How Nestlé expanded beyond the kitchen
The story of Nestlé, the maker of Butterfinger candy bars and Purina pet food, starts with the coming together of bitter rivals in the late 1800s in Switzerland.
In 1867, a German-born pharmacist, Henri Nestlé, began a milk-food production company in the small town of Vevey. His first product, an infant cereal for mothers who couldn’t breast-feed, combined cow’s milk, wheat flour and sugar. It was a quick success. Almost a decade later, he sold the company for one million Swiss francs.
Around the time that Nestlé began his company, a competing dairy concern began operation. The competitor, the AngloSwiss Condensed Milk Company, was founded by three American brothers in Switzerland. Its Milkmaid brand promised a safe alternative to fresh milk.
After more than two decades of fierce competition, the rival companies merged in 1905 to form the Nestlé and Anglo-Swiss Condensed Milk Company. It would form the basis of what has grown into a multinational giant that sells pet food, health supplements and candy bars.
Early on, Nestlé pushed its business overseas, and it opened its first American factory in 1900. The outbreak of World War I led to rich government contracts for condensed milk and chocolate. By the end of the war, Nestlé had 40 factories around the globe. In 1938, the company’s factory in Brazil led to the invention of Nescafé, the instant coffee.
During World War II, the Swiss company’s global operation supplied both sides of the conflict. That approach would later come back to haunt it. In 2000, the company agreed to pay $14.6 million to settle Holocaust-era claims that some of its companies in countries under German control used slave labour. “As a rule they were not worried or uneasy about the situation, and as long as production was maintained they had no thoughts of intervening in the policy of their subsidiaries,” said a 2001 report.
Nestlé’s growth accelerated after World War II. In 1947, the company merged with Maggi, the maker of the Fondor seasoning brand. In the 1970s, Nestlé executives predicted a sluggish future for the food industry and diversified into cosmetics and pharmaceuticals. The company acquired a stake in L’Oréal, the world’s No. 1 cosmetics company, and bought Alcon Laboratories, the No. 1 company in eye care products. When Helmut Maucher took over as chief executive in 1981, he said that he saw his task as “getting this somewhat the sleepy company to move ahead.” The first German to lead the Swiss company since Nestlé, Maucher set off a wave of food industry megamergers.
In 1984, Maucher made a $3 billion deal to acquire the Los Angeles-based dairy company Carnation. In 1988, Nestlé spent $5.5 billion to buy the pasta giant Buitoni. And in 1992, the company won a battle for Source Perrier, a mineral water company.