Case Study

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  • Topic: Fair trade, Coffee, FLO International
  • Pages : 35 (10076 words )
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  • Published : February 23, 2013
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NESTLE'S NESCAFE PARTNERS' BLEND: THE FAIRTRADE DECISION
(A)
Jordan Mitchell wrote this case under the supervision of Professor Niraj Dawar solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2006, Ivey Management Services

INTRODUCTION
In early February 2005, Hilary Parsons, head of corporate affairs, Nestlé UK was on a train heading from Geneva, Switzerland, to Nestlé SA’s head office in Vevey. As the train chugged along Lac Léman with a dramatic view of the mountain scenery, Parsons thought about the current decisions relating to Nestlé UK’s Nescafé Partners’ Blend initiative. With roots tracing back to the late 1990s, the Partners’ Blend project involved developing a soluble instant coffee for the expanding “ethical” coffee segment in the U.K. market. Over the past two years, Parsons, along with several other managers at Nestlé UK and at Nestlé’s head office in Switzerland, had been working on developing the product, brand positioning, consumer messaging and, importantly, a traceable and transparent supply chain linking back to individual smallholder farmers in Ethiopia and El Salvador.

Throughout the process, Parsons had been in touch with members of the Fairtrade Foundation, an independent body that awarded its Fairtrade mark to products (not companies) that abided by its set of standards aimed at guaranteeing a better deal for third-world growers. Fairtrade had expressed interest in certifying the yet-to-be launched Nescafé Partners’ Blend. The two parties had agreed to convene in Switzerland, in February 2005, to discuss the possibilities of releasing Nescafé Partners’ Blend with the Fairtrade mark.

As Parsons approached the familiar mountain range at Vevey, she pondered the issues for the meeting between Nestlé’s managers and Fairtrade Foundation’s representatives. As the largest buyer of coffee beans in the world, would Nestlé SA change its historical position on not accepting Fairtrade certification of its coffee products?

AWARD-WINNING CASE — This case won the Corporate Social Responsibility Award at the 2006 European Foundation for Management Development (EFMD) Case Writing Competition. This document is authorized for use only in Corporate Social Responsibility by Joanne Lawrence at Hult International Business School - Shanghai from October 2012 to April 2013. Page 2

THE GLOBAL COFFEE MARKET
Coffee was widely consumed throughout the world in forms ranging from canned coffee drinks common in Japan to elaborate half-caf, low-fat, iced-mocha frappés in North America. Worldwide coffee consumption represented an approximate retail value of US$33 billion, accounting for 57 per cent of all hot drinks consumed, and beating out tea as the number one hot beverage of choice. Arabica and Robusta were the two basic types of coffee. Arabica had a caffeine content between 0.6 and 1.5 per cent, while Robusta’s was 1.5 to three per cent. Arabica, typically grown at 800 to 2,400 meters above sea level, at temperatures ranging from 17 to 23 degrees Celsius, had a strong aroma, tasty acidity and less body. Robusta, grown between zero and 800 meters above sea level, at average temperatures between 18 to 27 degrees Celsius, was known for its low-acid content and strong body. Arabica accounted for...
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