It’s pretty unusual for the head of a global corporation to lay the blame for business failure on a named executive. But that’s exactly what Peter Brabeck, chairman and chief executive of Nestlé, did last week to Chris White, former Nestlé Rowntree managing director. Essentially, Brabeck accused White of being a clever ice-cream salesman incapable of grasping that the seasonal product extensions characteristic of the ice cream market are inappropriate to the much more stable confectionery business. Consequently, White had failed, and cost the company a lot of money in the process.
It’s arguable that this amounts to an extraordinary, and refreshing, mea culpa from a man who had played an important part in appointing White in the first place. But is the judgment we are being invited to accept a fair appraisal of the situation at Nestlé Rowntree, and White’s role in bringing it about? In short, is White being made a scapegoat for a deeper-rooted corporate malaise?
It has to be said that White’s brand of antipodean charm did not always make him friends during his tenure. He was brought in to be a new broom – and relentlessly sweep away the past is what he did, with demonic energy. Such an individual and such a strategy were always going to be high risk, with exaggerated success or failure being the consequence. In that sense, White’s record is directly connected with the 275 proposed redundancies at the company’s York headquarters. As he is with leading brand KitKat’s disastrous dive, and a lacklustre performance from Smarties and Polo (though equally, he must take credit for the spectacular rise of Aero).
And yet, White alone cannot be blamed for the direction in which Nestlé Rowntree is heading. It is arguable that Nestlé’s strategy in acquiring Rowntree for an inflated £2.5bn (by 1988 standards) was flawed from the start. Not only had Nestlé overpaid (and so ended by playing financial catch-up), it also seemed mildly surprised that Cadbury, already a global confectionery company, should fight back so ferociously on its home ground once the Swiss predator tried to poach its territory. Nestlé believed that the takeover would bring economies of scale to the confectionery business, and thus justify the price paid. The idea was to use the successful UK business as a cash cow; and exploit Nestlé’s distribution system to expand the brands into Europe. Though Nestlé’s fairly enlightened hands-off policy in York certainly had its successes – KitKat became the top-selling countline in the early 1990s – it is debatable whether the strategy as a whole could work. As one City analyst drily puts it: "Extension of the chocolate franchise had not been a recipe for success for Cadbury or Hershey."
Add to this that Nestlé’s corporate development over the years has been towards a "health, nutrition and wellness" company and the confectionery sector is polarising in the opposite direction. Then reiterate the remorseless combativeness of Cadbury (which seems to have got its act together and saw off with particular vigour Nestlé’s critical Double Cream launch). And ask the question: is confectionery a battleground that Nestlé will wish to fight on in the long term?