Nestlé acts to boost its corporate image

Nestlé chief executive Peter Brabeck took the unusual step last week of flying to London to present a review of the 1998 financial results for the world’s biggest food producer.

It was the first time since 1988 that Nestlé, which is listed in Switzerland, had felt the need to explain its inner machinations to the UK media. Eleven years ago, there was a clear reason for such a move: to announce Nestlé’s acquisition of Rowntree.

This time round, however, there were no major acquisitions behind Brabeck’s appearance on the podium at London’s Mandarin Oriental hotel, alongside UK chairman and chief executive Peter Blackburn and other senior members of the corporate team.

On the agenda this time is an attempt by Brabeck and Nestlé’s UK operation to build its corporate image in its fourth largest world market.

Blackburn believes that Nestlé is unfairly saddled with an image of corporate anti-hero for its alleged role in promoting baby milk sales in developing countries, with the attendant problems of mixing the formula with unclean water.

Nestlé is highly sensitive to this issue, which has been stirred up by a recent adjudication by the Advertising Standards Authority against an ad Nestlé placed in a student paper in 1996, which claimed it was a responsible marketer of baby milk in developing countries.

Blackburn previously ran Nestlé in France, where the company is treated reverentially and has a clean, caring image comparable to Boots The Chemist in the UK. But for this devout, moralistic Yorkshireman, an ex-accountant and former executive at Rowntree with its Quaker tradition, the ethical drubbing Nestlé is subjected to in the UK over activities in the developing world is hard to take. One source says: “It affects the morale of people in the company. When they meet friends, people automatically think they work for an unethical company. When they meet government ministers, there is also suspicion.”

Brabeck’s appearance on the public podium in London is part of a new strategy by Nestlé to dispel this unfortunate image.

The company is well aware that it has been demonised in the UK over the baby milk issue mainly through the consumer boycott co-ordinated by Baby Milk Action. Whether it knows how best to respond is another matter.

The efficient marketing machine has crunched up against what it sees as an emotional response in the UK to the baby milk issue as well as the nascent issue of genetically modified food.

Its new course of action to meet the criticism head on, open its doors to public scrutiny and present an image of corporate responsibility does not come easy to the traditionally shy and retiring Nestlé, which exudes cold, clinical efficiency. It is like watching Star Trek’s half-Vulcan, half-human Dr Spock wrestling with his human emotions. One source says of Brabeck: “In most countries he goes to, he is treated as some kind of corporate saint. When he comes to the UK he is treated like Darth Vader.”

Nestlé does not seem to understand why these ethical issues are so high up the agenda in the UK when they are not elsewhere.

Brabeck told the assembled journalists last week: “We can’t simply ignore the controversy over infant formula that crops up now and again. In the UK it has been and is still a very important issue, although it rarely makes headlines now.

“I want to state that no human institution is infallible and if one of our employees makes a mistake let me assure you we are reacting immediately. We are a responsive and responsible company in this area. But I have to say, not infallible.”

Brabeck seems equally perplexed over the opposition to genetically modified foods in the UK. Nestlé has pledged to exclude genetically modified organisms from food sold in the UK, even though Brabeck says: “We share the concerns that many governments have over the long-term sustainability of agricultural production. To handle this risk, we have to be close to this new technology. We aren’t going to avoid the risk by not researching technology.”

In the event, Nestlé revealed that during the first quarter of this year, it performed relatively strongly in the UK, recording volume rises of seven per cent in the first four months of this year, performing well in coffee, with stable sales in food and ice cream, and encouraging signs of innovation in confectionery.

But still the company’s big failure remains an inability to build a strong corporate brand franchise in the UK.

Nestlé the brand has few emotional resonances with British consumers, which makes criticisms of its ethical approach so much more difficult to counter.

The company has tried over the years to build up the Nestlé brand name by introducing it into ads and through direct marketing campaigns. But its biggest brands such as Kit Kat are not associated directly with Nestlé, though Nescafé has some associations.

Brabeck’s press call was designed to alter negative perceptions among the chattering classes. But Nestlé had better act fast. Baby Milk Action will not let the issue lie in fact it is stepping up its campaign, and widening the terms of its boycott.