2009 Processor of the Year: Nestle USA

A $101 billion global company works hard at understanding shoppers with a $60 weekly food budget.

By Dave Fusaro, Editor in Chief

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At Nestlé, Creating Shared Value focuses on nutrition, the responsible management of water resources and improving the lives of farmers and rural communities around the world. Here in the U.S., Nestlé USA is focusing its efforts on the areas where it can make the greatest positive impact – on issues relating to nutrition, health and wellness as well as sustainability.

Creating Shared Value is "the convergence of competitiveness and sustainability," Jose Lopez, executive vice president for operations and global business excellence, wrote in a position paper. He says the foundation is the 1987 statement of the United Nations' Brundtland Commission: "Development which meets the needs of the present without compromising the ability of future generations to meet their own needs."

Building a leading company

Nestlé SA is no newcomer to the U.S., having established its first facility in Fulton, N.Y., in 1900 to produce condensed milk and infant formula. A year earlier, Carnation Co. began operations in Kent, Wash., with a new process to produce canned, sterilized, evaporated milk.

For much of its first 70 years, Nestlé in the U.S. was primarily a candy, coffee and tea company. A transforming acquisition came in 1973 with the purchase of Cleveland's Stouffer Corp., a classic story of a family restaurant chain that starting offering frozen versions of its popular entrees so patrons could cook them at home.

Nestlé bought in at a critical time, when the Solon, Ohio, plant required upgrading and R&D needed funds for some ambitious new products – including a novel line of reduced-calorie entrees that would be called Lean Cuisine.

During the same time period, Carnation enjoyed steady growth and diversity. No longer just a condensed milk company, Carnation was busy creating new grocery categories with products such as Coffee-Mate and Carnation Instant Breakfast. The company had grown to $3.5 billion in sales with products ranging from evaporated milk and ice cream to Buitoni pastas and sauces, Friskies pet foods and Libby's pumpkin products. So another transformative acquisition for Nestlé arrived in 1985 with the purchase of Carnation Co.

"I joined Carnation right out of business school in 1980 with the goal of becoming a general manager for a packaged goods company," recalls Alford. "I like the nuts and bolts of running a company. I like all parts of the business, whether it's sales, advertising, talking about a new product, going to manufacturing facilities. I even like to see the trucks leaving the distribution center."

There has been buying and selling since, with Contadina, Ortega Mexican foods and secondary coffee brands (Hills Brothers, Chase & Sanborn, MJB) being jettisoned and Baby Ruth and Butterfinger (from Planters-Lifesavers), Drumstick novelties, Alpo dog foods and Haagen-Dazs being folded in. In the new millennium, key buys have been Power Bar, Dreyer's Grand Ice Cream and Chef America, creator of the Hot Pockets handheld foods.

Nestlé USA was incorporated in 1990 to handle all this activity. Other key acquisitions for the Swiss parent – such as Ralston Purina, Gerber baby foods and numerous bottled water brands – have spawned business units separate from Nestlé USA.

Keeping all those new product pipelines full is a global R&D organization and the considerable resources of a $101 billion global food & beverage company. Making all those products is a manufacturing organization that is well funded but disciplined by the financial and corporate goals of its Swiss parent. For both of those perspectives, see the following stories.

Present and future

While Joe Weller, chairman and CEO of Nestlé USA for 11 years, is remembered for the acquisitions, Alford may be credited with aligning this sprawling organization around the consumer, developing personnel and best practices and keeping it all in step with Vevey's principles.

"Joe Weller was a great mentor and role model for me. In 2006, I was extremely fortunate to inherit from him a very strong company with a tremendous product portfolio and outstanding performance. What new CEO wouldn't want that?" Alford says.

"I'm building on that foundation and making Nestlé USA stronger by focusing on understanding our consumers. To do this we must have insight into what our consumers want – emotionally as well as nutritionally – and then meet those needs better than anyone else. Because at the end of the day, consumers want products that taste great and make them feel good about their choice."

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