Statistics: 

Public Company 
Incorporated: 1866 as Anglo-Swiss Condensed Milk Company 
Employees: 253,000 
Sales: CHF 86.76 billion ($76.66 billion) (2004) 
Stock Exchanges: Basle Geneva Zurich Amsterdam Brussels Frankfurt
London Paris Tokyo Vienna OTC 
Ticker Symbols: NESN; NSRGY (ADRs) 
NAIC: 311514 Dry, Condensed, and Evaporated Dairy Product
Manufacturing; 311520 Ice Cream and Frozen Dessert Manufacturing;
311511 Fluid Milk Manufac- turing; 311422 Specialty Canning; 311411
Frozen Fruit, Juice, and Vegetable Processing; 311412 Frozen Specialty
Food Manufacturing; 311230 Breakfast Cereal Manufacturing; 311111 Dog
and Cat Food Manufacturing; 311320 Chocolate and Confectionery
Manufacturing from Cacao Beans; 312111 Soft Drink Manufacturing;
311930 Flavoring Syrup and Concentrate Manufacturing; 311920 Coffee
and Tea Manufacturing; 311823 Dry Pasta Manufacturing; 311999 All
Other Miscellaneous Food Manufacturing; 325412 Pharmaceutical
Preparation Manufacturing; 325620 Toilet Preparation Manufacturing;
551112 Offices of Other Holding Companies 

Company Perspectives: 
Quality is the essential ingredient in all of our brands and the reason why
millions of people choose Nestlé products every day. Our consumers have
come to trust in Nestlé's commitment to excellence and turn to Nestlé
brands to maintain nutritional balance in a fast paced world. 

Key Dates: 
1866: The Anglo-Swiss Condensed Milk Company is founded in Cham,
Switzerland. 
1867: Henri Nestlé begins selling cow's milk-food in Vevey, Switzerland. 
1900: Nestlé opens a factory in the United States. 
1905: Nestlé and the Anglo-Swiss Condensed Milk Company merge. 
1938: Nestlé introduces Nescafe. 
1974: Nestlé enters the nonfood business, becoming a major shareholder of
the cosmetics company L'Oréal. 
1979: After numerous name changes, Nestlé S.A. is adopted as the official
corporate title of the company. 
1985: Nestlé acquires Carnation and Hills Brothers Inc. 
1992: Nestlé acquires Perrier. 
1998: Nestlé acquires the Spillers pet food business belonging to Dalgety
PLC, making it the second largest pet food maker in Europe. 
2002: Nestlé acquires Ralston-Purina to become co-leader in the global pet
food business. 
2003: Nestlé acquires Dreyer's Grand Ice Cream. 
2005: Chief executive officer Peter Brabeck-Letmathe is named chairman of
the board. 

Company History:
Nestlé S.A. is the largest food and beverage company in the world. With a
manufacturing facility or office in nearly every country of the world, Nestlé
often is referred to as "the most multinational of the multinationals." Nestlé
markets approximately 7,500 brands organized into the following
categories: baby foods, breakfast cereals, chocolate and confectionery,
beverages, bottled water, dairy products, ice cream, prepared foods,
foodservice, and pet care.
Early History
While serving as the American consul in Zurich, Charles Page decided that
Switzerland, with its abundant milk supply and easy access to the whole
European market, was the perfect location for a condensed milk factory.
The first canned condensed milk had been produced in the United States by
Gail Borden some ten years before, and originally Page planned to produce
and sell "Borden Milk" in the European market as a licensee. The plan fell
through, however, so in 1866 he established the Anglo-Swiss Condensed
Milk Company as a limited company in Cham, Switzerland.
The company's name was meant to flatter the British, to whom Page hoped
to sell a great deal of his condensed milk. Anglo-Swiss first expanded its
operations beyond Switzerland's borders in 1872, when it opened a factory
in Chippenham, England. Condensed milk rapidly became a staple product
in European cupboards--the business downturn in 1872 and the depression
of 1875 did not affect the firm's sales. Charles Page died in 1873, leaving
the company in the hands of his brother George and Anglo-Swiss's other
investors. The next year, Anglo-Swiss undertook further expansion in
England by purchasing the Condensed Milk Company in London. By 1876
sales were almost four times their 1872 level.
Meanwhile, in Vevey, Switzerland, in 1867 Henri Nestlé began selling his
newly developed cow's-milk food for infants who could not be breastfed.
Demand for his Farine Lactée Nestlé soared. Between 1871 and 1873, daily
production more than doubled, from fewer than 1,000 tins a day to 2,000.
Nestlé's goal was to bring his baby food within everyone's reach, and he
spared no effort in trying to convince doctors and mothers of its benefits.
But while his energy and good intentions were nearly endless, his financial
resources were not. By 1873, demand for Nestlé's product exceeded his
production capabilities, resulting in missed delivery dates. At 61, Nestlé was
running out of energy, and his thoughts turned to retirement. Jules
Monnerat, a former member of parliament who lived in Vevey, had long
eyed the business, and in 1874 Nestlé accepted Monnerat's offer of CHF 1
million. Thus, in 1875, the company became Farine Lactée Henri Nestlé
with Monnerat as chairman.
In 1877 Nestlé faced a new competitor when the Anglo-Swiss Condensed
Milk Company--already the leading manufacturer of condensed milk in
Europe--decided to broaden its product line and manufacture cheese and
milk food for babies. Nestlé quickly responded by launching a condensed milk
product of its own. George Page tried to buy the competing company
outright, but he was firmly told that Nestlé was not for sale. Turning his
attention elsewhere, he purchased the Anglo-Swiss Company's first factory
in the United States in 1881. The plant, located in Middletown, New York,
was built primarily to escape import duties, and it was soon successful
enough to challenge Borden's supremacy in the U.S. condensed milk market.
It also presented a drawback: George Page spent so much time there that
Anglo-Swiss began to lose its hold on Europe, much to the delight of Nestlé.
After George Page's death in 1899, the Anglo-Swiss Condensed Milk
Company decided to sell its American business to Borden in 1902 so that it
could concentrate on regaining market share in Europe.
Until 1898 Nestlé remained determined to manufacture only in Switzerland
and export to its markets around the world. But that year the company
finally decided to venture outside Switzerland with the purchase of a
Norwegian condensed milk company. Two years later, in 1900, Nestlé
opened a factory in the United States, and quickly followed this by entering
Britain, Germany, and Spain. Early in the 1900s, Nestlé also became
involved in chocolate, a logical step for a company based in Vevey, the
center of the Swiss chocolate industry. Nestlé became a partner in the Swiss
General Chocolate Company, the maker of the Peter and Kohler brands.
Under their agreement, the chocolate company produced the first Nestlé
brand milk chocolate, while Nestlé concentrated on selling the Peter, Kohler,
and Nestlé brands around the world.
Merger of Nestlé and Anglo-Swiss in 1905
In 1905 Nestlé and the Anglo-Swiss Condensed Milk Company finally
quelled their fierce competition by merging to create the Nestlé and Anglo-
Swiss Milk Company. The new firm would be run by two registered offices,
one in Vevey and one in Cham. With Emile-Louis Roussy as chairman, the
company now included seven factories in Switzerland, six in Great Britain,
three in Norway, and one each in the United States, Germany, and Spain.
In response to an increase in import duties in Australia--Nestlé's second
largest export market--the company decided to begin manufacturing there
in 1906 by buying a major condensed milk company, the Cressbrook Dairy
Company, in Brisbane. In the next few years production and sales continued
to increase as the company began to replace sales agents with subsidiary
companies, particularly in the rapidly growing Asian markets.
Most of its factories were located in Europe, however, and when World War
I broke out in 1914, Nestlé's operations, particularly in such warring
countries as Britain and Germany, were seriously affected. Although
production continued in full force during the early months of the war,
business soon grew more difficult. By 1916 fresh milk shortages, especially
in Switzerland, meant that Nestlé's factories often sold almost all of their
milk supplies to meet the needs of local towns. Shipping obstacles, increased
manufacturing and operating costs, and restrictions on the use of
production facilities added to Nestlé's wartime difficulties, as did a further
decrease in fresh milk supplies due to shortages of cattle.
To deal with these problems and meet the increased demand for its
products from governments supplying their troops, Nestlé decided to expand
in countries less affected by the war and began purchasing existing factories,
particularly in the United States, where it established links with several
existing firms. By 1917 Nestlé had 40 factories, and in 1918, its world
production was more than double what it was in 1914. Nestlé pursued the
same strategy in Australia; by 1920 it had acquired a controlling interest in
three companies there. That same year, Nestlé began production in Latin
America when it established a factory in Araras, Brazil, the first in a series
of Latin American factories. By 1921, the firm had 80 factories and 12
subsidiaries and affiliates. It also introduced a new product that year--
powdered milk called Lactogen.
It did not take long for the effects of such rapid expansion to catch up with
the company, however. Nestlé and Anglo-Swiss reported its first loss in
1921, to which the stock market reacted with panic, making matters
worse. The company explained that the CHF 100 million loss was due to the
rising prices of raw materials such as sugar and coal, and a trade depression
that had caused a steady fall in consumer purchasing power, coupled with
falling exchange rates after the war, which forced the company to raise
prices.
To battle the storm, the company decided to reorganize both management
and production. In 1922 it brought production in line with actual sales by
closing some of its factories in the United States, Britain, Australia, Norway,
and Switzerland. It also hired Louis Dapples, a banking expert, to put the
company back in order. Dapples directed Nestlé with an iron fist,
introducing stringent financial controls and reorganizing its administration.
By 1923, signs of improvement were already evident, as Nestlé's
outstanding bank loans had dropped from CHF 293 million in 1921 to CHF
54.5 million in 1923. Meanwhile in France, Belgium, Italy, Germany, and
South Africa, production facilities were expanded. By consolidating certain
operations and expanding others, Nestlé was also able to widen its
traditional range of products.
Overall, the late 1920s were profitable, progressive times. In addition to
adding some new products of its own--including malted milk, a powdered
beverage called Milo, and Eledon, a powdered buttermilk for babies with
digestive disorders--the company bought interests in several manufacturing
firms. Among them were butter and cheese companies, as well as Sarotti
A.G., a Berlin-based chocolate business that began manufacturing Nestlé,
Peter, Cailler, and Kohler chocolate. In 1928, under the direction of
Chairman Louis Dapples, Nestlé finally merged with Peter, Cailler, Kohler,
Chocolats Suisses S.A.--the resulting company of a 1911 merger between
the Swiss General Chocolate Company and Cailler, another leading firm--
adding 13 chocolate plants in Europe, South America, and Australia to the
growing firm.

Expansion During the Great Depression

Nestlé was becoming so strong that it seemed even the Great Depression
would have little effect on its progress. In fact, its U.S. subsidiary, Nestlé's
Food Company Inc. of New York, barely felt the stock market crash of
1929. In 1930 Nestlé created new subsidiaries in Argentina and Cuba.
Despite the Depression, Nestlé added more production centers around the
world, including a chocolate manufacturer in Copenhagen and a small
factory in Moravia, Czechoslovakia, to manufacture milk food, Nescao, and
evaporated milk. Factories were also opened in Chile and Mexico in the mid-
1930s.
While profits were down 13 percent in 1930 over the year before, Nestlé
faced no major financial problems during the Depression, as its factories
generally maintained their output and sales were steady. Although Nestlé's
New York-based subsidiary, renamed Nestlé's Milk Products Company, was
more affected than those in other countries, U.S. sales of milk products were
steady until 1931 and 1932, when a growing public frugality began to
cause trouble for more expensive but established brands such as Nestlé's.
Profit margins narrowed, prices dropped, and cutthroat competition
continued until 1933, when new legislation set minimum prices and
conditions of sales.
The markets, such as the United States, that were among the first to feel
the effects of the Depression were also the first to recover from it. The
Depression continued in Switzerland, however. Nestlé products
manufactured there could no longer compete on international markets since
Swiss currency exchanges were made especially difficult from the early
1930s, when many major countries devalued their currencies, until 1936,
when Switzerland finally did likewise. The company decided to streamline
production and close several factories, including its two oldest, in Cham and
Vevey.
Decentralization efforts begun during the Depression continued to modify
the company's structure gradually. By 1936, the industrial and commercial
activity of the Nestlé and Anglo-Swiss Condensed Milk Company itself was
quite limited in comparison with the considerable interests it had in
companies manufacturing and selling its products. More than 20 such
companies existed on five continents. In effect, the firm had become a
holding company. Consequently, the Nestlé and Anglo-Swiss Condensed Milk
Company Limited was established to handle production and marketing on
the Swiss market; the parent company officially became a holding firm,
called the Nestlé and Anglo-Swiss Holding Company Ltd.; and a second
holding company, Unilac Inc., was created in Panama by a number of
Nestlé's overseas affiliates.

Nescafé Instant Coffee Debuting in 1938 (first mover)

In 1937 Louis Dapples died, and a new management team, whose members
had grown up with the organization, took over. The team included
Chairman Edouard Muller, formerly managing director; Carl J. Abegg, vice-
chairman of the board; and Maurice Paternot, managing director. In 1938
Nestlé introduced its first nonmilk product: Nescafé. The revolutionary
instant coffee was the result of eight years of research, which had begun
when a representative of the Brazilian Coffee Institute asked Louis Dapples if
Nestlé could manufacture "coffee cubes" to help Brazil use its large coffee
surplus. Although coffee crystals and liquid extracts had been tried before,
none had satisfactorily preserved a coffee taste.
Nestlé's product took the form of a soluble powder rather than cubes,
allowing users to control the amount of coffee they used. Although Nestlé
originally intended to manufacture Nescafé in Brazil, administrative barriers
were too great, so Nescafé was first manufactured in Switzerland. Limited
production capacity meant that it was launched without the elaborate
marketing tactics usually used for products with such potential.
Nescafé quickly acquired a worldwide reputation, however, after it was
launched in 1939 in the United States, where it did exceptionally well.
Nestea, a soluble powdered tea, also made a successful debut in the early
1940s.
World War II had a dire effect on Nestlé. In 1939 profits plummeted to $6
million, compared to $20 million the year before. As in the last war, the
company was plagued by food shortages and insufficient supplies of raw
materials. To wage its own battle against the war, the company decided to
split its headquarters at Vevey and transfer part of the management and
executive team to an office in Stamford, Connecticut, where it could better
supervise distant markets. Nestlé continued under control of dual
managements until 1945.
But the war was not all bad for Nestlé. When the United States became
involved in 1941, Nescafé and evaporated and powdered milk were in
heavy demand from American armed forces. Nestlé's total sales jumped
from $100 million before the war to $225 million in 1945, with the
greatest increase occurring in North America, where sales went from $14
million to $60 million. With the end of the war, Nestlé's European and
American branches were able to discuss future plans without fear of
censorship, and the company could begin to face the challenge of rebuilding
its war-torn subsidiaries. Nestlé also relaunched Nescafé and baby foods and
began to research new products extensively. Researchers focused on the three
areas Nestlé considered most likely to affect the food industry's future: an
increase in world population, rising standards of living in industrialized
countries, and the changing social and economic conditions of raw-
material-producing countries.

Postwar Growth Through Merger and Acquisition (fire attack)

In 1947 Nestlé merged with Alimentana S.A., the manufacturer of Maggi
seasonings, bouillon, and dehydrated soups, and the holding company
changed its name to Nestlé Alimentana Company. Edouard Muller became
the first chairman of Nestlé Alimentana, but he died in 1948, before the
policies he helped formulate put the company on the road to a new future.
Carl Abegg assumed leadership of the board.
In 1950 Nestlé acquired Crosse and Blackwell, a British manufacturer of
preserves and canned foods. Nestlé hoped its $24 million investment would
serve as a marketing outlet for Maggi products, but the plan was less than
successful, primarily because Crosse and Blackwell could not compete in the
United Kingdom with H.J. Heinz Company. Similar setbacks occurred in
1963, when Nestlé acquired Findus frozen foods in Scandinavia for $32
million. Although the company performed well in Sweden, it encountered
difficulties in other markets, where the British-Dutch giant Unilever reigned.
While parts of the Findus operation eventually became profitable, Nestlé
merged its German, Italian, and Australian Findus branches with Unilever.
The development of freeze-drying in 1966 led to Taster's Choice, the first
freeze-dried coffee, as well as other instant drinks.
In 1971 Nestlé acquired Libby, a maker of fruit juices, in the United States,
and in 1973 it bought Stouffer's, which took Nestlé into the hotel and
restaurant field and led to the development of Lean Cuisine, a successful line
of low-calorie frozen entrees. Nestlé entered the nonfood business for the
first time in 1974 by becoming a major shareholder in the French company
L'Oréal, a leading cosmetics company. Nestlé diversified further in 1977
with the acquisition of Alcon Laboratories, a Fort Worth, Texas,
pharmaceutical company that specialized in ophthalmic products. Then, two
years later, Nestlé purchased Burton, Parsons and Company Inc., an
American manufacturer of contact lens products. The company adopted its
present name--Nestlé S.A.--in 1979.

Facing Boycott in Late 1970s and Early 1980s

The 1970s saw Nestlé's operations in developing countries increase
considerably. Of Nestlé's 303 manufacturing facilities, the 81 factories in
developing nations contributed 21 percent of Nestlé's total production. In
the mid-1970s, however, the firm faced a new problem as a result of its
marketing efforts in these countries, when a boycott against all Nestlé
products was started in the United States in 1977. Activists claimed that
Nestlé's aggressive baby food promotions made mothers in developing
countries so eager to use Nestlé's formula that they used it any way they
could. The poverty-stricken areas had high rates of illiteracy, and mothers,
unable to read and follow the directions, often mixed the product with local
polluted water or used an insufficient amount of the expensive formula,
unwittingly starving their infants. Estimates of Nestlé's losses as a result of
the boycott, which lasted until the early 1980s, ranged as high as $40
million.
In 1981 Helmut Maucher became managing director of Nestlé and made
this controversy one of his top priorities. He met with boycott supporters
and complied with the World Health Organization's demands that Nestlé
stop promoting the product through advertising and free samples. His direct
confrontation of the issue contrasted with Nestlé's earlier low-profile
approach and was quite successful in allaying its critics' fears.

Series of Major Acquisitions in the Later 1980s (fire attack)

Maucher also reduced overhead by turning over more authority to operating
units and reducing headquarters staff. In addition, he spearheaded a series
of major acquisitions. In 1985 Nestlé acquired Carnation, a U.S.
manufacturer of milk, pet, and culinary products, for $3 billion, at the time
one of the largest acquisitions in the history of the food industry. This was
followed in 1985 by the acquisition of Hills Brothers Inc., the third largest
U.S. coffee firm, which added ground roast coffee to Nestlé's product line. In
the late 1980s, as food companies around the world prepared for the
integration of the European Community in 1992, Nestlé continued to make
major acquisitions. In 1988 the company paid £2.55 billion ($4.4 billion) for
Rowntree Mackintosh PLC--a leading British chocolate manufacturer--
marking the largest takeover of a British company by a foreign one to date.
That same year Nestlé also purchased the Italian pasta maker Buitoni SpA.
Capital expenditures reached CHF 2.8 billion in 1991. Half was devoted to
installation improvements, including data processing and automation,
particularly in North America and Europe. The other half was spent
expanding plants, primarily in Latin America and the Far East, areas where
products were often based on local raw materials, tastes, and habits. That
year Nestlé made 31 acquisitions, also adding a new factory in the People's
Republic of China. Among the companies purchased were Alco Drumstick, a
U.S. ice cream manufacturer with many European activities; Indra, a
Swedish frozen-food maker; La Campiña, a Mexican evaporated milk
producer; and 97 percent of Intercsokolàdé, a Hungarian chocolate maker.
The latter was Nestlé's first venture into the newly opened markets of
Eastern Europe.
In September 1991 Nestlé and The Coca-Cola Company formed a 50-50
joint-venture, Coca-Cola Nestlé Refreshment Company, to produce and
distribute concentrates and bases for the production of ready-to-drink
coffee and tea beverages. With an initial capitalization of $100 million the
products, to be sold under the Nescafé and Nestea brand names, would be
marketed worldwide save for Japan, primarily through Coca-Cola's
international network of businesses.
Nescafé, sold in more than 100 countries by 1991, was launched in the
Republic of Korea--Coca-Cola and Nestlé's first joint endeavor--as was
Nescafé Cappuccino in Europe. Hills Bros. "Perfect Balance," a 50 percent-
decaffeinated coffee, began selling in the United States, as did Nestea in cans
at the beginning of 1992. By early 1992, a joint venture allowed the
company to obtain a majority interest in Cokoladovny, a Czechoslovakian
chocolate and biscuit producer. In addition, Nestlé in 1992 battled for and
won, with a bid of $2.3 billion in cash, the French mineral water producer
Source Perrier, though European regulators forced Nestlé to sell off some
Perrier brands. That same year Nestlé took nearly full control of another
mineral water concern, Vittel. Nestlé had acquired a 30 percent stake in
Vittel in 1969, a move marking the company's first foray into mineral
water.

Reemphasis on Core Food Area in Later 1990s

As the 1990s continued, Nestlé recommitted itself to its core food products
area, never having been able to grow its healthcare and cosmetics sectors
into significant parts of the overall business. The company sold off some of
its health and beauty interests, retaining Alcon and the minority holding in
L'Oréal--it still hoped to gain full control of the latter, which was privately
controlled. Nestlé made other divestments as well, including Wine World
Estates, a group of northern California wineries (sold in 1995); canned
beans and pasta operations in Canada, a fresh meat business in Germany,
and cold meat operations in Sweden (1996); Contadina canned tomato
products in the United States, Sarotti chocolate and Dany sandwiches in
Germany, and Locatelli brand cheeses in Italy (1997); and Libby's canned
meat products, which were sold to International Home Foods for $126
million in 1998.
Acquisitions in the mid-to-late 1990s centered around mineral water, ice
cream, and pet foods. In 1993 Nestlé purchased mineral water brands in
the United States (Deer Park and Utopia) and Italy (Vera and San
Bernardo), as well as ice cream brands in Italy, the Philippines, and South
Africa. Added in 1994 were the Alpo pet food company in the United
States and Warnke ice creams in Germany; the company also gained a
majority stake in chocolate maker Goplana S.A. in Poland. Still further
expansion of the ice cream sector came in 1995 with the purchase of
Conelsa, the leader in the Spanish market; the chilled dairy products division
of Pacific Dunlop in Australia; and Dolce S.A.E., the leading maker of ice
cream in Egypt. That year Nestlé also acquired Ortega, a leading brand of
Mexican food products in the United States. In 1997 Nestlé entered the
Canadian ice cream market through the purchase of Ault and Dairy World,
giving the company a 40 percent market share. In early 1998 Nestlé took
full control of the San Pellegrino mineral water group and acquired Klim
milk powders and Cremora coffee creamers from Borden Brands
International. Also in 1998 the company secured the number two position
in the European pet food market, trailing only Mars, through the £715
million ($1.2 billion) purchase of the Spillers pet food business of Dalgety
PLC.
Despite all of this activity, Nestlé's acquisition pace slowed during the late
1990s as the company shifted toward organic growth starting in 1996. The
numerous acquisitions had enabled Nestlé to gain a presence in various
product areas in various countries. The company now had fewer countries
and products that it wished to add to its portfolio. Other reasons for the
shift to organic growth included the increasing price of acquisitions and
antitrust concerns. Meanwhile, in June 1997 Peter Brabeck-Letmathe was
named chief executive, taking over the day-to-day management of Nestlé
from Maucher. In September 1998 Nestlé announced that Maucher would
retire as chairman by the spring of 2000, being replaced by Rainer Gut,
then chairman of the Credit Suisse Group.
Nestlé's aggressive marketing of infant formula once again became an issue
in 1997 when a report called  Cracking the Codewas issued by the
Interagency Group on Breastfeeding Monitoring (IGBM), which had
conducted research in Bangladesh, Poland, South Africa, and Thailand. The
IGBM concluded that several companies, including Nestlé, were in violation
of the World Health Organization's International Code of Marketing of
Breastmilk Substitutes, which had been adopted in 1981. According to the
report Nestlé's code violations included supplying pregnant women and
health workers with materials that promoted formula feeding but did not
emphasize the superiority of breastfeeding over formula, and distributing
free samples. Nestlé countered by calling the report biased and flawed, and
by eliciting a response critical of  Cracking the Code from an independent
marketing research consultant.
At the dawn of the 21st century, Nestlé had about 500 factories in more
than 78 countries, boasted sales exceeding CHF 70 billion, and was the
undisputed leader in the food industry worldwide. Its portfolio included
more than 8,500 brands. The company had set a goal of achieving 4
percent underlying sales growth each year, but failed to meet this target for
1998, largely because of economic downturns in southeast Asia, Latin
America, and Eastern Europe.

Consolidation and Expansion in the Early 21st Century

It took several years before the character of the Brabeck-Letmathe era of
leadership revealed itself. Initially, Brabeck-Letmathe managed the company
in a fashion similar to his predecessor, Maucher. The pair, in fact, had
agreed on a list of characteristics to remain unaltered during the two reigns
of command, but after several years at the helm, Brabeck-Letmathe
realized he needed to break the covenant, making one sweeping change in
particular. Maucher had insisted that Nestlé retain its decentralized
structure as a way to cater to local markets and tastes (Nestlé, for example,
produced 200 different formulations of Nescafé), but Brabeck-Letmathe saw
the company becoming uncompetitive so he began to consolidate its
operations. The management of factories, which historically had been divided
country by country, was broken into regional divisions. Further, products
that were similar were organized into strategic business units, adding more
cohesion to the operation of Nestlé's global business.
Maucher was remembered as a wheeler and dealer, executing an ambitious
acquisition campaign during his decade-and-a-half in charge. Brabeck-
Letmathe, in contrast, waited several years before making a major
acquisition, preaching growth through internal means during his first years
in office. When he did strike out on the acquisition trail, he gravitated
toward companies involved in pet care, health, and nutritional products,
steering Nestlé toward the higher, value-added market in which the
company added basic ingredients to products. Nestlé acquired PowerBar in
2000, but Brabeck-Letmathe's master stroke occurred two years later
when he spent $10.3 billion to acquire Ralston-Purina. The acquisition made
Nestlé the joint world leader in the pet food business, putting the company
alongside Mars, Incorporated, which owned the Pedigree, Sheba, and
Whiskas brands. Next, Brabeck-Letmathe turned his attention to Nestlé's ice
cream business, completing the acquisition of a German ice cream
manufacturer named Schoeller in 2002. The following year, the company
spent $2.8 billion to acquire majority control of Dreyer's Grand Ice Cream.
As Nestlé pressed forward under the leadership of Brabeck-Letmathe, the
company plotted a future course that distinguished it from its rivals. Rival
food conglomerates such as Unilever and Danone focused on narrowing their
strategic focus, shedding businesses in an effort to increase their profit
margins. Unilever, for example, shuttered more than 100 of its factories
and reduced the number of its brands from 1,600 to 400 during the first
three years of the decade. Nestlé chose a different path for its future,
promising to get bigger as the years passed, emphasizing growth in areas
designed to transform it from a food company into a food, health, and
wellness company with a deeper involvement in nutritional products.
Growth in this direction promised to be the legacy of Brabeck-Letmathe's
tenure. The influence of his leadership was expected to increase as he
completed his first decade of stewardship. In early 2005, Brabeck-Letmathe
was named chairman of Nestlé, giving him the two most powerful positions
at one of the largest companies in the world.