Nestlé’s Risky But Noble Approach to a Worldwide Problem

Imagine this scenario: your firm, which operates in 189 countries and is worth over 240 Billion dollars, manufactures a product with a core ingredient proven to be the culprit for major health concerns worldwide. This scenario has occurred in the past with tobacco and alcohol products, and it’s happening again with brands who sell products high in sugar like Coca-Cola and Nestlé. In such circumstances, how does your business react? How do you answer the critics? How do you inspire employees to believe in the brand?

 While Nestlé’s competitors are taking somewhat predictable, more short-term solutions to this problem, Nestlé is marching down its own path toward becoming a scientifically driven “nutrition, health, and wellness company.” The company plans to not abandon its core food and sweets business; but instead apply its expertise in developing and producing tasty and texture-pleasing snacks to develop over-the-counter and prescription nutritional solutions for the maintenance of health.

Nestlé’s Journey to Health Conscious Foods

Nestlé’s first step in this journey was to form the Nestlé Institute of Health Sciences; a biomedical research institute that operates as part of the company’s R&D network. The Institute employs some 160 plus scientists, who specialize in cell biology, gastrointestinal medicine and genomics, tasked with developing and testing food products which could be used to treat diseases like Alzheimer’s, diabetes, or even to slow progression of aging.

The Nestlé Institute’s subsidiary, Nestlé Health Science, has a staff of more than 3,000 whose directive is to develop scientific methods to improve health through nutrition. The research center’s mission includes their belief that “the food we consume on a daily basis is the largest single influence on our health.” The staff develops new or amends existing food products to remedy common health problems.

On the shelves today are products that provide nutritional therapies to respond to pediatric food allergies, malnutrition, wound management, diabetes, digestive health, swallowing difficulties, kidney injuries, epilepsy, fatigue and muscle function, and obesity. For example:

• Betaquick: a milk-like drink for people with epilepsy
• Meritene Regenervis: a flavored drink mix for fatigue and muscle function
• Optifast: a line of shakes, soups, and snack bars for the obese.

Is Nestlé’s Solution Realistic and Obtainable? In short, yes – because there is substance and commitment behind Nestlé’s effort. Thus far, Nestlé is already at 20% of its goal to create $10 Billion in sales. Hitting that number would make business generated from these nutritional products larger than it brings in through its confectionary business.

Is this effort strategically sound? This strategy will move the company away from the business which they have marketing, production and distribution expertise and move them into an area with much greater government regulation.

And it involves the risk that it will not find food products that will have real medicinal value and will support a business. So it seems marginal financially even if you take into account the governmental threat that places sugar-based products on the defensive.

If the strategy is financially risky, why do it? It seems to me that the obvious explanation is that Nestlé executives believe it is the right thing to do for their customers, employees and the general population. This initiative gives Nestlé a higher purpose that employees can be proud of (similar to Unilever’s justification for the incredible scope of social objectives in their portfolio). It is the right thing to do. And, it’s sharply different from other firms which have responded to the sugar “problem” with smaller containers and tweaked formulas.

Big kudos to Nestlé!