International marketing

 Written Case Format: 1- Do a brief summary of case information (5-6 sentences) 2- Answer each question separately. Please number each question. Support your answer with concepts learned in class. Length of a case: 3 pages. Your answers should be typed, double-spaced using 12 pt. Times New Roman font. 

CASE 12 Nestlé: The Infant Formula Controversy

largely on the intensive advertising and promotion of in-
fant formula. Clever radio jingles extol the wonders of the
“white man’s powder that will make baby grow and glow.”
“Milk nurses” visit nursing mothers in hospitals and their
homes and provide samples of formula. These activities
encourage mothers to give up breast feeding and resort to
bottle feeding because it is “the fashionable thing to do or
because people are putting it to them that this is the thing
to do.”

THE DEFENSE
The following points are made in defense of the marketing of baby
formula in Third World countries:

• Nestlé argues that the company has never advocated bottle
feeding instead of breast feeding. All its products carry a
statement that breast feeding is best. The company states
that it “believes that breast milk is the best food for infants
and encourages breast feeding around the world as it has
done for decades.” The company offers as support of this
statement one of Nestlé’s oldest educational booklets on
“Infant Feeding and Hygiene,” which dates from 1913 and
encourages breast feeding.

• However, the company does believe that infant formula
has a vital role in proper infant nutrition as a supplement,
when the infant needs nutritionally adequate and appropri-
ate foods in addition to breast milk, and as a substitute for
breast milk when a mother cannot or chooses not to breast
feed. One doctor reports, “Economically deprived and
thus dietarily deprived mothers who give their children
only breast milk are raising infants whose growth rates
begin to slow noticeably at about the age of three months.
These mothers then turn to supplemental feedings that are
often harmful to children. These include herbal teas and
concoctions of rice water or corn water and sweetened,
condensed milk. These feedings can also be prepared
with contaminated water and are served in unsanitary
conditions.”

• Mothers in developing nations often have dietary defi cien-
cies. In the Philippines, a mother in a poor family who is
nursing a child produces about a pint of milk daily. Mothers
in the United States usually produce about a quart of milk
each day. For both the Filipino and U.S. mothers, the milk
produced is equally nutritious. The problem is that there is
less of it for the Filipino baby. If the Filipino mother doesn’t
augment the child’s diet, malnutrition develops.

• Many poor women in the Third World bottle feed because
their work schedules in fi elds or factories will not permit
breast feeding. The infant feeding controversy has largely
to do with the gradual introduction of weaning foods during
the period between three months and two years. The average
well-nourished Western woman, weighing 20 to 30 pounds
more than most women in less developed countries, cannot

Nestlé Alimentana of Vevey, Switzerland, one of the world’s larg-
est food-processing companies with worldwide sales of over $100
billion, has been the subject of an international boycott. For over
20 years, beginning with a Pan American Health Organization al-
legation, Nestlé has been directly or indirectly charged with in-
volvement in the death of Third World infants. The charges revolve
around the sale of infant feeding formula, which allegedly is the
cause for mass deaths of babies in the Third World.
In 1974 a British journalist published a report that suggested
that powdered-formula manufacturers contributed to the death
of Third World infants by hard-selling their products to people
incapable of using them properly. The 28-page report accused
the industry of encouraging mothers to give up breast feeding and
use powdered milk formulas. The report was later published by the
Third World Working Group, a lobby in support of less developed
countries. The pamphlet was entitled “Nestlé Kills Babies,” and
accused Nestlé of unethical and immoral behavior.
Although there are several companies that market infant baby
formula internationally, Nestlé received most of the attention. This
incident raises several issues important to all multinational compa-
nies. Before addressing these issues, let’s look more closely at the
charges by the Infant Formula Action Coalition and others and the
defense by Nestlé.

THE CHARGES
Most of the charges against infant formulas focus on the issue of
whether advertising and marketing of such products have discour-
aged breast feeding among Third World mothers and have led to
misuse of the products, thus contributing to infant malnutrition
and death. Following are some of the charges made:

• A Peruvian nurse reported that formula had found its way to
Amazon tribes deep in the jungles of northern Peru. There,
where the only water comes from a highly contaminated
river—which also serves as the local laundry and toilet—
formula-fed babies came down with recurring attacks of
diarrhea and vomiting.

• Throughout the Third World, many parents dilute the
formula to stretch their supply. Some even believe the bottle
itself has nutrient qualities and merely fi ll it with water. The
result is extreme malnutrition.

• One doctor reported that in a rural area, one newborn male
weighed 7 pounds. At four months of age, he weighed
5 pounds. His sister, aged 18 months, weighed 12 pounds,
what one would expect a four-month-old baby to weigh. She
later weighed only 8 pounds. The children had never been
breast fed, and since birth their diets were basically bottle
feeding. For a four-month-old baby, one can of formula
should have lasted just under three days. The mother said
that one can lasted two weeks to feed both children.

• In rural Mexico, the Philippines, Central America, and
the whole of Africa, there has been a dramatic decrease in
the incidence of breast feeding. Critics blame the decline

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Cases 1 An Overview

formulas in the Third World. The Infant Formula Action Coali-
tion (INFACT, successor to the Third World Institute), along with
several other world organizations, successfully lobbied the World
Health Organization to draft a code to regulate the advertising and
marketing of infant formula in the Third World. In 1981, by a vote
of 114 to 1 (three countries abstained, and the United States was
the only dissenting vote), 118 member nations of WHO endorsed
a voluntary code. The eight-page code urged a worldwide ban on
promotion and advertising of baby formula and called for a halt
to distribution of free product samples or gifts to physicians who
promoted the use of the formula as a substitute for breast milk.
In May 1981, Nestlé announced it would support the code and
waited for individual countries to pass national codes that would then
be put into effect. Unfortunately, very few such codes were forth-
coming. By the end of 1983, only 25 of the 157 member nations of
the WHO had established national codes. Accordingly, Nestlé man-
agement determined it would have to apply the code in the absence
of national legislation, and in February 1982, it issued instructions to
marketing personnel that delineated the company’s best understand-
ing of the code and what would have to be done to follow it.
In addition, in May 1982 Nestlé formed the Nestlé Infant For-
mula Audit Commission (NIFAC), chaired by former Senator
Edmund J. Muskie, and asked the commission to review the com-
pany’s instructions to fi eld personnel to determine if they could be
improved to better implement the code. At the same time, Nestlé
continued its meetings with WHO and UNICEF (United Nations
Children’s Fund) to try to obtain the most accurate interpretation
of the code. NIFAC recommended several clarifi cations for the in-
structions that it believed would better interpret ambiguous areas
of the code; in October 1982, Nestlé accepted those recommenda-
tions and issued revised instructions to fi eld personnel.
Other issues within the code, such as the question of a warning
statement, were still open to debate. Nestlé consulted extensively
with WHO before issuing its label warning statement in October
1983, but there was still not universal agreement with it. Acting on
WHO recommendations, Nestlé consulted with fi rms experienced
and expert in developing and fi eld testing educational materials, so
that it could ensure that those materials met the code.
When the International Nestlé Boycott Committee (INBC)
listed its four points of difference with Nestlé, it again became
a matter of interpretation of the requirements of the code. Here,
meetings held by UNICEF proved invaluable, in that UNI-
CEF agreed to defi ne areas of differing interpretation—in some
cases providing defi nitions contrary to both Nestlé’s and INBC’s
interpretations.
It was the meetings with UNICEF in early 1984 that fi nally led
to a joint statement by Nestlé and INBC on January 25. At that
time, INBC announced its suspension of boycott activities, and
Nestlé pledged its continued support of the WHO code.

NESTLÉ SUPPORTS WHO CODE
The company has a strong record of progress and support in imple-
menting the WHO code, including the following:

• Immediate support for the WHO code, May 1981, and testi-
mony to this effect before the U.S. Congress, June 1981.

• Issuance of instructions to all employees, agents, and
distributors in February 1982 to implement the code in
all Third World countries where Nestlé markets infant
formula.

feed only breast milk beyond fi ve or six months. The claim
that Third World women can breast feed exclusively for one
or two years and have healthy, well-developed children is
outrageous. Thus, all children beyond the ages of fi ve to six
months require supplemental feeding.

• Weaning foods can be classifi ed as either native cereal
gruels of millet or rice, or commercial manufactured milk
formula. Traditional native weaning foods are usually made
by mixing maize, rice, or millet fl our with water and then
cooking the mixture. Other weaning foods found in use are
crushed crackers, sugar and water, and mashed bananas.

• There are two basic dangers to the use of native weaning
foods. First, the nutritional quality of the native gruels is
low. Second, microbiological contamination of the tradi-
tional weaning foods is a certainty in many Third World set-
tings. The millet or the fl our is likely to be contaminated, the
water used in cooking will most certainly be contaminated,
and the cooking containers will be contaminated; therefore,
the native gruel, even after it is cooked, is frequently con-
taminated with colon bacilli, staph, and other dangerous
bacteria. Moreover, large batches of gruel are often made
and allowed to sit, inviting further contamination.

• Scientists recently compared the microbiological contamina-
tion of a local native gruel with ordinary reconstituted milk
formula prepared under primitive conditions. They found
both were contaminated to similar dangerous levels.

• The real nutritional problem in the Third World is not
whether to give infants breast milk or formula but how
to supplement mothers’ milk with nutritionally adequate
foods when they are needed. Finding adequate locally pro-
duced, nutritionally sound supplements to mothers’ milk
and teaching people how to prepare and use them safely
are the issues. Only effective nutrition education along
with improved sanitation and good food that people can
afford will win the fi ght against dietary defi ciencies in the
Third World.

THE RESOLUTION
In 1974, Nestlé, aware of changing social patterns in the develop-
ing world and the increased access to radio and television there,
reviewed its marketing practices on a region-by-region basis.
As a result, mass media advertising of infant formula began to
be phased out immediately in certain markets and, by 1978, was
banned worldwide by the company. Nestlé then undertook to carry
out more comprehensive health education programs to ensure that
an understanding of the proper use of their products reached moth-
ers, particularly in rural areas.
“Nestlé fully supports the WHO [World Health Organization]
Code. Nestlé will continue to promote breast feeding and ensure
that its marketing practices do not discourage breast feeding any-
where. Our company intends to maintain a constructive dialogue
with governments and health professionals in all the countries it
serves with the sole purpose of servicing mothers and the health of
babies.” This quote is from “Nestlé Discusses the Recommended
WHO Infant Formula Code.”
In 1977, the Interfaith Center on Corporate Responsibility in
New York compiled a case against formula feeding in developing
nations, and the Third World Institute launched a boycott against
many Nestlé products. Its aim was to halt promotion of infant

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Part 6 Supplementary Material

The boycott focus is Taster’s Choice Instant Coffee, Coffee-
mate Nondairy Coffee Creamer, Anacin aspirin, and Advil.
Representatives of Nestlé and American Home Products re-
jected the accusations and said they were complying with World
Health Organization and individual national codes on the subject.

THE NEW TWISTS
A new environmental factor has made the entire case more com-
plex: As of 2001 it was believed that some 3.8 million children
around the world had contracted the human immunodefi ciency
virus (HIV) at their mothers’ breasts. In affl uent countries mothers
can be told to bottle feed their children. However, 90 percent of the
child infections occur in developing countries. There the problems
of bottle feeding remain. Further, in even the most infected areas,
70 percent of the mothers do not carry the virus, and breast feeding
is by far the best option. The vast majority of pregnant women in
developing countries have no idea whether they are infected or not.
One concern is that large numbers of healthy women will switch to
the bottle just to be safe. Alternatively, if bottle feeding becomes
a badge of HIV infection, mothers may continue breast feeding
just to avoid being stigmatized. In Thailand, pregnant women are
offered testing, and if found HIV positive, are given free milk pow-
der. But in some African countries, where women get pregnant at
three times the Thai rate and HIV infection rates are 25 percent
compared with the 2 percent in Thailand, that solution is much
less feasible. Moreover, the latest medical evidence indicates that
extending breast feeding reduces the risk of breast cancer.
In 2004 the demand for infant formula in South Africa out-
stripped supply as HIV-infected mothers made the switch to for-
mula. Demand grew 20 percent in that year, and the government
investigated the shortages as Nestlé scrambled to catch up with
demand. The fi rm reopened a shuttered factory and began import-
ing formula from Brazil.

THE ISSUES
Many issues are raised by this incident and the ongoing swirl of
cultural change. How can a company deal with a worldwide boy-
cott of its products? Why did the United States decide not to sup-
port the WHO code? Who is correct, WHO or Nestlé? A more
important issue concerns the responsibility of a multinational cor-
poration (MNC) marketing in developing nations. Setting aside the
issues for a moment, consider the notion that, whether intentional
or not, Nestlé’s marketing activities have had an impact on the be-
havior of many people. In other words, Nestlé is a cultural change
agent. When it or any other company successfully introduces new
ideas into a culture, the culture changes and those changes can be
functional or dysfunctional to established patterns of behavior. The
key issue is, What responsibility does the MNC have to the culture
when, as a result of its marketing activities, it causes change in that
culture? Finally, how might Nestlé now participate in the battle
against the spread of HIV and AIDS in developing countries?

QUESTIONS
1. What are the responsibilities of companies in this or simi-

lar situations?

2. What could Nestlé have done to have avoided the accusa-
tions of “killing Third World babies” and still market its
product?

• Establishment of an audit commission, in accordance with
Article 11.3 of the WHO code, to ensure the company’s com-
pliance with the code. The commission, headed by Edmund
S. Muskie, was composed of eminent clergy and scientists.

• Willingness to meet with concerned church leaders, interna-
tional bodies, and organization leaders seriously concerned
with Nestlé’s application of the code.

• Issuance of revised instructions to Nestlé personnel, October
1982, as recommended by the Muskie committee to clarify
and give further effect to the code.

• Consultation with WHO, UNICEF, and NIFAC on how to
interpret the code and how best to implement specifi c provi-
sions, including clarifi cation by WHO/UNICEF of the defi –
nition of children who need to be fed breast milk substitutes,
to aid in determining the need for supplies in hospitals.

NESTLÉ POLICIES
As mentioned earlier, by 1978 Nestlé had stopped all consumer
advertising and direct sampling to mothers. Instructions to the
fi eld issued in February 1982 and clarifi ed in the revised instruc-
tions of October 1982 to adopt articles of the WHO code as Nestlé
policy include the following:

• No advertising to the general public

• No sampling to mothers

• No mothercraft workers

• No use of commission/bonus for sales

• No use of infant pictures on labels

• No point-of-sale advertising

• No fi nancial or material inducements to promote products

• No samples to physicians except in three specifi c situations:
a new product, a new product formulation, or a new gradu-
ate physician; limited to one or two cans of product

• Limitation of supplies to those requested in writing and
fulfi lling genuine needs for breast milk substitutes

• A statement of the superiority of breast feeding on all labels/
materials

• Labels and educational materials clearly stating the hazards
involved in incorrect usage of infant formula, developed in
consultation with WHO/UNICEF

Even though Nestlé stopped consumer advertising, it was able
to maintain its share of the Third World infant formula market.
In 1988 a call to resume the seven-year boycott was made by a
group of consumer activist members of the Action for Corporate
Accountability. The group claimed that Nestlé was distributing
free formula through maternity wards as a promotional tactic that
undermined the practice of breast feeding. The group claimed that
Nestlé and others, including American Home Products, have con-
tinued to dump formula in hospitals and maternity wards and that,
as a result, “babies are dying as the companies are violating the
WHO resolution.” In 1997 the Interagency Group on Breastfeed-
ing Monitoring (IGBM) claimed Nestlé continues to systemati-
cally violate the WHO code. In 2008 the International Baby Food
Action Network (IBFAN), based in Malaysia, accused Nestlé and
the other manufactures of “. . . violating the Code, or stretching the
restrictions, with abandon.” Nestlé’s response to these accusations
is included on its Web site (see www.nestle.com for details).

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Cases 1 An Overview

guide to examine the social responsibility and ethical issues
regarding the marketing approach and the promotion used.
Were the decisions socially responsible? Were they ethical?

5. What advice would you give to Nestlé now in light of the
new problem of HIV infection being spread via mothers’
milk?

3. After Nestlé’s experience, how do you suggest it, or any
other company, can protect itself in the future?

4. Assume you are the one who had to make the fi nal decision
on whether or not to promote and market Nestlé’s baby for-
mula in Third World countries. Read the section titled “Ethi-
cal and Socially Responsible Decisions” in Chapter 5 as a

This case is an update of “Nestlé in LDCs,” a case written by J. Alex Murray, University of Windsor, Ontario, Canada, and Gregory M. Gazda and Mary J. Molenaar, University
of San Diego. The case originally appeared in the fi fth edition of this text.

The case draws from the following: “International Code of Marketing of Breastmilk Substitutes” (Geneva: World Health Organization, 1981); INFACT Newsletter, Minneapolis,
February 1979; John A. Sparks, “The Nestlé Controversy—Anatomy of a Boycott” (Grove City, PA: Public Policy Education Funds); “WHO Drafts a Marketing Code,” World Busi-
ness Weekly , January 19, 1981, p. 8; “A Boycott over Infant Formula,” BusinessWeek, April 23, 1979, p. 137; “The Battle over Bottle-Feeding,” World Press Review , January 1980,
p. 54; “Nestlé and the Role of Infant Formula in Developing Countries: The Resolution of a Confl ict” (Nestlé Company, 1985); “The Dilemma of Third World Nutrition” (Nestlé
SA, 1985), 20 pp.; Thomas V. Greer, “The Future of the International Code of Marketing of Breastmilk Substitutes: The Socio-Legal Context,” International Marketing Review ,
Spring 1984, pp. 33–41; James C. Baker, “The International Infant Formula Controversy: A Dilemma in Corporate Social Responsibility,” Journal of Business Ethics 4 (1985),
pp. 181–90; Shawn Tully, “Nestlé Shows How to Gobble Markets,” Fortune , January 16, 1989, p. 75. For a comprehensive and well-balanced review of the infant formula issue,
see Thomas V. Greer, “International Infant Formula Marketing: The Debate Continues,” Advances in International Marketing 4 (1990), pp. 207–25. For a discussion of the HIV
complication, see “Back to the Bottle?” The Economist , February 7, 1998, p. 50; Alix M. Freedman and Steve Stecklow, “Bottled Up: As UNICEF Battles Baby-Formula Mak-
ers, African Infants Sicken,” The Wall Street Journal , December 5, 2000; Rone Tempest, “Mass Breast-Feeding by 1,128 Is Called a Record,” Los Angeles Times , August 4, 2002,
p. B1; “South Africa: Erratic Infant Formula Supply Puts PMTCT at Risk,” All Africa/COMTEX, August 22, 2005; Hillary Parsons, “Response. We’re Not Trying to Undermine
the Baby-Milk Code,” The Guardian , May 22, 2007, p. 35; Annelies Allain and Yeong Joo Kean, “The Baby Food Peddlers,” Multinational Monitor 29, no. 1 (2008), pp. 18–19.

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