Speaking of the past that our generation misses, there are a few things that must be mentioned: Nestlé milk powder, Yinlu peanut milk and eight-treasure porridge, Hsu Fu Chi candies, and bagged Nestlé coffee. Not many people may still know about "Nestlé Fruit Vitamin C+", which was also the best-tasting "fruit" drink in childhood. Nestlé was not the first food giant to enter China, but Nestlé China has indeed achieved successful localization. The growth of Nestlé China not only deeply influenced the growth of the post-80s and post-90s generations in China but also single-handedly cultivated China's coffee culture. This veritable food giant is an old enterprise that originated in a small country city with only about 8 million people and has been operating for over 150 years. In the 2016 Fortune Global 500 ranking, Nestlé ranked 66th, while Pepsi, also a comprehensive food company, ranked 127th, Mondelez International (an independent company spun off from Kraft) ranked 352nd, and Danone ranked 433rd. As of December 31, 2016, Nestlé's annual sales revenue reached CHF 89.5 billion, with nearly 500 factories in over 80 countries and regions, and more than 330,000 employees. The world's food industry giant, operating steadily for over 150 years, with more than 20 brands at the CHF 1 billion level—Nestlé. How exactly does it produce delicious and sellable products, taking the lead in the ever-changing food industry? How does it manage such a huge organization? What is special about its organizational structure and management model? What is its corporate culture? Through what product innovation model has it been able to win in the fierce market competition for over 100 years and lead food consumption trends? Why has its product quality system become a research subject for peers and scholars? Swiss DNA Speaking of Nestlé's origins, we must mention its birthplace—Switzerland. In 1866, Nestlé was founded in Switzerland, known as the "roof of Europe," with a domestic population of only about 8.39 million. Limited by the small market size of Switzerland, it seems that from its inception, Nestlé was destined to do business worldwide. Before modern times, Switzerland was very poor because most of its territory is in the Alps, mainly based on small-scale agricultural economy, as apart from ice, snow, water sources, and mountain scenery, Switzerland had very few natural resources to sustain human livelihood. This harsh living condition prompted Swiss people to enter Europe before the 14th century, making a living through diligence, intelligence, and labor. The Swiss are not only resilient and good at integrating into local societies but also strive to maximize resource utilization—Swiss entrepreneurs' pioneering spirit, professionalism, and frugality gradually formed in this way. Historically, Switzerland never had a centralist tradition; it was the first country in modern Europe to establish a democratic system and is one of the few countries that adopt a pure federal system as its political system. Federalism is particularly suitable for multicultural societies. Under this system, each Swiss canton retains its own government and important independent decision-making power, allowing different political, cultural, religious beliefs, and histories to develop. Switzerland thus formed a diverse atmosphere that could accept European immigrants. In modern times, European immigrants forced to leave their homes for various reasons at different historical periods entered Switzerland. Some of them, who were enterprising and compatible with Swiss character, chose to stay and start their own careers—Nestlé's founder, Henri Nestlé, was a German immigrant. Image source: FBIF Food & Beverage Innovation WeChat official account Mergers and Acquisitions: Writing Nestlé's 150 Years Many excellent Swiss enterprises are known for their long history, and Nestlé, with over 150 years of history, is also a standout. During its 150-plus years of development, Nestlé's history has been written by countless mergers and acquisitions. Nestlé's first merger occurred in 1905 with Anglo-Swiss Condensed Milk Company, also a Swiss enterprise. The new company retained the "Nestlé" name and expanded its business. Both in product form and capacity, Nestlé met the demand for easily preserved dairy products before and after World War I. To ensure smooth production during World War I, Nestlé acquired some American companies and began building factories in Australia—at this point, it already had the prototype of a multinational corporation. After World War I, Nestlé acquired a series of chocolate companies such as Cailler, and in 1938 developed the famous Nestlé instant coffee. Between the two world wars, Nestlé continued to develop and produce dairy products, infant foods, and chocolate. For strategic development reasons, to ensure production capacity and normal operations, Nestlé also kept acquiring or building factories in the United States, Australia, and other areas less affected by the war—by the end of World War II, Nestlé had grown into a global company with factories on five continents. After World War II, the global economy gradually recovered. Nestlé added two fast-growing categories—culinary products and famous instant beverages (mainly Nestlé instant coffee)—to its original dairy, infant nutrition, and chocolate businesses, entering a period of steady development. By the 1960s, Nestlé began attempting diversification through acquisitions, rapidly expanding its territory. In Europe, Nestlé successively acquired brands and companies such as Maggi to strengthen its position in the food industry. On the other hand, it also acquired various companies globally in mining, hotels, catering, wine, canned food, eye care, etc.—this was a period of great development for Nestlé, with rapid growth in profits and sales. However, by the mid-to-late 1970s, Nestlé encountered the global economic slowdown caused by the first oil crisis. Additionally, it faced fierce competition in multiple markets, and overall performance growth slowed. As mentioned earlier, by the 1980s, Nestlé's then-CEO Helmut Maucher determined that uncontrolled diversification must stop. He redefined Nestlé's strategic goals, deciding to expand the company into the world's largest food enterprise. The key to Maucher's move was his clear recognition that Nestlé must be more focused in business and focus on medium- and long-term strategies in the food and beverage market. For example, in addition to traditional products like milk and chocolate, Nestlé must be the first to enter the most promising areas such as water, breakfast cereals, and pet food. Driven by this strategy, in 1996, Nestlé became the "world's largest food company" through acquisitions and mergers, achieving sufficient economies of scale. Nestlé's board of directors and Maucher's two successors—Peter Brabeck-Letmathe and Paul Bulcke—continued to implement this strategy. Whether Maucher, Brabeck, or Bulcke, all three adhered to the direction of scale, and while continuing to expand through acquisitions, they continuously reorganized and optimized Nestlé's management and production structure. From a medium- and long-term strategic perspective, they constantly reassessed the companies and brands acquired by Nestlé—buying enterprises that fit Nestlé's future development strategy while selling off unprofitable (e.g., vegetable and fruit cans, cheese) and soon-to-be unprofitable businesses. Centralized-Decentralized Management Approach To manage such a huge organization, Nestlé adopts an extremely flexible organizational structure and management model—a method known as "centralized-decentralized" management. "Centralized" means that Nestlé's Swiss headquarters decides important strategic decisions and basic policies, while "decentralized" means that regional markets have significant autonomy at the execution level, especially in marketing and service innovation. Many management experts believe that this management model is one of the reasons Nestlé can successfully integrate acquired companies and maintain the vitality of these external brands. In its corporate values, Nestlé promises to "respect diverse cultures and traditions" and allows acquired companies considerable autonomy—most brands acquired by Nestlé have thus been able to continue smoothly and even expand their development paths. For example, KitKat, a British product born in 1938, has become the third-largest chocolate brand globally through Nestlé's vast sales network. Although Nestlé has also encountered some food safety and humanitarian issues (which is another long story), overall, these are not much related to Nestlé's internal management, because from the beginning of designing the management structure, Nestlé's managers decided to promote management with a humble and service-oriented attitude. Headquarters' authority is limited to: formulating long-term strategies and deciding important investments; optimizing the management and distribution of factories and supply chains in various regions; managing brand strategies; formulating policies and rules for a series of management systems such as production and quality safety systems; cultivating excellent management talents; promoting innovation top-down through the R&D system and formulating various rules to encourage innovation in local institutions; and providing technical and knowledge support to factories and institutions in various regions. On the basis of consensus on values and long-term strategy, Nestlé headquarters minimizes interference in local companies. Headquarters formulates principles and rules for action and promotes compliance across the group. However, when facing complex and changing local market environments, Nestlé branches in various regions have the authority to respond directly to local consumers' tastes and eating habits. This "centralized-decentralized" management model adopted by Nestlé is more common among European companies. European companies' management is known for value diversity; they do not regard short-term performance as the sole pursuit of corporate operations but rather advocate a "long-term perspective" on performance and corporate competitiveness. In contrast, American companies place more emphasis on stock market performance, thus stressing managers' control and tending to launch standardized products in target markets. Although neither model is superior, compared to the unified management model of American companies, Nestlé's branches in various regions have astonishingly large autonomy, which brings them enduring innovation capabilities. Localization Strategy Nestlé's "localization" in production and operation is reflected in: regional companies/acquired enterprises produce products for their host country/region, employ local staff as much as possible, and use local raw materials as much as possible. This management model is an important reason Nestlé can successfully integrate acquired companies and maintain the vitality of acquired brands for a long time. Nestlé's "localization" is also reflected in its brand strategy: Nestlé has over 2,000 brands globally, including in China: Hsu Fu Chi candies, Dashan mineral water, Wuyang ice cream, Yinlu peanut milk, etc. These brands are highly regional and down-to-earth, seemingly unrelated to the international "Nestlé" brand. The strength of the relationship between these brands and Nestlé's main brand depends on local consumers' needs and preferences, meaning that to meet consumers' diverse needs, Nestlé can "hide" behind products and services without imposing the Nestlé brand on acquired companies. So even though Yinlu peanut milk is under Nestlé, what we drink now is still authentic Yinlu products with their own characteristics. Conclusion: For any enterprise, including Nestlé, the world's number one food company, the journey of going global is bound to be full of twists and turns. Since entering China over 30 years ago, Nestlé started from an unremarkable city in Shuangcheng, Heilongjiang. This project took nearly 10 years from government negotiations to factory construction and production. In 1990, when people had no environmental awareness, the Shuangcheng factory was equipped with an international-standard wastewater treatment workshop. When entering the water market, it took 3 years to inspect water sources. In Pu'er, Yunnan, it introduced coffee and supported coffee farmers. Nestlé, with its amazing perseverance and patience, expanded its territory in China and became a multinational enterprise most like a mainstream Chinese enterprise. Currently, Chinese enterprises are engaging in globalization with great enthusiasm and speed, conducting cross-border acquisitions and mergers. Nestlé's practice of ensuring the implementation of the "Creating Shared Value" concept globally is worth learning from for Chinese enterprises, including those that have already, are currently, and will soon embark on the journey of globalization. After all, whether globalized or not, sustainable and steady growth is the goal every entrepreneur pursues. Source: "Creating Shared Value" by Wang Ruohan -END-