China Food

In 2021, Nestle will invest in China again!

Nestle, the world’s largest food producer, has made new moves in China after its big investment in Tianjin and Shuangcheng last year. This time, it’s Qingdao.

According to local media, Nestle’s series of investments in this northern city surfaced at the signing and promotion conference of “project landing year” investment promotion project negotiation Week held in Qingdao last week.

“Key areas”

These latest investments in China include: Nestle coffee R & D center project settled in Qingdao, will invest in the construction of new coffee R & D and production base and infant complementary food production base in Qingdao Laixi factory, and the newly established Nestle Greater China instant drink product innovation center will bring six independent patents to Qingdao to explore and develop more new coffee products.

In response to the inquiry of snacks, Nestle China said that more information about the current round of investment is planned to be released in April. As of press time, the overall amount of the above investment is not clear.

Xiaoshidai once introduced that although Nestle China’s revenue will still exceed 44 billion yuan in 2020, the Swiss food giant’s business portfolio in China is obviously undergoing in-depth restructuring, that is, it is more focused on the “key areas” set in China, such as baby feeding, candy, coffee, flavored food, dairy products and pet care.

To this end, Nestle announced last year that it sold its local water business to Tsingtao Beer Group, and sold Yinlu peanut milk and Babao porridge. At the same time, Nestle also announced a series of capital increase plans and projects with a total amount of more than 730 million yuan in Tianjin, and an investment of 400 million yuan in Harbin Shuangcheng.

Among them, Tianjin’s investment is mainly to expand the company’s existing pet food and candy business capacity, upgrade the Tianjin Nestle Quality Assurance Center, and invest in the construction of Nestle’s first plant-based product production line in Asia in Tianjin. The latter has launched 10 new plant meat products called “jiazhiyao” at the end of last year.

Although it is not clear about the positioning of Qingdao’s new products for the moment, it is very possible to point to high-end products. Last year, Nestle CEO Schneider predicted that. Nestle will invest in products with faster growth, higher profit margins, more in line with industry trends, more able to meet younger and higher consumption groups, and more high-end products.


Division of categories

So, what products does Nestle aim at for the latest investment in Qingdao?

After sorting out a number of public information today, xiaoshidai found that Nestle’s idea has been relatively clear. The new production capacity of Tianjin, Shuangcheng and Qingdao has carried out an obvious “division of labor” in categories. The latter focuses on “wet products” in coffee and infant nutrition.

According to the information released by Qingdao Laixi local government since last year, instant coffee project, product innovation center and Jiabao fruit puree project are invested and constructed by Qingdao Nestle Co., Ltd.

Xiaoshidai introduced last week that Jiyin silky latte series is on the market, which is said to be the “first batch of R & D and new products” in the local market

“Because (last year) our business with Yinlu has made some adjustments and entered a new cooperation mode, we have adjusted the innovation of instant coffee to Qingdao.” Peng Zhixin, head of Nestle’s ready to drink coffee business in Greater China, told snacks earlier that the center will cover all Nestle’s liquid drinks, such as ready to drink coffee, as well as professional catering solutions for liquid drinks customers.

On the infant nutrition project, the local government of Laixi, Qingdao, described it in more detail, including “the only factory in Asia, Africa and Oceania that produces Jiabao brand wet products”, and pointed out that “the annual output is expected to be about 1000 tons, and 19 flavors will be developed in the first phase, etc.

This is also different from the production capacity of two cities announced by Nestle last year. The latter mainly covers baby food and adult product lines, including expanding the production area of baby rice noodles in the original grain production area of two cities. Nestle has predicted that the scale of China’s infant complementary food market will exceed 40 billion yuan in 2024, almost double that in 2018.

Chinese chess game

In the past year, Nestle has been dealing with assets with slow growth and low profit margins, while continuing to “invest” in key areas identified by Nestle, which also reflects the new “view” of Nestle headquarters executives on China, the world’s second largest market.

Xiaoshidai noticed that at a meeting of analysts held on February 19, Nestle CFO Fran ˊ OIS Xavier Roger was asked what his outlook for the Chinese market would be with the sale of Yinlu business. In response, he said that although the Spring Festival in 2020 is not helpful to the business, and Chinese consumers did not hoard much food during the epidemic, Nestle still aims to increase the median single digits.

“There are several reasons for us to remain optimistic.” He said that the silver heron factor that first put pressure on the performance is no longer there. In addition, since the second half of last year, Wyeth nutrition products also showed a positive momentum year on year. In the end, most of its businesses in China are still doing well, including pet care, espresso and some dairy businesses. “Therefore, we are optimistic about the beginning of the Chinese market in 2021.”

At the above-mentioned meeting, Fran ú OIS Xavier Roger also pointed out that the biggest engine driving Nestle’s organic sales revenue growth is the high-end products brought by innovation. “The profit margin of high-end products will be three or four percentage points higher than the average.” He said that the high-end can also make Nestle’s product sales differentiated and resist the impact of rising commodity prices.

According to Nestle’s 2020 annual report, the company’s underlying trading operating profit margin (Utop) reached 17.7%, up 10 basis points on the basis of financial statements and 20 basis points in fixed currency terms. Schneider said earlier that global revenue growth of more than 4% in 2021 is “something we have to work on.”.

Link: Nestle and Qingdao

Nestle has invested and built a factory in Qingdao since the early 1990s. The original enterprise mainly produced condensed milk, UHT milk, light milk and light cream. By the beginning of last year, there were 72000 dairy cows in the city, with a daily output of 500 tons of fresh milk and an annual milk capital of 700 million.

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