IBM 651 ISSUES IN INTERNATIONAL BUSINESS

INDIVIDUAL PROJECT CASE STUDY

“NESTLE BABY FORMULA SCANDAL”

PREPARED BY

NAME NO.MATRIC
1. NUR HAZWANI BINTI ABDUL RANI 2017926577

GROUP BY:

BA2465A

PREPARED FOR:

DR. NUR MELISSA MOHAMMAD FAISAL WEE

1
TABLE OF CONTENT

NO Particulars Page
1. Abstract 3
2. Acknowledgement 4
3. Introduction 5
4. Findings 6-13
 Key Argument 1
 Key Argument 2
 Key Argument 3
 Key Argument 4
5. Conclusion 14
6. Reference 15
7. Appendix 16-19

2
ABSTRACT
Nestle is an international company that deals in the production of beverages and foods that
target all age groups in the world. The company has its origin from Switzerland, and it has
expanded to cover all the corners of the world including Europe, America, Africa, Asia and
South America. Nestle is the largest food and beverage company in the world, and it has a
lot of revenue from its sale of innovative food products. The range of Nestle food products
includes bottled water, cereal, frozen food, baby food, pet food, and ice cream. Nestle has
more than 250,000 employees worldwide and factories all around globally. Henri Nestle
adopted his coat-of-arms as a trademark in 1867. Nestle, which means ‘little nest’ is
universally understood to represent warmth, security, nourishment, family togetherness,
nurturing and caring values. In an effort to save his neighbour’s child who was unable to
accept his mother’s breast milk, Swiss pharmacist and Nestle founder Henri Nestle
developed the world’s first milk food for infants. Aimed at combating the problem of mortality
due to malnutrition, the product was well received in Europe and this marked the beginning
of the Nestle Creating Shared Value legacy, which today is embedded within values and
corporate business principles. More than 140 years on, Nestle is the world’s leading Food,
Nutrition, Health and Wellness company committed towards building a business based on
sound human values and principles.

Despite its success in the market, Nestle still faces internal and external challenges that they
need to overcome in order to reach their goals. With the dynamism in the market Nestle
tends to embrace change and comes up with products suitable for its customers while still
improving on the quality of its original products line. Improvements on the technology,
organizational structure, marketing mix, operations as well as human resource management
led to more profit margins of the company. Nestle has a lot of challenges especially external
ones that seem to grow each day.

The Swiss multinational Nestle has been accused of violating ethical marketing codes and
manipulating customers with misleading nutritional claims about its baby milk formulas.
Nestle also promotes its baby milk around the world with misleading idealised and
unsubstantiated claims such as ‘nutritional foundation for life’ ‘helps develop motor skills’
start’, ‘gentle start’ and ‘protects’ babies. Nestle puts babies who need to be fed on formula
at risk. It refuses to warn on labels that powdered formula is not sterile and may contain
harmful bacteria and does not give correct instructions on how to reduce the risks.

3
ACKNOWLEDGEMENT
In the name of “Allah”, the most beneficent and merciful who gave us strength and
knowledge to complete this assignment. This assignment is a part of my subject Issues in
International Business (IBM 651). This assignment has proved to be very helpful and is a
great experience for me. I would like to express my gratitude to my subject lecturer Dr Nur
Melissa who gave me this opportunity to fulfil this report. She gave me full support and help
me in various ways. Also she guided me in different matters regarding the assignment. She
has been very kind and patient while teaching, I thank her for her overall support.

I have taken efforts in this project. However, it would not be possible without the help of our
parents and families. They have given a lot of ideas and helped in various ways too. I would
like to express my gratitude to my parents and family for their kind cooperation and
encouragement which helps me a lot in the completion of project. Lastly I love to express
gratitude and thanks to all of my classmates in developing the project and to the people who
have willingly helped me out with their abilities. May Allah bless all of us, Thank You.

4
INTRODUCTION

In this report, I will discussed regarding Nestle Baby Formula issues. The Swiss
multinational Nestlé has been accused of violating ethical marketing codes and manipulating
customers with misleading nutritional claims about its baby milk formulas. Nestle have been
accused and been under fire because of their claim on baby milk formulas. They have
violating ethical marketing codes and manipulating customers with misleading nutritional
claims about its baby milk formula. Some academic and scientist have highlighted the way
that language used by Nestle to promote infant milk formulas can sometimes mislead
consumers about this. When the mothers cannot or choose not to breastfeed, companies
like Nestlé have a huge responsibility to provide products that are safe, nutritionally complete
and informed by the best available science. It have been confirms that Nestlé continues to
use science as merely a marketing tool, valuing higher profit margins over its scientific
credibility.” Promoting breast milk substitutes among feeding mothers is an arguable topic
over the years and health authorities recommend exclusive breast feeding for infants till they
reach six months of age.

Nestle the world’s largest food company also has broken a pledge to end the use of vanilla
flavourings in baby milk powders. The Swiss multinational has continued to sell vanilla-
flavoured infant formulas in Hong Kong, even though it advertises infant products in
mainland China as healthy options because they do not contain the flavouring. In South
Africa, the firm used sucrose in infant milk formulas, while marketing its Brazilian and Hong
Kong formulas as being free of sucrose “for baby’s good health. Nestle also promotes its
baby milk around the world with misleading idealised and unsubstantiated claims such as
‘nutritional foundation for life’ ‘helps develop motor skills’ start’, ‘gentle start’ and ‘protects’
babies.

In this report, I will also discuss how this issues have tarnished Nestle image and capability.
This issues have damage Nestle Corporate image as this company have a good reputation
and it is very familiarize with costumers because the majority of people consume some
products of this company. I will also discuss how Nestle respond toward the issues as the
company strategy are to aim and offer a portfolio of products that evolve with consumer
needs, offer good nutrition and delight the senses, contributing to healthier, balanced lives
and a healthier planet. Nestle company believe that they must respond to deliver good food
in ever more relevant, accessible and sustainable ways.

5
FINDINGS
KEY ARGUMENT 1
This issues happen because Nestle have manipulate customers with misleading nutritional
claims about its baby formula. Nestle have neglect the ethical code in advertising. Nestle
should follow ethics in advertising because it is important a company is being responsible
towards the needs of the customer. Ethical advertising evens the playing field for the
consumer by giving them the information they need to make an informed decision on what
products to buy and how these products will enhance their lives--whether they need the
product or they just want that product. Nestle need to show they have morals when
advertising to consumers, because that makes consumers’ feel like the company cares
about what they need. This shows that the customer is protected by a company that is
behaving in a way that makes a difference to the community they work in. Nestle need to
work with the community in a way that is sustainable and keeps all the customers happy.

When the issues happen, Nestle have been under fire for marketing claims and false health
claim on baby milk formulas. Infant formula is supposed to be a highly-regulated industry.
After all, it’s the sole source of nutrition for babies who can’t breastfeed, and a supplemental
source for many who can. Because of this issues Nestle is under investigation, specifically
because of exaggerated health claims and ingredient inconsistencies. Nestlé is in fact not
driven by nutritional science but instead by a sharp and prioritized focus on profit and growth
at the expense of vulnerable infants. Organizations like the European Food Safety Authority
advise against its inclusion in formula, recommending lactose as the preferred carb (unless a
baby is lactose intolerant). Some of Nestle’s infant milks sold in Brazil and Hong Kong play
to this advisory. For example, Brazil markets lactose as a premium ingredient, and the Hong
Kong labeling states, “No sucrose has been added for baby’s good growth.” Still,
researchers found two Nestle formulas in South Africa contained sucrose. Similarly, they
also found added flavorings in some products and not others, despite the fact nutrition
expert’s advice against any flavorings in infant formula.

These examples illustrate how Nestle goes against its own advice in certain markets,
underlying a use of nutritional science as a marketing tool rather than a criterion for product
formulation in the interests of child health. If an ingredient (such as sucrose) is not healthy,
then it should be in none of their products. Anything other than this approach seriously
undermines Nestle’s commitment to science and reputation as a nutrition provider. There are
a rules that prohibits companies from making claims that could discourage parents from
breastfeeding, including language that compares formula to breast milk in any way. A
mother’s breast milk is constantly changing to adapt to a growing or sick baby’s nutritional
needs. Formula can’t do that. It also calls out Nestle for using health claims, such as for

6
probiotics and prebiotics, around the world that were prohibited by European health
regulators for lacking sufficient scientific evidence. It said several products claim to be “the
closest to breastmilk” yet each have different ingredients.

There is a report says that over 70 Nestle baby milk products in 40 countries found that
Nestle often ignored its own nutritional advice in its advertising. In South Africa, the firm used
sucrose in infant milk formulas, while marketing its Brazilian and Hong Kong formulas as
being free of sucrose “for baby’s good health”. In Hong Kong, it promoted its baby milk
powders as healthier – because they were free from vanilla flavourings even as it sold other
vanilla-flavoured formulas elsewhere in the territory. If the science is clear that an ingredient
is safe and beneficial for babies then such ingredients should be in all products. If an
ingredient is not healthy, such as sucrose, then it should be in no products. Nestle’s
inconsistency on this point calls into serious question whether it is committed to science, as
it professes to be.”

Nestle should know that Mothers receive infant feeding information and advice from a variety
of sources. One way is acquiring the promotional information from the infant formula
companies. This can be via mass media advertising, distribution of promotional materials,
and point-of-purchase marketing activities. Second, companies try to reach mothers
indirectly by cultivating brand preference through contacts with and endorsements by health
professionals. Advertising carries several responsibilities. Advertising informs the public so
that they can be aware of products and make informed choices among different products or
brands. Advertising also benefits businesses in assisting them to sell their product. Nestle
should be honest about their ingredient in baby milk to avoid the public critic that can affect
their image.

7
KEY ARGUMENT 2

This issues become more bigger when there is a report has found that Nestle marketed its
infant milk formula as “closest to”, “inspired by” and “following the example of” human breast
milk in several countries, despite a prohibition by the UN’s World Health Organisation
(WHO). WHO adopted a strict code of advertising banning the promotion of baby milk
products as being in any way comparable to breast milk. The code stipulates that there
should be absolutely no promotion of breast milk substitutes, bottles and teats to the general
public that neither health facilities nor health professionals should have a role in promoting
breast milk substitutes; and that free samples should not be provided to pregnant women,
new mothers or families. The aim of this Code is to contribute to the provision of safe and
adequate nutrition for infants, by the protection and promotion of breast-feeding, and by
ensuring the proper use of breast-milk substitutes, when these are necessary, on the basis
of adequate information and through appropriate marketing and distribution. When Nestle
market their product with misleading information that can make the consumers confuse, they
should be responsible for it.

Nestle should know that they cannot compare their infant formula with human breast milk
because breast milk provides optimal nutrition for babies. It has the right amount of nutrients,
is easily digested and readily available. Most health authorities recommend exclusive
breastfeeding for at least 6 months rather than give their baby infant formula. Breast milk
contains everything the baby needs for the first six months of life, in all the right proportions.
Its composition even changes according to the baby’s changing needs, especially during the
first month of life. Breast milk is loaded with antibodies that help baby fight off viruses and
bacteria. This particularly applies to colostrum, the first milk. Colostrum provides high
amounts of immunoglobulin A (IgA), as well as several other antibodies. When the mother is
exposed to viruses or bacteria, she starts producing antibodies. These antibodies are then
secreted into the breast milk and passed to the baby during feeding. Infant formula can’t do
that.

Breast milk provides the ideal nutrition for infants. It has a nearly perfect mix of vitamins,
protein, and fat everything that baby needs to grow. And it's all provided in a form more
easily digested than infant formula. Breast milk contains antibodies that help baby fight off
viruses and bacteria. Breastfeeding lowers baby's risk of having asthma or allergies. Plus,
babies who are breastfed exclusively for the first 6 months, without any formula, have fewer
ear infections, respiratory illnesses, and bouts of diarrhea. They also have fewer
hospitalizations and trips to the doctor. Breastfeeding promotes healthy weight gain and
helps prevent childhood obesity. Studies show that obesity rates are 15–30% lower in

8
breastfed babies, compared to formula-fed babies. Breastfed babies have higher amounts of
beneficial gut bacteria, which may affect fat storage. Babies fed on breast milk also have
more leptin in their systems than formula-fed babies. Leptin is a key hormone for regulating
appetite and fat storage. Breastfed babies also self-regulate their milk intake. They’re better
at eating only until they’ve satisfied their hunger, which helps them develop healthy eating
patterns.

In conclusion, Nestle is inappropriate to market its infant milk formula as “closest to”,
“inspired by” and “following the example of” human breast milk because they cannot provide
the same benefits and advantages. Nestle should follow the UN’s World Health Organisation
(WHO) code that banning the promotion of baby milk products as being in any way
comparable to breast milk. Nestle must aims to contribute to the provision of safe and
adequate nutrition for infants, by the protection and promotion of breastfeeding, and by
ensuring the proper use of breast milk substitutes, when these are necessary. Nestle need
to aware that advertising food products for infants and young children in a way that may
cause families to believe they are good or necessary. Nestle need to stop claiming any
nutritional or health benefits on food labels for infants and young children

9
KEY ARGUMENT 3
The infant formula controversy certainly damaged Nestle’s corporate image. It is
unconceivable that a company like Nestle, one of the largest and most profitable food
processing companies in the world, has committed such mistakes, in launching a product in
a foreign country without making the necessary marketing research. They did not take into
consideration the local infrastructure, as well as the local culture. In addition, they did not
have any monitoring policy or any educational practices in order to make sure that
consumers were making the right use of the product. Moreover, it was not taken into
consideration the risk in launching a product without a clear understanding of current
legislation. A better marketing strategy might have been to advertise their product as a good
option for supplementing a baby’s diet.

Not only does the cooperation market false information to create a dependency on their
formula, but according to a report by the International Baby Food Action Network (or IBFAN),
Nestle provides hospitals with free baby formula for a week. Sounds charitable but looking
more in-depth into the implications of this, one can see that it’s nothing but a malevolent
marketing strategy. When a mother stops breastfeeding, it takes a few days to a week for
her milk to dry up and the hormones to go back to normal. So by the time the formula runs
out, so does a mother’s milk, and they have no choice but to buy more formula. This move
from Nestle certainly damage their image and lead to boycott to their product. The boycott
keeps the issue of Nestlé’s bad practices in the public eye. Because of the boycott, Nestle
said it would stop claiming its formula is The new “Gold Standard” in infant nutrition after
receiving thousands of emails from boycott supporters. They try to maintain their images.

Corporate responsibility is a very taboo topic to speak about when it comes to vast
corporations such as nestle and MNC because although, both companies are trying to be
aware and conscious of the issue that arise due to its services and products, at the end of
the day, the company still wants to promote and make their profit. Nestle in my opinion made
sure that their company was viewed as the responsible type as soon as the media
surrounded the case. The company clearly had not done the proper research involved when
making such an impact on a countries culture, clearly the formulas were being marketed and
distributed irresponsibly and this had a lot to do with the company's consumer awareness.

I believe that nestle could have been more aggressive in terms of their research about the
places where their product was being distributed and marketed. Clearly due to the
circumstances, nestle company was negligent in being more proactive in the proper
distribution of the marketing materials and product. Nestle was well aware of their impact on
cultures and knew that they would be inducing a type of culture shock because of their

10
products implied uses. Nestle and other companies of its sort could do more to study the
social and medical effects of their products and services. Companies that provide these
types of food products, can have a psychological effect on cultures, with the assumption that
products replace certain vital nutrients. A smarter marketing approach could be use, one that
would include information written in the language of the places where the product is being
distributed.

Nestle is a company who is there to sell a product. A product that was nutritional for babies. I
believe that Nestle was smart to save their reputation and their corporate image by
attempting to change their advertising strategies. They decided to promote their brand with
health programs that informed mothers of the formula and the proper usage. Nestle still told
the mothers that breast feeding is the best nutrition for a baby. I think Nestle did a good job
trying to save their brand by smarter advertising and educating the women. It only helped
Nestle. By Nestle giving free samples out to women was a good strategy only to help women
who were not financially stable or healthy enough to produce the breast milk needed.

In conclusion, this issues has tarnished Nestle corporate image to achieve its vision to be
the leader in Nutrition, Health and Wellness company. They fail to produce better quality of
product to the consumers because of this baby formula issues. Nestle need to increase their
image by study the consumers need from time to time and satisfy the consumers as much
as possible. Strong research and development is needed to increase their corporate image
and brand name.

11
KEY ARGUMENT 4
Nestle have respond towards the issues by telling the media that nestle follow the highest
standard when marketing breast milk substitute. They strongly support breastfeeding given
the fundamental part in the growth and development of babies during their first 1000 days.
Nestle said that for mothers who cannot or choose not to breastfeed, infant formula is the
only suitable breast milk substitute. They support the World Health Organization’s (WHO)
recommendation of six months exclusive breastfeeding, followed by the introduction of
adequate nutritious complementary foods along with sustained breastfeeding up to two
years of age and beyond. Save the Children’s report acknowledges the positive role infant
formula can play in providing adequate nutrition when breastfeeding is not possible. They
agree that current breastfeeding rates are still insufficient. As the Save the Children report
states, there are numerous social and economic factors influencing infant formula usage
worldwide that are not due to the actions of manufacturers alone.

Nestle believe the key to improving infant nutrition, is the need to pay more attention to
inappropriate foods fed to some infants in the first six months, when they are neither
breastfed nor formula fed. Whilst Nestlé actively seeks to make formula as close to breast
milk as scientifically possible, they reject any suggestion that they claim infant formula is
equal to or better than breast milk. Nestle aim to offer infants the best possible start in life
through their support for breastfeeding, scientific research, responsible marketing practices
and commitment to providing safe and nutritious products. They reiterate their readiness to
work with civil society, the public sector and other concerned stakeholders to improve the
health and nutrition of women and children.

Nestlé reportedly applies the WHO (World Health Organization) Code of Marketing of Breast
Milk Substitutes and subsequent WHA (World Health Assembly) resolutions as implemented
by member states. Nestle have voluntarily decided to remove vanilla flavour from the recipes
that still contain. They also claim that vanilla flavourings is safe and permitted for infants
above 6 month of age according to CODEX that protect the health of consumers and
promote fair practices in the food trade. They said that they are in the process of finding
alternatives. Nestle also removing vanillin claims in new labels because of the vanilla
flavours issues. They said that they do not use any statements that idealize their products or
imply that they are superior to or equivalent to breast milk on their infant formula labels or
communications materials. Infant formulas have evolved and are compositionally closer to
human milk than unmodified cow’s milk. As such, Nestle communicate that products are
‘inspired by breast milk.’ For infants who cannot be fed on breast milk as recommended,
infant formula is recognized by WHO as the only suitable breast milk substitute.

12
For the sucrose issues in baby formula, Nestle denied claims that they used sucrose in any
of its product for infants for (0-6 month ) and adding that they were voluntarily eliminating
sucrose from all other follow on formula product (6-12 month). They said that sucrose was
present in less than 10% of its recipes for that age range. Nestle also said that they will
follow World Health Organization code that banning the promotion of baby milk products as
being in any way comparable to breastmilk. They know that the code aims to contribute ‘to
the provision of safe and adequate nutrition for infants, by the protection and promotion of
breastfeeding, and by ensuring the proper use of breast-milk substitutes, when these are
necessary, on the basis of adequate information and through appropriate marketing and
distribution’.

13
CONCLUSION

To sum up, Nestle have been accused because of their claim on baby formula. They have
manipulate customers with misleading nutritional claims about its baby formula. A report also
found that Nestle ignored its own nutritional advice in its advertising. Nestle companies have
manipulate consumers’ emotional responses to sell a variety of products and this behaviour
is especially unethical when it comes to the health of vulnerable babies.

Next, Nestle marketed its infant milk formulas as “closest to”, “inspired by” and “following the
example of” human breastmilk in several countries, despite a prohibition by the UN’s WHO.
For example, Nestle products in Hong Kong and Spain were advertised as being “inspired by
human milk”, and having “an identical structure” to breastmilk. The WHO banned the
promotion of infant milk products as being in any way comparable to breastmilk in 1981, but
the Swiss firm insists that it follows the code 'as implemented by national governments'.

The baby formula controversy damaged Nestle’s corporate image. In this case, Nestle
displayed negligence and did not fulfil their corporate social responsibility to the public. The
company’s marketing practices were unclear, which led to the misconception that formula
was a good way to replace breast milk and other forms of nutrition vital to child development.
Nestle faces a lot of problems in this infant formula issue. But, Nestle also react and give
respond to media by telling that Nestle have follow the highest standard when marketing
their baby formula. Nestle also denied that they use any statement that their baby formula is
equivalent to breast milk on their infant formula labels or communication materials.

In my opinion for this case, I believe Nestle's intentions were in the right place as well as in
the wrong. Every company around the world advertises to help build their company and
customer base. Nestle, followed what just about every company does, they appealed their
product to customers to make a sale. Often times advertisements can be perceived the
wrong way or misunderstood, especially from other countries. I do not fully believe that
Nestle is at fault, although it is shocking to see what their product has done to certain
countries. I think that Nestle should have provide better promotion or advertising and avoid
making misleading marketing claims and provide the truth information.

14
REFERENCES

Essays, UK. (November 2018). A Case Study Of The Food Company Nestle Marketing
Essay. Retrieved from https://www.ukessays.com/essays/marketing/a-case-study-of-
the-food-company-nestle-marketing-essay.php?vref=1

The Guardian, (2018) Nestlé under fire for marketing claims on baby milk formulas Available
from: https://www.theguardian.com/business/2018/feb/01/nestle-under-fire-for-marketing-
claims-on-baby-milk-formulas

The Guardian, (2019) Nestlé breaks pledge to end use of vanilla flavouring in baby formula
Available from:https://www.theguardian.com/business/2019/apr/09/nestle-breaks-pledge-to-
end-use-of-vanilla-flavouring-in-baby-formula

15
APPENDIX

16
17
18
19