Last August, E. W. Saunders, a vice president of Nestle S. A., the Swiss-based company that sells more than $12 billion in food worldwide a year, flew to the United States on a mission of unusual delicacy.
He was seeking unobtrusive ways to neutralize a threatened boycott of Nestle products by religious and other groups objecting to the ways in which the company markets a product -- infant formula -- in the Third World.
After three days of meetings in this country Saunders returned to Switzerland and wrote a memo summarizing his trip and outlining antiboycott strategy and tacics. That memo, which he sent to a superior, and another internal Nestle document have since leaked out of the company, and copies were given to The Washington Post.
The documents provide an unusual behind-the-scenes glimpse of a large multinational company in combat with liberal critics. The documents show Nestle:
Seizing on and circulating an article in Fortune magazine that was favorable to its side, and that accused pro-boycott religious groups of being "Marxists marching under the banner of Christ." "Third party rebuttals of the activists' case" were especially important to Nestle, Saunders wrote, partly because of "the lack of credibility in the U.S. for any company to overtly sell itself when it has been attacked . . . . There must be maximum exploitation of the opportunities presented by the Fortune article."
Moving swiftly to support a nonprofit, tax-exempt conservative foundation here, the Ethics and Public Policy Center headed by Ernest W. Lefever, recently a transition adviser to President-elect Ronald Reagan, when it discovered that Lefever was also sympathetic to its cause. EPPC reprinted the Fortune article last July. And Nestle last year gave EPPC $25,000. Nestle and Lefever both insist these two occurrences were unconnected. Saunders, however, was urging in his memo that Nestle support EPPC; he even noted that the president of Nestle USA, David Guerrant, was "somewhat concerned that Nestle should not be seen to be the dominant subscriber to the . . . center."
Nestle's Washington lawyer, Thomas J. Ward, "informs us that there are ways in which this mattr can be satisfactorily handled," Saunders wrote.
Describing counterboycott efforts as "moving in the right direction -- few letters; little press coverage" -- despite "an apparent 'smouldering fire situation' . . . among selected groups." Saunders added, "The basic strategy for dealing with the boycott, i.e., containment of the awareness of the activists' campaign, without being responsible for escalating awareness levels, is working . . . . "
According to the second document, a letter from a Nestle lawyer, Carlo R. Fedele, to a Nestle director, the company was also busy among officials of the World Health Organization, which was then drafting a code for the ethical marketing of infant formula in Third World countries.
The draft code was much tougher than the guidelines laid down by the International Council of Infant Food Industries, the Zurich-based trade association of many of the world's makers of infant formula. ICIFI's president was Saunders of Nestle.
ICIFI was in the process of hiring as secretary-general an assistant director of WHO, Dr. Stanislaus Flache. Lawyer Fedele wrote that Flache, who was to join ICIFI in August of last year, "was very active during . . . June," apparently in connection with the proposed WHO code. In addition, he said "we can count upon a sure friend" in Dr. E. M. Demaeyer, a member of WHO's nutruition unit. "He has demonstrated it to us up to now and we are certainly able to count upon his support in the course of the negotiations" over the code, Fedele said.
The argument over infant formula in the Third World is complex, but there is no dispute over breast milk's superiority: it provides initial near-perfect nutrition, protects against disease, and is virtually costless. Lactating mothers as a group, in addition, are less likely to conceive than mothers who aren't breast-feeding.
Because formula is often mixed with unclean water and in unclean bottles in Third World countries, critics say, its unnecessary use can lead to malnutrition, disease and death. They also say oor families ought not be encouraged to spend money on formula when a free alternative is available.
The critics have aimed their fire not at formula itself, because they recognize circumstances in which it is invaluable, but at the aggressive marketing techniques some companies have used in the past to sell it. One technique was to give out free samples. Another was to use "milk nurses" -- employes whose supposedly objective advice discourages breast feeding. A third has been to offer inducements to hospital employes to recommend formula.
The companies say that, partly through the ICIFI, such practices have now been pretty well stopped. They also take fundamental issue with claims that they are responsible for massive switches from breast-feeding, saying instead that they provide the best available food supplement to babies who need it, when they need it.
About 6 million Third World infants now get formula. An estimated one-third of the formula is supplied by Nestle.
Nestle and its officials responded to questions on the Saunders memo through a public relations firm in New York, Daniel J. Edelman Inc. The company had no response to quiries on its activities within WHO as set out in the letter from Fedele, himself a former WHO official. While noting that the Fortune article contained "some statements . . . not entirely positive concerning Nestle," the company said it was still "pleased" to reprint and disseminate an undisclosed number of copies, because it was "a balanced piece" enabling readers to learn "the truth about the infant formula controversy."
In the United States, the Nestle boycott is coordinated by the Infant Formula Action Coalition (INFACT), headed by Douglas A. Johnson of Minneapolis. Two mainstays of the boycott are the National Council of Churches and the NCC-sponsored Interfaith Center on Corporate Responsiblity, which acts for 170 Catholic religious orders and 17 Protestant denominations in trying to persuade the corporations in which they invest to adopt -- voluntarily -- more "socially responsible" business practices.
The involvement of the magazine and Lefever's EPPC began in September 1979 when, Lefever recalled, political polemicist Irving Kristol suggested to him that the infant formula issue was "a natural for you because it involves churches." Lefever is the author of a book highly critical of the World Council of Churches.
At a luncheon at the F Street Club a few weeks later, Lefever met Fortune Washington editor Herman Nickel, a former long-time foreign correspondent who had been expelled from South Africa, and proposed that he undertake a study project. At the time, Nickel said, he knew nothing of the center's financing.
He cleared the proposal with Fortune management, which independently was interested in the subject, and whichh conditioned its approval on getting a "spinoff" article. "We knew Herman Nickel and we knew that his research would be honest," said managing editor William S. Rukeyser. Then Nickel signed a contract under which the EPPC would pay half of his $5,000 honorarium on delivery of the first draft and the other half on publication.
"I took very special precautions to make sure that . . . my professional integrity, which is all I got, was not going to be impaired," he said in the interview. In addition to specifying that he would do no travel at industry expense, he took a special precaution based on Lefever's unexpected disclosure that the first draft would be reviewed by a panel of three presons including one from the infant formula industry.
Nickel insisted in writing, and Lefever agreed, that the inclusion of an industry reviewer "will in no way impair the independence of my study and my right to reach whatever conclusions I find are warranted by the evidence . . . .
"It is my understanding that the review panel will be balanced by persons whose expertise . . . is untainted by vested interests," Nickel continued in a letter to Lefever. He retained "ultimate responsibility for the contents and conclusions" and noted Lefever's oral "assurance that none of the funding will come from the infant food industry."
Lefever, asked why he wanted an industry reviewer, replied, "Because the industry knows more about this than anyone else," adding that the reviewer had not been selected. He indicated that no thought had been given to expanding the panel to include an expert critical of the industry.
"Nestle had no influence whatsoever on the selection of the topic, the appropriateness of the research, the selection of the author, or the author's findings," Lefever told the reporter. "I am not influenced by the source of contributions. We do have a policy of accepting no money from a donor for a study in which the donor may have a direct or indirect financial interest."
The target deadline for the first draft was March 1980. Nickel couldn't meet it, largely because of Fortune assignments and a serious bike accident. Meanwhile, he said, Fortune told him to go ahead with an article on "anticorporate activism on the part of the ICCR and Council of Churches focusing on the infant formula campaign. . . ."
Nickel worked with executive editor Richard Armstrong, who contributed the phrase "Marxists marching under the banner of Christ." Nickel said he stands by the description "because I think you could say it was justified by the evidence . . . ." Similarly, managing editor Rukeyser said of the phrase, "I certainly approved it. And I stand by it and take responsibility for it."
Predictably, the "Marxists" phrase -- along with some of Nickel's nonideological facts and arguments -- drew angry responses.
Nickel "tries to pass off the data that we have collected and the human concerns of the international health agencies as an ideological attack on innocent corporations," said INFACT's Johnson. "By ideological I mean reds, Marxists. He sees a red behind every bush. So, in our view, it is a red-baiting attack and, at the same time, an ideological right-wing apology for Nestle and the other infant formula manufacturers."
M. William Howard, president of the National Council of the Churches of Christ, protested "guilt-by-association conclusions" contained in an article that "conveniently [omitted] mention of the hundreds of official church bodies on the local, state, and national level that debated and voted in favor of the boycott of Nestle."
Leah Marguiles, director of the interfaith Cener's Infant Formula Program, invited readers of Nickel's "grossly irresponsible" article "to visit an emergency rehydration ward in any Third World country. I do not think they will come home and tell the churches to stop challenging corporations toward greater social responsibility in their business practices." c
During the summer, Nestle, which had given $5,000 to the general fund of Lefever's EPPC in March 1980, contributed $20,000 more. It hadn't even been aware of him or the center until after Nickel had been commissioned to write the formula study, the company said through the Edelman public relations firm. "Lefever and his associates are dedicated to fair and reasonable treatment of important issues, and [Nestle] therefore believes it is a privilege to support this work. Both the company and Lefever said Nestle is far from being the center's "dominant" financial backer.
Also over the summer, the EPPC prepared reprints of its own -- but under a title changed, without Fortune's permission, to "Crusade Against the Corporation: Churches and the Nestle Boycott." The change was "purely an editorial judgment," Lefever said. Permission for it wasn't sought solely because of an "oversight," he added.
In early August, Lefever invited Nickel to dinner at the University Club with Saunders and Nestle lawyer Ward. "I couldn't help it if Mr. Saunders and Mr. Ward thought my article was very good," Nickel said. "I did not give them any advice on how Nestle should deal with any problem. It's not my job as a reporter to do that."
Saunders' memo cited Ward's "strong recommendation" for retaining, as a consultant, David J. Waters, a former State Department assistant chief of protocol. Waters would "help me, as president of ICIFI, with worldwide infant formula attacks, to establish the network that is necessary, and as a bonus to act as independent counsel on the adequacy of U.S. measures," Saunders wrote. Waters, saying he was "just a consultant" representing "various people," said "I don't think I want to talk about my clients."