Ethical Marketing Conduct: Lessons from the Nestlé Case

Nestlé, one of the world’s most recognized food and beverage companies with over 2,000 brands under its umbrella, has experienced both the power and peril of marketing at a global scale. While the company has built a legacy of convenience, nutrition, and reach, it has also encountered reputational challenges—particularly due to ethical missteps in its marketing practices. The infamous infant formula controversy reveals critical lessons about what happens when marketing loses sight of integrity, especially in vulnerable markets.

The Infant Formula Controversy

Despite mounting evidence supporting the health benefits of breastfeeding, Nestlé aggressively marketed infant formula as a superior alternative in developing countries. The products were sold at low prices to uneducated mothers who viewed Nestlé as a trusted authority. Once dependent on formula, many women’s breast milk production declined, leaving them reliant on continued purchases—even when clean water was unavailable or unaffordable to safely prepare the product. Tragically, this led to severe malnutrition and illness among infants.

In a separate ethical lapse, the company advised against sucrose-containing infant products in some regions due to health risks, yet sold such products in places like South Africa and Hong Kong. This discrepancy in messaging further damaged public trust (Krasny, 2012).

Competitive Analysis: Ethics Over Conformity

Nestlé’s top competitors, including Danone and Reckitt Benckiser (Mead Johnson), also engaged in similarly aggressive strategies, distributing free samples and marketing directly to vulnerable consumers. Collectively, these three companies held a 45% market share in the global baby formula industry (Danone, 2018).

While monitoring competitor behavior is vital, ethical competitive intelligence should aim to learn—not imitate blindly. Nestlé likely tracked these practices but failed to differentiate its approach. Instead of matching unethical tactics, they should have leveraged consumer feedback, ethical standards, and social listening tools—even in low-access regions—by deploying on-the-ground survey teams. Ethical intelligence should never be used to harm competitors but rather to elevate one's brand through differentiation (Ingrid, 2018).

Pricing Ethics: When Strategy Becomes Exploitation

Nestlé employed penetration pricing by introducing formula at extremely low costs to gain market entry, then shifted to premium pricing once dependency grew. While both are valid strategies in the business world, the motivation and context render their usage here problematic. The pricing leveraged the desperation of mothers who were deceived into thinking they were doing what was best for their babies (HubSpot, 2020).

An ethical alternative would be to supply free formula with clean water in emergencies or where breastfeeding isn’t feasible—clearly explaining the risks and intended usage. Nestlé could still maintain profitability by positioning the product as a supplement, not a replacement. Additionally, stopping unethical promotions by paid healthcare professionals would signal genuine care for the consumers they serve.

Product Liability and Promotion Reform

Nestlé’s response to the backlash included the creation of the Nestlé Infant Formula Audit Commission (NIFAC)—an internal watchdog to ensure compliance with WHO regulations and marketing standards (Springer Link, n.d.). However, true change demands more than internal promises. It requires proactive consumer engagement, transparent communication, and an overhaul of promotional channels.

Social media and online platforms offer an opportunity to reset the narrative. Nestlé could emulate brands like Horizon Organic, which educates parents through visually appealing, evidence-based social content. A similar initiative—such as a “Parent Resource Hub” on Nestlé’s website with Q&As, videos, and real-time support—could rebuild trust and position the brand as a transparent leader in infant care.

In the case of a product issue, responsiveness is critical. According to Olenski (2016), brands must prioritize clear, honest messaging on their website, social platforms, and press channels. Offering refunds or assistance not only minimizes backlash but also shows consumers they are valued beyond their wallets.

Final Thoughts

What Nestlé's case reminds us is that ethical lapses often arise not from a single wrong decision—but from a series of shortcuts, rationalizations, and compromises. As marketing consultants, brand leaders, and strategists, we must resist the temptation to follow the crowd or exploit informational asymmetries—especially with vulnerable audiences.

Key Takeaway:

Ethical marketing is not just a compliance box—it’s a long-term brand strategy. Companies that prioritize transparency, accountability, and empathy in their pricing, promotions, and competitive research are not only trusted more—they last longer.

References

Chu, W. (2018, February 2). Nestlé is under scrutiny for its infant formula marketing approach. NutraIngredients. https://www.nutraingredients.com/Article/2018/02/02/Nestle-underscrutiny-for-its-infant-formula-marketing-approach#

Codes of Conduct: AMA Statement of Ethics. (n.d.). American Marketing Association. https://www.ama.org/codes-of-conduct/

Danone. (2018). Danone policy for the marketing of breast-milk substitutes. https://www.danone.com/content/dam/danone-corp/danonecom/about-us-impact/policies-and-commitments/en/2018/Danone%20Policy%20for%20the%20Marketing%20of%20Breast-Milk%20Substitutes%202018.pdf

HubSpot. (2020, March 17). The ultimate guide to pricing strategies. https://blog.hubspot.com/sales/pricing-strategy

Ingrid. (2018, June 26). The difference between competitive intelligence and corporate espionage. https://datascouts.eu/2018/06/26/ethical_competitive_intelligence/

Krasny, J. (2012, June 25). Every parent should know the scandalous history of infant formula. Business Insider. https://www.businessinsider.com/nestles-infant-formula-scandal-2012

Lee, D. (1993, August 16). Nestlé’s foray into baby formula market falters. Los Angeles Times. https://www.latimes.com/archives/la-xpm-1993-08-16-fi-24444-story.html

Olenski, S. (2016, October 28). 5 strategies on how your brand should handle a product recall. Forbes. https://www.forbes.com/sites/steveolenski/2016/10/28/5-strategies-on-how-your-brand-should-handle-a-product-recall/

Springer Link. (n.d.). The Nestlé infant formula audit commission (NIFAC) charter. https://link.springer.com/content/pdf/bbm%3A978-1-4471-1618-9%2F1.pdf