The History of Nestlé
Founded in 1866, Nestlé is the largest food and beverage company in the world. Initially, the company sold only infant’s cereal but they quickly diversified to include a variety of products including chocolate, coffee, soup, yogurt, water and frozen foods in their portfolio.
The organization employs nearly a quarter of a million people from 70 different countries around the world. Nestlé operates in almost every part of the world. They have reached an impressive global audience both through their own efforts and through joint ventures with companies like Coca-Cola. Nestlé ‘s success has been driven by a combination of product innovation and business acquisition. It is their motivation for growth and diversity that has allowed Nestlé to become the key player in nutrition that it is today.
In this article, I will explore 1) the foundation of Nestlé, 2) war time, 3) inter-war hardship, 4) another war in europe, 5) recovery, 6) quiet years, and 7) transformation into a global player.
FOUNDATION OF NESTLÉ
In 1866, the first condensed milk factory in Europe opened in Cham, Switzerland. The company was called the Anglo-Swiss Condensed Milk Company. The factory was owned by two American men, brothers Charles and George Page. They had see the growth of condensed milk in the United States and wanted to manufacture milk near to a large, quality source. Switzerland produced a large amount of high-quality fresh milk and had been the center of production for many milk based products since the early 19th century. The business owners created their milk products in Switzerland, but it was always intended for the English market. They opened a British factory in England in 1873.
Henri Nestlé, the company’s founder, worked as an assistant to a local pharmacist early in his career. He was trained in science and chemistry. Henri was an innovator by nature, and he experimented with everything from food to cement. In 1867, Henri Nestlé produced a nutritious combination of milk, wheat, and sugar. This cereal was so nutritious that it saved the life of a child. He called it Farine lactee. The product took off, and he began producing his baby food on a large scale. He started out buying the milk he needed to make the Farine lactee fresh each morning. By 1869, this method was no longer practical, and he began to purchase his milk supply from a collection center to have it delivered to his factory. Nestlé ‘s business acumen combined with his quality products resulted in an impressive growth of his business. By 1875, only 8 years after his initial launch, Nestlé products could be found across the globe in countries like Indonesia, Argentina, Egypt and even the United States.
The first Nestlé logo was created in 1868 and Henri Nestlé based it upon his family’s coat of arms. Henri had immigrated to Switzerland from Germany. The first logo was a play on his family name, Nestlé, which means ‘nest’ in the German language. The first logo included his familial origins by incorporating a nest and adding young birds being fed to link the logo to his baby food products. The logo has been reimagined and simplified over the years, but it has retained the same basic structure that Henri Nestlé developed in 1868.
Throughout the last decades of the 19th century, the two Swiss companies, Nestlé and the Anglo-Swiss Condensed Milk Company had become incredibly competitive. In 1905, Nestlé merged with Anglo-Swiss Condensed Milk Company.
The First World War brought serious disruption to economies and businesses all across Europe. Switzerland remained neutral, though armed, during the First World War. Even though they did not take part in the fighting, their economy was still substantially affected by the German loss and the breakup of the Austro-Hungarian Empire. Switzerland suffered a severe economic crisis caused by a decrease in energy consumption during the First World War.
Many industries in Europe were severely disrupted between 1914 and 1918. Even though Switzerland was not involved in the hostilities, it was difficult for Nestlé to find the goods needed to continue manufacturing as they had before. Distribution was also difficult because the entire continent was at war. Nestlé depended on fresh milk for many of its early products, and there were shortages of milk and almost every other fresh product during this period. Like many manufacturers, Nestlé sold most of their supplies in order to help support the needs of the surrounding towns and villages.
Some companies, including Nestlé, were able to survive this period of economic hardship because of the large scale fighting. Nestlé acquired several government contracts that required them to expand rapidly. When the war came to an end in 1918, Nestlé had 40 factories across the globe.
Although the global depression began in the 1930s, the period immediately after the world was a time of severe economic hardship in Central Europe. Unemployment soared in Germany, Poland and Austria while inflation reaches new levels. The economic storm had been brewing since before the war, but loss of the war only exacerbated the situation in most Central European countries.
Nestlé was only one of hundreds of companies who felt the force of the economic crash in the 1920s. Despite their difficulties, they were able to make it through this period of financial hardship and short supply. They acquired Calliet, Peter, and the Kohler Swiss Chocolate company in the mid-1920s. It was at this point that chocolate became one of the central focuses of the business. The investment in chocolate would spark innovation and diversification later in the century.
Much of the 1920s and 1930s were spent trying to remain afloat during difficult political and economic times. There was little growth or improvement until the year 1938 when Nestlé launched its first coffee product: Nescafé. The birth of Nescafé actually dated back to eight years prior when the Brazilian government offered Nestlé their surplus coffee in the hopes that they might preserve it.The Second World War was looming, and this slowed the growth of what was to become one of Nestlé ‘s most successful products. Ironically, it was the Allied soldiers who acted as the first brand ambassadors of Nescafé. Nestlé quickly reached a worldwide market as they sent tons of their coffee to the frontlines at the behest of the United States government.
ANOTHER WAR IN EUROPE
Because of Switzerland’s legendary neutrality during the wars of the 20th century, Nestlé ‘s Swiss plants were not requisitioned or repurposed by the Swiss government. This is in stark contrast to the manufacturing and production situation in most of Europe at this time.
In 1939, the management of Nestlé was shifted to the United States. Far away from the European front, Nestlé worked tirelessly to maintain the business that they had built both in Europe and around the world.
Innovation did not stop during the second world war. Nestea was created by Nestlé in the year 1940. The history of tea goes back thousands of years, and the success of iced tea had been well documented since the early 19th century. Nestea was not introduced to America until 1948. For a time, Nestea was a joint venture between Coca-Cola and Nestlé, two of the biggest food and beverage manufacturers and distributors in the world.
The end of World War II was a period of growth and recovery across the world. As political and financial stability returned to Europe, many organizations who had been strong enough to make it through the war grew substantially.
The end of the war marked a period of substantial growth for Nestlé as they began to acquire new companies and dozens of new products. One of the biggest acquisitions made was with Maggi, another Swiss company. Maggi was founded around the same time as Nestlé in 1872 by Julius Maggi. Maggi has some of the same initial goals as Nestlé. Julius Maggi wanted to improve the nutrition of working families by bringing them meals that were protein rich while remaining inexpensive. The organization was initially established in 1897 in Singen, a German town on the northern German-Swiss border. In 1947, Maggi went under several changes in leadership and a number of instances of corporate restructuring. Eventually, the holding company responsible for Maggi, Alimentana S.A., merged with Nestlé. Nestlé began manufacturing Maggi products that were sold all over the world. In many parts of Asia, Maggi noodles are synonymous with instant noodles and the brand holds a majority share of the market. Other products include seasoning sauces, bouillon cubes, and dehydrated soups.
In 1948, Nestlé introduced America to a product that would live on to become an icon in American culture: Nesquik. Nesquik is a chocolate powder that is mixed with milk to create an instant glass of chocolate milk. The brand also developed and added a strawberry flavor. The Nesquik Bunny, which first appeared in 1973, became an advertising hit among adults and children. Today, Nesquik includes two flavors and is available in both powdered form and syrup form.
With no major wars in Europe for several decades, all was quiet on the Western front. But not all was quiet in business. In 1974, Nestlé decided to make their first move outside the of the food production industry. Their target was L’Oreal. L’Oreal was founded in 1909 and was a world-renowned Parisian company with a flair for hair. The company was founded when Eugene Schueller, a French chemist, created a hair dye that become immensely popular among the hairdressers of Paris. Because of his popularity, he already had an established relationship with his target client and the press when he opened his doors in 1909. Between 1909 and 1974, L’Oreal expanded from hair dye to innovative hair care. In 1964, L’Oreal acquired Lancome, a prestigious name in French skincare and cosmetics that was already established throughout the world. L’Oreal went under a restructuring the brought the company public in 1963. Through this restructuring, Eugene Schueller’s daughter, Liliane Bettencourt, kept her majority stake in the company. In 1974, Nestlé offered Bettencourt a sweet deal. They would accept half of her stock in L’Oreal in exchange for a 3% stake in Nestlé. Together, Nestlé and the Bettencourt family owned 60% of L’Oreal’s shares, and L’Oreal became the biggest cosmetics company in the world during the 1980s. In 2014, Nestlé and the family reorganized their agreement, and Nestlé sold back some of its shares in L’Oreal to the family.
In 1977, Nestlé continued their diversification process when they took on Alcon Laboratories, an American pharmaceutical company. Alcon was founded in Fort Worth Texas in 1945, and it specialized in creating ophthalmic products including products for contact care. Nestlé purchased the company in 1977 in a successful attempt to segue into the pharmaceutical market. Under Nestlé ‘s watch, Alcon grew to operate in 75 countries around the world with products available in 180 countries. In 2002, Nestlé offered its stock in Alcon. In 2008, a quarter of their stock was purchased by Novartis. Novartis now owns 77% of Alcon Laboratories. Nestlé is no longer the owner of any of Alcon’s shares.
In 1984, Nestlé made business history when it offered to pay $3 billion to acquire the Carnation Company. This was one of the biggest acquisitions by a company in the food industry. In fact, it was rumored to be the largest merger of two companies in history outside of the oil industry. Carnation was attractive to Nestlé not just because of their evaporated milk products but because they were a diverse company. Carnation was the owner of Friskies, an important and profitable line of pet food. They also owned Contadina tomato products. The deal was so large that it was subject to governmental approval, but the FTC granted permission in 1985.
Nestlé ‘s coffee history went back to 1940 when they worked to preserve the Brazilian government’s coffee bean excess. The story took a new turn in 1986 when the company launched Nespresso. Nespresso was designed to be a high-end luxury coffee, different from the freeze-dried budget coffee that its predecessor had become. Today, Nespresso is known as the premium in portioned coffee and is represented in advertising by George Clooney. Nespresso has boutique stores around the world and has agreements with luxury hotel chains like The Ritz-Carlton and Shangri-La Hotels.
TRANSFORMATION INTO A GLOBAL PLAYER
After the fall of the Berlin Wall in 1989, a huge amount of Europe once again became an accessible market. Poland, Hungary, and the Czech Republic would soon be known as emerging European markets. China became more accessible during this period, as well. For a company with international ambitions, like Nestlé, this was the ideal trade situation. With new diverse markets to serve, Nestlé was presented with a unique opportunity to become an even more diverse organization.
The first major acquisition during this period was in 2001 when Nestlé acquired and merged with the Ralston Purina Company. A new company in comparison, Purina created products like Friskies, which was a wildly popular brand of pet food in the United States. After the merger, a new pet food company called Nestlé Purina PetCare Company was established.
Nestlé picked up the pace in 2002 when they took on two more of North America’s most successful companies. This time, the theme was frozen products, and Nestlé picked up Dreyer’s ice cream in July. The next month, Nestlé bought Chef America Inc, a frozen food manufacturer, for a cool $2.6 billion. The plan to take on the freezer aisle continued in 2003 when Nestlé acquired Movenpick Ice Cream, a luxury Swiss ice cream company. The decade came to a head in a spectacular fashion when Nestlé took over both Jenny Craig and Uncle Toby’s in 2006.
Towards the end of the decade, Nestlé made one of its biggest-ever acquisitions when it purchased Gerber. This move was a return to Nestlé ‘s historic roots as Gerber continues to be one of the key baby food manufacturers in the United States and Canada. Nestlé purchased the business for $5.5 billion in 2007.
Nestlé has come a long way from its 19th-century Swiss-German origins in nutritious gruel to become one of the biggest production conglomerates in the world. Nestlé has carried with them their spirit of innovation and nutrition from the 19th century into the 21st century. Today, Nestlé owns more than 2,000 brands that are sold in more than 197 countries around the world. They have a clear objective to be the leader in health and wellness. The company has not limited itself to nutrition but moved into the beauty and health categories in order to create a truly diverse company.
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