Nestles Israel activity brings Arab boycott threat

Nestle owns 53% of Israeli food Osem. Osem managing director Gad Propper: Nestle does not capitulate to boycotts.

The Arab League boycott office, based in Syria, last week threatened to boycott Swiss food giant Nestle (SWX:NESN), unless the company liquidated its activity in Israel, including its 53% stake in Osem Investments Ltd. (TASE: OSEM), worth NIS 2 billion.

In response, Nestle issued its own press release the next day on July 5, saying that it had no intention of capitulating to the Arab boycott. The company added that has 253,000 employees in over 100 countries, was not involved in politics, but in business, and also invested heavily in Arab countries.

Nestle stated, Nestlé is regularly attacked by various Arab and Islamic circles for doing business in Israel. In the latest such moves, on 4 July 2006, the Damascus-based Arab League Central Boycott Office (CBO) added Nestlé to the list of companies to be boycotted because of links with Israel, although it seems likely that the decision will be ignored by most Arab League member states. Herewith the corporate response.

In Muslim countries throughout the world, Nestle employs around 23,000 people in 51 factories and 151 sales and distribution offices. With a total turnover of Swiss franc 3.3 billion and investments of more than one billion over time, Nestle contributes significantly to the prosperity and well-being of the general population in those countries.

Nestle is a truly global company which operates in almost all countries in the world. The company employs some 253,000 people from over 100 countries and of many creeds. Nestlé has consistently emphasized the importance of mutual respect and tolerance, regardless of culture, religion or nationality. This a core company value as expressed in the Nestle Corporate Business Principles.

Nestle's investment decisions are made purely on the basis of commercial and industrial viability. Political considerations have no influence whatever on such decisions. Nestlé has made industrial investments in Morocco, Tunisia, Egypt, Syria, Israel, Palestine, as well as Saudi Arabia, United Emirates, Qatar, Bahrain, Iran, Pakistan, Malaysia and Indonesia, among many other countries in the world. This demonstrates the company's respect for cultural, ethnic and religious diversity. In each of these countries, Nestlé serves the needs of its consumers as well as the interests of its local staff.

Radical pro-Arab organizations in the UK, including an organization called Friends of al-Aqsa are calling for a boycott of Nestle products in the UK because of the companys activity in Israel. This organization is also calling for boycotts of other international companies active in Israel. No company, including Nestle and LOreal Paris, have suspended their activities in Israel, either because of previous calls for a boycott or the present call.

Osem managing director Gad Propper told Globes today, Nestle does not capitulate to boycotts. The fact that somebody in Syria decided to boycott Nestle does not mean that he has any influence on the company. Im sure that it will not surrender, which is seen in the companys official response.

Agence France Press (AFP) reports that many Arab countries, including most members of the Arab League will probably ignore the call for a boycott.

Regardless, the Arab League Central Boycott Office has added Nestle to its blacklist of companies trading with Israel, and issued an ultimatum to the company to halt trade with Israel.

Nestle first invested in Osem in the early 1990s, acquiring options for 10% of the company. At the same time, Osem began importing Nestle products. In 1996, Nestle realized its option, and has subsequently increased its stake in a joint company, considered to be one of Nestles most successful in the world.

In 1998, Nestle increased its stake in Osem to 47%, and signed a products know-how, technology and R&D sharing agreement. Under this agreement, Nestle opened an R&D center in Israel. In 2000, Nestle increased its stake in Osem to 50.1% under a joint management agreement that included the positions of Israelis Dan Propper as CEO and Gazi Kaplan as chairman.

Nestle has continued to gradually increase its holdings in Israel. There have been rumors, denied by Dan Propper, that Nestle plans to delist Osem from the TASE. Six months ago, Nestle bought some Osem shares owned by descendants of the companys founders Orit and Yitzhak Yarkoni, Naomi Kolin and Dan and Gad Propper.

Published by Globes [online], Israel business news - www.globes.co.il - on July 9, 2006

Copyright of Globes Publisher Itonut (1983) Ltd. 2006

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