This is very much in line with trends in the food and beverage industry that are emerging in the Asia Pacific region since the COVID-19 pandemic outbreak struck, especially in countries that have moved into a ‘recovery phase’ such as China, where a further boom has been predicted for e-commerce platforms in general.
Nestle Malaysia says it will adapt to the ‘new normal’ by evolving according to consumer trends.
“Whilst it is difficult to anticipate the full extent of the changes this pandemic will trigger, we [are] confident in our ability to tap into new opportunities for growth in 2020,” Nestle Malaysia CEO Juan Aranols said.
“We are capturing growth opportunities across all channels, including e-commerce acceleration and the increased demand for home-delivery products – [so will look at] expanding the range of Nestle products available for consumers shopping online.”
As an example, Nestle Malaysia launched its most recent ‘at-home’ range last month in conjunction with Starbucks – a traditionally foodservice oriented brand – to make Starbucks drinks more available to consumers via e-commerce and home-delivery.
This includes a new range of Medium Roast and Dark Roast coffees, inspired by the cappuccinos, lattes, mochas and caramel latte traditionally consumed in Starbucks outlets, in its ‘Starbucks at Home’ range, which was first launched last year.
“[This way,] consumers are able to enjoy high quality Starbucks coffees in a convenient instant or soluble format — at home,” Nestle Malaysia said in a statement.
There are 11 different coffee variants in the at-home range, and Nestle will be selling this on e-commerce platforms such as Lazada and Shopee as well as at offline retailers and supermarkets.
“We will continue with our innovation drive and we have a strong pipeline of new products coming in the second part of the year,” Aranols added.
Preparing for challenges ahead
The company announced last month in its Q1 2020 results that its turnover had come in at RM1.43bn (US$335.1m) and profit after tax at RM186.3m (US$43.7m), largely stable when compared with Q1 2019 revenue (RM1.45bn/US$339.8m) and but some 20.7% lower in terms of Q1 2019 profit after tax (RM235m/US$55m).
The drop in profits was attributed to factors such as higher commodity costs, an earlier Chinese New Year in 2020, currency exchange volatility, COVID-19’s impact on Nestle Malaysia’s out-of-home business, and ‘incremental expenses’ to protect staff safety and ensure the operational continuity amidst the pandemic.
Revenue stability was largely bolstered by export sales, though Aranols also warned that COVID-19 related challenges are not done and dusted just yet.
“The challenges associated to COVID-19 will persist in the months to come, [but we] are confident in Malaysia’s potential and capability to see economic recovery once the current COVID-19 crisis is behind us,” he said.
“We will continue to build capabilities for the long-term, [so] this year we will be allocating the highest capital expenditure in six years, RM280m (US$65.7m) in investment [to] add new manufacturing capabilities.
“[These will include] expanding current production capacity for MAGGI Noodles, as well as a new high technology production line in Shah Alam that will allow us to enter into new high growth categories with great future potential.”
Malaysian Prime Minister Muhyiddin Yassin announced yesterday (June 7) that the country would be entering the ‘recovery phase’ of its Movement Control Order (MCO) until August 31, after new daily local transmission numbers dropped to mostly single digits.
Nestle Malaysia’s out-of-home business, which was most affected by the MCO, is expected to see a gradual rise as limits on foodservice outlets are gradually lifted.