From humble beginnings in Vevey, a small town in Switzerland, to the largest food company in the world, Nestle has come a long way.
Let’s trace the origins of Nestlé and its exceptional legacy of 150+ years that have led it to become a company with:
Grab a Kit Kat or sit back with a cup of freshly brewed Nescafe, and let’s go back to 1866, the year it all began.
The story of Nestlé begins with Henri Nestlé of Vevey, a namesake of the company, and unsurprisingly, its founder. But it is also linked with two brothers, Charles and George Page, who were located far away in America at the time.
While the world of business was not a global village back then, perhaps it was fate, the love for milk, or sheer successful marketing strategy that brought the businesses of the two together to form the Nestlé we see today.
Charles Page was a U.S. consul who visited Switzerland and became intrigued by its Swiss cows and beautiful meadows. The country had been a primary milk production center since the 19th century due to its available resources of high-quality cows and attracted people with a passion for milk production from far and wide.
Page was one such individual with a different aspiration: he wanted to create condensed milk. Easy to store and transport, condensed milk, according to him, was the next big thing in the entrepreneurial world.
Therefore, with his brother George Page, he created the Anglo-Swiss Condensed Milk Company and opened the doors of the first-ever condensed milk factory in Switzerland, in the town of Cham, in 1866.
L to R: George & Charles Page
Meanwhile, Henri Nestlé was a local pharmacist in Vevey who loved experimenting with anything and everything he could get his hands on. This meant creating incredible food fusions was right up his alley.
During the 1860s, infant mortality rates remained a grave problem in Switzerland. As a man with 13 siblings, Henri understood the woes of infants. Yet, the turning point came when he saw that premature babies faced difficulty in consuming breast milk.
Invoking his creativity, he combined available resources and his scientific knowledge to produce “Farine Lactee” in 1867, an infant formula made with cow’s milk, wheat flour, and sugar.
This proved to be a breakthrough, and soon, sales increased to 1000+ cans in 1871 and more than 2000 in 1873. Two years later, Nestlé’s products could be found worldwide, including but not limited to Indonesia, Egypt, and the U.S.
As sales increased exponentially, Henri gave his company a logo symbolizing his family name that meant “Little Nest”. The logo, therefore, contained a bird’s nest.
Today, the logo has been simplified but remains its original idea and charm as an ode to the founder.
In 1875, Henri retired, and the company was led forth by three local businessmen in Vevey. However, simultaneously, the Anglo-Swiss Condensed Milk Company expanded to newer markets in Europe, and upon discovering Nestlé’s infant formula and its success, it developed a rival product and floated it into the market.
To Nestlé, this was nothing less than a declaration of industry war, and soon after, Nestlé added a new product to its portfolio: a Farine Lactee condensed milk. Fierce competition developed, followed by price wars and predatory market strategies.
As both companies competed for a greater market share and ROI on their rival products, it did not come as a surprise when both began generating lower revenues and making losses.
The price war lasted roughly for about 30 years until the death of all three – Henri, George, and Charles.
In 1905, the current directors of the companies agreed to halt their rivalry and combine their businesses for greater market share, revenues, and expanded reach over the globe.
As a result, Nestlé and Anglo-Swiss Condensed Milk Co. was founded – that eventually became Nestlé.
For many years, Henri and the Page brothers went head to head in the milk industry, expanding into European markets, creating substitute rival products, adopting predatory pricing strategies, and undercutting price benchmarks.
All this only yielded the worst for both businesses in the form of reduced revenues, higher price elasticity of demand, and a confused clientele.
Their saving grace was the strategic decision of the directors to call a truce and join forces – shared winners over lone losers. With the main competition becoming the same company, the focus was brought back to improving operations and opting for practices the business could sustain. Resultantly, the only path now was onwards and upwards.
This means foresight, strategy, and impartial business sense take priority over emotional responses, especially in the business world.
Most companies take a few years to establish themselves in their local markets, minimizing risks. Only once they are comfortably settled and have enough brand appeal and resources to expand do they risk entering the global market.
But Nestle is not like most companies, is it?
Henri Nestle had become a big player in the Western Europe Market, and Page Brothers were leading the way in Britain. Thus, the merger already allowed Nestle to be the go-to condensed milk brand.
From there, it was always going to spread itself and capture as much of the global share as it could, and so it did. Within a decade, this newly merged company had taken its operations around the world, establishing factories in the UK, Europe, the United States, and Asia.
WWI broke out in 1914, and the scale of disruption around the globe was huge. Almost every industry was affected. Some thrived and grew, but many collapsed or barely survived.
Nestle also faced an initial period of hardship where it was difficult to maintain its supplies due to severe shortages, and maintaining a smooth distribution network in Europe was near impossible. Hence, most of their supplies ran out of catering to the needs of locals.
However, the war presented a unique opportunity. The demand for milk shot up, and consequently, governments around the world sought contracts with major milk producers and distributors.
Nestle acquired several of these contracts that enabled it to not only come out of the difficult situation it was in but also rapidly expand its operations. It developed most of its factories in the US, where supply and distribution were easier, and recovery began. In fact, by the end of the war, the company had over 40 factories in the world, nearly doubling Nestlé’s overall production.
Of course, the circumstances around WWI were unusual and worked in favor of Nestle. But it wasn’t the only reason the firm grew at such a pace. Research and innovation had defined the companies that came together to form Nestle. Hence, the same qualities were inherited and ingrained in Nestle. At a time where global infrastructure was going through a phase of transformation, Nestle was at the forefront of it utilizing it and spreading it.
For instance, railways and steamships were the new business logistics, and they became the company’s ticket into established and untapped urban markets overseas. Print media became the main face of modern marketing. Nestle cleverly capitalized on it by projecting its brand through newspapers, magazines, and billboards. The adverts focused on what made the company stand out: quality, taste, nutrition, safety, and affordability – characteristics Nestle still proudly stands by.
All while these advancements were being embraced, Nestle didn’t lose sight of what they were truly about: their products. Hence, as far as production is concerned, they continued to introduce more efficient methods in their factories, expanding their capacity and boosting quality.
Both the World Wars were a make-or-break event. From a decrease in demand to disruption in supply, Nestle faced all sorts of challenges. But Nestle, even before it merged, was always looking for opportunities to grow, and the government contracts gained during the war were essentially the result of it. If Nestle didn’t have its operations worldwide, it would never have captured the governmental radar. It may have survived the shortage; it may have not.
These contracts allowed the company to grow, which worked perfectly with its innovative strategies, such as tapping urban markets and marketing using print media to enhance the brand appeal and create a brand affinity. This highlights the importance of being proactive and always looking for potential opportunities, even in challenging times.
1918, the year WWI finally ended.
The fighting did stop, but the unstable economic situation the world was in couldn’t be fixed easily. Nestle’s government contracts were up, and it found itself amongst the many companies facing the force of the crisis. To add to their difficulties, consumers that had shifted to condensed milk during the war shifted back to fresh milk as supply resumed.
The company went into a loss for the first time in 1921.
At that point, sales were down, and production costs were high for Nestle. Its operations needed an overhaul to reach sustainability. For this purpose, Swiss banker Louis Dapples was handed the task of reorganizing the company.
Not only was he able to match production and sales, but the move also helped Nestle clear its outstanding debt. Thereafter, the company spent a good part of the decade staying afloat and focusing on sustaining its operations.
First milk, and then condensed milk; despite having a global reach, Nestle hadn’t really made an effort to expand its product portfolio.
Perhaps, till the 1920s, it had never felt the need to. It had been growing at a rapid pace and adding several countries to its customer base. Now, as growth stagnated and consumer demand shifted to fresh milk, something different had to be done.
Thus, they made a series of acquisitions that opened their doors to new industries, the most notable of which was the Kohler Swiss Chocolate company in the mid 1920s. Consequently, chocolate became the second most important product of Nestle.
Alongside chocolate, the company also introduced malted milk, a powdered beverage named Milo, and powdered buttermilk for small children.
The chocolate business was going well for Nestle, but they were yet to launch the product that would change the company’s future forever.
In 1930, the Brazilian Coffee Institute approached the company with a unique problem. Brazil had a huge surplus of coffee, but there was no real demand or use at the time. Nestle spent the next 8 years researching and experimenting with products to develop from this coffee.
While the Brazilians suggested coffee cubes, Nestle had a better idea instead.
Voila, in 1938, Nestle launched “Nescafe” an instant soluble coffee solution, the first of its kind and one of the most popular Nestle products to date. This was later followed by Nestea, another incredibly popular product that continues to drive the tastes of many across the globe today.
There was immense potential in Nescafe but at the same time, Nestle began to experience the severe impacts of WWII even before it broke into a worldwide conflict. The company’s revenues nosedived from $20 million in 1938 to $6 million in 1939.
Although Switzerland remained neutral in both world wars, the situation in Europe was highly volatile, and business could not be conducted normally. Again, Nestle looked towards America by shifting its base of operations to Connecticut, far away from the conflict.
Their previous experience during WWI had allowed the company to form healthy relationships with the states, which helped them settle in. Unfortunately, the USA could not stay away from the war for too long and joined the allies in 1941.
For Nestle, it was a complete blessing; Nescafe became a staple food for the US military as it was easily preservable, and the taste has already become a hit. Hence, without having to spend a fortune on advertisements, the coffee product penetrated worldwide, and funnily, its first brand ambassadors were allied soldiers.
Nestle sent tons and tons of Nescafe to the frontlines and managed to turn around their sales completely. From making $100 million in 1938 to reaching up to $225 million in 1945.
The end of WWI and the economic depression brought by it made life difficult for almost every business, including Nestle. Plus, the fact that customers preferred fresh milk instead of condensed milk meant that Nestle found it difficult to sustain its business.
Customers’ demands and preferences, as well as the market scenarios, can change drastically over time. Nestle learned that they needed to be flexible enough to adapt and bold enough to take risks. Otherwise, they will be left with no choice but to shut up shop.
This is when the milk company gradually began expanding by introducing new products and exploring new markets. It, in turn, allowed the company to grow despite the difficult situation.
Hence, companies should never rest on their laurels and try to improve consistently, be it by innovating, branching out, and increasing the quality and quantity of products or services they offer.
The end of the world war had set the perfect stage for Nestle to take its business to the next level. Sales were at an all-time high, Nescafe and Nestea were making waves, and through military and government supports, the company had opened up new markets for its products.
On top of it, the world did not go into a similar depression like WWI. Instead, it marked a period of stability and peace, one which firms everywhere looked to capitalize on. Likewise, Nestle did not waste any time in getting in on the action and making some very key and monumental moves. In fact, these post-war years are often termed as the most dynamic period in the company's history!
As the world recovered from the war, Nestle followed an aggressive acquisition policy acquiring multiple brands worldwide. The most significant name it added to its portfolio was fellow Swiss company, Maggi.
The journey for this soup and noodles company started somewhat around the same time as that of Henri Nestle. Its founder, Julius Maggi shared the same vision of serving nutritious yet convenient foods to the public.
After the war, in 1947, Maggi went through a number of restructurings and changes in leadership. Resultantly, the best way for the company to move forward was to join hands with Nestle. Their established factories in numerous countries introduced the Maggi brand to the world, and it became a sensation. In fact, in many Asian regions, Maggi is synonymous with instant noodles.
The Magic of Maggi
Following Maggi’s acquisition, Nestle took over several other firms in the food industry, including:
With these moves, Nestle extended its product range and established a stronghold in the preserved foods industry.
While Nestle spread its wings by bringing other brands under its umbrella it did not lose sight of the products it developed itself.
For instance, the Nescafe coffee, which had been a huge success during the war, continued its astonishing path upwards. From 1950 to 1959, its sales almost tripled, and with the development of an anti-freeze version in 1966, its sales quadrupled in the next decade.
Simultaneously, Nestle also worked on launching new products. In 1948, it further embedded itself in American households with Nesquik, a chocolate powder that would instantly mix in cold milk.
Owing to the product’s success, they even introduced the Nesquik Bunny to win over both adults and children.
During the same time, Nestle rebranded its infant cereals as Cerelac while launching an extensive range of canned foods under Maggi.
By the 1970s, Nestle had well and truly occupied a dominant position in the food industry. It was now time to step out of the comfort zone and venture into new industries.
The big break came in 1974 when Nestle made a move for a Parisian hair care company, L'Oréal. Established in 1909, this company had gone from making hair dyes to a full range of cosmetic care products. It has also formed a loyal customer base in France.
With big plans, Nestle offered the family owners of L'Oréal a 3% stake in Nestle in return for a 50% share. The offer was too attractive to refuse, and the two companies entered into a new partnership. This merger reaped multifold returns for both parties, and by the 1980s, the brand was the leader in its industry.
The cosmetic arena wasn’t the only one Nestle aimed to capture. There was an economic slowdown and general volatility between French and Swiss markets. The price of cocoa and coffee went up more than three times. Nestle decided to take a risk and leap into waters it had never been before.
In 1977, it also became the owner of the American pharmaceutical company, Alcon. This, too, was a success with the brand operating in 75+ countries and being sold more than twice that number.
Nestle never looked to slow down despite its numerous acquisitions and diverse brand offerings.
In 1984, it offered a mind-blowing $3 billion to buy out the food company, Carnation. Many believe this to be one of the largest acquisitions outside the oil industry – at least at the time. The scale of the deal was such that it took a year for it to be approved and finalized.
It wasn’t just being in the same industry that sparked Nestle’s interest; it was also the fact that Carnation had a diverse portfolio, including a profitable pet food brand, Friskies, and Contadino tomato products.
Nestle also added UK confectionery company Rowntree Mackintosh to its list of acquisitions in 1988, giving it ownership of popular chocolates, Kitkat and Smarties. In the same year, it also included Buitoni-Perugina, a major Italian pasta and confectionery company to its mix.
Alongside the mergers, Nestle was also actively working on making a comeback with its coffee products. Thus, in 1986, it rolled out Nespresso, a premium version of its coffee, different from the previous freeze-dried budget version. The idea behind it was simple: present a DIY system for any person who wanted to enjoy luxury coffee.
Many firms that plan to diversify their portfolios lose grip on their main industry. Nestle wasn’t one of them. Its initial strategy for growth post-WWII was to cement its hold in the food industry with a series of acquisitions and new product offerings. Then, it made its move in other industries while still improving on its basic offerings of food, coffee, and chocolate-related products.
Nestle grew exponentially by tactfully merging and acquiring companies it thought would add value to its brand. This paid off handsomely and turned Nestle into a force to be reckoned with. It highlights the need for brands to enhance their value offerings, using whatever means they have at their disposal, right from diversifying to collaborating with others.
With the fall of the Berlin wall in 1989, markets in Central and Eastern Europe, as well as China opened up. Trade barriers disintegrated, liberalization picked up the pace, and economic markets around the globe started to integrate well.
This proved to be quite beneficial for Nestle. There were new diverse markets to expand to and favorable policies that encouraged them – not that they needed any second invitation.
From the late 1990’s to the late 2000’s, Nestle went on an aggressive acquisition spree and acquired the following companies:
A number of other partnerships were also made, such as the one with Belgian chocolatier Pierre Marcolini, helping Nestle augment its position in the food and nutrition industry while allowing it to diversify in health, wellness, and beauty.
Now, why did Nestle do that?
The answer is to remain attuned to the changing consumer tastes and remain ahead in a market that never stays still.
Sure, continuous innovation is essential, but Nestle didn't just rely on that and continued to acquire businesses and benefit from synergies to become the undisputed leader in the business world.
All this while, Nestle has remained true to its roots and continued to delight the customers worldwide.
Realizing that with expanding its global footprint, there were bound to be an array of issues that it needs to deal with effectively, Nestle launched a Group-wide initiative called GLOBE (Global Business Excellence).
The primary purpose behind this initiative was to harmonize and simplify business processes and empower Nestle to make the most of its competitive advantage while alleviating the risks and drawbacks.
From San Pellegrino in 1997 to Henniez and Gerber in 2007, Nestle's relentless strategy to acquire an array of businesses in different markets, ranging from pet care and baby food to ice cream and bottled water, strengthened its overall position and breathed new life into the company.
Nestle not only wanted to expand to new product lines but also become the market leader in all of them, in different parts of the world. The fastest and most effective way to do just that was through strategic acquisitions.
In an ever-evolving market, staying still or focusing solely on a select few activities is risky for large businesses. The key, at times, to grow is to embrace an external growth strategy by acquisitions in different industries with distinctive lines of business.
Nestle stays firmly committed to its goals of helping people, families, and pets around the globe live happier and healthier lives. From meeting the ever-evolving needs of the modern consumer to providing safe and premium-quality of food on-demand, Nestle does it all.
However, it understands that dramatic shifts are happening in the market with consumer demands dynamically changing, new entrants offering endless choices, and people living and shopping in ways never seen before.
Winning in such an environment requires disruption and a hybrid-growth model. No one understands that better than Nestle, and here’s how it is driving value from its base portfolio while embracing new ventures to scale up.
Unlike other business entities who outsource the innovation part and fail to prepare for the future, Nestle has strategically decided to combine its scale and capabilities with the mentality and speed of a start-up.
InGenius, Nestlé's employee innovation accelerator, is the ultimate platform that encourages intrapreneurship within the company. Internal start-ups within the company are launched, and employees are encouraged to think big and creatively.
Moreover, Nestle’s global R&D accelerator program brings together scientists, students, and employees, empowering them to come up with new innovative products.
Lean designs, fast prototyping, quick testing, continuous hustling, and room for big risks make the incubator program a success. The goal of the internal start-ups is to help promptly develop new product lines from scratch within 9 months, paving the way for the future of food.
What’s more is that employees are given challenges to solve, ranging from improving the quality of food to helping achieve the net-zero target. On top of this, Nestle also helps young social entrepreneurs, outside its fold, by offering them holistic support, mentorship, and access to its R&D and innovation experts by partnering up with Ashoka – an organization that identifies and supports social entrepreneurs.
To better tap into today’s consumer trends, Nestle goes the extra-mile to revive the brands with modern innovation.
It does this by introducing new varieties of products and adding unique flavors to attract new customers and retain existing ones. For instance, in 2017 alone, Nestle launched 1000 new products. Yes, that’s right!
From bringing in new flavors of juices and milk to launching frozen organic meals and non-dairy desserts, among others, it tries its best to exceed its customers’ expectations.
Fueling growth through innovation and improving operational efficiency are two key components of Nestle’s value creation model.
While innovation is considered everyone’s job at Nestle, increasing operational efficiency is also stressed upon.
Each and every aspect of the business, be it hiring people, using data analytics to make decisions based on logic, optimizing supply chains, or deploying manufacturing solutions, is reviewed and revamped to increase efficiency and deliver desirable business outcomes.
Nestle, together with Swiss academic and industrial partners such as ETH Zurich, Ecole Polytechnique Fédérale de Lausanne (EPFL), and companies Bühler and Givaudan, announced a joint research program, Future of Food, that will help develop nutritious, tasty, sustainable, and trendy food and beverage products.
It's just another example of Nestle leveraging innovation and partnerships to move forward. Plus, it highlights Nestle’s commitment to providing healthy food while doing right by the environment.
Nestle is actively working on providing healthier diets to people worldwide. It's even reformulating its popular products such as Kit Kat and Maggi, among others, to reduce the sugar, salt, and saturated fat in them while also transitioning its brands towards organic.
In addition to this, it is actively working towards ensuring its supply chains have zero environmental impact and reducing its carbon footprint by changing its plastic packaging.
Nestle has announced that it will phase out all packaging that’s not recyclable by 2025 and ensure the packaging it uses is eco-friendly.
Last but not least, Nestle, in its quest to stand out and scale, is emphasizing the need to please the customers in every way possible. It aims to do that by delivering customers exactly what they want, how they want it, and in the taste, and shape they want it.
Meeting the needs of consumers on an individual level, according to Nestle will make all the difference. Hence, it is investing in it. Nestle acquired a start-up in UK, Tails.com, which provides tailored diets to dogs on a monthly basis based on age, breed, and weight among other factors.
Ascending to the top is one thing, but remaining at the top is the real challenge. Nestle’s strategy of launching incubators, experimenting with products, enhancing capabilities, and thinking ahead to create a new future highlights the importance the company places on innovation.
Nestle never hesitates to be bold and go out of its way to innovate to accelerate its growth and achieve scale. It realizes the value that can be derived from innovation and hence, leaves no stone unturned in thinking out of the box and putting its money where its mouth is. More than anything else, this fundamental strategy has helped the company dominate and remain a customer favorite.
A vital company in the challenging times of Covid-19, Nestle made many changes in its processing and manufacturing processes to continue supplying good food. As supply chain challenges intensified, Nestle focused its efforts on streamlining the supply chain end-to-end, from sourcing supplies to logistics.
Nestle to capture market share and organically grow by 7.7% in the first quarter of 2021.
Making the health and safety of its employees a priority, Nestle implemented enhanced safety measures on and off its premises, including factories, distribution centers, labs, and offices.
Nestle responded to Covid-19 effectively and made sure its employees are protected and motivated by:
Nestle extended a helping hand to those in need in the crisis. It provided holistic support to medical institutions, food banks, food delivery organizations, and relief organizations in the local communities who are on the frontline.
Not only did Nestle donate essentials such as food and bottled water but also money. Nestle joined forced with the International Federation of the Red Cross and Red Crescent Societies (IFRC) and donated CHF 10 million. Plus, in order to speed up the vaccination and ensure fair distribution of vaccines, it partnered up with COVAX and donated CHF 2 million.
There’s no doubt that the Covid-19 pandemic disrupted the global markets and adversely impacted Nestle in ways more than one. However, Nestle managed to survive and thrive by continuously adapting, being proactive, and striving to do right by the people and the communities it served, as evident from its increased market share and growth during the period.
Nestle products are recognized, consumed, and valued in all corners of the world. It is a company that has ingrained itself in the day-to-day life of people and continues to raise the bar higher. From innovation, people management, and a long-term strategic approach to quality of products and services, social responsibility, and competitiveness, Nestle ticks all the boxes.
Here are the four main lessons derived from the growth of Nestle from a relatively small Swiss-based company established in 1866 to one of the most successful, admired, and profitable multinational companies in the world:
A company as big as Nestle, which operates in almost all countries worldwide, has achieved success by localizing its offerings and catering to the needs of each individual market.
Sure, it could have made generalized global strategies and campaigns, but it took the difficult path by localizing everything from sourcing, product planning, production, marketing, and even the brand strategy.
It highlights the importance of being customer-centric regardless of who you are as a company and where you operate.
Whether it be changing consumer demands, the evolving marketplace, or crisis situations, Nestle has never stopped innovating. Sure, it has paid the price of a few campaigns gone wrong, but one thing that it has been relentless at is continuing to strive to be a step ahead.
Nestle does it all, from committing to sustainability to coming up with new creative ways of providing more value to all stakeholders. It serves as a lesson for brands in this modern digital age. You can only survive and succeed if you innovate. Period.
Nestle has over 2000 brands. Yes, that’s right. Nestle has rapidly grown, gained a competitive advantage, increased its market share, achieved synergies, and enhanced efficiency in its business by acquiring companies.
It actively looks for potential acquisition opportunities and doesn’t hesitate to take risks. This showcases that if you want to grow as a company, you need to broaden your horizons and partner up with others. Foresight, strategic decisions, and impartial business sense are critical - now more than ever.
The external growth strategy has worked wonders for Nestle by allowing it to expand into new industries and distinctive production lines - all of which have contributed immensely to its growth over the years. Simply put, if you can’t beat them, just join them, or well, in Nestle’s case, buy them.
As a company, your values are bigger than your revenue. If you truly focus on and stick to your values, you can attract consumers and scale your company. Nestle has done just that by not only saying but becoming the “Good food, Good Life” company.
It firmly abides by its core principles of “Unlocking the power of food to enhance the quality of life for everyone, today and for generations to come.”
Every decision that is made, every product that is launched, every customer that is served, is served to shape a better and healthier world. No wonder Nestle has become a global icon from a local favorite.