To a backdrop of its slowing growth in the region, Nestlé has revealed that it will double the number of its research and development units in China. The announcement came at the company’s first ever China-centric earnings call from Shanghai.
The two new R&D facilities in Xiamen and Dongguan will also support Nestlé’s joint ventures with Chinese food companies Yinlu and Hsu Fu Chi, as well as working on projects with its R&D centres in other countries.
The move is intended to further the Swiss food major’s understanding of Chinese consumers, ingredients and local cuisine. It will also provide scientific and technological expertise to the rest of the business in Asia and around the world.
The unit in Xiamen will specialise in ready-to-drink beverages and will support Yinlu, China’s leading producer of ready-to-drink peanut milk and ready-to-eat rice congee.
The Dongguan facility, meanwhile, will have expertise in baked products and will work closely with Hsu Fu Chi, a leading producer of affordable confectionery, biscuits and traditional snacks in China.
Nestlé already owns a 60% stake in each of the family-owned businesses.
Nestlé had earlier revealed its third-quarter figures from Shanghai—the first time in its history that the company had presented an earnings call from China. Naturally, presentations by Paul Bulcke, Nestlé’s chief executive, Wan Ling Martello, its CFO and a selection of its regional chiefs focused somewhat on the Chinese market.
The company’s total sales in the first nine months of the year slowed to 11.7% from 12.9% at the six-month stage.
However, Nestlé sees China as a source of long-term growth opportunities, even though the country is facing an economic slowdown of its own, said Roland Decorvet, Nestle's China chief executive.
“The rising middle-class is expanding its palate and is interested in more dairy products and on-the-go foods,” he added.
Bulcke remarked: “There is nervousness of slowing growth, but I can tell you that we link with creating better lifestyles and better projections and better growth.”
Research for growth
Nestlé’s investment in Xiamen and Dongguan reflects its long-term commitment to advance nutrition and food science in China, according to Johannes Baensch, the company’s global head of R&D.
“We are continuing to invest in our R&D capability in Asia because we know this will bring us closer to local consumers, and give us a greater understanding of the raw materials used to make the products,” he said.
“Wherever they are in the world, our regional R&D units are global centres of competency for certain technologies. They create proprietary knowledge and focus on growth opportunities for our business.
“They are successful because of the local people we hire and because of the way these people are integrated into our R&D network, sharing knowledge and experience.
“We’ve been building our R&D capability in China for more than ten years. The result is a really talented team, and a strong talent pool for the future.”
Decade of R&D
The company set up its first R&D facility in China in Shanghai in 2001 to support its joint venture with the culinary products producer Totole.
Today, its R&D unit in Shanghai continues to specialise in the development of culinary products for retail, as well as in out-of-home products for Nestlé Professional, and ice cream.
In 2008 Nestlé set up a second R&D facility in Beijing to provide specialised support in packaging and analytical science, and in the development of dairy, nutrition, cereal, beverage mix, and pet care products.
Beijing also has a major focus on food safety and quality, consumer insights, and basic research in health science.
Together with Nestlé’s facilities in Shanghai and Beijing, the new R&D units in Xiamen and Dongguan will be part of the newly named “R&D China”.
R&D China will set out to build on Nestlé’s existing scientific collaborations with universities and research organisations in the country.