Global food and beverage giant Nestle's recent new investments to boost its high-end portfolio including baby food, coffee and dairy products signal the Swiss firm's confidence and commitment to further tap the rapidly growing China market.
Nestle has added production facilities in Laixi, a city in Qingdao, Shandong province, including a new product innovation center and the launch of production of Gerber puree, in a bid to expand production.
"Despite challenges brought by the COVID-19, Nestle has continued to increase its investment in the Chinese market, which demonstrates our commitment to China and its consumers," the company said.
"With China having entered a new stage of development, Nestle is highly confident about the Chinese market," said Rashid Qureshi, chairman and CEO of Nestle Greater China Region.
Qureshi said the company will continue to promote various efforts aimed at supporting green and innovation-driven development and help upgrade the local agricultural and food sectors.
China, as the world's most promising market for maternal and infant products, has shown a rapidly growing demand for high-quality organic baby foods.
The new factory in Laixi－it adheres to strict organic standards－is Nestle's only factory for Gerber pet products in Asia, Africa and Oceania areas. The production line has introduced 18 flavors of Gerber puree to consumers in China.
The new establishment in Qingdao also produces the company's popular ready-to-drink coffee. It has established a product innovation center for developing ready-to-drink coffees, liquid dairy and other beverages for the Chinese market. Nestle will further expand the procurement of local fresh milk to support large-scale demand for Nestle business development.
The newly-added production lines are part of Nestle's recent moves to bring more high-end and healthy products to the vibrant Chinese market.
In its quarterly fiscal report released on April 22, Nestle's China business saw double-digit year-on-year growth. The growth, whose exact figure was not disclosed, was broad-based across most product categories, reflecting continued momentum in e-commerce and a strong innovation pipeline, said the report.
The largest growth contributor was Nestle Professional, its food service sector. Its coffee, culinary, dairy and confectionery all grew at double-digit rates. Growth in infant nutrition products returned to positive territory. Its pet food unit, Purina Petcare, also reported strong growth.
To bring its products closer to consumers, Nestle brought 181 products from 15 countries with 29 products debuted for Chinese consumers at the China International Consumer Products Expo in Hainan province. Among them, Nestle International Travel Retail, part of Nestle SA's unit that offers Nestle's confectionery brands to travelers via duty-free environments such as airports, cruise ships and ferries, has debuted at the expo in China in an effort to grab more growth opportunities at the duty-free market in Hainan province.
"Chinese consumers have flocked to Hainan to spend their duty-free allowances. So, it is highly appropriate for NITR to be part of this expo, taking place in the current throbbing heart of our industry," said NITR General Manager Stewart Dryburgh.
Nestle has also invested in innovative food sectors with the launch of its first plant-based line－both for retail and for the catering sector－last year in Tianjin. It features tailor-made recipes based on Chinese culinary traditions. It is Nestle's first plant-based production line in Asia.
The facility will mainly produce plant-based products for the food service industry under the Harvest Gourmet brand.
Meanwhile, Nestle has sold businesses that have been underperforming. It agreed to sell its China water business to Tsingtao Brewery Group in August.
Nestle also announced in November that it had agreed to sell its Yinlu peanut milk and canned rice porridge businesses in China to Food Wise Co Ltd. The deal covers all of Yinlu's operations, including its five factories in the provinces of Fujian, Anhui, Hubei, Shandong and Sichuan.
Zhu Danpeng, a food and beverage analyst in Guangzhou province, said Nestle's has prioritized its business portfolio on goods with high growth potential.
"The investment strategy for global multinationals has undergone great changes, from focusing on scale in the past to looking at business sectors driven mostly by high-tech, high profits and sustainability."
For example, Danone, a French food and beverage giant, announced on April 29 the launch of its locally manufactured early nutrition product Nutricia, which has been produced at its plant in Qingdao, marking a new phase in implementing its strategy－"developed in China and manufactured in China"－and the conglomerate will apply its cutting-edge technology with advanced localized production in the next five years.