Nestle’s water business in China will be sold to Qingdao Beer Group!
Nestle Nestle has announced its agreement with Tsingtao Brewery group in mainland China, and Tsingtao Brewery group will buy water business in Nestle China. According to industrial and commercial data, Qingdao beer group is wholly owned by Qingdao state owned Assets Management Bureau, and Qingdao Beer Co., Ltd. is a listed company of the group.
The deal includes local brands “Dashan” and “Yunnan mountain spring”, as well as Nestle’s three water business plants in Kunming, Shanghai and Tianjin. According to the license agreement, Qingdao Beer Group will produce and sell Nestle Youhuo brand in China.
So far, Nestle will transfer the above water business in China to Qingdao beer group, including all shares of Nestle in Shanghai Nestle drinking water Co., Ltd., Tianjin Nestle natural mineral water Co., Ltd. and Yunnan Dashan Beverage Co., Ltd. to Qingdao beer group.
Nestle said in a circular today that the two companies are committed to seamless handover, “the above transaction will not affect consumers, market access, customers, outlets and employees.”. It also stressed that Nestle is committed to sustainable development in China and to strengthening its development commitment by establishing the necessary production layout.
Today, Nestle did not disclose the financial information of the transaction at the same time.
Divestiture of local water brands
Nestle’s water business in China includes global brand Nestle Youhuo and local brands Dashan and Yunnan Shanquan, Nestle said in today’s notice. In the future, it will maintain and continue to provide Chinese consumers with its iconic international water brand products (including “Paris water”, “Saint Pellew” and “Puna”).
Nestle and Tsingtao beer also said that the strategic cooperation will achieve complementary advantages and resource sharing. Both sides are committed to providing better products and services for consumers and contributing new experiences to the better life of consumers.
According to the data of the third-party market research institutions obtained by snack agents, in the Chinese bottled water market in 2019, the market share of Nestle’s Yunnan Dashan is 1.3%, ranking eighth; Nestle Youhuo is 0.4%, ranking 11th.
In addition, Nongfu mountain spring ranked first with a market share of 11.7%, followed by Yibao (10.4%), Jingtian (5.5%), Master Kang (5.3%), Wahaha (3.3%).
In June this year, Nestle announced the latest strategic direction of drinking water business, and delineated a number of key development categories, including iconic international brands, leading high-end mineral water brands and functional water and other differentiated health products.
But at the same time, Nestle has also made it clear that it may sell some of its drinking water businesses that are not in line with its strategic direction, and will explore strategic options, including potential sales, for most of the North American (US and Canada) drinking water businesses. In 2019, sales of Nestle’s drinking water business reached 7.8 billion Swiss francs (about 58.349 billion yuan), and Nestle may sell a large piece of North American drinking water (excluding international brands), contributing more than 40% of its sales.
Later, xiaoshidai confirmed from Nestle China that China’s water business was also included in the evaluation scope of the strategic adjustment. “In line with the new strategic direction of the global water business, Nestle has begun to explore the best solutions for the future of water business in China, including potential sales.” At that time, Nestle also stressed to the snacks agent: “the high-end water business is not within the scope of this potential sale.”
Implementation of new water business strategy
The transaction announced today also represents that Nestle’s new water business strategy has been implemented in China. Shortly after the launch of the new strategy in June, Nestle sold two drinking water businesses in succession.
At the end of June, Nestl é Vera, its bottled water brand, had been transferred to the new company of Sicon, a PET bottle maker. The sale also included San pello’s bottling plants in four regions of Italy.
Then in early July, Nestle Canada announced that it planned to sell its pure life bottled water business to ice river springs, a local family business in Canada. The deal is expected to be completed in the third quarter of 2020.
In fact, the reason for the decision to “make a big operation” in the water business is that nestle still wants to do this business better. After the appointment of Nestle CEO Snyder, drinking water has been designated as Nestle’s high growth category.
According to Mr. snack, at the mid-term performance meeting in 2020, Schneider reiterated that drinking water continues to be one of Nestle’s four high growth target categories, but the high growth category does not mean that it will achieve high growth every quarter or every year.
He said the drinking water business had experienced a period of weak performance, and Nestle benefited from the new strategy to ensure that the category returned to high growth in the future. Schneider said he believed that there was the best opportunity for Nestle to have high-end and functional products.
In fact, Nestle’s water business in China has also taken high-end and functionality as the direction of exploration.
In terms of high-end layout, at the beginning of June this year, acquapanna Puna, an Italian high-end water brand of Nestle, officially entered the Chinese market and launched a variety of packaging products. In July of this year, Nestle also launched a light functional bubble water beverage under the Youhuo brand, which is positioned as “high-end strengthening water supplement”.
Why does the new owner make a move?
For this transaction, I believe more people are concerned about why the “new owner” Tsingtao beer group made a move?
It is found that Tsingtao Brewery Group has already tried to set foot in the field of beverage.
On July 27 last year, Tsingtao Beer held a new product launch of its Prince seaweed soda water. At that time, Huang Kexing, Secretary of the Party committee and chairman of the board of Qingdao beer group, said that the group “promotes high-quality development with a broader vision, higher objectives and stronger measures to better meet the needs of consumers.”
In fact, Qingdao Beer’s “cross-border” drinks can be traced back to 2000.
According to a report in 2000, Qingdao Beer Co., Ltd. and Asahi Beer Co., Ltd. jointly established Tsingtao Beer Asahi Beverage Co., Ltd. Among them, Qingdao beer holds 40% of the shares, and Asahi holds 60% of the shares.
According to the above report, the joint venture also plans to build a new project with an annual output of 50000 tons of tea drinks, and all the products will be sold in China. After the tea beverage is put into production, the company will continue to develop and produce products such as mineral water and purified water.
Years later, Tsingtao Brewery bought all the joint venture shares held by Asahi.
The snack agent also noted in the 2019 annual report of Qingdao beer that the company would “make full use of existing resources to extend development to other liquor and beverage industries, realize the complementary advantages of brands, equipment and products, maximize the channel value, and constantly create new growth points.”
In 2019, the turnover and profits of Tsingtao beer are almost entirely generated by the production and sales of beer. Last year, the company’s revenue was 27.98 billion yuan, net profit was 1.85 billion yuan, and the gross profit rate was 38.94%. Looking at Nongfu Shanquan, a beverage giant known as “Maotai in water”, the gross profit margin of packaged drinking water was 60.2% last year. Nestle did not disclose the gross profit margin of its drinking water business in China.
Huang Kexing, chairman of the board of Qingdao beer, said in the company’s annual report in March this year that while continuing to strengthen and optimize the main beer industry, the company has exerted innovative thinking, integrated platform resources, actively explored “beer +” new business areas, and created a multi business win-win and common benefit ecosystem complementary to the main business, laying the foundation for long-term sustainable and high-quality development.