Nestle's Infant Formula : A Challenge in Marketing Strategy.

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IPMI Business School

Business Policy & Strategy Case Done by Yan Sugondo

Regular Class of January 2003

Nestle’s Infant Formula :

A Challenge in Marketing Strategy

Company Backgrond

        PT Nestle Indonesia (Nestle) is one of the largest producer in consumer goods in Indonesia. It holds numerous well-known brands, e.g. Dancow, Milo, Carnation, Milkmaid, Bear Brand (milk products), Nescafe, Nestea (drinks), Maggi (culinary), Kokokrunch, Honey Stars (cereal), also Fox’s, Smarties, Kitkat, Polo (candies & chocolate). Its commercial operation in Indonesia had started  since 1965, with the opening of its first factory in Waru, Sidoarjo, East Java. Currently, Nestle has three operating factories, with around 2,000 employees, Kejayan (East Java), in Panjang (Lampung), and in Cikupa (Banten). In addition, Nestle has a long term relationship with East Java milk farmers for being the largest milk customer. With the moto “Good food, good life”, Nestle has a mission to take part in society development, by producing high quality products.

One implementation of Nestle’s mision to produce high quality products is producing healthy products for babies, such as infant formula and babies’ dairy food (in Indonesia, Nestle still imports from other Nestle’s factory in Malaysia). Under this product line, Nestle has Lactogen, NAN & PreNAN for infant formula, and Nestle baby cereal & biscuits. However, compared with other milk products, Nestle’s infant formula has  low contribution to total sales. Exhibit 1 shows Sales to Trade in Tonnage for all Nestle’s milk products, including infant formula   for    the    last

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three years. As we can see, sales of infant formula contributes 18% in 2000, 16% in 2001 and 15% in 2002, with average increase per year by only 1%-5%.

The main reason for low contribution of infant formula, is the International Marketing Code of Conduct of Breastfeeding Substitutes issued by the World Health Organization (WHO). The Code (commonly known as WHO Code) recognizes that marketing infant formula is, by definition, an attempt to reduce the number of breastfed babies, and recognizes that breastfeeding is both a vital public health and economic issue. Therefore, the WHO Code PROHIBITS certain aggressive ...

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