CASE STUDY WK 2

1

ENTERING A NEW MARKET: NESTLÉ ALIEMENTANA*

Nestlé Aliementana of Vevey, Switzerland, one of the world’s largest food processing

companies, is a leading producer of baby formula. While widely considered a secondary choice to

breast-feeding, baby formula is viewed as necessary in certain situations, i.e., where mothers cannot

produce milk.

It was the late 1960s. Nestlé felt its sales begin to level out in Europe and the United States.

Looking for new opportunities, instead of attempting to find new products for existing markets, Nestlé

decided to find new markets for its existing product. And Nestlé did not have to look far. Almost

immediately Nestlé recognized both the opportunity and local need for its baby formula in developing

countries around the world, particularly in Africa.

PROPOSAL

Nestlé had decided to enter Africa with its baby formula. It was the job of Gerry Smith, Vice

President of New Business Development, to decide how to do this. Mary Stuart, a co-worker, came to

Gerry with a brilliant idea. She explained, “We have a problem. The languages in these countries vary.

We simply do not have the knowledge base to translate our marketing materials across languages,

dialects within languages, to groups of people, many of who cannot read, in markets where advertising

media is often scarce, to say the least. Why not use images with which people can connect?”

Mary’s idea was to abandon the traditional sales pitch, and to have representatives distribute

baby formula dressed in white nurse’s outfits. Free samples could be given generously to hospitals and

area health care workers in order to encourage those institutions to promote their baby formula.

Gerry was intrigued. Nestlé needed new markets, and the people in these markets needed baby

formula.

LIMITED TRIAL

Gerry decided to go ahead with the trial. Sales figures shot up! His initial thoughts had been

correct. There was demand for baby formula in these countries. Nestlé decided to market baby formula

in developing countries according to Mary’s proposal.

*This case is based on a real situation. Some of the names and events have been disguised or modified for the purpose of illustration for the intended class discussion. Copyright © 2012 by Neu Academic Press. To order copies or request permission to reproduce materials please go to http://www.study.net. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet or transmitted in any form or by any means—electronic, mechanical, photocopying, recording or otherwise—without the permission of Neu Academic Press.

2

LAURA

Several months later, Laura entered Gerry’s office with concerns. Laura was in charge of Africa

sales. She spent a lot of time traveling among the countries in Africa to see firsthand how operations

were going.

“Gerry,” she began. “Sales figures in Africa could not be better. But I am seeing things that

concern me. These mothers….”

“Yes?” asked Gerry, somewhat puzzled.

“These mothers are not using our formula the right way. The water to which they have access is

often impure. We emphasize the need to boil the water and sterilize the bottles and nipples…. But I do

not think they are doing it. And….” Laura paused.

“Yes?” again Gerry asked, this time somewhat agitated.

“And our baby formula is expensive,” she explained. “It costs sometimes half of what the

mothers have to cover all of their household expenses.”

“So?” Gerry asked. “We don’t force them to buy it!”

“You’re right,” Laura acknowledged. “But they are buying it. Only…. They’re diluting it. These

babies are not getting the nutrition they need. I am concerned.”

BABY FORMULA GOING FORWARD

Although Gerry appeared upset with Laura, he was really upset more generally. He knows what

happens next: infants become sick and could die. Malnutrition is a chief risk if baby formula is not used

properly. Medical professionals in Europe and the United States spend a lot of time educating

communities about proper use of baby formula.

But it certainly would not make sense simply to pull out of Africa, would it? That would seem

almost just as harmful in that mothers who use baby formula responsibly and need baby formula would

no longer have access to it. Is it really Nestlé’s responsibility that people are misusing the company’s

product?

Imagine that you are Gerry. What do you do?