Nestlé – The Infant Formula Incident by pengxiuhui


									                      Nestlé – The Infant Formula Incident

Summary of Case and Results
In response to a pamphlet entitled “Nestlé Kills Babies,” published in 1974 by the Swiss
consumer/activist group, Arbeitsgruppe Dritte Welt, Nestlé Alimentana filed a four-count
libel suit against members of the organization. The pamphlet was a reprint of an earlier one
entitled “Bottled Babies,” published by a similar British group. Both alleged that false
advertising had prompted mothers in LDCs to use infant formula instead of breast feeding,
and consequently caused the deaths of thousands of children. However, the original pamphlet
had not mentioned Nestlé or any of the other companies by name, and thus did not raise the
issue of libel.

Three of the charges, which Nestlé subsequently withdrew, related to allegations made in the
pamphlet about Nestlé’s promotional methods in LDCs. The fourth charge, which led to a
judgment against thirteen members of the group in June 1976, focused on the defamatory title
“Nestlé Kills Babies.”

In his decision, the judge stated that the cause behind the injuries and deaths was not Nestlé’s
products; rather, it was the unhygienic way they were prepared by end-users. Although Nestlé
won its case, the firm’s victory was diluted by (1) having to pay one third of the court costs
and (2) being told by the judge to change its marketing methods to prevent further misuse of
its products. The defendants were ordered to pay $120 each in damages to Nestlé and two
thirds of court costs.

Companies selling consumable products (foods, beverages, pharmaceuticals) to LDCs have
long recognized the need to adapt their promotional techniques to their consumers who are,
by and large, poor and illiterate. In recent years, one particular group of food
producers—those firms making infant formula and other milk products—has come under
severe attack by various religious, consumer and governmental organizations. Criticism
focuses on two issues: (1) that companies allegedly use false advertising to induce mothers to
substitute formula for their own milk, and (2) that firms are directly responsible when misuse
of their products results in illness or death. The assault was dramatized in the recent Swiss
case involving Nestlé Alimentana.

The responses of milk product manufacturers have ranged from writing corporate policies on
LDC marketing to organizing industry councils and holding meetings with pressure groups.
But most significantly, companies have altered marketing practices in ways that other firms
making consumable items should find instructive. These changes include

    Tightening up direct selling methods. A common practice is to have “mother-craft
    nurses,”—local women who may be nurses, dietitians or midwives—visit clinics and
    homes to encourage doctors and consumers to use infant formula. Critics charge that
   these women are often unqualified to speak on nutrition and that they distort facts to
   make formula feeding more attractive than breast feeding. As a result, many firms now
   forbid representatives from discouraging breast feeding and demand that they go to
   clinics and homes only if invited or sent by a family doctor.
   Stressing nutritional training. Firms are improving the nutritional instruction given to
   representatives. In addition, promoters are providing consumers with educational
   presentations, including seminars, films and brochures.
   Such training not only combats misuse of products, but also benefits the manufacturer.
   For example, one corporation whose sales representatives in Indonesia conducted local
   demonstration on uses of a condensed-milk product found that the presentations
   accomplished several aims: (1) alerted the representative to problems people had in
   preparing and using the product, (2) served as a rough test market for the product and (3)
   helped to bolster the firm’s image.
   Controlling distributors’ promotional activities. Manufacturers selling milk products
   through distributors have often given them free rein over local advertising. Some
   corporate executives worry about becoming too closely associated with distributors’
   advertising, fearing possible liability for erroneous claims made by distributors. However,
   such liability would be difficult to avoid in any situation involving a company’s
   trademarks and products. A few firms, recognizing this, are currently monitoring all new
   promotional campaigns of distributors.
   Curtailing mass media advertising. Several corporations that formerly advertised infant
   formula on TV, radio, billboards and newspapers are now relying solely on sales
   Improving labeling and directions for use. Some firms have revised package
   instructions to ensure safety. For example, Wyeth Laboratories’ X S-26 formula labels
   include the following: (1) comprehensive, easy-to-follow directions on preparing and
   storing the product (vital in areas lacking refrigeration and/or clean water), (2) a
   “suggested feeding table” giving the amount of formula and frequency of feedings
   according to an infant’s weight and age, (3) a statement in bold type stressing the
   importance of following directions carefully and (4) a statement on the preferability of
   breast feeding newborn babies and the proper role for prepared formula in an infant’s
   Developing promotional/instructional materials to help low-literacy users. The
   International Council of Infant Food Industries, formed in 1975, is studying ways to
   improve communication methods for use in areas of high illiteracy. Possibilities include
   cartoons, pictures, radio programs and even sound trucks. (Use of new informational
   materials would be subject to approval of local authorities.)
Price of Social Responsibility
For some firms, the cost of maintaining ethical standards is high. One large food company
actually closed down its milk-processing plant in Pakistan because pasteurization laws were
not being enforced, and local firms selling unpasteurized milk were gaining a competitive
edge. Additionally, the quality of the firm’s product was tarnished by local consumers who
frequently diluted the milk with polluted stream water to “stretch” it for their own use or for

In light of these problems, and others—such as the high cost of marketing and training, and
the relatively low sales volume—some companies have contemplated withdrawing these
products from LDC markets. However, the market potential for milk products in these
countries is strong because of increasing populations and rising standards of living. In
addition, the growing role of women in the labor force is creating a greater need for infant
formulas. Thus, it appears that firms will remain in these markets.

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