Monday, June 7, 2010

Look up in the sky. It's not a bird. It's a shark.


Nestle controls 70% of the market for powdered milk (Bear Brand), chocolate milk (Milo), and coffee (Nescafe), and non-dairy creamer (Coffeemate). Other products have a strong market share with Nestle enjoying a virtual monopoly on these markets.

For the monopoly to achieve, they organized a nationwide chain of distributors with a semi-exclusive right to distribute products in their allotted areas.

Distributors are required to sell the products at a certain price that is dictated by Nestle. They are also prohibited from adjusting the price for retailers to absorb. That means their profit margins shrink and over a period of time, they begin to absorb bigger losses.

It is logical that distributors make their profits in marked up prices to retailers. Now they are left with scraps.

Because of Nestle’s domination of the market, they can unilaterally increase prices. Instead, the multinational predator bullies its distributors and threatens them with sanctions and removal should they not hit quotas.

This is the story of FD2 and others like them.

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