INSIGHT-At Nestle, interacting with the online enemy

VEVEY, Switzerland Fri Oct 26, 2012 2:00am EDT

VEVEY, Switzerland Oct 26 (Reuters) - It looks like mission control: in a Swiss market town, an array of screens in Nestle's headquarters tracks online sentiment. Executives watch intently as California wakes up, smells the coffee - and says whether it likes it.

This is the nerve centre of the company's Digital Acceleration Team. By monitoring conversation about its products on social media - right down to "realtime recipe tweets" across the United States - they aim to win over a sometimes hostile world.

Other companies, such as PepsiCo, Danone and Unilever, have exploited the opportunities to promote themselves online. But Nestle is also concentrating on using social media for damage limitation.

Vilified for years for its sales of baby milk formula in developing countries, Nestle today is confronting its critics online as protesters find newer targets, such as the company's $7 billion a year bottled water business. The $200 billion food and beverage group set up its digital team a year ago, and says it has doubled spending on social media advertising in the last couple of years.

"People have been complaining about companies forever, but before they did it at the water cooler or at the bar," said Bernhard Warner, co-founder of London-based consultancy Social Media Influence. "Now they are doing it online and spreading their complaints to disparate communities."

Nestle is not the only bottled water producer under fire. Others including Coca-Cola are also accused of undermining public water systems. Groups such as Boston-based Corporate Accountability International, a non-profit which originated in the protests against Nestle's infant formula, have alleged for almost a decade that bottled water makers damage the environment when they extract the water, waste resources on bottles and shipping, and take what should be a common good.

The fight matters a lot to Nestle, as it's the world's largest producer of bottled water. Its brands include Poland Spring, Perrier and San Pellegrino and accounted for almost 8 percent of its sales of 83.6 billion Swiss francs ($85.31 billion) in 2011.

In 2008 it ran an advertisement in Canada claiming that "bottled water is the most environmentally responsible consumer product in the world." Campaigners in North America have nonetheless persuaded tens of thousands of people to sign a "Think outside the bottle" pledge to drink water from the tap, and pushed some U.S. campuses and municipal buildings to ban the bottled variety.

CODE RED

At HQ, Nestle's team of Digital Accelerators is tasked with "listening, engaging, transforming and inspiring." Each member spends eight-month stints working in the space with a mini TV studio, rather like a busy newsroom or trading floor.

Pete Blackshaw, 47-year old head of digital marketing and global media, is in charge. On a recent weekday, the American and his staff of 30 to 40-year-olds were monitoring the online action on such topics as the latest cute dog photo on the Purina pet food website, or who was drinking Nescafe.

Blackshaw pointed to a map of the world showing California's Twitter action. He also highlighted how the centre's screens are set up to spot trouble.

"If there is a negative issue emerging, it turns red," says Blackshaw, indicating a screen powered by software from Salesforce.com Inc., which is also used by such brands as Dell computers and delivery company UPS. It captures millions of posts each day on topics of interest to Nestle.

"When there is a high number of comments," Blackshaw adds, "it alerts you that you need to engage."

That can mean a real-time online response from a team member - each has a small flag indicating their country of origin above their desk - or the team might pass an issue on.

Nestle says it has strict 'do's and don'ts' for how staff should respond online, including disclosing their relationship to the company if they discuss a product. At the same time, the team is inevitably making up some rules as it goes along.

The company does not pay bloggers for pro-Nestle posts and follows industry ethics codes, disclosing any "consideration" it gives, such as providing product samples to online reviewers. Common tricks used by some public figures include faking - or purchasing - social network followers: California-based web security research firm Barracuda Labs estimates the average price for 1,000 'robot' Twitter followers at $18.32 (Facebook fans are a pricier $35.59 for 1,000).

Nestle does not purchase online popularity.

When it recently thanked its "fans" for reaching 600,000 "Likes" on its main corporate Facebook page, a user identified as Andrew Wood from Britain retorted: "We are not all fans however - some have joined so that they can protest about your ethics and spread word of the long standing boycott of your products."

Nestle replied on Facebook: "That's a fair point, and the terms 'fans' and 'likes' may not be the ideal descriptors for everyone. That said, we value the input and feedback from all 600,000+. Thanks for the feedback."

TAKE A BREAK

Such responses result from a lesson learnt two years ago, when Greenpeace posted a spoof ad, watched by nearly 1.5 million people on YouTube, for Nestle's KitKat snacks.

The ad showed a bored office worker take "a break" from shredding documents, to munch on a chocolate wafer finger that - unnoticed by him - had mutated into an ape-like claw. As he chewed, it spurted blood. "Give the orang-utan a break," the slogan urged. "Stop Nestle buying palm oil from companies that destroy the rainforests."

Nestle initially made the problem worse, earning an entry in a book by the consultant Bernhard Warner about "the 50 greatest social media screw-ups". It tried to get the video pulled and threatened to delete hostile messages on its Facebook page.

No matter what your views on palm oil, that reaction was "absolutely 'verboten' for digital natives," said Warner. "All corporates looked at this and thought 'oh my goodness, how vulnerable are we?'"

Eventually, after more than 200,000 protest emails, Nestle sat its officials down with Greenpeace to plan a policy against deforestation.

"One of the most significant things that has happened in the corporate world in the last 10 years is this idea of being respectful of and monitoring not just what your fans have to say but also your critics," said Warner. "It has completely changed the world of crisis management and reputation management and all the training that goes into it."

Nestle has climbed to 12th spot from 16th in 2011 in the Reputation Institute's index of the world's most reputable companies.

"They have a very strong reputation among the general public," said Nicolas Trad of the New York-based consultancy firm, which surveys 100,000 consumers for an annual reputation survey. "However, looking a little bit deeper, we find that perceptions of key opinion leaders - such as academics, regulators, nutritionists, NGOs and the like - are much weaker than those of consumers," he said. "This is risky as this group is often ahead of the curve."

PURE LIFE

On the day Nestle's Digital Accelerators were monitoring online responses to cute dog photos, they were also on the lookout for word on its water business.

Chairman Peter Brabeck had posted a blog in response to "Bottled Life," a documentary criticising Nestle that was released earlier this year. The documentary, shown in cinemas in Switzerland as well as at film festivals and on European TV channel Arte, alleges Nestle is "intent on amassing resource rights worldwide with the aim of dominating the water market of the future."

In his blog, Nestle chairman Brabeck sought to put such criticism into the context of a broader global crisis of water scarcity. "This is the most vital issue of our time, and in this big picture, bottled water is rather irrelevant," he wrote.

Among the film's targets is Pure Life, the world's top-selling bottled water brand, which is produced by Nestle and uses purified groundwater - the same water as comes out of the tap - with added minerals. Pure Life is a budget brand largely aimed at emerging markets, where demand is growing.

The movie alleges a bottling plant for Pure Life in Pakistan may be contributing to a falling water table there. Nestle denies this, saying the amount used by its plant at Sheikhupura near Lahore is too small.

In Pakistan, there's no conclusive evidence on either side. Data from the province of Punjab show no significant variation in the water table at testing stations in the region, but local water authorities do not maintain data on how much groundwater individual companies or industries pump.

THE AMPLIFIER

History shows the power of such objections.

Around a decade ago, a California-based NGO publicised locals' worries that a Coke bottling plant in Kerala in India was damaging their water supply. The claims were rejected by Coke but eventually resulted in officials closing the plant. A government-appointed committee proposed that Coca-Cola pay damages for causing "environmental degradation by over-extraction of ground water."

More than 1 million people have so far watched "Bottled Life" - not a huge audience by global standards. But social media is "the amplifier", as Blackshaw, who previously worked as a digital brand manager at Proctor & Gamble, says.

Nestle's global critics have already picked up the documentary. "We are calling on Nestle to come clean about where the water is coming from and stop undermining local control of water," said Kristin Urquiza of Corporate Accountability International. "Nestle should be concerned about how this is hurting its brand image."

The company has not engaged directly with the film makers: it says it responded to their questions on paper, but declined to make executives available on camera as it knew the documentary would be "polemical."

In his blog, Brabeck wrote that the film "illustrated a whole spectrum of perceptions, misperceptions and allegations concerning this part of our business."

A woman named Deirdre Mistarz asked on the blog about a suggestion in the film that Nestle is not willing to provide drinking water for people near the Pakistan plant: "Are the poor to be treated as lepers, to be deprived of the basic human need of clean water; are they to be extinguished because they are so poor they cannot help to fill the coffers of Nestle?"

Two hours later, Brabeck responded: "This is not true. We have installed two water filtration facilities in the region which can be accessed by more than 10,000 people and we are in the process of building a third."

Of course, Nestle's Digital Accelerators also use social media for traditional publicity. A French team member has developed an app that plays a cookery video when a package code is scanned. And Nestle said sales of Perrier water had a strong start to the year, helped by a video which was popular on YouTube. Its story: to save a melting world, a glamorous woman drinks Perrier.

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