(FORTUNE Magazine) – THE WORLD'S largest food company is showing a feisty will to stay on top. Boasts Nestle Chief Executive Helmut Maucher: ''We're No. 1 and we're rejoicing!'' Maucher has transformed the once lethargic Swiss chocolate maker into a nimble colossus. Through a daring string of acquisitions, he has strengthened the company's position in the U.S. and Europe, emphasized new, sophisticated, high-margin products, and added a shopping cartful of leading brands, ranging from Friskies pet food to Kit Kat candy bars to Buitoni pasta. Since he took over seven years ago, Maucher, 61, has been shaping his strategy for the special new demands of the global food business. But any manager who wants to expand internationally could learn from him. He is a long-term thinker with a knack for transferring successful products and marketing methods from one country and culture to another, even when the fit seems loose at best. He is willing to accept years of losses to create a market. Maucher has grasped more firmly than many managers in his industry that food is becoming a capital-intensive, high-technology business that benefits from worldwide distribution. A growing number of single, career-minded consumers and two-income couples dine on gourmet frozen dishes designed for microwave ovens. Prepared dinners and a host of fresh refrigerated products require expensive research and development. Once that investment has been made, marketers need a roster of powerful brands backed by heavy advertising to win shelf space in big chain stores all over the world. At the same time, tastes are becoming more cosmopolitan. Coffee is sneaking up on tea as a favorite drink in Japan, and U.S.-style fancy frozen dinners have become a hit in Europe. While these products still have to be fine-tuned to local tastes, the companies that win the global battle will be those that can support costly advertising and R&D -- and get maximum mileage from their brands -- by selling similar products worldwide. That gives Nestle a big edge. One of the first multinationals, Nestle has plants in more than 60 countries, and its products turn up everywhere. Food is virtually its sole business. The company is the world's largest producer of coffee, powdered milk, and frozen dinners, and has passed Mars to become No. 1 in candy. Says John Wakely, an analyst with Paine Webber in London: ''Nestle is in the best position of any food company to take advantage of the globalization of the industry.'' Most of Nestle's competitors, which used to concentrate on their own home markets, are now scrambling to extend their reach. British whiskey and food producer Grand Metropolitan recently struck a deal to acquire Pillsbury of the U.S. for $5.8 billion. Among U.S. companies shopping hard in Europe are Sara Lee and Philip Morris. Under Maucher, Nestle has joined the takeover game with a vengeance. Its 1985 purchase of Carnation, the evaporated milk and pet food producer, made Nestle a powerhouse in the U.S., with 1988 sales of $6.5 billion. But Maucher's top target now is Western Europe. In its drive to create a unified market by 1992, the European Economic Community is sweeping away a thicket of nontariff trade barriers that cost food companies as much as $1.1 billion a year in additional distribution and manufacturing costs, according to an EEC study. Spurred by the historic deadline, Maucher spent some $6 billion last year to buy British chocolate company Rowntree and Italian pastamaker Buitoni. Nestle now dominates Europe as never before. Its subsidiaries in Italy, West Germany, France, and Britain each boast sales of over $1.6 billion. ''Despite the naysayers, the old Continent has great growth potential,'' says Maucher. ''We're out to win the battle of 1992.'' Maucher's bold strategy is putting new spice in Nestle's results. Bolstered by the acquisitions, profits rose an estimated 8% in 1988 to $1.3 billion, while sales jumped 14% to $27 billion. Nestle is predicting increases in sales and profits of up to 15% in 1989, assuming a stable dollar. The outlook wasn't always so favorable. The late 1970s and early 1980s were years of dreary decline. The nadir came in 1980, when Nestle earned less than it had nine years earlier. A bloated corporate staff endlessly meddled with the operating companies. Maucher, then head of German operations, mockingly called the futuristic, glass-and-chrome headquarters in Vevey on the banks of Lake Geneva ''the Vatican.'' Three levels of management approval were needed merely to put out a press release. To make matters worse, a storm of controversy broke over Nestle's aggressive marketing of infant formula to Third World mothers. Critics argued that Nestle ads were persuading women who should have been breast-feeding their babies to buy formula they couldn't afford. Faced with a much publicized boycott in the U.S., Nestle arrogantly refused to discuss the issue with boycott leaders. The turning point came when Maucher took charge in 1982. He began his career in his native Germany as a teenage apprentice in a Nestle milk factory. A brisk extrovert who wears saddle shoes and a tie emblazoned with the Nestle insignia, Maucher has a refreshingly enthusiastic style. Slurping chicken soup at a so-called tasting lunch, where top managers at Vevey try out Nestle products, he recently roared: ''I can almost hear the chicken clucking!'' He loves aphorisms, exhorting the troops: ''Let's have more pepper and less paper!'' When hiring, he urges subordinates to ''look in their eyes, not in their files.'' TO END the infant formula battle, Maucher swiftly took a series of steps. He met with church leaders who were supporting the boycott and accepted demands of the World Health Organization that Nestle stop promoting the product through advertising and distribution of free samples. He set up a commission headed by Edmund Muskie, the widely respected former U.S. senator from Maine, to monitor Nestle's compliance. The company has maintained its share of the Third World infant formula market even without consumer advertising. Maucher drastically cut staff at headquarters and pushed authority down to the operating units. In place of 25-page monthly reports, he designed a one- page form that highlights key numbers such as working capital, overhead, and inventories. Combing the reports for weak spots, he presses operating units to cut costs. Results have been spectacular. By reducing the time it takes to turn over inventory from eight weeks to six, Nestle Enterprises, a U.S. unit that sells coffee, chocolate, and frozen foods, has helped hold interest payments to about $45 million a year since 1982, despite a 50% increase in sales. Buoyed by lower costs, Nestle's British subsidiary has nearly quadrupled profits since 1985 to $232 million last year. Under Maucher, Nestle is becoming far more hospitable to non-Swiss investors. For years two-thirds of the company's shares were reserved for Swiss citizens. Nestle recently removed the restriction. Even so, investors may not be banging down the doors. Says Paine Webber's Wakely: ''Nestle doesn't believe its duty is exclusively to the shareholders. It takes a broader view.'' The cornerstone of Nestle's success is the amazing durability of its traditional products. Last year coffee contributed more than a fourth of operating profits, earning over $600 million on sales of $4.7 billion. Nestle produces 200 types of instant coffee alone, from the dark robust espresso preferred in Latin countries to the lighter blends popular in the U.S. Four research laboratories around the globe spend about $50 million a year experimenting with new shadings in color, aroma, and flavor. In 1985 Nestle added ground roast coffee through the purchase of Hills Bros., the third- largest U.S. producer. THE STAR PERFORMER is still Nescafe, the world's first instant coffee. It was created 50 years ago and is the top seller in virtually every country except the U.S., where it trails General Foods' Maxwell House. Instant-coffee sales are declining worldwide, probably because of the proliferation of easy- to-use coffeemakers, but they are still growing in two tea-drinking countries -- Britain and Japan. In the 1960s Britons downed six cups of tea for each cup of coffee. Today the ratio is 2 to 1. Nestle doesn't claim to have engineered the switch. But while this momentous cultural phenomenon was occurring, the company pushed Nescafe hard and managed to win half the market. Even more amazing is the instant-coffee boom in Japan. Introduced to coffee by American occupation troops, the Japanese have been warming to the drink ever since. The Japanese consider Nescafe a luxury gift item, toting it in fancy containers to dinners and birthday parties instead of chocolates and flowers. The best case study of Maucher's ability to transplant strong brands from one country to another is Lean Cuisine, a line of low-calorie frozen dinners produced by Stouffer, which Nestle has owned since the 1970s. Introduced in 1981, Lean Cuisine has helped lift Stouffer's U.S. market share from 28% to 38%. Now Lean Cuisine has successfully crossed the Atlantic. The first -- and toughest -- stop was Britain, where the product's success is a tribute to Maucher's willingness to play a long-term game. In the early 1980s the Nestle products crowding Britain's frozen-food bins were mainly dull, low-margin items ranging from beef burgers to fish sticks. British management proposed a daring shift to a new line of expensive dishes led by Lean Cuisine. Maucher endorsed the plan. Nestle, he said, was willing to tolerate four years of heavy losses and falling market share in frozen foods to make Lean Cuisine a transatlantic hit. Lean Cuisine arrived in 1985, a year before the company's $55 million British frozen-food plant reached full production. Most of the entrees were imported from a plant in Canada. The cost of shipping crates of spaghetti bolognese in refrigerated ships -- not to mention paying customs duties -- was enormous. But the stuff was a big hit. Though British consumers thoroughly disdain weight-watching, they loved the taste. The new plant now turns out a dozen entrees tailored to the British palate, including Kashmiri chicken curry and cod with wine sauce. It also produces U.S. favorites, using ingredients as close to the original as Nestle can get. Maucher's gamble paid off. This year sales of frozen dinners should reach $100 million and post a solid profit. Nestle now holds 33% of the British market for frozen dinners, one of the country's fastest-growing businesses. Lean Cuisine is also selling well in France. Candy was a textbook challenge for Maucher. Though Americans think chocolate when they see the Nestle name, the company was surprisingly weak in candy before its acquisition of Rowntree. It ranked fourth behind Mars of the U.S., Jacobs Suchard of Switzerland, and Rowntree of Britain. The takeover of Rowntree more than doubled candy sales to $4 billion a year. NESTLE INVENTED milk chocolate more than a century ago, but stuck with the wrong products. It specialized in the finely crafted bars the Swiss are famous for while the market was flat. The growth was in chocolate-covered snacks with well-known brand names like Mars' Milky Way and Rowntree's Kit Kat. Says Maucher: ''In chocolate Nestle missed the part of the world that belongs to Coca-Cola and rock-and-roll.'' Maucher wanted to catch up, but he wasn't sure how to do it. Developing new brands would be expensive, and a takeover seemed out of the question, since Nestle had never made a hostile bid. Maucher sought a joint venture and quickly settled on Rowntree as an ideal partner. The British candymaker's strengths fitted Nestle's weaknesses. Based in York, Rowntree boasts a strong lineup of brands in addition to Kit Kat. In 1987 Maucher proposed that Nestle become a minority shareholder and help Rowntree market its products in Continental Europe. When Rowntree yawned, Maucher let the matter drop. Then Suchard, Nestle's bitter Swiss rival, quietly bought 15% of Rowntree stock in what appeared the first step of an unfriendly takeover. Maucher broke with tradition by making his own hostile bid. At a press conference in London, he posed for cameras eating a Rowntree candy bar. Rowntree put up an emotional public relations blitz to persuade the British government to block the bids. When the government decided not to take sides, Rowntree was forced to choose between its two pursuers. A Maucher brainstorm helped him win the support of Rowntree's management. He suggested -- and has since implemented -- a plan to shift responsibility for mapping chocolate strategy and developing new products from Vevey to York. Explains Maucher: ''We needed the single-mindedness of people who think about chocolate 24 hours a day.'' If the past is any guide, Rowntree can count on lavish advertising and R&D support, coupled with plenty of management freedom. That combination has worked wonders at Carnation, Nestle's biggest acquisition before Rowntree. Carnation had a strong lineup of brands -- Friskies and Carnation -- but an autocratic, tightfisted management that had skimped on advertising to keep profits up. Nestle gave Carnation a virtual blank check to rebuild its brands. Since 1984 advertising and promotion expenditures have nearly tripled to $160 million. And Carnation has thoroughly adopted Nestle's hands-off management style. ''If things are going well, I never hear from Maucher,'' says Carnation President Timm Crull. ''And I let my people run their own show.'' THROUGH CARNATION, Nestle is breaking into the $1.6-billion-a-year U.S. infant formula market. The newest entry is Good Start, developed for babies who have allergic reactions to milk. Nestle scientists found that allergic babies could digest a formula if milk protein molecules were snipped into shorter strands. Nestle had planned a consumer advertising campaign for Good Start, which would have been a departure in the formula business. Under guidelines set up by the American Academy of Pediatricians, advertising for similar products is aimed at doctors through medical journals. The academy argues that mothers should choose an infant formula with professional advice. No doubt because of memories of the Third World boycott, the company quickly backed down. With sales humming in the U.S. and Europe, Maucher is looking to what he considers the market of tomorrow, the Third World, and the food of tomorrow, pasta. ''Do you know that 20% of the world's population consumes 80% of Nestle products?'' he asks. ''We can't feed the world on beefsteak. So noodles will conquer the world.'' Whether it's with noodles or Lean Cuisine, Maucher is supplying the dash of pepper that keeps Nestle leading the pack.

CHART: NOT AVAILABLE CREDIT: GABOR KISS CAPTION:THE WAY THE WORLD LOOKS FROM VEVEY These geographical areas are sized by the amount of Nestle products they buy.