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― Archibald MacLeish

Sunday, December 8, 2013

John Miller: Are There Two (2) NESTLE(s) In the Philippines?

Welcome to the world of Nestlé Philippines. Please allow us to introduce to you our Company - our long history, our brands and products, our various programs for our employees and for the communities, our guiding principles and what we stand for. John Martin Miller, Chairman and CEO
"All business depends upon men fulfilling their responsibilities." Mahatma Gandhi
The Early Years. Although Nestlé products were already available in the Philippines as far back as 1895, it was not until 1911 when The Nestlé and Anglo Swiss Condensed Milk Company was established in the country, with its first sales office in Calle Renta, Binondo. 
The Company was forced to suspend its operations during World War II, but soon made a comeback after Liberation, under a new name:  Filipro, Inc.   It continued to import products such as MILO, NIDO powder milk, MILKMAID and NESCAFÉ from other countries.  In the early 1950’s, Filipro encountered difficulties when the Philippine government imposed import control.  Due to lack of imported products to sell, it was forced to become a distributor of peanut butter, napkins, fruit preserves, and patis (fish sauce) just to keep its operations going.
Local Production. In 1960, Nestlé S.A.and San Miguel Corporation entered into a partnership resulting in the formation of Nutritional Products, Inc.  (Nutripro). In 1962, Nutripro’s first factory started operations in Alabang, Muntinlupa to manufacture NESCAFÉ.   In 1977, Filipro, Inc. and Nutripro Inc. merged under the name Filipro, Inc.  In 1986,  Filipro, Inc. changed to its present  name as  Nestlé Philippines, Inc.
Nestlé now has manufacturing facilities in Cabuyao (Laguna), Cagayan de Oro, Lipa (Batangas), Pulilan (Bulacan) and Tanauan (Batangas) to meet the growing demand for Nestlé products in the country. 
Growth and Diversification.  In 1991, Nestlé pioneered the AIJV (ASEAN Industrial Joint Venture), a regional complementation program.  The Company participated in this program with the production of breakfast cereals at the Nestlé Lipa Factory, for export to  ASEAN markets. Today, three of the Nestlé factories in the Philippines – Lipa, Cabuyao, and Cagayan de Oro -- serve as ASEAN Supply Centers to meet the requirements of Nestlé markets in the region.
In late 1998, Nestlé Philippines became a wholly owned subsidiary of Nestlé S.A., following the latter’s purchase of all of San Miguel Corporation’s equity shareholding in the Company. 
Driven by its mission to nurture generations of Filipino families, Nestlé today produces and markets products under some of  the country’s well known brands  such as NESCAFÉ, NIDO, MILO, NESTEA, MAGGI, BEAR BRAND, NESTLÉ, and PURINA, among others.  Its product range has expanded to include coffee, milk, beverages, non-dairy creamer, food, infant nutrition, ice cream and chilled dairy, breakfast cereals, confectionery, and pet-care.
Nestlé Philippines, Inc. (NPI) today is a robust and stable organization, proud of its role in bringing the best food throughout the stages of the Filipino consumers’ lives. The Company employs about 3,400 men and women all over the country. It is now among the top companies in the entire Nestlé world, and is among the country’s Top 10 Corporations. Its products are No. 1 or strong No. 2 brands in their various categories. 

The Nestlé culture
Apart from its commitment to safety and quality and its respect for diversity, Nestlé is committed to a number of cultural values. These values come partly from its Swiss roots and have been developed during its history. They are also evolving so as to support the permanent reshaping of the Company.
They can be described as follows:
• Commitment to a strong work ethic, integrity, honesty and quality.
• Personal relations based on trust and mutual respect. This implies a sociable attitude towards others, combined with an ability to communicate openly and frankly.
• A personalized and direct way of dealing with each other. This implies a high level of tolerance for other ideas and opinions, as well as a relentless commitment to co-operate proactively with others.
• A more pragmatic than dogmatic approach to business. This implies being realistic and basing decisions on facts.
• Openness and curiosity for dynamic and future trends in technology, changes in consumer habits, new business ideas and opportunities, while maintaining respect for basic human values, attitudes and behavior.
• Pride in contributing to the reputation and the performance of the Company. This calls especially for nurturing a sense of quality and long-term achievement in the daily work beyond fashion and shortsighted gain.
• Loyalty to and identification with the Company.
Nestlé is not like other companies. We have a unique set of values and guiding principles that have been built up over time. Nestlé’s Corporate Business, Management & Leadership Principles describe the way that people throughout the Nestlé Group interact with one another day by day.
We believe in people rather than systems 

We are committed to creating value for our shareholders but we won’t favour quick-wins at the expense of long-term business development

We are committed to continuous improvement

Above all, we are pragmatic!
The Nestle Philippines MBA Business Case Study
Consider this case involving the Company and a distributor, Forefront IT Trading Corp., owned by Filipino investors who are now complaining of unfair and unethical business practices by their foreign partners. In a disgusting display of corporate bullying, the multinational refused to pay Forefront's more than P12 million in collectibles unless it signed a Release and Quit Claim dropping all other legitimate claims. This when a ranking official of the foreign firm had promised, verbally, the settlement of all just and reasonable claims.
The amount consisted of close to P1 million in withheld expanded value-added tax (EVAT) for 2007 that the multinational should refund to Forefront, plus P11.07 million representing performance incentives, advances made by Forefront for the company's promotional activities and cost of products taken back by the multinational.
The multinational allegedly took back the products in Forefront's possession after terminating the distributorship agreement when the latter protested the meddling and unprofessional conduct of the multinational's sales official assigned to it. The distributor had wanted a replacement.
It turned out that the multinational's sales official was carrying on an extramarital relationship with a Forefront executive, a married man. She exploited this relationship to secure unusually large orders of her employer's products and even slow-moving items that Forefront had to dispose of even at cost, even to the extent of forgoing profits. Santa Banana, she even succeeded in passing on to Forefront some poorly paying accounts not included in the original agreement. All these eventually resulted in huge losses to the distributor.
This came to a point where Forefront experienced difficulties in meeting its payroll, the 13th month pay for December 2007, and separation benefits for some 80 employees who had to go as a result of severe financial stress.

When advised of the affair and the resulting conflict of interest situation, the latter simply dismissed the matter as "a purely personal affair between two consenting adults," and ignored the request that their sales official be replaced. Yet, the multinational's own Corporate Business Principles and Code of Conduct states, among other things, that the company "requires its management and employees to avoid even the appearance of impropriety in its business relationships on behalf of the company."
MBA Business Case Question: In the context of Nestle's much respected value system, what should Nestle do  to redress Forefront's grievances?