We live in the most plentiful times known to mankind.
Whereas in the past our ancestors had to spend most of their waking hours tirelessly working
for their food, today we are just one click away from an endless slew of delicious goodness.
It might seem strange, then, to discover that today, when the choice of brands couldn’t
be higher, the companies behind the food industry have never been so few.
That’s why today we’ll be taking a look at the world’s largest food company, Nestle.
The year is 1866, and two entrepreneurs on the opposite sides of Switzerland were getting
ready to start their own companies.
The man on the right was Charles Page, a former US consul who had fallen in love with Switzerland’s
green meadows and fat cows.
His dream was to build a condensed milk factory, hoping to mimic the success of the first such
factory in the world built ten years earlier by Gail Borden in the US.
Charles had previously sent his brother George to that factory to try to learn more about
Borden’s method, which involved evaporating the water in the milk and adding sugar.
Together the brothers founded the Anglo-Swiss Condensed Milk Company, with the hope of becoming
the British Empire’s primary supplier of canned milk.
At the same time, 100 miles southwest of the Page brothers lived Henri Nestle, a German
immigrant with an equally fervent passion for dairy products.
As one of fourteen children in the Nestle family, Henri was painfully aware of the high
infant mortality rate across Europe.
To help solve the problem, Henri spent several years developing an affordable breast milk
substitute by combining milk with grain and sugar.
From 1867 onwards, Henri’s Farine Lactée became indispensable to Swiss society.
By 1871, his infant formula was sold throughout Western Europe, with his factory churning
out over 1,000 cans every day.
Just two years later, Henri was selling over 2,000.
In 1877, however, a new competitor rose up to challenge Nestle.
While Henri was earning pennies selling his infant formula in Western Europe, the Page
brothers had made a fortune selling their condensed milk across the world.
They had become the primary supplier of the British Empire, as they had originally intended,
but by 1877 they had also spread to the US and Continental Europe.
Eager to expand their business, the Page brothers started selling their own infant formula.
To Henri, this was declaration of war, and so he promptly released Nestle-branded condensed
milk in retaliation, starting a relentless price war that would rage on for almost 30
years.
Although both companies grew during this period, competition hurt their bottom line immensely.
Henri and the Page brothers were proud men and were unwilling to concede, but by 1905,
when all three of them were dead, the directors of the two companies agreed to a merger.
The newly created company had a total of 20 factories and over the next decade Nestle
would spread to every inhabited continent.
The advent of World War 1 seemed advantageous at first, since the world’s militaries knew
how valuable canned milk would be.
Pretty soon, however, Nestle realized that they would have no way to service this new
demand: Raw material shortages and international embargoes
left Nestle’s 20 factories empty.
In response, Nestle started buying factories in the US, drastically expanding their production
and cozying up to Uncle Sam.
By 1917 Nestle’s capacity had doubled to 40 factories, and by 1921 it had doubled again
to 80.
World War 1 had taught Nestle a valuable lesson: don’t keep your eggs in one basket.
Throughout the thirties, Nestle opened factories in Asia and Latin America, so that when the
next war came around they’d be ready.
Coincidentally, this decentralization kept Nestle safe from the Great Depression and
allowed them to develop one of their most renowned products: Nescafe.
The idea for Nescafe came from the Brazilian government, which wanted Nestle to find a
use for their immense coffee surplus.
The Brazilians had suggested making coffee cubes, but Nestle eventually decided to make
a soluble powder instead.
Nescafe hit the US shelves in 1938 with minimal advertising, and yet one year later it had
become one of the most popular coffee products in the country.
To Nestle, the outbreak of World War 2 felt like a deja vu.
At first demand grew rapidly, but the sheer scale of the global destruction left Nestle
with huge supply shortages.
Nestle’s saving grace came in 1941, when the US formally entered the war.
Nescafe became a staple of the armed forces and government contracts propelled Nestle
to record profits.
World War 2 ended up being so profitable for Nestle that they immediately started buying
up the smaller European companies that weren’t so lucky.
Their best purchase by far came in 1947, when they acquired Maggi, the manufacturer of various
soups and seasonings.
One year later, Nestle unveil two other brilliant products: Nestea and Nesquik, which quickly
reach Nescafe levels of popularity.
Throughout the next decades Nestle expanded mainly through acquisitions, entering various
new markets, from frozen food to pharmaceuticals.
One of their most successful moves came in 1974, when they acquired a 30% stake in the
French cosmetics firm L’Oreal.
Just three years later, however, Nestle were faced with their first major controversy.
US activists accused Nestle of using predatory marketing tactics to promote their breastfeeding
substitutes in the developing world.
The boycott quickly spread to Europe, and although Nestle eventually complied with the
demands set forth by the World Health Organization, the boycott has been intermittently active
to this day.
Nestle’s expansion continued throughout the 1980s, buying up brands like Friskies,
KitKat and After Eight.
During this time they also created Nespresso system.
In 1992 Nestle decided to go all in on mineral water, establishing what eventually became
the world’s largest bottled water company.
Since then their brand ownership has grown exponentially, but so too have their controversies.
In 2002 Nestle demanded debt repayment from Ethiopia during one of the harshest famines
in recent memory, eventually backing down after over 8,000 angry email complaints.
In 2005 the CEO of Nestle claimed that people shouldn’t have a right to water, a claim
that backfired so profusely that Nestle have a Q&A webpage dedicated to his apologies and
backtracking.
Last but not least is the cocoa industry, which is the bedrock of Nestle’s chocolate
products and is also, coincidentally, one of the global centers of child labor, slavery
and human trafficking.
Despite the numerous lawsuits and calls for boycott, however, Nestle has become bigger
than ever, owning over 2,000 different brands across the world.
Since people are unlikely to give up on Nestle’s delicious goodies any time soon, it’s safe
to say that Nestle will continue expanding in the future.
Thanks for watching and a big thank you to all of our supporters on Patreon!
If you liked Nestle’s story feel free to subscribe for more and to check out the full
Behind the Business playlist for the interesting stories of other companies.
Once again, thanks a lot for watching, and as always: stay smart.