Last Updated Sep 29, 2009 1:04 PM EDT
This could be a big problem for Nestle. The dealings were most likely legal -- the US and the EU have sanctions against both Mugabe and his wife, but Nestle is in Switzerland, which is not an EU member. Public opinion, however, is another matter. Several human rights activists have called for a boycott, and Nestle South Africa could be particularly vulnerable, as there appears to be a lot of public outcry there.
But Nestle says it had no choice.
"At the end of 2008 the company found itself operating in a market where 8 of its 16 contractual suppliers had gone out of business," the company said in a statement. "As a result, in early 2009, Nestle was forced to purchase milk on the open market from a wide variety of suppliers on a non-contractual basis. This includes milk from the Gushungo Dairy estate." It was either buy from Grace Mugabe or shut down, Nestle argues. "Had Nestle decided to close down its operations in Zimbabwe the company would have triggered further food shortages and hundreds of job losses."
Still, many people aren't buying it. And bad feelings still linger over Nestle's decades-old baby formula marketing scandal, which inspired a worldwide boycott. That boycott technically hasn't ended yet, but it's certainly died down, and Nestle has done a lot to rebuild its public image. As FoodNavigator.com put it, the Mugabe scandal "could undo years of careful public relations and company strategy."