MMJN 101 – BUSINESS ETHICS & CORPORATE SOCIAL RESPONSIBILITY

FACULTY MEMBER : DR.WALUYO,MM; ZAINAL ABIDIN,MM; JALAL

CASE 2
NESTLE’S : CREATING SHARED VALUE IN INDONESIA

GROUP
1. ANTO BROTO
2. ERI SADEWO
3. RATNA DHARMAYANTI ODATA
4. SAGA HAYYU SUYANTO PUTRA
5. SYAIFUL BAHRI MZ

MMES-55 PRASETIYA MULYA BUSINESS SCHOOL

Jl. R.A.Kartini, RT.14/RW.6, Cilandak Bar., Kec. Cilandak, Kota
Jakarta Selatan
Daerah Khusus Ibukota Jakarta 1 12430
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The Company’s History

1866-1905 1905-1913 1914-1918 1919-1938 1939-1947 1948-1959 1960-1980 1981-2005 2006-TODAY

• The Pioneer • The Belle Epoque • Survival During • Crisis and • Ridding Out the • Greater • Frozen Food to • Towards • Creating Shared
Years Wartime Opportunity Storm Customer Pharmaceuticals Nutrition, Health Value
Convenience and Wellness

NESTLE'S LOGO EVOLUTION OVER THE YEARS

Original 1868 1938 1966 1988 1995 2015

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The Theories - 1

CSR Strategic & Sustainability of Business Author Notes

Elkington 25 years later,

Elkington reviewed the
1997 theory, and pushing
- toward the
2018 transformation of
capitalism and focus
TRIPLE BOTTOM LINE on breakthrough
change disruption,
asymmetric growth
and scaling the next
generation market
solution.

PEOPLE : Social variables dealing with community, education equity, social resources, health, well-
being, and quality of life.
PLANET : Environmental variables relating to natural resources, water & air quality, energy
conservation & land use.
PROFIT : Economics variables dealing with the bottom line & cash flow. 3
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The Theories – 2

CSR Strategic & Sustainability of Business Author Notes

CREATING SHARED VALUE Porter Policies and practices

& that enhance the
Kramer competitiveness of a
company while
2011 simultaneously
advancing the
economic,
environmental and
social conditions in the
communities in which
it operates in a
planned way.

▪ BUSINESS OPPORTUNITIES & CHALLANGES

▪ SOCIAL NEEDS
▪ CORPORATE ASSETS & EXPERTISE 4
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The Theories

CSR Strategic & Sustainability of Business Author Notes

TOWARD A THEORY OF BUSINESS – RESEARCH IN ORGANIZATION BEHAVIOR Thomas - Purpose :
5 FROM 10 DEFINITIONS Donaldson Optimize collective
& value
Business : James P.
A form of cooperation involving the Production, Exchange and Distribution of goods and services for the purpose of Walsh - Accountability :
achieving Collective Value (2015) To all business
participants
Business Participant:
Someone who affects or is affected by the pursuit of Collective Value. Some Business Participants are identified - Control :
through their membership in entities that affect or are affected by the pursuit of Collective Value.
Prohibit assaults on
participant s’ dignity
Benefit:
The contributions made by Business to the satisfaction of a Business Participant’s Positive and Intrinsic Values, net of
any aversive impact on the satisfaction of those same values. - Success:
Optimized collective
Dignity: value
An Intrinsic Value prescribing that each Business Participant be treated with respect, compatible with each person’s
inherent worth.

Business Success:
Optimized Collective Value, optimized subject to clearing the Dignity Threshold. Equifinalty assumed, alternative
states of Business Success are possible.
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The Theories

CSR Strategic & Sustainability of Business Author Notes

THE NEW STORY OF BUSINESS: TOWARDS A MORE RESPONSIBLE CAPITALISM R Edward Business is undergoing
Freeman a conceptual
(2017) revolution. Since the
6 PRINICIPLES - THE IDEA BEHIND THE NEW STORY Global Financial Crisis
there are many new
1. The unit of analysis is stakeholder relationships; ideas and proposals to
2. Stakeholders are interdependent; make capitalism more
3. Tradeoffs are managerial failures of creative imagination; responsible. The
4. Purpose, values, and ethics must be embedded in organizations; purpose of this paper
5. Business exists in the physical world; and is to identify key flaws
6. People are complicated. Let's look at each in turn and see how they are connected with each other in the “old story” of
and this new story. capitalism. Six
principles are
explained that taken
together form the
basis for a new story of
business, one of
responsible capitalism.

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The Theories

CSR Strategic & Sustainability of Business Author Notes

SOCIAL INNOVATION – THE IMPORTANCE OF MARKETING FOR SOCIAL INNOVATION Osburg, Social Innovation and the
3 Cs
Thomas,
Nobody can deny that innovation is key business success and growth. At first glance, one usually think Schmidp 1. Co-creating Social
about economic success as the sole fruit of innovation. However innovation driven by the intent to eter, Innovation with
benefit society, also known as social innovation. (has recently garnered much attention, Mounting
René Stakeholders
evidence that the company can do well and good at the same time has spurred that development to a
(2013) 2. Communicating
great extents.
Social Innovation
The principles of marketing and stakeholder centricity are at utmost relevance to social innovation. The three
3. Calibration
concepts should be applied to existing social innovationsas well as to future social innovations to maximize value
creation both in the business and socio-environmental arenas.

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The Analysis

Backgrounds When Impact

1977 Boycott
Declining breast-feeding rates lead some activists to question the baby food marketing
strategies of companies including Nestlé. In 1977 they call on people to boycott Nestlé
products

Nestlé articulates its Creating Shared Value approach to doing business, whereby any 2015 Creating shared value
approach
action for shareholders must also create value for the communities where it operates and
wider society. Nestlé acquires weight management business Jenny Craig and Australian
breakfast cereals company Uncle Toby’s. 2007

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The Analysis - Nestle applied theories

CREATING SHARED VALUE AT Nestlé Theory

Being a global leader brings not only a duty to operate responsibly, but also an opportunity to create
long-term positive value for the society. We call this Creating Shared Value, and we embed it firmly
across all parts of our business. • TRIPLE BOTTOM LINE
People, Planet & Profit
HEALTH & NUTRITION
1. Nestle for healthier kids global initiatives – helping 50 million children lead healthier • CREATING SHARED VALUE (CSV)
Advancing economic, environmental
lives by 2030.
and social conditions in the
2. Leveraging media packaging as nutrition information for consumers communities
3. New MILO with less sugar - A healthier and tastier choice for Indonesian families
• TOWARD A THEORY OF
WATER & THE ENVIRONMENT BUSINESS
1. Tackling plastic pollution – working towards a waste free future Optimize collective value
2. Clean water access for dairy farmers – Improving livelihood and farming practices
3. The water bottle of the future – Developing 100% sustainable water bottles with our • SOCIAL INNOVATION
Co-creating Social Innovation with
partners
Stakeholders
4. Advances and production processes in environment protection
• TOWARDS A MORE
RURAL DEVELOPMENT RESPONSIBLE CAPITALISM
1. Sustainable partnership for mutual benefits : nestle & Lampung coffee farmers Purpose, values, and ethics must be
embedded in organizations;9
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The Recommendation

• Adopt a CSV framework with key

performance indicators, using the
SDGs.

• Establish cross-sectoral learning

working groups on specific
challenges to improve shared value

• Create a digital-based system for

preparing the business
transformation and disruption

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THANK YOU

MMES-55 PRASETIYA MULYA BUSINESS SCHOOL

Jl. R.A.Kartini, RT.14/RW.6, Cilandak Bar., Kec.
Cilandak, Kota Jakarta Selatan
Daerah Khusus Ibukota Jakarta
11 12430
APPENDIX
CASE 2 : NESTLE’S : CREATING SHARED VALUE IN INDONESIA

MMES-55 PRASETIYA MULYA BUSINESS SCHOOL

Jl. R.A.Kartini, RT.14/RW.6, Cilandak Bar., Kec.
Cilandak, Kota Jakarta Selatan
Daerah Khusus Ibukota Jakarta
12 12430
 GROUP

The Company’s History

1866 1904
Establishment
The history begins in 1866, with the foundation of the Anglo-Swiss Condensed Milk Company. Henri Nestlé develops a breakthrough infant food
in 1867, and in 1905 the company he founded merges with Anglo-Swiss, to form what is now known as the Nestlé Group. During this period
cities grow and railways and steamships bring down commodity costs, spurring international trade in consumer goods.
1866 GROUP
US brothers Charles and George Page help establish Anglo-Swiss Condensed Milk Company. Using abundant supplies of fresh milk in
Switzerland, they apply knowledge gained in their homeland to establish Europe’s first production facility for condensed milk in
Cham. They start supplying Europe’s industrial towns with the product under the Milkmaid brand, marketing it as a safe, long-life
alternative to fresh milk.
1867 Nestlé’s founder, German-born pharmacist Henri Nestlé, launches his ‘farine lactée’ (‘flour with milk’) in Vevey, Switzerland. It
combines cow’s milk, wheat flour and sugar, and Nestlé develops it for consumption by infants who cannot be breastfed, to tackle
high mortality rates. Around this time he starts using the now iconic ‘Nest’ logo.
1875 Henri Nestlé sells his company and factory in Vevey to three local businessmen. They employ chemists and skilled workers to help
expand production and sales.
1878 Fierce competition develops between Nestlé and Anglo-Swiss, when both companies start selling rival versions of the other’s
original products: condensed milk and infant cereal. Both firms expand sales and production abroad.
1882-1902 In 1882 Anglo-Swiss expands into the US, but the death of George Page frustrates its plans. In 1902 it sells its US-based operations,
which paves the way for an eventual merger with Nestlé.
1904 Nestlé begins selling chocolate for the first time when it takes over export sales for Peter & Kohler. The Nestlé company also plays
a role in the development of milk chocolate from 1875, when it supplies his Vevey neighbour Daniel Peter with condensed milk,
which Peter uses to develop the first such commercial product in the 1880s.

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The Company’s History

1905 1929
• 1905 -1913 Anglo-Swiss and Nestlé merge to form the Nestlé & Anglo-Swiss Milk Company. The company has two head offices, in Vevey and
Cham, and opens a third office in London to drive dairy export sales. Over several years the company expands its range to include
unsweetened condensed milk and sterilised milk.
1914
GROUP
War breaks out across Europe and disrupts production for the company, but hostilities also drive demand for Nestlé dairy products,
in the form of large government contracts.
1915 Condensed milk is long-lasting and easy to transport, which makes it popular with armed forces. For example, in 1915 the British
Army starts issuing Nestlé canned milk to soldiers in their emergency rations. Strong demand for the product means that the
company’s milk refineries are working flat out.
1916 Nestlé & Anglo-Swiss acquires Norwegian dairy company Egron, which has patented a spray-drying process for producing milk
powder – a product its new owner starts selling.
1917-1918 Milk shortages in Switzerland mean that Nestlé & Anglo-Swiss has to surrender fresh milk supplies to help people in towns and cities.
To meet demand for condensed milk from the warring nations, the company buys US refineries and signs supply agreements with
Australian companies, which it later acquires.
1921-1922 Falling prices and high stock levels lead to the first, and only ever, financial loss for Nestlé & Anglo-Swiss in 1921. Banker Louis
Dapples joins as Crisis Manager, and encourages the company to appoint professional managers for the first time. Administration is
centralised, and research is consolidated at one laboratory in Vevey, Switzerland.
1929 The company buys Switzerland’s largest chocolate company Peter-Cailler-Kohler, the origins of which date back to 1819 when
François Louis Cailler creates one of the country’s first chocolate brands Cailler. Chocolate now becomes an integral part of the
Nestlé & Anglo-Swiss business.

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The Company’s History

1934 1945
• 1934 Malted chocolate drink Milo is launched in Australia, and its success means it is later exported for sale in other markets. The
company continues to develop baby and infant foods in this inter-war period, and launches Pelargon in 1934, a full-milk powder for
babies enriched with lactic acid bacteria, to improve its digestibility. Read more: Meet the Milo supermen who inspired our super
brand
1936 GROUP
A competitive market for chocolate in Switzerland encourages Nestlé-Peter-Cailler-Kohler to innovate by launching Galak white
chocolate and Rayon, a chocolate with honey and air bubbles, the next year. Vitamins are a major selling point for healthy products
in the 1930s, and Nestlé launches vitamin supplement Nestrovit in 1936.
1938 Nescafé is launched as a ‘powdered extract of pure coffee’ that retains coffee’s natural flavour, but can be prepared by simply adding
hot water. The product is the brainchild of Max Morgenthaler, who begins work on it in 1929, when the Brazilian government asks
Nestlé & Anglo-Swiss to find an outlet for its huge coffee surplus. Read more: What did we do when the bank called? Invented
Nescafé
1939 Fearing that the Axis powers could occupy Switzerland, Nestlé & Anglo-Swiss relocates some managers to a new office in Stamford in
the US, which operates as the company’s second headquarters during the war. The fighting in Europe makes it impossible for Nestlé
to export milk from there, so the company supplies Africa and Asia from the US and Australia, and expands production in Latin
America. Read more: What did we do when the bank called? Invented Nescafé
1942-1945 World War Two initially slows sales of Nescafé, but they pick up as hostilities continue. After the US enters the war, Nestlé brands
rapidly gain popularity among American service personnel. At the end of the war, Nescafé is also included in CARE aid supplies in
Japan and Europe. Nestea is launched in the late 1940s.

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The Company’s History

1947 1962
• 1947 Nestlé & Anglo Swiss merges with Swiss company Alimentana, which produces Maggi soups, bouillons and seasonings, and is
renamed Nestlé Alimentana. Alimentana’s history dates back to 1884, when Julius Maggi developed a protein-rich dried soup to
tackle malnutrition. Read more: Julius Maggi had his finger on the pulse
1948
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In the US Nestlé Alimentana launches a soluble tea, Nestea, which is manufactured using the same method as Nescafé, and can be
served both hot or cold. Nesquik, which dissolves easily in cold milk, is also launched in the US and becomes a top seller. Read more:
"Fancy a steaming hot cup of ...Nestea?"
1954 Nestlé infant cereal has been available since 1948 as a powdered product, but it is now rebranded as Cerelac. Originally only sold as a
bouillon cube, Maggi seasoning brand Fondor is launched as a powder. Packaged in a convenient shaker, it can now be used as a
condiment in the dining room, as well as in the kitchen.
1957 Canned ravioli is launched under the Maggi brand. Its huge success prompts Nestlé to launch more canned, prepared foods, which
become a new growth segment. Read more: Julius Maggi had his finger on the pulse
1960 With increasing numbers of households buying freezers, demand for ice cream is rising. Nestlé buys German producer Jopa and
French manufacture Heudebert-Gervais to capitalise on this growth, and adds Swiss brand Frisco in 1962. The company also buys UK
canned foods company Crosse & Blackwell.
1962 Nestlé buys the Findus frozen food brand from Swedish manufacturer Marabou, and extends the brand to international markets.
Findus is one of the first companies to sell frozen foods in Europe, from 1945.

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The Company’s History

1968 1988
• 1968 Chilled dairy products are increasingly popular, Nestlé buys French yogurt producer Chambourcy. In the early 1970s the latter
launches the Sveltesse range of yoghurts, aimed at health- and weight-conscious consumers.
1969 Nestlé enters mineral waters by buying a stake in French waters brand Vittel.

1973 GROUP
Keen to bolster its canned foods and frozen portfolio in Anglo-Saxon markets, Nestlé takes over the US frozen foods company
Stouffer Corporation, and buys canned foods producer Libby, McNeill & Libby in 1976.
1974 For the first time, Nestlé diversifies beyond food and drink, becoming a minority shareholder in global cosmetics company L’Oréal.

1977 Renamed Nestlé S.A, the company continues its diversification strategy, buying US pharmaceutical and ophthalmic products
manufacturer Alcon Laboratories. Declining breast-feeding rates lead some activists to question the baby food marketing strategies
of companies including Nestlé. In 1977 they call on people to boycott Nestlé products.
1981 Stouffer’s Lean Cuisine frozen meals are launched on a low-fat, low-calorie platform, and the brand posts impressive sales. Nestlé
and L’Oreal establish Galderma as a joint venture active in dermatology. The World Health Assembly adopts the WHO code on
breast-milk substitutes, and Nestlé is one of the first companies to develop policies based on it and apply them across its business.
1985 By acquiring US-based Carnation Company for USD 3 billion, Nestlé adds brands such as Carnation and Coffee-Mate to its portfolio. It
also enters the pet food business when it buys the Friskies brand. Read more: How did Carnation flower as a brand?
1986 The Nespresso story begins with a simple idea: enable anyone to create a perfect cup of coffee, just like a skilled barrista. Read more:
Calling coffee pilgrims everywhere! Nespresso
1988 Nestlé buys UK confectionery company Rowntree Mackintosh, adding brands including KitKat, After Eight and Smarties to its
portfolio. It also acquires Italian pasta, sauce and confectionery group Buitoni-Perugina.

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The Company’s History

1991 2002
• 1991 Nestlé establishes a joint venture with General Mills, Cereal Partners Worldwide, to produce and market breakfast cereals globally.
The company also creates a joint venture with The Coca-Cola Company to form Beverage Partners Worldwide, to manufacture and
market brands including Nestea.
1992
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Nestlé develops its position in mineral waters by acquiring France’s Perrier Group. Nestlé Sources Internationales is created as a
separate waters business in 1993, and is renamed Nestlé Waters in 2002. Read more: How a Victorian exercise craze whipped Perrier
into shape
1997 New CEO Peter Brabeck-Letmathe sees growth potential in personalised nutrition. He articulates Nestlé’s position as the leader in
‘Nutrition, Health and Wellness’, as the millennium approaches.
1998 Nestlé buys Italian mineral waters business Sanpellegrino Group. Nestlé Pure Life is launched in developing countries, to guarantee
clean and healthy drinking water, and Aquarel is launched in Europe two years later.
2000 The Sustainable Agricultural Intiative Nestlé (SAIN) is launched to promote collaboration with local farmers. It aims to improve their
living standards and ensure a sustainable supply of commodities.
2001 Nestlé buys US pet food business Ralston Purina, and merges it with Nestlé Friskies Petcare to establish the new market leader in pet
care, Nestlé Purina Petcare.
2002 After expanding its ice-cream business in the 1990s, Nestlé acquires the licensing rights to premium producer Häagen-Dazs in the US
and Canada, and buys Mövenpick and Dreyer’s Grand Ice Cream in 2003. It also acquires frozen foods business Chef America for USD
2.6 billlion.

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The Company’s History

2005 2002
• 2005 Nestlé articulates its Creating Shared Value approach to doing business, whereby any action for shareholders must also create value
for the communities where it operates and wider society. Nestlé acquires weight management business Jenny Craig and Australian
breakfast cereals company Uncle Toby’s. 2007
2007
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A growing focus on medical nutrition leads Nestlé to the acquire Novartis Medical Nutrition. It also buys baby food company Gerber
and Swiss mineral waters concern Sources Minérales Henniez. Read more: The Gerbers can’t get out of the house!
2009 The first Creating Shared Value Forum in New York brings together experts to discuss global challenges in the areas of nutrition,
water and rural development, and the role of business in helping to solve them. The Forum becomes an annual event. Nestlé creates
a foodservice business division, named Nestlé Professional from 2009.
2010 Nestlé acquires Kraft Foods’ frozen pizza business. The Nestlé Cocoa Plan and Nescafé Plan are both launched to develop the
company’s sustainable supply chains in cocoa and coffee, improve social conditions in farming communities, and ensure their
profitability.
2011 Nestlé Health Science and the Nestlé Institute of Health Sciences are established, to research science-based nutritional products
aimed at preventing and treating chronic medical conditions. Nestlé becomes the first food company to work with the Fair Labor
Association (FLA), to help tackle child labour in the cocoa supply chain.
2012 Nestlé acquires Wyeth Nutrition, formerly Pfizer Nutrition, for USD 11.9 billion, to strengthen its position in infant nutrition.

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The Company’s History

2013 2018
• 2013 Nestlé Health Science buys US-based medical foods company Pamlab, which specialises in medical nutrition for patients with
conditions including mild cognitive impairment and depression. Weight management business Jenny Craig is sold in America and
Oceania. 2014
2014
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With the creation of Nestlé Skin Health, Nestlé takes full control of the Galderma dermatology joint venture which it created with
L’Oréal in 1981. The companies also end their joint venture Innéov, a cosmetic nutritional supplements business launched in 2002.
Galderma subsequently acquires some of its assets.
2015 Nestlé launches Cailler, the oldest surviving Swiss chocolate brand, as its first super-premium global chocolate. French frozen foods
business Davigel is sold.
2017 Nestlé announces that it will explore strategic options for its US confectionery business and extends its consumer healthcare
portfolio with the acquisition of Atrium Innovations. The move supports Nestlé’s pursuit of growth opportunities in consumer
healthcare, complements the company’s focus on high-growth food and beverage categories such as coffee, petcare, infant nutrition
and bottled water. US investments are also made in Chameleon Cold–Brew coffee, Blue Bottle Coffee, Sweet Earth and Freshly. 2018
Nestlé and The Coca-Cola Company end their Beverage Partners Worldwide joint venture.
2018 Nestlé and The Coca-Cola Company end their Beverage Partners Worldwide joint venture.

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The Company’s History in Indonesia

2013 2018
• 1971 Nestlé imported products became more available in Indonesia after 1873 through the marketing of the Nestle branch in Singapore.
Because Indonesia experienced increased consumer demands, Nestlé officially started doing business in Indonesia in 1971 on behalf
of PT. Food Specialties Indonesia.
1972
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To support these efforts in Indonesia, the milk processing plant in Waru, East Java, began operating in 1972. In line with the
operation of the Processing Plant Factory Waru, Nestlé Indonesia began to provide technical assistance to the local people, especially
to cattle ranchers.
1979 In 1979, a coffee processing plant was established in Panjang, Lampung, as a second factory in Indonesia to produce Nestlé NESCAFÉ
coffee.
1990 After successfully opening and operating the plants in Lampung, Pasuruan, and East Java, in 1990, the new plant at Cikupa became
operational, producing confectionery such as POLOs and FOX'S.
2000 PT Food Specialties Indonesia, Nestlé Confectionary Indonesia & Supmi Sakti merged into PT Nestlé Indonesia. The merger was
considered so successful that in 2001, Nestlé Beverages Distribution Indonesia joined Nestlé Indonesia
2010- Since the market potential in Indonesia saw great increases by 2010 the factory in Kejayan expanded to become one of the 10 largest
present Nestlé factories in the world. Currently, this Kejayan plant produces 700, 000 liters of milk fresh every day from raw materials from
33,000 dairy farmers in East Java.
After successfully opening and operating the dairy processing, coffee processing and confectionery processing plants, in 2013, a new
plant, Nestlé’s fourth in Indonesia, will open to produce MILO, DANCOW and CERELAC Nestlé baby cereal.

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