Transformational Challenge Nestlé 1990–2005

I wanted to stimulate your creative thinking and give Our goal is to earn consumers’ trust as their preferred you a more in-depth feeling of some of the resources Food, Beverage, Nutrition, Health and Wellness Company available in the Group, which are not always suffi ciently both for their own needs and those of their family mem- exploited. We have therefore again organised, not only bers, including their pets. We understand consumers’ the very much appreciated Product Exhibition, but also Nestlé 1990–2005 Challenge Transformational nutritional and emo- a visit to IMD, where we will be exposed to the latest tional needs/prefer- thinking on relevant business issues seen from the aca- TTransformational ransformational ences and provide demic point of view. A visit to our Research Centre at CChallenge hallenge them with innova- Lausanne, which, by the way, celebrates its 10th anni- tive branded prod- versary, will give you the opportunity to get a better idea NNestléestlé 11990–2005990–2005 ucts and services of how those 650 people can help you to achieve a AAlbertlbert PPfifi fffnerfner based on superior higher degree of competitiveness in the market place. HHans-Jörgans-Jörg RRenkenk science and technol- But before starting on the specifi c issues, let me make ogy. By serving our a preliminary remark: it is only fair that I should explain consumers and im- to you how most of our subjects for discussion fi t into proving their quality a broader framework, namely the development strategy of life, everywhere in of our Group. Over the past years, I have had more than the world, we ensure once the opportunity to refl ect on the shape of things profi table, sustain- to come, to use H.G. Wells’ wonderful title that conjures able, long-term capi- up the future as an imagined landscape seen from afar. tal effi cient growth. Many distinct scenarios passed through my mind – from Our Nestlé perform- a world of continuous economic growth as a result of ance model is to more free trade, worldwide democracy, and a more bal- deliver an Organic anced distribution of wealth – to the other extreme of a Growth target be- revival of socialistic, nationalistic thought, combined tween fi ve and six with trade protectionism and religious fundamentalism. per cent, combined However, the more scenarios I thought of and tried to with further improve- analyse in their relevance to the future of our Company, ments in EBITA and the more I was reminded of Winston Churchill’s words: ROIC margins. We strive for market leadership or strong “It is a mistake to look too far ahead. Only one link in No. 2 positions in all categories/markets in which we op- the chain of destiny can be handled at a time.” With this erate. On this basis, we seek to deliver an industry out- in mind, I decided to leave the big visions behind and performing long-term Total Shareholder Return and to re- to concentrate pragmatically on the many ideas and main an attractive fi nancial investment. Where Nestlé 662453_Nestle_UG_eng_Luxus.indd2453_Nestle_UG_eng_Luxus.indd 1 118.7.20078.7.2007 99:20:39:20:39 Transformational Challenge Nestlé 1990–2005 Transformational Challenge Nestlé 1990–2005 Outlooks – Insights Windows can provide a view either of the outside world or of an interior, and the tension and interplay between inside and outside can alter the perception of the viewer. The photographer Christian Vogt has produced a series of photographs that eloquently express this interplay, with the photographs on the cover and at the start of each chapter showing views into and out of Nestlé buildings in Vevey (headquarters), La Tour-de-Peilz (Rive-Reine training centre) and Orbe (factory and research building). Transformational Challenge — Nestlé 1990–2005 Table of Contents Foreword 7 Introduction 9 Part I Background and Environment 25 1. Background 27 2. The Political, Economic and Social Environment and its Impact on Nestlé 37 Part II Strategies and their Implementation 74 3. Key Managers and Strategies 77 4. Business Mix and Brand Policy 97 5. Geographic Expansion: Zones and Markets 139 6. Organisational Change 151 7. GLOBE 183 8. Research and Development 191 Part III Nestlé and its Stakeholders 223 9. Corporate Governance 225 10. Human Resources/Trade Unions 253 11. Nestlé and the Public 277 Epilogue 309 Appendix 315 I. Executive Board Members, 1990–2005 316 II. General Organisation of Nestlé S.A., 1 January 2005 318 III. Key Figures, 1990–2005 320 IV. Acquisitions and Divestments, 1990–2005 (selection) 322 V. Nestlé Research Centres, 1990–2005 (by country) 330 VI. Abbreviations 332 VII. Directory of Diagrams and Tables 338 VIII. Nestlé Publications (selection) 340 IX. Footnotes 344 X. Index (Individuals and Companies) 360 5 Transformational Challenge — Nestlé 1990–2005 Foreword Nestlé will be celebrating its 140th anniversary this year. De- spite having a history that stretches back almost one and a half centuries, however, the company has always kept itself young while at the same time remaining true to its underlying values. A 140th anniversary is no cause for major festivities in itself – nor have any been planned as such – and neither is it normally a reason to publish a company history. Convinced as I was that Nestlé and its environment had changed more over the last fi fteen years than was previously the case over a quarter of a century, however, I asked Nestlé‘s corporate historian Dr. Albert Pfi ffner to pick up where Jean Heer‘s work of 1991 left off and bring the company‘s history from 1990 to 2005 up to date. In view of the increasingly rapid pace of change both within and outside the company, I did not want to wait until our 150th anniversary to record the changes – and, of course, the continuities – that have shaped Nestlé over the last decade and a half. In their work, Dr. Pfi ffner and his co-author Dr. Hans-Jörg Renk, who previously worked within Nestlé’s Media Relations department, enjoyed complete freedom and unrestricted ac- cess to all internal sources, as well as to current and former senior Nestlé managers. They were not bound by any param- eters, but worked to the best of their knowledge and belief on the basis of historical facts. In this process they chose their own focal points, and were by no means compelled to inter- pret matters in a way that slavishly toed the company line. Af- ter all, one of the cornerstones of Nestlé’s corporate culture is the freedom it grants its employees to carry out their work and make their own decisions. I am delighted to introduce you to this publication, and hope you fi nd it an interesting read. Peter Brabeck-Letmathe Chairman of the Board and Chief Executive Offi cer 7 Transformational Challenge — Nestlé 1990–2005 Introduction It is rare for a corporate historian to be entrusted with the task of writing about a period – in my case since 1993 – which he has experienced himself and extends up to the present day. This task presents opportunities, but also brings its own risks. The opportunities arise from being able to familiarise oneself directly with the background circumstances, the environment in which decisions are made and most of the decision-makers themselves. I and my co-author Hans-Jörg Renk took advan- tage of the opportunity to speak to the key players and ask them about various issues, as far as was possible in the time available. As a historian I was more accustomed to writing about events and people – such as company founder Henri Nes- tlé – on the basis of secondary sources. Gaps due to lack of information simply had to be accepted. With this current project, on the other hand, the mass of available sources was immense. What was missing, however – and here we come to the risks – was the usual distance between the historian and his subject. The implications of many of the decisions made in the past have yet to become fully apparent, and a balanced assess- ment will not be possible until more time has passed. The particular motivation and challenge behind this publication was, therefore, to convey the “internal” perspective of the company, or rather of its main players. After all, it is not so much the environment itself that infl uences the actions of a company, but rather the attitude of the major players within the company towards that environment. In this respect, this publication may serve both as introductory reading and also a work of reference for the writing of Nestlé’s history at a later date. The chosen perspective is that of the Nestlé Group as a whole. This book does not set out to represent the history of individual divisions, markets, products or brands, which are only dealt with in selected cases as part of the greater whole. As a result, this publication focuses mainly on events from the point of view of the headquarters in Vevey. 9 Transformational Challenge — Nestlé 1990–2005 Tables and statistics are intended to provide a rapid over- view, present supplementary information and illustrate certain trends. However, the absolute fi gures should be approached with due caution as evaluation methods have been subject to frequent changes and series of fi gures extending over longer periods of time and various product areas, countries, curren- cies and groups often cannot be compared directly. The book is structured according to the main issues on which we have chosen to focus. In Part I, we investigate which of the changes in the corporate landscape during the period under review are considered the most relevant by senior managers, and as such are seen as having represented the main challenges for the Nestlé Group.

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