Friday, November 24, 2006

Nestlé Chief Executive should relax more

The Guardian ran a profile of Nestlé Chief Executive Office and Chairman, Peter Brabeck-Letmathé, today. The corporate malpractice of the company he leads clearly catches up with him. The headline was: "Peter Brabeck-Letmathe: smooth defender of a tainted brand". See,,1955666,00.html.

Mr. Brabeck suggests criticisms are misplaced. He puts the malpractice in the past, in the case of its baby food marketing, or suggests there is an over-simplification, in the case of Nestlé's failure to act on child slavery in its cocoa supply chain.

Readers of this blog and the supporting evidence to which it links will know that Mr. Brabeck is not only being untruthful, but is very much responsible for the problems Nestlé faces. This is not just in the theoretical sense that he is Chief Executive, but in the practical sense. Mr. Brabeck claims to personally investigate any hint of a violation of the baby food marketing requirements for example. I write to him often to report violations and the replies we receive back from Nestlé staff are dismissive, denying evidence and showing contempt for the regulations of the World Health Assembly and the legal opinions of experts at the United Nations Children's Fund (UNICEF).

In the blog about my São Lourenço hat and Nestlé's illegal water pumping operation I explained it was Mr. Brabeck who promised pumping would stop in January 2005, a promise that was broken. A promise that appears to still being broken despite the company signing a legal agreement with the Public Prosecutor earlier this year.

The Guardian states: "Such criticism helps keep an army of press handlers and lobbyists employed by the Swiss multinational."

That is Mr. Brabeck's decision. To invest in news management, rather than address the concerns. This failure has an impact which investors notice. The Guardian says:

"Although Nestlé has had a relatively good run in recent months, its shares have underperformed peers such as Unilever or US rivals such as General Mills and Kelloggs despite top-line growth rates consistently higher in the 5-7% range and margins that have improved from 10% to 13%. Alain Oberhuber, analyst at Bank Vontobel in Zurich, believes Brabeck-Letmathe's manner detracts from this performance. 'When I talk to investors in the UK they say he comes across as too Austrian. They mean he is not very sensitive to criticism ... He believes analysts do not understand the potential of his company."

Mr. Brabeck attempts to suggest critism of his company and the policies he pursues are not widespread: "He points to a survey by research group GlobeScan that found Nestlé's reputation on social responsibility to be good in Africa but bad in Britain, saying it is only the bogeyman for some in the UK and possibly Sweden."

Well, let us leave aside the fact that our partners on the ground in Africa raise concerns about Nestlé practices and provide evidence of on-going aggressive marketing. Let us leave aside the way Nestlé is exploiting concerns over HIV to promote formula feeding and to argue laws regulating the marketing of baby foods should be weakened (while UNICEF and other experts argue HIV makes marketing regulations more important not less). Let's leave aside the fact that a boycott and media campaign was launched by a group in Cameroon after Nestlé was found promoting formula in clinics (leading to regulations being introduced recently).

As the article is about company image, let us look instead at that GlobeScan finding. Mr. Brabeck says criticism is limited to the UK and possibly Sweden. Yet according to The Times: "Britain, Australia and Italy give Nestlé the red card" - though other countries do apparently score Nestlé well in this survey. See:,,9065-2289959,00.html

Although its not mentioned in the article, in a presentation on 7 November 2006, Mr. Brabeck referred to the survey as : "Our annual GlobeScan reputation survey". The questions Nestlé chose to ask could have had a significant impact. See Nestlé's website.

An independent survey conducted in 17 countries by GMIPoll found a different story. As The Guardian reported last September, Nestlé is one of the four most boycotted companies on the planet. See

And in a global internet vote coinciding with the World Economic Forum in 2005, Nestlé won the public award for irresponsible corporate behaviour, by a margin of over 2 to 1 on the second placed companies. See

Nestlé is a tainted brand. It needs more than smooth talking to address that. It needs a change in direction, to be less confrontational and dismissive of criticism. Instead of employing an army of press handlers and lobbyists to try to limit the damage, Nestlé should listen and take action. It should embrace the International Nestlé Boycott Committee's four-point plan, for a start. See

It may take a change in leader for that to happen. A piece of good news in The Guardian piece is that Mr. Brabeck says he is going "to relax a little bit and have a new generation taking over a bit."

Perhaps we could suggest he relaxes a lot and let's someone else take over the job of running Nestlé. Someone from a different mould. It could do everyone, including Nestlé investors, a great favour if he did.

No comments: