Paper 2: Nestle Neglects its Social Responsibility


Nestle Neglects its Social Responsibility

“Infant formula was developed in the 1920s to provide a medically acceptable alternative to breast milk for mothers who were not able to breast-feed their babies.  By the 1960s, 75 percent of all American babies were being fed infant formula” (Velasquez, 1).  Infant formula became a trusted source of nourishment for newborns in developed nations. However, when the previously climbing birth rates in the United States and Europe came to a slow in the 1960s, infant formula manufacturers realized that they would need to seek out new markets for their products in order to maintain a growth in sales.  Third World nations with high fertility rates would provide them with a large new sample of potential consumers.  Many of these nations were beginning to urbanize which would make it easy for companies to communicate their message to consumers. Individuals in these areas could now access traditional advertising through radio, television, and newspapers. Furthermore, consumers in these developing nations would be eager to purchase products that would allow them emulate First World practices.  Expanding distribution to Third World nations would be a profitable business decision.

In the 1960s, two vastly different types of companies, drug companies and food companies, were producing infant formula.  Their varied business backgrounds impacted the way they planned on introducing their formulas to this new demographic of consumers.  “The three main American drug companies producing infant formula (Bristol-Myers, Abbott Laboratories, and American Home Products) tended to emphasize dietary research in the development of their formulas and tended to market their formulas through medical channels…The two main food companies (Nestle—a Swiss company—and Borden’s), on the other hand, entered the infant formula business as a way of diversifying the canned milk products they were already producing and they tended to market their product through conventional consumer-oriented mass advertising” (Velasquez, 1).  Nestle held fifty percent of the worldwide infant formula market share, which totaled $1.5 billion in 1978.  Due to its large stake in the market, Nestle became the brand name synonymous with this expansion into Third World nations.  Nestle used its influence to set the pace for expansion, leading the way for other formula companies to follow.

Eager to augment earnings, Nestle began to set up advertising campaigns in the Caribbean, South America, Africa, and Southeast Asia to assist its entrance into these new markets.  It took to several platforms to spread the word and raise awareness of infant formula.  Instead of easing into the introduction of its products, Nestle bombarded consumers.  “In August, 1974, for example, Nestle broadcasted 135 30-second advertisements for its infant formula Lactogen in Sierra Leone,” which was significantly larger than those aired by competitors like, “Unigate, another infant formula company, [that] ran 45 30-second advertisements” for its formula in Sierra Leone during the same time period (Corporate Crime & Violence, 1987, 2).  Nestle knew that in these areas only the most elite watched television and that radio advertising would be a better medium for connecting with those who were less affluent and would be most likely to purchase its products. In Malaysia, “Nestle ran three and a half times as many formula ads on radio as on TV in 1976” (Velasquez, 2).  A portion of the population in many areas did not even have access to radio; advertisements were posted on the sides of trucks and station wagons so that all those who passed by could see.

The advertisements Nestle ran were aimed at “[persuading] third-world women that formula is the modern, healthy, and Western way to feed babies.  Bottle-feeding [became] a status symbol; breast-feeding, a vulgar tradition” (Velasquez, 2).  Infant formula was marketed as the solution for fighting malnutrition.  If you gave your children formula, they would grow to be like hearty and healthy white children.  Upbeat jingles and eye-catching images were used to entice women.  “White man’s powder that will make baby grow and glow,” sung one Nestle radio advertisement (McGraw-Hill, 1).  Another chanted, “Help your baby grow healthy and happy.  Give him [Nestle’s] Lactogen with Honey” (Velasquez, 3).

Furthermore, Nestle targeted mothers just as they gave birth, giving them little time to try breast-feeding before being exposed to formula.  Women dressed in white nurse outfits visited maternity wards, educating new mothers about formula and leaving them with free samples.  Their polished appearances led women to believe that they were medical professionals when in fact they were simply sales representatives.  Nestle even gave out accompanying booklets outlining early childhood and the advantages of bottle-feeding.  Nowhere were women told that breast-feeding would offer their children significantly greater health benefits given their socioeconomic conditions.

Nestle’s decision to move into Third World nations was a profitable one.  As anticipated, new mothers were eager to try this First World product that promised them healthy and well-off children.  Focused on its continuously climbing revenue, Nestle was unprepared for the events that were about to unfold.

Alan Jackson was a doctor at a clinic at the University of the West Indies in Kingston.  Jackson became alarmed when a Jamaican woman showed up at the clinic with her two children, a four-month-old son who was five pounds, and an eighteen-month-old daughter who weighed twelve pounds (she lost another four pounds soon after her first visit to Jackson).   The woman told Jackson that she had ten previous children, none of which had ever suffered form malnutrition.  These were the only children that she had fed infant formula.  “One tin of feed should have lasted for something under three days.  She said that one tine of feed lasted two weeks to feed both of the children,” reported Jackson (Solomon, 1981, 1).  Due to her weekly income of $7, this woman was forced to make the formula last as long as possible.  Dr. Jackson was not the only doctor to encounter patients facing these conditions. Throughout Third World nations where formula was being distributed, infants were facing malnutrition and diarrhea at alarming rates.  In 1974 the world became aware of the escalating problem when a British journalist released a twenty-eight-page report titled “Nestle Kills Babies.”  Nestle was being blamed for driving sales while employing unethical business practices.

World activists immediately cited several flaws in Nestle’s decision making.  Had the company taken a few short minutes to evaluate these developing nations, executives would have immediately seen why bringing infant formula there was dangerous.  Given the stark differences in health conditions between the developed First World nations and the new underdeveloped markets it is clear that giving infants the same formula would not be safe.  Upon birth, children do not have the antibodies needed to build up a strong immune system and fight diseases.  While this may not be a large issue for First World newborns who will receive immunization boosters from their pediatricians, this is a concern for children in underdeveloped nations.  They will not receive the necessary antibodies from vaccinations; instead, they receive their defense from their mothers who pass on their antibodies through breast milk.  Infants are stripped of their defense mechanism when they are given formula in place of their mother’s milk.  Those consuming Nestle’s formula were left without a protective shield and became susceptible to illnesses that they may have been able to otherwise fight off.

Furthermore, Nestle should have been able to predict that given the socioeconomic conditions in these nations consumers would not be able to properly use its products. Infant formula is expensive.  After women finished the free samples given to them in maternity wards they were forced to spend a large portion of their income on new formula. In order to make the formula last as long as possible women began to dilute it before giving it to their children. This reduced the nutritional value infants received.  Additionally, the formula requires refrigeration after opening.  Simple appliances like refrigerators are not readily available in many developing nations; women were forced to leave their opened formula in warm temperatures that made it susceptible to bacteria growth.  Moreover, infant formula comes in powdered form and requires water in its preparation process.  In many areas the available water is not safe for consumption.  Infants were digesting formula that was prepared using the local water that was often used for bathing and cleaning clothing.  This same water was used to wash the bottles that infants were fed from, far from a sterile cleaning method.

Had these mothers been willing and able to follow proper formula care, they were unable to read the instructions on Nestle product labels in order to do so.  Literacy rates are relatively low in many of the areas where formula was being sold.  In the case that a consumer was literate, she was still unable to understand the labeling, as it was not written in local dialects that consumers could comprehend.  Lastly, critics scorned Nestle for its advertising techniques.  The brand falsely portrayed formula as the best feeding option. These consumers were easily impressionable and were swayed by flashy images and jingles.  Because they were not familiar with this type of advertising, they were unable to recognize Nestle’s desire to boost sales and believed all advertising messages to be true.

Nestle ignored any signs that bringing formula to developing nations was detrimental.  It based all of its decision making on its shareholders.  The Swiss company was willing to ignore any of the negative implications associated with the distribution of its products.  Milton Friedman would support Nestle and its actions.  Under his shareholder model of business ethics, it is acceptable for a brand to operate with the sole intention of turning a profit. Entering these developing nations was a strategic business move that would increase the brand’s revenue, a successful campaign under Milton’s school of thinking.  “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud,” he wrote (Friedman, 1857, SM17).  Milton would argue that considering the socioeconomic constraints of the people in these developing nations was beyond the scope of Nestle’s responsibility.  The only obligation Nestle had was to its shareholders, who expected that the brand would try to increase revenue as much as possible.

Opponents to Nestle favor a stakeholder ideology.  They believe that business decisions should not be driven solely by the desire to augment earnings.  Before business plans can be implemented, all those potentially impacted by the decisions made must be considered.  Nestle had an ethical obligation to the residents of these developing nations; if they were not fit to consume the brand’s infant formula the company should have refrained from entering the market. Edward Freeman would staunchly support these stakeholder-concerned thinkers.  Capitalism must “[recognize] the common-sense practical world of global business today” he wrote (Freeman, 2000, 178).  In conducting global business, it is a company’s responsibility to tailor its actions to the varied practices and conditions in different areas.  Stakeholders have diverse needs and restrictions based on their geographic location; a company must consider that in its planning.

Donaldson would further disagree with Nestle’s actins, believing that the company neglected its role in the global market.  “The existence of fundamental international rights implies that no corporation can wholly neglect considerations of racism, hunger, political oppression, or freedom through appeal to its ‘commercial’ mission” he wrote (Donaldson, 1990, 159).  Nestle ignored the fundamental rights of individuals in Third World nations when it failed to consider the hunger and economic issues facing consumers; instead it solely focused on its commercial goal of increasing revenue.  Donaldson argues that corporations must avoid depriving and help protect from further depriving.  It was not Nestle’s job to aid those who are already deprived by enhancing welfare.  It did however need to ensure that its actions were not worsening the welfare of humans.

Worldwide unrest forced Nestle to change its practices. Under pressure from the World Health Organization, the company stopped advertising and directly consulting new mothers in Third World nations where its formula was sold.  It created an audit commission and arranged to meet with organizations around the world that were concerned with its business practices.  Although Nestle has amended its practices, the distribution of infant formula in underdeveloped nations continues to be an area of ethical concern in the twenty-first century.

Exhibit 1: Worldwide protests resulted in the publication of countless letters and articles.

 

 

 

 

Exhibit 2: Nestle and its infant formula remains an ethical question in the twenty-first century.  Angry protesters take to social media.

 

 

 

 

 

 

Works Cited

Donaldson, Thomas J. “Rights in the Global Market.” Trans. Array The Ethics of International Business. New York: Oxford University Press, 1990. Print.

Freeman, Edward. “Business Ethics at the Millennium.” Philosophy Documentation Center. 10.1 (2000): 169-180. Web. 20 Sep. 2012. <http://www.jstor.org/stable/3857703&gt;.

Friedman, Milton. “A Friedman Doctrine—T e Social Responsibility Of Business Is Increase Its Profits.” New York Times13 Sep 1970, SM17. Print.

“Multinational Monitor.” Multinational Monitor. 8.4 (April 1987): n. page. Web. 21 Nov. 2012. <http://multinationalmonitor.org/hyper/issues/1987/04/formula.html&gt;.

Murray, J. Alex, Gregory M. Gazda, and Mary J. Molenaar. “Case 1-2 Nestle: The Infant Formula Controversy.” Trans. Array. Fifth EditionMcGraw-Hill, Web. 21 Nov. 2012. <http://highered.mcgraw-hill.com/sites/dl/free/007352994x/862122/case_1_2_Nestle_The_Infant_Formula_Controversy.pdf&gt;.

Solomon, Stephen. “The Controversy Over Infant Formula.” New York Times [New York] 06 Dec 1981, n. pag. Web. 21 Nov. 2012. <http://www.nytimes.com/1981/12/06/magazine/the-controversy-over-infant-formula.html?pagewanted=all&gt;.

Velasquez, Manuel G. “Infant Formula in Developing Countries.” Trans. Array Business Ethics: Concepts and Cases. . Sixth EditionPearson, 2006. Web. 21 Nov. 2012. <http://wps.prenhall.com/hss_velasquez_busethics_6/38/9873/2527720.cw/index.html&gt;.

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