Nestle plans investment in Chinese manufacturing partner

17-Apr-2011 - Last updated on 18-Apr-2011 at 12:04 GMT

Nestle is planning to buy a 60 per cent share in China’s Yinlu Foods Group for an undisclosed sum, in a move that will help household brand Yinlu gain more traction in the Central and Western regions of the country.

Nestle has been present in China for more than 20 years and has 23 factories and two R&D centres there. In 2010 Nestle achieved sales of some CHF 2.8bn in the greater China region.

CEO Paul Bulcke said investment would unite Yinlu’s entrepreneurship, product expertise and consumer understanding with its own innovation and R&D capabilities.

Chen Quingyuan, Yinlu’s chairman, said: “Together we will continue to develop our brand and manufacturing capabilities, in particular in the Central and Western part of China.”

The deal is subject to the approval of the Chinese authorities, and Bulcke said the proposal will be submitted soon. It is foreseen that Chen Quingyuan will stay on to lead the company once the deal is complete.

Complementary brands

Nestle and Yinlu already have history of working together, as Yinlu co-manufactures Nescafe in China. The latter is also known for its own peanut milk and rice porridge products, “tailored to Chinese consumers’ tastes and habits”, are said to be in keeping with the global food giant’s stated focus in health and wellness products.

Nestle’s brands in China do span a number of product categories, however, including confectionery, coffee, bottled water, culinary products, milk products and products for food service.

New regional head

The news of the arrangement in China follows the announcement last week that Nestle’s Zone Asia, Oceania and Africa will have a new executive vice president come October, as Nandu Nandkishore has been appointed to the position by the board to succeed Frits van Dijk, who retires in September.

In its Q1 results announced on Friday the zone reported sales of CHF 3.8bn, representing 11.8 per cent organic growth and 9.1 per cent real internal growth.

The consumer goods giant said all regions performed well, including China, the South East region, the Middle East, Africa, Indonesia and Indochina.

Its strategy in emerging markets is to drive deeper distribution of its Popularly Positioned Products (PPPs), which aims to bring nutritious products within the reach of lower income groups, and target a million more retail outlets by 2012.