Nestle wants to "add weight" to China's coffee market development

Recently, Nestlé (NESN.VX), the world's largest food company, has frequently expanded in China. In addition to continuously acquiring domestic enterprises, it has directly "overweight" its main business segments including coffee, in order to rapidly increase the proportion of its business in China.

Nestle Greater China President Di Kewei told China Securities News on the 22nd:"China has become the world's second largest economy, the Chinese market represents the future, Nestle's Chinese business in the global proportion is not high, but in the future we will increase the development of the Chinese market, the proportion of the Chinese market in sales share will gradually increase." For this reason, Nestle expects to invest several billion yuan in the Chinese market every year in the next few years."

"Plus Code" Chinese Market

It is reported that Nestle China market revenue in 2010 was 2.8 billion Swiss francs (about 20.4 billion yuan), while Nestle global revenue in 2010 reached 109.72 billion Swiss francs, the proportion of sales in the Chinese market is only 2.5%. "As the world's largest food company, Nestle's main business in China is still very small, even the top five are not in place, which does not match the booming Chinese market." Deke is called.

Despite its small size, China is one of Nestle's fastest-growing markets, with revenue growth of 15% in 2010. According to Di Kewei, the future development potential of the Chinese market is very large, so Nestle will also vigorously expand its business in China. "Take coffee as an example. At present, the per capita annual consumption of coffee in the mainland of China is only 3 cups, while in developed countries such as the United States, the figure is several hundred cups. Even in China Hong Kong and China Taiwan, the per capita annual consumption exceeds 100 cups. Coffee consumption in China has great growth potential, so coffee business is the first business that Nestle will focus on in the future."

Nestle signed a memorandum of cooperation with Yunnan Pu 'er City Government on November 21. The two sides will cooperate deeply in coffee talent cultivation, technical assistance, brand building and cultural development in the future. It is reported that the total planting area of small coffee in Pu 'er City of Yunnan Province is 425,000 mu, accounting for 65.6% of the whole country. At present, Nestle's coffee beans purchased in Yunnan account for 22% of the local output, and all Nestle's small coffee beans are purchased directly through Pu 'er City.

Nestle launched its Nestle Coffee Program in 2011, under which Nestle will invest another 500 million Swiss francs (about 3.4 billion yuan) in its coffee projects by 2020, on top of the 200 million Swiss francs already invested in the past decade. Against the background of limited growth potential in developed countries, the analysis agreed that this portion of funds would be focused on emerging market countries.

According to Nestle China, Nestle's coffee bean purchases in Yunnan will double in the next few years due to business expansion. At present, Nestle has one coffee factory in Dongguan and one in Shanghai. It is revealed that Nestle's third large-scale coffee processing plant is also under construction in Qingdao.

The "overweight" of coffee business is only one of the manifestations of Nestle's increased development efforts in China. Di Ke introduced that coffee business is Nestle's primary business in China; secondly, Nestle will vigorously develop dairy products business, especially infant milk powder; and the third place to vigorously develop is Nestle's candy biscuit business,"there are liquid beverages, condiments industry, etc., business categories with growth potential will become Nestle's key development targets".

Mergers and acquisitions "help"

In fact, Nestlé's business expansion in China is often accompanied by mergers and acquisitions of local brands, and Nestlé's development and growth also benefit from continuous mergers and acquisitions. "Food is local, so the local strategy is Nestle's." Deke is called.

Since the beginning of this year, Nestle's domestic M & A efforts have also increased. Nestle China announced on November 17 that Nestle's acquisition of 60% equity in Xiamen Yinlu has been approved by the regulatory authorities and the two sides have formally formed a partnership. In April this year, Nestle signed the 60% equity acquisition agreement with Yinlu, but did not disclose the specific purchase price. Yinlu's sales in 2010 were 5.46 billion yuan. On July 11 this year, Nestle also announced that it would buy 60% of Xu Fuji for US $1.7 billion, which is currently pending regulatory approval."We are confident that the government will make the right decision," Di said.

Before this, Nestle successively acquired local enterprises such as Taitai Le and Yunnan Dashan in China. "An important criterion for Nestlé's partner selection is a good understanding of Chinese consumers, which Nestlé lacks. Nestle doesn't want to change local partners, it wants them to change Nestle. Local brands understand consumers, Nestlé can provide R & D support and financial support, a good example of which is the tenfold increase in sales over the past 10 years." Di Ke said.

Insiders pointed out that M & A brought Nestle expansion of business scope, diversification of products, rapid increase of market share and diversification of culture, etc. The recent acceleration of M & A also shows Nestle's emphasis on the domestic market. At present, the rapid growth of emerging markets, especially China, has become the main growth point of Nestle's global business, and the acquisition of local brands with growth potential has become the fastest way.

China Coffee Trading Network: www.gafei.com