Nestle: At 150 years, new frontiers key to growth

Swiss-based Nestle is one of the biggest food sector companies in the world. People now consume more than one billion servings of Nestlé products per day. The company operates in 200 countries and employs nearly 350,000 people. It has 435 factories in 85 countries including Sri Lanka.

Nestlé, whose slogan is 'Good Food, Good Life' offers over 2,000 brands spread across seven basic product lines, with beverages being its highest earner. Powdered and liquid beverages, water, milk products and ice cream, cooked food, pet care and confectionery are among the products.

The story of Nestle, which turns 150 years this year, is a fascinating blend of invention, immigrant flair and resourcefulness.

Canned condensed milk, invented by Gail Borden in the early 1850s, proved invaluable as a military ration in the 1860s. It became a very successful product due to the lack of refrigeration at that time.

Page brothers

Hoping for similar success in Europe, US immigrant Charles Page founded the Anglo-Swiss Condensed Milk Company in Cham, Switzerland, in 1866. His brother George was still in the US learning Gail Borden's pioneering process for producing condensed milk. This involved heating milk to evaporate some of the water, then adding sugar as a preservative.

George and Charles Page, the American brothers and Nestlé forefathers named their condensed milk 'Milkmaid'. High standards of quality and safety, a modern factory, efficient distribution and savvy marketing ensured the product was a success.

The brand that began Nestlé's 150-year history is still sold today as Nestlé Milkmaid. "Ours is the original condensed Swiss milk and the best. Every other kind is inferior," they boldly claimed.

A year later, Henri Nestlé, a German pharmacist who came over to Switzerland, launched his Farine lactée - a combination of cow's milk, wheat flour and sugar - in Vevey, Switzerland, saving the life of a neighbour's child. People across the world soon began to recognise the value of his life saving product, which led to a global company by 1872. Around this time he started using the now iconic 'Bird's Nest' logo. The Nestle name, of course, comes from him. To this day, Nestle is headquartered in Vevey.

Merger

Following a two-decade long battle as fierce competitors, the Anglo-Swiss Condensed Milk Company merged with Nestlé in 1905 to form the leading nutrition, health and wellness company it is today. The company introduced many new products over the years. By 1934, people could enjoy a chocolate drink with Milo and by 1938 they could 'start the day with a Nescafe', simply by adding hot water.

By 1948, they could enjoy Nesquik, a cocoa-based powder that dissolves easily in cold milk. And by 1957, they could finish the day with Maggi pasta 'ready meals' in cans.

Nestle has been active in Sri Lanka since 1906, just one year after the merger. Naturally, Milkmaid was the first product imported to the country and it is still a major product for Nestle in Sri Lanka. Nestle became a public-quoted company in Sri Lanka in 1983 and launched commercial production in 1984.

Today, its local portfolio comprises several major Nestle brands which are mostly produced locally at its state-of-the-art production facility in Kurunegala.

Nestle manufactures over 90 percent of its products sold in Sri Lanka. The company provides direct employment to almost 1,200 people and indirectly benefits over 23,000 distributors, suppliers, farmers and their families.

Among the other worldwide Nestle products are chocolates, coffee creamer, infant formula, pet care products, ice cream, milk powder, vegetarian cooked food, Italian food, cereals, whole grain breakfast, ready food, infant cereal, bottled water and food drinks.

In the year ended December 31, 2015, Nestle worldwide profits totalled 9,467 million Swiss francs (US$ 9,908 million), down from 14,904 million in 2014. Sales were 88,785 million Swiss francs (US$92,923 million), down from 91,612 million.

Excluding gains from the 2014 sale of the company's stake in L'Oreal, profits were up 6.5%, although the company has missed its sales-growth target of 5% to 6% three years running. Nestle confirmed its full-year outlook after first-quarter underlying sales growth of 3.9 per cent beat expectations as accelerating volume growth made up for slower pricing. As anticipated, the first quarter continued the positive momentum in real internal growth, with softer pricing. "We gained market share in the majority of our categories and businesses," the maker of Nescafe instant coffee and Pure Life bottled water said in a statement.

"By being a Nestle shareholder, as well as investing in a company capable of guaranteeing you a first-rate financial return, you are also putting your faith in a company that is having a positive impact on society and in its future," said chairman of Nestle S.A. Peter Brabeck-Letmathe.

Brabeck-Letmathe who spoke on April 7 before an audience of 2,853 shareholders at the Nestle annual meeting in Lausanne.

Nestle is venturing into several new areas in food technology - Nestlé SA scientists are untangling genetic profiles to develop medical foods - one of the company's big hopes for sales growth. The Swiss food company is tapping into an estimated $15 billion market for prescription-based powders and drinks to meet specific nutritional requirements to treat diseases. The scientists will develop medical foods containing natural compounds extracted from foodstuffs such as tomatoes, coffee and grapes.

Nestlé will expand research and innovation activities in Asia with the setting up of the Nestlé Research Centre (NRC) Asia in Biopolis, the biomedical research hub of Singapore. The expansion builds on Nestlé's strategic innovation partnership with Singapore's Agency for Science, Technology and Research (A*STAR), and provides a new base for Nestlé Research Centre, with a focus on healthy aging.

Nestle also engages in many CSR and community uplift programs. For example, the Nestlé Healthy Kids Global Program will be on-going in 80 countries to improve the nutrition, health and wellness of children around the world.

Nestle has run into controversy with some of its food products in several countries. In India, Maggi noodles were banned in June 2015 and subjected to tests after concerns were expressed that they had excess levels of lead and other harmful substances.

India's Central Food Technological Research Institute (CFTRI) last week submitted analysis reports on Maggi Noodles to the country's Supreme Court stating that lead levels for all samples are within permissible limits. The CFTRI Mysuru laboratory furnished the reports after testing 29 samples of Maggi Noodles not only for lead and MSG, but also for other safety parameters such as metal contaminants, crop contaminants and toxic substances. Nestle relaunched Maggi Noodles in India on November 9, 2015, after fulfilling conditions set by the Bombay High Court which lifted the ban.

Sri Lankan authorities also tested the locally manufactured noodles which were found to be safe.

In the USA, Nestle initiated a voluntary recall of select food products in March this year after finding glass pieces in certain DiGiorno Pizza, Lean Cuisine and Stauffer's Lasagna products. "No injuries have been reported," according to Nestle USA's press release. "We are recalling these products because they may contain small pieces of glass that may cause injury."

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