zimbabwe (Pvt) Ltd.; Alcon Laboratories (Australia) Pty Ltd.; Friskies Pet Care Pty Ltd. (Australia); Nestlé Australia Ltd.; Nestlé Confectionery Ltd. (Australia); Nestlé New Zealand Ltd.; Food Specialties (PNG) Ltd. (Papua New Guinea); Alcon Pharma GmbH (Germany); Alois Dallmayr Kaffee oHG (Germany; 48.6%); Blaue Quellen Mineral-und Heilbrunnen AG (Germany; 90.6%); Clintec-Salvia GmbH (Germany; 50%); Heimbs & Sohn GmbH & Co. KG (Germany; 48.6%); Nestlé Deutschland AG (Germany; 97.2%); Trinks GmbH (Germany; 90.6%); Vit-tel Mineralwasser GmbH (Germany; 52.5%); Nestlé (Ireland) Ltd.; Alcon Laboratories (U.K.) Ltd.; Cereal Partners U.K. (50%); Gray, Dunn & Co. Ltd. (U.K.); Multisnack Ltd. (U.K.); Rowntree Mackintosh Ltd. (U.K.); The Nestlé Co. Ltd. (U.K.); Indra AB (Sweden); Lars Jónsson AB (Sweden; 50%); Svenska Nestlé AB (Sweden); Zoégas Kaffe AB (Sweden; 90.8%); Alcon Pharmaceuticals Ltd.; Dyna S.A.; Food Ingredients Specialties S.A.; Frisco-Findus AG (98.7%); Frismat AG; Leisi AG Nahrungsmittelfabrik; Maggi AG; Nespresso S.A.; Nestlé World Trade Corporation; Société des Produits Nestlé S.A.; Thomi & Franck AG; Nestlé Prodalim Gida Mamulleri Imalat Ve Pazarlama Anonim Sirketi (Turkey; 97.2%); Österreichische Nestlé GmbH (Austria); Alcon-Couvreur N.V. (Belgium); Friskies Service Merchandising S.A. (Belgium); Nestlé Belgilux S.A. (Belgium); Refrifood Benelux S.A. (Belgium); Vittel Import S.A. (Belgium; 52.5%); Nestlé Danmark A/S (Denmark); Alcon Iberhis S.A. (Spain); Derivados Lácteos y Alimenticios S.A. (Spain); Granja Castelló S.A. (Spain; 50%); Productos del Café S.A. (Spain); Sociedad Nestlé AEPA (Spain); Nestlé-Findus Oy (Finland); Cereal Partners France (50%); Chambourcy S.A. (France; 99.9%); Clintec Nutrition Clinique S.A. (France; 50%); Davigel S.A. (France; 99.9%); France Glaces-Findus S.A.; Gloria S.A. (France); Herta S.A. (France); Laboratoires Alcon S.A. (France); Loumidis S.A. (Greece); Nestlé Hellas S.A.I. (Greece; 51%); Nestlé-Rowntree S.A. (France); Société de Produits Alimentaires et Diététiques, SOPAD-Nestlé S.A. (France); Société Genérale des Eaux Minerales de Vittel S.A. (France; 52.5%); Source Perrier (France); Alcon Italia S.p.A. (Italy); Berni Industrie Alimentari S.p.A. (Italy); Clintec S.r.l. (Italy; 50%); Nestlé Italiana S.p.A. (Italy); Intercsokoládé Kft (Hungary; 97.1%); A/S Nestlé Norge (Norway); Artland Nederland B.V. (Netherlands); Nestlé Ne-derland B.V. (Netherlands); COMCAFE Comercial de Café, Ltda. (Portugal); Nestlé Portugal S.A.

Further Reading

Heer, Jean, World Events 1866-1966: The First Hundred Years of Nestlé, Vevey, Switzerland, Nestlé, 1966; Historical Highlight, Vevey, Switzerland, Nestlé, 1991; Nestlé Annual Report, 1991; Heer, Jean, Nestlé: 125 Years, 1866-1991, Verey, Switzerland, Nestlé, 1991; “Nestlé Consolidating its Chocolate Production,” New York Times, February 5, 1993; Templeman, John, Stewart Toy, and Dave Lindorff, “Nestlé: A Giant in a Hurry,” Business Week, March 22, 1993.

—updated by Anne C. Hughes

Nestlé S.A.

CH-1800
Vevey
Switzerland
(021) 510-112

Public Company
Incorporated: 1866 as Anglo-Swiss Condensed Milk Company
Employees: 197,722
Sales: SFr40 billion (US$26.64)
Stock Index: Zurich Geneva Basel Berne Lausanne St. Gall Paris Frankfurt Dusseldorf Amsterdam Vienna

Nestlé is the largest food company in the world. With about 400 manufacturing facilities on five continents, Nestlé has often been called “the most multinational of the multinationals,” largely because only 2% of its sales are made in its home country. Nestlé S.A. is a holding company for some 200 operating units that manufacture and sell a wide variety of products, including tea, coffee, dairy products, baby food, frozen foods and ice cream, pet foods, pharmaceutical products, and cosmetics.

While serving as the American consul in Zurich, Charles Page decided that Switzerland, with its abundant milk supply and easy access to the whole European market, was the perfect location for a condensed milk factory. The first canned condensed milk had been produced in the United States by Gail Borden some ten years before, and originally Page planned to produce and sell “Borden Milk” in the European market as a licensee. The plan fell through, however, so in 1866 he established the Anglo-Swiss Condensed Milk Company as a limited company in Cham, Switzerland.

The company’s name was meant to flatter the British, to whom Page hoped to sell a great deal of his condensed milk. Anglo-Swiss first expanded its operations beyond Switzerland’s borders in 1872, when it opened a factory in Chippenham, England. Condensed milk rapidly became a staple product in European cupboards—the business downturn in 1872 and the depression of 1875 didn’t even affect the firm’s sales. Charles Page died in 1873, leaving the company in the hands of his brother George and Anglo-Swiss’s other investors. The next year, Anglo-Swiss expanded in England again by purchasing the English Condensed Milk Company, in London. By 1876, sales were almost four times their 1872 level.

Meanwhile, in nearby Vevey, in 1867 Henri Nestle began selling his newly developed cow’s-milk food for infants who could not be breast fed. Demand for his Farine Lactée Nestlé soared; between 1871 and 1873, daily production more than doubled, from fewer than 1,000 tins a day to 2,000. Nestlé’s goal was to bring his baby food within everyone’s reach, and he spared no effort in trying to convince doctors and mothers of its benefits. But while his energy and good intentions were nearly endless, his financial resources were not. By 1873, demand for Nestlé’s product exceeded his production capabilities, resulting in missed delivery dates. At 61, Nestlé was running out of energy, and his thoughts turned to retirement. Jules Monnerat, a former member of parliament who lived in Vevey, had long eyed the business, and in 1874 Nestlé accepted Monnerat’s offer of SFrl million. Thus, in 1875, the company became Farine Lactée Henri Nestlé with Monnerat as chairman.

In 1877, Nestlé faced a new competitor when the Anglo-Swiss Condensed Milk Company—already the leading manufacturer of condensed milk in Europe—decided to broaden its product line and manufacture cheese and milk food for babies. Nestlé quickly responded by launching a condensed milk product of its own. George Page tried to buy the competing company outright, but he was firmly told that Nestlé was not for sale. Turning his attention elsewhere, he purchased the Anglo-Swiss Company’s first factory in the United States in 1881. The plant, located in Middletown, New York, was built primarily to escape import duties, and it soon was successful enough to challenge Borden’s supremacy in the American condensed milk market. It also presented a drawback: George Page spent so much time there that Anglo-Swiss began to lose its hold on Europe—much to the delight of Nestlé. After George Page’s death in 1899, the Anglo-Swiss Condensed Milk Company decided to sell its American business to Borden in 1902 so that it could concentrate on regaining market share in Europe.

Until 1898, Nestlé remained determined to manufacture only in Switzerland and export to its markets around the world. But that year the company finally decided to venture outside Switzerland with the purchase of a Norwegian condensed milk company. Two years later, in 1900, Nestlé opened a factory in the United States, and quickly followed this by entering Britain, Germany, and Spain. Early in the 1900s, Nestlé also became involved in chocolate, a logical step for a company based in Vevey, the center of the Swiss chocolate industry. Nestlé became a partner in the Swiss General Chocolate Company, the maker of the Peter and Kohler brands. Under their agreement, the chocolate company produced the first Nestlé brand milk chocolate, while Nestlé concentrated on selling the Peter, Kohler, and Nestlé brands around the world.

In 1905, Nestlé and the Anglo-Swiss Condensed Milk Company finally quelled their fierce competition by merging to create the Nestlé and Anglo-Swiss Milk Company. The new firm would be run by two registered offices, one in Vevey and one in Cham, a practice it continues today. With Emile-Louis Roussy as chairman, the company now included seven factories in Switzerland, six in Great Britain, three in Norway, and one each in the United States, Germany, and Spain.

In response to an increase in import duties in Australia—Nestlé’s second-largest export market—the company decided to begin manufacturing there in 1906 by buying a major condensed milk company, the Cressbrook Dairy Company, in Brisbane. In the next few years production, and sales, continued to increase as the company began to replace sales agents with subsidiary companies, particularly in the rapidly growing Asian markets.

But most of its factories were located in Europe, and when World War I broke out in 1914, Nestlé’s operations, particularly in warring countries like Britain and Germany, were seriously affected. Although production continued in full force during the early months of the war, business soon grew more difficult. By 1916 fresh milk shortages, especially in Switzerland, meant that Nestlé’s factories often sold almost all of their milk supplies to meet the needs of local towns. Shipping obstacles, increased manufacturing and operating costs, and restrictions on the use of production facilities added to Nestlé’s wartime difficulties, as did a further decrease in fresh milk supplies due to shortages of cattle.

To deal with these problems and meet the increased demand for its products from governments supplying their troops, Nestlé decided to expand in countries less affected by the war and began purchasing existing factories, particularly in the United States, where it established links with several existing firms. By 1917, Nestlé had 40 factories, and in 1918, its world production was more than double what it was in 1914. Nestlé pursued the same strategy in Australia; by 1920 it had acquired a controlling interest in three companies there. That same year, Nestlé began production in Latin America when it established a factory in Araras, Brazil, the first in a series of Latin American factories. By 1921, the firm had 80 factories and 12 subsidiaries and affiliates. It also introduced a new product that year—powdered milk called Lactogen.

It didn’t take long for the effects of such rapid expansion to catch up with the company, however. Nestlé and Anglo-Swiss reported its first loss in 1921, to which the stock market reacted with panic, making matters worse. The company explained that the SFrl00 million loss was due to the rising prices of raw materials such as sugar and coal, and a trade depression that had caused a steady fall in consumer purchasing power, coupled with falling exchange rates after the war, which forced the company to raise prices.

To battle the storm, the company decided to reorganize both management and production. In 1922 it brought production in line with actual sales by closing some of its factories in the United States, Britain, Australia, Norway, and Switzerland. It also hired Louis Dapples, a banking expert, to put the company back in order. Dapples directed Nestlé with an iron fist, introducing stringent financial controls and reorganizing its administration. By 1923, signs of improvement were already evident, as Nestlé’s outstanding bank loans had dropped from SFr293 million in 1921 to SFr54.5 million in 1923. Meanwhile in France, Belgium, Italy, Germany, and South Africa, production facilities were expanded. By consolidating certain operations and expanding others, Nestlé was also able to widen its traditional range of products.

Overall, the late 1920s were profitable, progressive times. In addition to adding some new products of its own, including malted milk; a powdered beverage called Milo; and Eledon, a powdered buttermilk for babies with digestive disorders, the company bought interests in several manufacturing firms. Among them were butter and cheese companies, as well as Sarotti A.G., a Berlin based chocolate business which began manufacturing Nestlé, Peter, Cailler, and Kohler chocolate. In 1928, under the direction of Chairman Louis Dapples, Nestlé finally merged with Peter, Cailler, Kohler, Chocolats Suisses S.A. (the resulting company of a 1911 merger between the Swiss General Chcolate Company and Cailler, another leading firm) adding 13 chocolate plants in Europe, South America, and Australia to the growing firm.

Nestlé was becoming so strong that it seemed even the Depression would have little effect on its progress. In fact, its U.S. subsidiary, Nestlé’s Food Company Inc. of New York, barely felt the stock market crash of 1929. In 1930 Nestlé created new subsidiaries in Argentina and Cuba. In spite of the Depression, Nestlé added more production centers around the world, including a chocolate manufacturer in Copenhagen and a small factory in Moravia, Czechoslovakia to manufacture milk food, Nescao, and evaporated milk. Factories were also opened in Chile and Mexico in the mid-1930s.

Although profits were down 13% in 1930 over the year before, Nestlé faced no major financial problems during the Depression, as its factories generally maintained their output and sales were steady. Although Nestlé’s New York-based subsidiary (which had changed its name to Nestlé’s Milk Products Company) was more affected than those in other countries, U.S. sales of milk products were steady until 1931 and 1932, when a growing public frugality began to cause trouble for more expensive but established brands like Nestlé’s. Profit margins narrowed, prices dropped, and cut-throat competition continued until 1933, when new legislation set minimum prices and conditions of sales.

The markets, like the United States, that were among the first to feel the effects of the Depression were also the first to recover from it. The Depression continued in Switzerland, however. Because currency exchanges to and from Switzerland were especially difficult between the early 1930s, when many major countries devalued their currencies, and 1936, when Switzerland finally did too, Nestlé products manufactured there could no longer compete on international markets. The company decided to streamline production and close several factories, including its two oldest, in Cham and Vevey.

Decentralization efforts begun during the Depression continued to modify the company’s structure gradually. By 1936, the industrial and commercial activity of the Nestlé and Anglo-Swiss Condensed Milk Company itself was quite limited in comparison with the considerable interests it had in companies manufacturing and selling its products. More than 20 such companies existed on five continents. In effect, the firm had become a holding company. Consequently, the Nestlé and Anglo-Swiss Condensed Milk Company Limited was established to handle production and marketing on the Swiss market; the parent company officially became a holding firm, called the Nestlé and Anglo-Swiss Holding Company Ltd.; and a second holding company, Unilac Inc., was created in Panama by a number of Nestlé’s overseas affiliates.

In 1937, Louis Dapples died and a new management team, whose members had grown up with the organization, took over. It included Chairman Edouard Muller, formerly managing director; Carl J. Abegg, vice chairman of the board; and Maurice Paternot, managing director. In 1938, Nestlé introduced its first non-milk product: Nescafe. The revolutionary instant coffee was the result of eight years of research, which had begun when a representative of the Brazilian Coffee Institute asked Louis Dapples if Nestlé could manufacture “coffee cubes” to help Brazil use its large coffee surplus. Although coffee crystals and liquid extracts had been tried before, none had satisfactorily preserved a coffee taste.

Nestlé’s product took the form of a soluble powder rather than cubes, allowing users to control the amount of coffee they used. Although Nestlé originally intended to manufacture Nescafe in Brazil, administrative barriers were too great, so Nescafe was first manufactured in Switzerland. Limited production capacity meant that it was launched without the elaborate marketing tactics usually used for products with such potential.

Nescafé quickly acquired a worldwide reputation, however, after it was launched in 1939 in the United States, where it did exceptionally well. Nestea, a soluble powered tea, also made a successful debut, in the early 1940s.

World War II, not surprisingly, had a dire effect on Nestlé. In 1939, profits plummeted to $6 million, compared to $20 million the year before. As in the last war, the company was plagued by food shortages and insufficient raw material supplies. To wage its own battle against the war, the company decided to split its headquarters at Vevey and transfer part of the management and executive team to an office in Stamford, Connecticut, where it could better supervise distant markets. Nestlé continued under control of dual managements until 1945.

But the war was not all bad for Nestlé. When the United States entered the war in 1941, Nescafe and evaporated and powdered milk were in heavy demand from American armed forces. By the end of the war, Nestlé’s total sales had jumped from $100 million before the war to $225 million in 1945, with the greatest increase occurring in North America, where sales went from $14 million to $60 million. With the end of the war, Nestlé’s European and American branches were able to discuss future plans without fear of censorship, and the company could begin to face the challenge of rebuilding its war-torn subsidiaries. Nestlé also re-launched Nescafe and baby foods and began to research new products extensively. Researchers focused on the three areas Nestlé considered most likely to affect the food industry’s future: an increase in world population, rising standards of living in industrialized countries, and the changing social and economic conditions of raw-material-producing countries.

In 1947, Nestlé merged with Alimentana S.A., the manufacturer of Maggi seasonings, bouillon, and dehydrated soups, and the holding company changed its name to Nestlé Alimentana Company. Edouard Muller became the first chairman of Nestlé Alimentana, but he died in 1948, before the policies he helped formulate would put the company on the road to a new future. Carl Abegg assumed leadership of the board.

In 1950, Nestlé acquired Crosse and Blackwell, a British manufacturer of preserves and canned foods. Nestlé hoped its $24 million investment would serve as a marketing outlet for Maggi products, but the plan was less than successful, primarily because Crosse and Blackwell could not compete in the United Kingdom with H.J. Heinz. Similar setbacks occurred in 1963, when Nestlé acquired Findus frozen foods in Scandinavia for $32 million. Although the company performed well in Sweden, it encountered difficulties in other markets, where the British-Dutch giant Unilever reigned. While parts of the Findus operation eventually became profitable, Nestlé merged its German, Italian, and Australian Findus branches with Unilever. The development of freeze-drying in 1966 led to Taster’s Choice, the first freeze-dried coffee, as well as other instant drinks.

In 1971, Nestlé acquired Libby, a maker of fruit juices, in the United States, and in 1973 it bought Stouffer’s, which took Nestlé into the hotel and restaurant field and led to the development of Lean Cuisine, a successful line of low-calorie frozen entrees. Nestlé entered the nonfood business for the first time in 1974 by becoming a major shareholder in the French company L’Oreal, today the largest cosmetic company in the world. Nestlé moved further into nonfood fields in 1977, when it acquired Alcon Laboratories, a Forth Worth, Texas pharmaceutical company that specializes in ophthalmic products, as well as Burton, Parsons and Company Inc., an American manufacturer of contact lens products acquired two years later. Also in 1979 the company adopted its present name—Nestlé S.A.

The 1970s saw Nestlé’s operations increase considerably in developing countries. Of Nestlé’s 303 factories, the 81 factories in developing countries contributed 21% of Nestlé’s total production. But in the mid-1970s, the firm faced a new problem as a result of its marketing efforts in developing countries, when a boycott against all Nestlé products was started in the United States in 1977. Activists claimed that Nestlé’s aggressive baby food promotions made mothers in developing countries so eager to use Nestlé’s formula that they used it any way they could. Due to poverty and illiteracy, this often meant mixing the formula with local, polluted water or trying to make the expensive supplies last longer by using an insufficient amount of formula, eventually starving their infants. Estimate of Nestlé’s losses as a result of the boycott, which lasted until the early 1980s, range as high as $40 million.

In 1981 Helmut Maucher became managing direct of Nestlé and made this controversy one of his first projects. He met with boycott supporters and complied with the World Health Organization’s demands that Nestlé stop promoting the product through advertising and free samples. His direct confrontation of the issue contrasted with Nestlé’s earlier low-profile approach and was quite successful in allaying its critics’ fears.

Maucher also reduced overhead by turning over more authority to operating units and reducing headquarters staff. In addition, he spearheaded a series of major acquisitions. In 1984 Nestlé acquired Carnation, a U.S. manufacturer of milk, pet, and culinary products, for $3 billion, at the time one of the largest acquisitions in the history of the food industry. This was followed in 1985 by the acquisition of Hills Brothers Inc., the third-largest American coffee firm, which added ground roast coffee to Nestlé’s product line. In the late 1980s, as food companies around the world prepared for the integration of the European Economic Community in 1992, Nestlé continued to make major acquisitions. In 1988 it acquired Rowntree PLC, a leading British chocolate manufacturer, for £2.55 billion, the largest takeover of a British company by a foreign one to date. Also that year it acquired the Italian pasta maker Buitoni SpA.

With factories in 60 countries and sales of SFr40 billion, Nestlé is the undisputed leader in the food industry. Its long history of international operations should stand it in good stead, but the giant will have to stay nimble to maintain its place as trade barriers crumble in Europe and its competition grows large and strong enough to challenge Nestlé around the world.

Principal Subsidiaries

Nestlé Enterprises Ltd. (Canada); Alcon Canada, Inc.; Carnation Foods Company Ltd. (Canada); Nestlé Foods Corp. (U.S.A.); Cain’s Coffee Co. (U.S.A.); Stouffer Foods Corporation (U.S.A); Stouffer Restaurant Co. (U.S.A.); Alcon Laboratories, Inc. (U.S.A.); Dermatological Products of Texas Inc. (U.S.A.); Beech-Nut Nutrition Corporation (U.S.A); Nestlé Trading Corporation (U.S.A.); Wine World, Inc. (U.S.A.); Paul F. Beich Co., Inc. (U.S.A.); Hills Bros. Coffee Inc. (U.S.A.); Carnation Company (U.S.A.); Nestlé Beich, Inc. (U.S.A.); Stouffer Hotel Co. (U.S.A.); Pasta & Cheese, Inc. (U.S.A.); LJ. Minor Corp. (U.S.A.); S.A. Nestlé de Productos Alimenticios (Argentina); Companhia Produtora de Alimentos S.A. (Brazil); Alcan Laboratorios do Brasil S.A.; Nestlé Industríale Comercial Ltda. (Brazil); Nestlé Chile, S.A.; Productos Alimenticios Savory S.A.I.C. (Chile); Nestlé de Colombia S.A.; Productos Nestlé (Costa Rica) S.A.; Productos Nestlé (El Salvador) S.A.; Indeca S.A.(E1 Salvador); Productos Nestlé (Guatemala) S.A.; Nestlé Hondurena S.A.(Honduras); Nestlé Jamaica Ltd.; Compania Nestlé S.A. de C.V. (Mexico); Alimentos Findus S.A. de C.V. (Mexico); Industrias Alimenticias Club S.A. de C.V. (Mexico); Productors Carnation S.A. de C.V. (Mexico); Productos Nestlé (Nicaragua) S.A.; Nestlé Panama S.A.; Nestlé Caribbean, Inc. (Panama); Compania Peruana de Alimentos S.A. (Peru); Nestlé Puerto Rico, Inc.; Sociedad Dominicana de Conservas y Alimentos S.A. (Dominican Republic); Trinidad Food Products Ltd.; Nestlé Venezuela S.A.; Venepastas C.A. (Venezuela); Saudi Food Industries Co. Ltd.; Nestlé Foods Co. Ltd. (South Korea); Nestlé China Ltd. (Hong Kong); Food Specialities Ltd. (India); P.T. Food Specialities Indonesia; Nestlé K.K. (Japan); Alcon Japan Ltd. (Japan); Societe pour l’Exportation des Produits Nestlé S.A. (Lebanon); Nestlé (Malaysia) Sdn. Bhd.; Malaysia Cocoa Manufacturing, Sdn. Bhd.; Nestlé Philippines, Inc.; Nestlé Singapore (Pte) Ltd.; Ceylon Nutritional Foods Ltd. (Sri Lanka); Nestlé Lanka Ltd. (Sri Lanka); Anping Distributors Ltd. (Taiwan); Nestlé (Thailand) Ltd.; Thai Soluble Coffee Company Ltd.; Carnation Manufacturing Co. (Thailand) Ltd.; Food and Nutritional Products (Pty) Ltd. (South Africa); Societe Camerounaise de Produits Alimentaires, Dietetiques et Autres CAM AD-NESTLé (Cameroon); Compagnie Africaine de Preparations, Alimentaires CAPRAL-NESTLÉ (Ivory Coast); NOVALIM-NESTLÉ (Ivory Coast); Societe Gabonaise de Produits Alimentaires (SOGAPRAL) (Gabon); Nestlé Ghana Ltd.; Nestlé Foods Kenya Ltd.; Nestlé products (Mauritius) Ltd.; Food Specialities (Nigeria) Ltd.; Nestlé Senegal; Societe Industrielle et de Distribution des Produits Alimentaires et Dietetiques SIDPAD (Tunisia); Nestlé Zimbawe (Pvt.) Ltd.; Nestlé Australia Ltd.; Allen Life Savers Ltd. (Australia); Nestlé New Zealand Ltd.; Nestlé Deutschland A.G. (West Germany); Herta Artland Dorffler GmbH & Co. KG (West Germany); Blaue Quellen Mineralund, Heibrunnen A.G. (West Germany); Trinks GmbH (West Germany); Heil-und Mineralquellen GmbH (West Germany); Aponti GmbH (West Germany); Dr. Ritter GmbH & Co. (West Germany); Dany Snack GmbH & Co. (West Germany); Alcon Pharma GmbH (West Germany); Alois Dallmayr Kaffee oHG (West Germany); Heimbs & Sohn GmbH & Co. KG (West Germany); Nestlé (Ireland) Ltd.; The Nestlé Co., Ltd. (U.K.); Findus (U.K.) Ltd.; Chambourcy Food Cop. Ltd. (U.K.); Herta (U.K.) Ltd.; Alcon Laboratories (U.K.) Ltd.; AB Findus (Sweden); AB Kaffebonans Rosteri (Sweden); AB Zoegas Kaffe (Sweden); Societe des Produits Nestlé S.A.; Maggi A.G.; Thomi & Franck A.G.; Frisco-Findus A.G.; Dyna S.A.; Leisi A.G. Nahrungsmittelfabrik; Frismat AG; Alcon Pharmaceuticals Ltd.; Nestlé World Trade Corporation; Food Ingredients Specialities S.A.; Prodalim Gida Mamulleri (Turkey); Imalat Ve Pazarlama Anonim (Turkey); Sirketi (Turkey); Osterreichische Nestlé GmbH. (Austria); Nestlé Belgiux S.A. (Belgium); Jacky S.A. (Belgium); Carnex Service Merchandising (Belgium); Herta Belgique S.A. (Belgium); Alcon-Couvreur N.V. (Belgium); N.V. Sanpareil (Belgium); Nestlé Danmark A/S; Sociedad Nestlé AEPA (Spain); Derivados Lácteos y Alimenticios S.A. (Spain); Alcon Iberhis S.A. (Spain); Alimentos Refrigerados S.A. (Spain); Cafes La Estrella S.A. (Spain); Malaga Comercial S.A. (Spain); Productos Brasilia S.A. (Spain); Granja Castello S.A. (Spain); Solis Industrias de Alimentación S.A. (Spain); Nestlé Findus Oy (Finland); Societe de Produits Alimentaires et Dietetiques, SOPAD-Nestlé S.A. (France); Gloria S.A. (France); Guigoz France S.A. (France); Lait Mont Blanc S.A. (France); France Glaces-Findus S.A. (France); Chambourcy Roche aux Fees & Cie. (France); Laboratoires Alcon S.A. (France); Herta S.A. (France); Societe Generale des Eauz Minerales de Vittel S.A. (France); Nestlé Hellas S.A.I. (Greece); Carnation Hellas A.E.B.E. (Greece); Loumidis S.A. (Greece); Nestlé Italiana S.p.A. (Italy); Locatelli S.p.A. (Italy); Encia S.p.A. (Italy); Alcon Italia S.p.A. (Italy); A/S Nestlé-Norge (Norway); Nestlé Nederland B.V. (Netherlands); Artland Nederland B.V. (Netherlands); Nestlé Portugal S.A.; TOFA-Torrefaccao de Cafes de Portugal, s.a.r.l. (Portugal); SICAL-Sociedade Importadora de Cafes, Lda. (Portugal).

Further Reading

Heer, Jean. World Events 1866-1966: The First Hundred Years of Nestlé, Vevey, Switzerland, Nestlé, 1966.

Nestlé S.A.

Avenue Nestlé 55
CH-1800 Vevey
Switzerland
(021) 924-2111
Fax: (021) 921-1885
Web site: http://www.nestle.com

Public Company
Incorporated : 1866 as Anglo-Swiss Condensed Milk Company
Employees : 225,808
Sales : SFr 71.7 billion (US$52.09 billion) (1998)
Stock Exchanges : Basle Geneva Zurich Amsterdam Brussels Frankfurt London Paris Tokyo Vienna
NAIC : 311514 Dry, Condensed, & Evaporated Dairy Product Manufacturing; 31152 Ice Cream & Frozen Dessert Manufacturing; 311511 Fluid Milk Manufacturing; 311421 Fruit & Vegetable Canning; 311411 Frozen Fruit, Juice, & Vegetable Processing; 311412 Frozen Specialty Food Manufacturing; 31123 Breakfast Cereal Manufacturing; 311111 Dog & Cat Food Manufacturing; 31132 Chocolate & Confectionery Manufacturing from Cacao Beans; 312111 Soft Drink Manufacturing; 31193 Flavoring Syrup & Concentrate Manufacturing; 31192 Coffee & Tea Manufacturing; 311823 Dry Pasta Manufacturing; 311999 All Other Miscellaneous Food Manufacturing; 325412 Pharmaceutical Preparation Manufacturing; 32562 Toilet Preparation Manufacturing

Nestlé S.A. is the largest food company in the world. With about 500 manufacturing facilities on six continents, Nestlé has often been called “the most multinational of the multinationals,” largely because less than two percent of its sales are made in its home country. About 37 percent of sales are derived from the overall European market, 32 percent from the Americas, and 19 percent from Africa, Asia, and Oceania (with the remainder not geographically categorized). Nestlé S.A. is a holding company for more than 200 subsidiaries and affiliates that manufacture and sell a wide variety of products, including coffee, mineral water, chocolate and malted beverages, chocolates and confectionery, culinary and refrigerated products, dairy products, baby food, breakfast cereal, frozen foods and ice cream, pet foods, pharmaceutical products, and cosmetics.

Early History

While serving as the American consul in Zurich, Charles Page decided that Switzerland, with its abundant milk supply and easy access to the whole European market, was the perfect location for a condensed milk factory. The first canned condensed milk had been produced in the United States by Gail Borden some ten years before, and originally Page planned to produce and sell “Borden Milk” in the European market as a licensee. The plan fell through, however, so in 1866 he established the Anglo-Swiss Condensed Milk Company as a limited company in Cham, Switzerland.

The company’s name was meant to flatter the British, to whom Page hoped to sell a great deal of his condensed milk. Anglo-Swiss first expanded its operations beyond Switzerland’s borders in 1872, when it opened a factory in Chippenham, England. Condensed milk rapidly became a staple product in European cupboards—the business downturn in 1872 and the depression of 1875 did not affect the firm’s sales. Charles Page died in 1873, leaving the company in the hands of his brother George and Anglo-Swiss’s other investors. The next year, Anglo-Swiss undertook further expansion in England by purchasing the Condensed Milk Company in London. By 1876 sales were almost four times their 1872 level.

Meanwhile, in Vevey, Switzerland, in 1867 Henri Nestlé began selling his newly developed cow’s -milk food for infants who could not be breast-fed. Demand for his Farine Lactée Nestlé soared; between 1871 and 1873, daily production more than doubled, from fewer than 1,000 tins a day to 2,000. Nestlé’s goal was to bring his baby food within everyone’s reach, and he spared no effort in trying to convince doctors and mothers of its benefits. But while his energy and good intentions were nearly endless, his financial resources were not. By 1873, demand for Nestlé’s product exceeded his production capabilities, resulting in missed delivery dates. At 61, Nestlé was running out of energy, and his thoughts turned to retirement. Jules Monnerat, a former member of parliament who lived in Vevey, had long eyed the business, and in 1874 Nestlé accepted Monnerat’s offer of SFr 1 million. Thus, in 1875, the company became Farine Lactée Henri Nestlé with Monnerat as chairman.

In 1877 Nestlé faced a new competitor when the Anglo-Swiss Condensed Milk Company—already the leading manufacturer of condensed milk in Europe—decided to broaden its product line and manufacture cheese and milk food for babies. Nestlé quickly responded by launching a condensed milk product of its own. George Page tried to buy the competing company outright, but he was firmly told that Nestlé was not for sale. Turning his attention elsewhere, he purchased the Anglo-Swiss company’s first factory in the United States in 1881. The plant, located in Middletown, New York, was built primarily to escape import duties, and it was soon successful enough to challenge Borden’s supremacy in the U.S. condensed milk market. It also presented a drawback: George Page spent so much time there that Anglo-Swiss began to lose its hold on Europe—much to the delight of Nestlé. After George Page’s death in 1899, the Anglo-Swiss Condensed Milk Company decided to sell its American business to Borden in 1902 so that it could concentrate on regaining market share in Europe.

Until 1898 Nestlé remained determined to manufacture only in Switzerland and export to its markets around the world. But that year the company finally decided to venture outside Switzerland with the purchase of a Norwegian condensed milk company. Two years later, in 1900, Nestlé opened a factory in the United States, and quickly followed this by entering Britain, Germany, and Spain. Early in the 1900s, Nestlé also became involved in chocolate, a logical step for a company based in Vevey, the center of the Swiss chocolate industry. Nestlé became a partner in the Swiss General Chocolate Company, the maker of the Peter and Köhler brands. Under their agreement, the chocolate company produced the first Nestlé brand milk chocolate, while Nestlé concentrated on selling the Peter, Köhler, and Nestlé brands around the world.

Nestlé and Anglo-Swiss Merged in 1905

In 1905 Nestlé and the Anglo-Swiss Condensed Milk Company finally quelled their fierce competition by merging to create the Nestlé and Anglo-Swiss Milk Company. The new firm would be run by two registered offices, one in Vevey and one in Cham, a practice it continues today. With Emile-Louis Roussy as chairman, the company now included seven factories in Switzerland, six in Great Britain, three in Norway, and one each in the United States, Germany, and Spain.

In response to an increase in import duties in Australia— Nestlé’s second largest export market—the company decided to begin manufacturing there in 1906 by buying a major condensed milk company, the Cressbrook Dairy Company, in Brisbane. In the next few years production and sales continued to increase as the company began to replace sales agents with subsidiary companies, particularly in the rapidly growing Asian markets.

Most of its factories were located in Europe, however, and when World War I broke out in 1914, Nestlé’s operations, particularly in such warring countries as Britain and Germany, were seriously affected. Although production continued in full force during the early months of the war, business soon grew more difficult. By 1916 fresh milk shortages, especially in Switzerland, meant that Nestlé’s factories often sold almost all of their milk supplies to meet the needs of local towns. Shipping obstacles, increased manufacturing and operating costs, and restrictions on the use of production facilities added to Nestlé’s wartime difficulties, as did a further decrease in fresh milk supplies due to shortages of cattle.

To deal with these problems and meet the increased demand for its products from governments supplying their troops, Nestlé decided to expand in countries less affected by the war and began purchasing existing factories, particularly in the United States, where it established links with several existing firms. By 1917 Nestlé had 40 factories, and in 1918, its world production was more than double what it was in 1914. Nestlé pursued the same strategy in Australia; by 1920 it had acquired a controlling interest in three companies there. That same year, Nestlé began production in Latin America when it established a factory in Araras, Brazil, the first in a series of Latin American factories. By 1921, the firm had 80 factories and 12 subsidiaries and affiliates. It also introduced a new product that year— powdered milk called Lactogen.

It did not take long for the effects of such rapid expansion to catch up with the company, however. Nestlé and Anglo-Swiss reported its first loss in 1921, to which the stock market reacted with panic, making matters worse. The company explained that the SFr 100 million loss was due to the rising prices of raw materials such as sugar and coal, and a trade depression that had caused a steady fall in consumer purchasing power, coupled with falling exchange rates after the war, which forced the company to raise prices.

Company Perspectives

Throughout its history, Nestlé culture has been formed by an abiding sense of responsibility to our consumers. Henri Nestlé created this Company ’s first product, Farine Lactée Henri Nestlé, out of a desire to help solve the problems of infant mortality that plagued Europe during the 19th century. In the 130 years since, we have never lost sight of the fact that our primary purpose is to help improve the quality of life for people everywhere.

To battle the storm, the company decided to reorganize both management and production. In 1922 it brought production in line with actual sales by closing some of its factories in the United States, Britain, Australia, Norway, and Switzerland. It also hired Louis Dapples, a banking expert, to put the company back in order. Dapples directed Nestlé with an iron fist, introducing stringent financial controls and reorganizing its administration. By 1923, signs of improvement were already evident, as Nestlé’s outstanding bank loans had dropped from SFr 293 million in 1921 to SFr 54.5 million in 1923. Meanwhile in France, Belgium, Italy, Germany, and South Africa, production facilities were expanded. By consolidating certain operations and expanding others, Nestlé was also able to widen its traditional range of products.

Overall, the late 1920s were profitable, progressive times. In addition to adding some new products of its own—including malted milk, a powdered beverage called Milo, and Eledon, a powdered buttermilk for babies with digestive disorders—the company bought interests in several manufacturing firms. Among them were butter and cheese companies, as well as Sarotti A.G., a Berlin-based chocolate business that began manufacturing Nestlé, Peter, Cailler, and Köhler chocolate. In 1928, under the direction of Chairman Louis Dapples, Nestlé finally merged with Peter, Cailler, Kohler, Chocolats Suisses S.A.— the resulting company of a 1911 merger between the Swiss General Chocolate Company and Cailler, another leading firm—adding 13 chocolate plants in Europe, South America, and Australia to the growing firm.

Expanded During the Great Depression

Nestlé was becoming so strong that it seemed even the Great Depression would have little effect on its progress. In fact, its U.S. subsidiary, Nestlé’s Food Company Inc. of New York, barely felt the stock market crash of 1929. In 1930 Nestlé created new subsidiaries in Argentina and Cuba. Despite the Depression, Nestlé added more production centers around the world, including a chocolate manufacturer in Copenhagen and a small factory in Moravia, Czechoslovakia, to manufacture milk food, Nescao, and evaporated milk. Factories were also opened in Chile and Mexico in the mid-1930s.

While profits were down 13 percent in 1930 over the year before, Nestlé faced no major financial problems during the Depression, as its factories generally maintained their output and sales were steady. Although Nestlé’s New York-based subsidiary, renamed Nestlé’s Milk Products Company, was more affected than those in other countries, U.S. sales of milk products were steady until 1931 and 1932, when a growing public frugality began to cause trouble for more expensive but established brands such as Nestlé’s. Profit margins narrowed, prices dropped, and cutthroat competition continued until 1933, when new legislation set minimum prices and conditions of sales.

The markets, such as the United States, that were among the first to feel the effects of the Depression were also the first to recover from it. The Depression continued in Switzerland, however. Nestlé products manufactured there could no longer compete on international markets since Swiss currency exchanges were made especially difficult from the early 1930s, when many major countries devalued their currencies, until 1936, when Switzerland finally did likewise. The company decided to streamline production and close several factories, including its two oldest, in Cham and Vevey.

Decentralization efforts begun during the Depression continued to modify the company’s structure gradually. By 1936, the industrial and commercial activity of the Nestlé and Anglo-Swiss Condensed Milk Company itself was quite limited in comparison with the considerable interests it had in companies manufacturing and selling its products. More than 20 such companies existed on five continents. In effect, the firm had become a holding company. Consequently, the Nestlé and Anglo-Swiss Condensed Milk Company Limited was established to handle production and marketing on the Swiss market; the parent company officially became a holding firm, called the Nestlé and Anglo-Swiss Holding Company Ltd.; and a second holding company, Unilac Inc., was created in Panama by a number of Nestlé’s overseas affiliates.

Nescafe Instant Coffee Debuted in 1938

In 1937 Louis Dapples died, and a new management team, whose members had grown up with the organization, took over. It included Chairman Edouard Muller, formerly managing director; Carl J. Abegg, vice-chairman of the board; and Maurice Paternot, managing director. In 1938 Nestlé introduced its first nonmilk product: Nescafe. The revolutionary instant coffee was the result of eight years of research, which had begun when a representative of the Brazilian Coffee Institute asked Louis Dapples if Nestlé could manufacture “coffee cubes” to help Brazil use its large coffee surplus. Although coffee crystals and liquid extracts had been tried before, none had satisfactorily preserved a coffee taste.

Nestlé’s product took the form of a soluble powder rather than cubes, allowing users to control the amount of coffee they used. Although Nestlé originally intended to manufacture Nescafe in Brazil, administrative barriers were too great, so Nescafe was first manufactured in Switzerland. Limited production capacity meant that it was launched without the elaborate marketing tactics usually used for products with such potential.

Nescafe quickly acquired a worldwide reputation, however, after it was launched in 1939 in the United States, where it did exceptionally well. Nestea, a soluble powdered tea, also made a successful debut in the early 1940s.

World War II had a dire effect on Nestlé. In 1939 profits plummeted to $6 million, compared to $20 million the year before. As in the last war, the company was plagued by food shortages and insufficient supplies of raw materials. To wage its own battle against the war, the company decided to split its headquarters at Vevey and transfer part of the management and executive team to an office in Stamford, Connecticut, where it could better supervise distant markets. Nestlé continued under control of dual managements until 1945.

But the war was not all bad for Nestlé. When the United States became involved in 1941, Nescafe and evaporated and powdered milk were in heavy demand from American armed forces. Nestlé’s total sales jumped from $100 million before the war to $225 million in 1945, with the greatest increase occurring in North America, where sales went from $14 million to $60 million. With the end of the war, Nestlé’s European and American branches were able to discuss future plans without fear of censorship, and the company could begin to face the challenge of rebuilding its war-torn subsidiaries. Nestlé also relaunched Nescafe and baby foods and began to research new products extensively. Researchers focused on the three areas Nestlé considered most likely to affect the food industry’s future: an increase in world population, rising standards of living in industrialized countries, and the changing social and economic conditions of raw-material-producing countries.

Postwar Expansion Through Merger and Acquisition

In 1947 Nestlé merged with Alimentana S.A., the manufacturer of Maggi seasonings, bouillon, and dehydrated soups, and the holding company changed its name to Nestlé Alimentana Company. Edouard Muller became the first chairman of Nestlé Alimentana, but he died in 1948, before the policies he helped formulate put the company on the road to a new future. Carl Abegg assumed leadership of the board.

In 1950 Nestlé acquired Crosse and Blackwell, a British manufacturer of preserves and canned foods. Nestlé hoped its $24 million investment would serve as a marketing outlet for Maggi products, but the plan was less than successful, primarily because Crosse and Blackwell could not compete in the United Kingdom with H.J. Heinz Company. Similar setbacks occurred in 1963, when Nestlé acquired Findus frozen foods in Scandinavia for $32 million. Although the company performed well in Sweden, it encountered difficulties in other markets, where the British-Dutch giant Unilever reigned. While parts of the Findus operation eventually became profitable, Nestlé merged its German, Italian, and Australian Findus branches with Unilever. The development of freeze-drying in 1966 led to Taster’s Choice, the first freeze-dried coffee, as well as other instant drinks.

In 1971 Nestlé acquired Libby, a maker of fruit juices, in the United States, and in 1973 it bought Stouffer’s, which took Nestlé into the hotel and restaurant field and led to the development of Lean Cuisine, a successful line of low-calorie frozen entrees. Nestlé entered the nonfood business for the first time in 1974 by becoming a major shareholder in the French company L’Oreal, a leading cosmetics company. Nestlé diversified further in 1977 with the acquisition of Alcon Laboratories, a Fort Worth, Texas, pharmaceutical company that specialized in ophthalmic products. Then, two years later, Nestlé purchased Burton, Parsons and Company Inc., an American manufacturer of contact lens products. The company adopted its present name— Nestlé S.A.—in 1979.

Faced Boycott in Late 1970s and Early 1980s

The 1970s saw Nestlé’s operations in developing countries increase considerably. Of Nestlé’s 303 manufacturing facilities, the 81 factories in developing nations contributed 21 percent of Nestlé’s total production. In the mid-1970s, however, the firm faced a new problem as a result of its marketing efforts in these countries, when a boycott against all Nestlé products was started in the United States in 1977. Activists claimed that Nestlé’s aggressive baby food promotions made mothers in developing countries so eager to use Nestlé’s formula that they used it any way they could. The poverty-stricken areas had high rates of illiteracy, and mothers, unable to read and follow the directions, often mixed the product with local polluted water or used an insufficient amount of the expensive formula, unwittingly starving their infants. Estimates of Nestlé’s losses as a result of the boycott, which lasted until the early 1980s, ranged as high as $40 million.

In 1981 Helmut Maucher became managing director of Nestlé and made this controversy one of his top priorities. He met with boycott supporters and complied with the World Health Organization’s demands that Nestlé stop promoting the product through advertising and free samples. His direct confrontation of the issue contrasted with Nestlé’s earlier low-profile approach and was quite successful in allaying its critics’ fears.

Series of Major Acquisitions in the Later 1980s

Maucher also reduced overhead by turning over more authority to operating units and reducing headquarters staff. In addition, he spearheaded a series of major acquisitions. In 1985 Nestlé acquired Carnation, a U.S. manufacturer of milk, pet, and culinary products, for $3 billion, at the time one of the largest acquisitions in the history of the food industry. This was followed in 1985 by the acquisition of Hills Brothers Inc., the third largest U.S. coffee firm, which added ground roast coffee to Nestlé’s product line. In the late 1980s, as food companies around the world prepared for the integration of the European Community in 1992, Nestlé continued to make major acquisitions. In 1988 the company paid £2.55 billion (US$4.4 billion) for Rowntree Mackintosh PLC—a leading British chocolate manufacturer—marking the largest takeover of a British company by a foreign one to date. That same year Nestlé also purchased the Italian pasta maker Buitoni SpA.

Capital expenditures reached SFr 2.8 billion in 1991. Half was devoted to installation improvements, including data processing and automation, particularly in North America and Europe. The other half was spent expanding plants, primarily in Latin America and the Far East, areas where products were often based on local raw materials, tastes, and habits. That year Nestlé made 31 acquisitions, also adding a new factory in the People’s Republic of China. Among the companies purchased were Aleo Drumstick, a U.S. ice cream manufacturer with many European activities; Indra, a Swedish frozen-food maker; La Campiña, a Mexican evaporated milk producer; and 97 percent of Intercsokolàdé, a Hungarian chocolate maker. The latter was Nestlé’s first venture into the newly opened markets of Eastern Europe.

In September 1991 Nestlé and The Coca-Cola Company formed a 50-50 joint-venture, Coca-Cola Nestlé Refreshment Company, to produce and distribute concentrates and bases for the production of ready-to-drink coffee and tea beverages. With an initial capitalization of $100 million the products, to be sold under the Nescafe and Nestea brand names, would be marketed worldwide save for Japan, primarily through Coca-Cola’ international network of businesses.

Nescafé, sold in more than 100 countries by 1991, was launched in the Republic of Korea—Coca-Cola and Nestlé’s first joint endeavor—as was Nescafé Cappuccino in Europe. Hills Bros. “Perfect Balance,” a 50 percent-decaffeinated coffee, began selling in the United States, as did Nestea in cans at the beginning of 1992. By early 1992, a joint venture allowed the company to obtain a majority interest in Cokoladovny, a Czechoslovakian chocolate and biscuit producer. In addition, Nestlé in 1992 battled for and won, with a bid of $2.3 billion in cash, the French mineral water producer Source Perrier, though European regulators forced Nestlé to sell off some Perrier brands. That same year Nestlé took nearly full control of another mineral water concern, Vittel; Nestlé had acquired a 30 percent stake in Vittel in 1969, a move marking the company’s first foray into mineral water.