Nestlé faces an ethical dilemma

Just what persuaded Nestlé to run an ad boasting of its achievements in the already controversial infant formula market remains an enigma. As does its choice of medium, an obscure student rag in Oxford.

Less mystifying, three years later, is the reaction it has created: a first-class public relations disaster. The Advertising Standards Authority appears poised to publish a damning verdict on Nestlé, which effectively brands the global corporation a liar, insofar as it claimed to have marketed infant formula products ethically.

No matter that Nestlé is appealing; as a result of a press leak, the damage has been done. Publicly, the PR machine tries to marginalise the issue: nothing new, another twist in a long-running saga – which of course it is.

Privately, in the Vevey boardroom, things may be viewed slightly differently. And for good reason. Few companies can be as sensitive to the importance of public image in successfully marketing its brands as Nestlé. Indeed, only last year, its newly installed chief executive, Peter Brabeck, was heard to say: ‘There is more to successful brand leadership than maximising economies of scale – we also need to appeal to the individual consumer’s emotional side. Our brands must project a familiar closeness and they cannot do so if they are not in tune with the ethnic, social and religious background of the people who purchase them.’

How true, as McDonald’s and Shell have found to their cost in dealing with their own recent public relations disasters. McDonald’s came across as a pedantic and somewhat absurd bully in the wake of the McLibel cause celebre; while Brent Spar and the Ogoniland affair portrayed Shell, one of the world’s most respected corporations, as an environmental rapist.

The difference between them is that Shell has apparently learnt its lesson. It has grasped the importance of the “consumer’s emotional side” and done something about it, by actively engaging in public debate.

Nestlé, on present evidence, appears to prefer the defensive route favoured by McDonald’s: obfuscation and legal prevarication. After all, this policy has served it well enough for over 20 years – why should it not continue to do so?

One answer is that the climate of public opinion has changed, and with it notions of responsibility. Twenty years ago, for example, it is difficult to believe Glenn Hoddle would have been sacked.

Another is that Nestlé’s management needs all the help it can get. The world’s largest foods group has been facing a mysterious sales slump, which is threatening to undercut the prestige of its marketing-bred chief executive. And with it, perhaps, the company’s highly rated share price.

Decidedly, this is not the moment to engage in another bout of public controversy.

Cover Story, page 28