Nestlé says the move will result in new facilities in the region that should provide farmers in Pu’er, a rural district once best known for its tea leaves, with training in improved coffee growing techniques while promoting the beverage to more consumers.
The facilities will include a coffee museum and an institute to provide training for 5,000 farmers, agronomists and other members of the coffee trade each year. The site will also offer modern warehousing facilities and a quality testing lab.
"We have worked with farmers and the local authorities in Yunnan province for 25 years to develop the region into a world-class coffee growing district," said Heiko Schipper, head of Nestlé's Food and Beverage division for the Greater China region.
"Over that time, our agronomists have provided more than 8,500 farmers with free agricultural assistance and training in improved growing techniques.”
In 2010, Starbucks also signed a similar MOU with the Pu'er government to promote coffee growing in the region. The company has increased its coffee purchase in Yunnan by more than 2,000% since 2007, when it first started buying beans in the province.
Meanwhile, Nestlé last year set up buying stations to procure coffee directly from farmers, helping them obtain better prices and a steady income. In turn, this has helped Nestlé obtain a regular supply of quality coffee.
Prior to that, the Swiss company extended its support for local farmers in Yunnan with the introduction of the Nescafé Plan, an initiative the company anticipates will double the amount of coffee it buys directly from farmers and their associations by 2015.
Beans on the rise
Yunnan is in one of China’s fastest growing coffee centres. According to research firm Mintel, the Chinese market for packaged coffee products has grown at a rate of 18% a year since 2007, and could rise another 75% to RMB16bn ($2.5 billion) by 2017.
Last season, Nestlé purchased 10,500 tonnes—or one-fifth—of the region’s total crop. The company claims its coffee-buying programme directly supports the livelihoods of up to 20,000 people.
While still not in the mainstream, where tea rules by a massive margin, drinking coffee is growing quickly among the Chinese, said Schipper. “People in China originally began drinking coffee simply as a 'pick-me-up'. Today, more and more Chinese consumers are regarding coffee as a social drink and are increasingly drinking it in and out of home.”
Last year, the company found that Chinese consumers prefer a rich, aromatic taste with balanced, milky flavours.
Ice cream investment
The Yunnan announcement comes two days after Nestlé said it would continue with the second phase of its five-year, RMB500m (US$80.6m) investment in its ice cream business in China.
The company completed the first phase of the investment last year with the installation of new equipment at its ice cream cones factory in Guangzhou province.
This will increase production capacity to over two million per day, making the factory Nestlé's largest ice cream cone manufacturing facility in the world.