Product Expansion a Key to Growth

Nestle SA, based in Vevey, Switzerland, celebrated its 125th anniversary last year.

The company traces its roots to 1866, when Europe’s first condensed-milk factory opened in Cham, Switzerland, operated by Anglo-Swiss Condensed Milk Co. Nestle itself was formed from the merger in 1905 of Anglo-Swiss Condensed Milk and Farine Lactee Henri Nestle.

Its business initially focused on milk and foods for infants, but Nestle added dozens of other products during the next century. Its Nescafe instant-coffee mixture, for instance, was developed in 1938.

During the past two decades, Nestle sharply expanded its product line through acquisitions. The company bought the Libby canned foods business in 1970, the Stouffer frozen foods and hotel businesses in 1973, and a 49% stake in the French cosmetics company L’Oreal SA in 1974.

(Liliane Bettencourt, whose father started L’Oreal, today retains a 4% stake in Nestle stemming from the L’Oreal deal. She’s the richest woman in France, worth $2.6 billion, according to Fortune magazine.)

Nestle’s takeover parade continued in the 1980s with its purchases of Carnation Co. and Hills Bros. coffee in 1985, pasta maker Buitoni-Perugina in 1988 and the British candy company Rowntree PLC in 1988.

In 1990, it purchased the Baby Ruth and Butterfinger candy bar businesses from RJR Nabisco Inc., and earlier this year Nestle won a bidding war for Source Perrier SA, the French mineral-water company. It also owns the Vittel brand of French drinking water.

Nestle also has been expanding through joint ventures. The company joined with U. S. cereal giant General Mills Inc. in late 1989 to form Cereal Partners Worldwide, which has quickly gained a major share of the European cereal business. Nestle also hooked up with Coca-Cola Co. last year to market instant coffees, teas and chocolate drinks worldwide.

Overall, Nestle had 438 plants in 63 countries at the end of 1991, and its products are sold in more than 100 nations. Nestle earned about $1.8 billion last year on sales of $36 billion, based on the dollar’s exchange rate with the Swiss franc at the end of 1991.