CASE STUDY ON NESTLE AND THE ONGOING INFANT FORMULA CONTROVERSY

GROUP-1 AJATSATRU ROUT(02) BINAYAK MAHAPATRA(11) BUSHRA AZIMA(13) KAMAL KIRAN BEHERA(21) PRANAB SARDAR(33) SAILAZA PARAHARAJ(40) SHOVAN DASH(47) SUDHAL KUMAR SETHY(54)1

OBJECTIVETo examine the ethics of Marketing practices of nestle & discuss the role of ethical consumption in curbing perceived ethical violation.

2

ANALYSIS OF THE ORGANISATION

3

Operations point of viewDue to the allegations Nestl's had to follow the code of conduct introduced by WHO which governs the marketing of the infant formula. In 2002 it had introduce an Ombudsman system to manage the baby milk issue by encouraging their employees to confidentially report violations of the code without fear of retribution It released dedicated reports on its economic and social impact in Africa and Latin America cautiously welcomed by the reporting industry

Resource point of viewAs per the Financial Times survey 2004 the company was rated worlds 11th most respected company It is now a part owner of body shop through its stake in LOreal It also started its own range of fair trade coffee Nestlesshare price has increased by1592 percent out performing the Morgan Stanleys Europien stock index by 166 percent

BACK GROUND & HISTORY

6

Nestle a multinational packaged food company Founded in the year 1867 by Henri Nestle Headquarter in Vevey, Switzerland Products baby food, coffee, diary products, breakfast cereals, ice-creams, chocolate. Global brand Nescafe, Kit-Kat, Maggi, Milo Nestl is the largest baby food manufacturer in the world. For decades, as industry leader, it has led the way in aggressively marketing its products. Aggressive marketing by Nestl and its competitors undermined breastfeeding, contributing to a dramatic drop in rates in many countries.

contd

In 1977, a public interest group based in Minneapolis, INFACT USA, launched a campaign to boycott the companys products. By 1981, the boycott was international and the momentum it gathered contributed to the creation of the International Code. Nestls public image was at an all-time low. 1984, with the boycott in effect in ten countries, Nestl promised to halt its aggressive promotion and adhere to the International Code and the boycott was suspended The boycott was reinstated in 1989 Boycott has compelled Nestl to change some policies, such as the age of introduction of complementary foods, and stops specific cases of malpractice if these gain sufficient exposure, Nestl continues

IDENTIFICATION OF THE PROBLEM

9

Beginning in the late 1970s Nestl began to attract global criticism for itsinfant-formulamarketing policies, especially those conducted indeveloping countries. Public outcry peaked with theNestl boycottof 1977 which (though suspended for several years in the mid-1980s) remains in effect today. Nestl is the most boycotted company in the world as a result. Entitled with Baby Killer in 1970 in developing countries Nestl advertised and still advertises its formula as a risk-free substitute (or even a preferable alternative) tobreast milk, resulting in increased use and often replacing available breast milk . Nestle advertised widely infant product was valuable in its nutrients which have complete benefits for baby from birth to one year

Formula was contaminated in poor countries, leading to disease in vulnerable infants. Because of the high illiteracy rates in developing nations many mothers are not aware of the sanitation methods needed in the preparation of bottles UNICEF estimates that a non-breastfed child living in disease-ridden and unhygienic conditions is between six and 25 times more likely to die of diarrhoea and four times more likely to die of pneumonia than a breastfed child Many poor mothers try to save money by economizing on the formula by using less than the recommended dose or substituting it with other inferior alternatives such as cows milk,rice water or corn starch with

ETHICAL ISSUES INVOLVED

12

The company not abiding the rules of WHO code The company not taking the moral responsibility for infant mortality Promotion agressively ignoring the benefits of breast feeding Lying to the fact that they were advertising in the public ignoring the value of breastfeeding13

ANALYSIS OF THE CASE

14

Systemic Issues

Political WHO,IBFAN

Economical Operating in Developed & under-developed

Commercial

countries

Free samples to mothers Free supplies to hospitals & clinics Tempting Advertisement Posters & pamphlets in hospitals Promotional booklets ignoring breastfeeding Incentives to milk nurses & health workers

15

Individual IssuesPsychological

Creation of mis-leading informationSociological

Illiteracy Low income

16

Corporate IssuesNon-compliance of WHO code Lobbying to prevent govt. translating the code into legislation Largest single source of violations of the WHO code by IBFAN report Undermining implementation of measures by Government

17

Nestle breaks the rules of The CodeMonitoring results from 69 countries 2,000 rule brakes Over 700 pictures Nestl is responsible for more rule breaks than any other company!!

Nestl inappropriately promotes baby milk in poor countries!

Nestl breaks the rules in its marketing. In areas that have a poor water supply and mothers do not have funds to buy the products, this can be very harmful. taking full advantage of illiterate mothers

Company

Advertisement

encouraging mothers to adopt modern bottle feeding in place of old fashioned and inconvenient breastfeeding

Contd.

This Baby Milk Action advertisement was challenged before the UKs Advertising Authority.

Baby Milk Action won the case! What was said was found to be truthful!

Nestle on the other hand lost the case when their anti-boycott advert was challenged by Baby Milk Action!

ASSUMPTIONS AND EVALUATION

21

RECOMMENDATIONS AND ALTERNATIVES

22

Concerned

about their sales and profit maximization ignoring the socio-economic factors. Due Care theory implementation Deontological theory implementation Nestle considered Breastfeeding as its competitor with its product 23

The

company should segment the market on the basic of socio-economic factors Necessary instructions to be required to be written in local languages Should encourage Breastfeeding at the time of giving free samples Give stress on communication Live demonstration in public Demonstration through mediaShould

promote alternative breastfeeding for HIV/AIDS infected mothers24

Contd..It

should be clearly mentioned in packages that Breastfeeding is an ultimate best Sodium Hypochlorite can be distributed freely with each Nestle milk packet

2%

25

IMPLEMENTATION PROCESS

26

ContdThey should follow the international code of conduct for advertisement and promotion The instruction should be in the regional language for the benefit of illiterate mother It should not be made free to the hospitals and clinics A product should be promoted according to the people but which should not be harmful to them

27

CONCLUSION

28

It is clear from the case presented that the reputation of a company is decided not in terms of its sales or profits maximization but in terms of the good will it earns by adopting morals and values in its production ,marketing and pricing . The product and marketing should not violate the societal standards Should not promote or undermine breast feeding The organization is responsible for any happenings or consequences in the society29