2009 Processor of the Year: Nestle USA

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."

One advantage of being part of a large and global company is the opportunity for employees to work in other countries. "I had the opportunity to work in Australia two different times and the international experience made me a much better person and a much better executive," Alford continues. "No matter what country you work in, there is always a diverse mix of employees from around the world. It's a necessity if you want to make it to the most senior ranks of leadership at Nestlé.

"A great example is our worldwide CEO Paul Bulcke. Paul joined Nestlé over 30 years ago in his native Belgium as a financial analyst. He moved over to marketing and worked in Switzerland, Spain, Ecuador and Chile. Then he held market head jobs in Portugal, Czech Republic, and Germany. He was heading up the entire North and South America Zone when he was named worldwide CEO early last year."

Despite all its advantages, size does have its shortcomings. As the world's largest food company, Nestlé SA tends a balancing act between fostering independent and localized thinking and enforcing corporate goals, between requiring financial discipline and sharing its considerable financial resources.

It's precisely that kind of stewardship that enables the budgeting of $500 million to build the world's largest and most sophisticated milk-based beverage plant (in Anderson, Ind.), which will create shelf-stable milk products that can be shipped at ambient temperatures and with a six-month best buy date.

…And yet promotes Libby's canned pumpkin every fall.
That comes up with the formulation and process changes that invented the concept of slow-churned ice cream, which lowered calories and fat but maintained the taste of full-fat ice cream.

… And still makes Pixy Stix and Lik-M-Aid.
That can dictate to its plants the conversion to harmless non-fluorocarbon refrigerants – including much original development work on carbon dioxide and ammonia hybrid systems – to prevent ozone depletion.

…And still makes condensed milk.
But all the size, global reach and financial discipline is secondary to the food and the consumers who buy it.

"Ultimately, all of us at Nestlé are passionate about food," says Alford. "I always say that we have to understand our consumers better than anyone else to remain successful. We use a variety of means to dig as deep as possible so we can truly identify with our consumers' wants and needs.

"One of our most recent initiatives has to do with identifying how consumers behave in-store – where they are known as shoppers. Marketing to a consumer is different than marketing to a shopper, because what a consumers says they will buy and what they actually buy are not necessarily the same thing. We know from research that up to 70 percent of purchase decisions are made in-store – so we are working with our retail partners to give shoppers what they want in each retail outlet, whether it's meal solutions, recipes or different types of information about our products.

"At our most recent marketing summit, we focused on shopper marketing and took part in a valuable exercise that allowed us to walk in our shoppers' shoes. We all went to different food stores with a shopping list and a fixed budget of $60 for a week's worth of groceries. That's the challenge most of our consumers face every week and it was a great learning experience. My goal is to get the shopper marketing mindset to become more integrated into our planning process and our overall business approach."