Nestle to chase Chinese palate

The Swiss giant is setting up research centres in Xiamen and Dongguan to focus on beverages and sweets that will appeal to mainlanders

PUBLISHED : Friday, 19 October, 2012, 12:00am
UPDATED : Friday, 19 October, 2012, 3:33am

Nestle plans to double the number of its research units in China as the world's largest food group chases double-digit growth in the world's most populated country.

The Swiss food giant, whose global sales have fallen short of expectations so far this year, has promised mainland consumers it would cater to their tastes.

It is planning to produce more China-specific beverages and baked products.

Nestle, which sells 1.5 million ice-creams on the mainland per day, plans to set up two new research and development units in Xiamen, Fujian province and Dongguan, Guangdong province, to learn about Chinese ingredients and local cuisine, chief executive Paul Bulcke said in Shanghai yesterday.

The company has two research units in Beijing and Shanghai.

"We continue to invest in our R&D capability in Asia because we know this brings us closer to local consumers and gives us a greater understanding of the raw materials," said Johannes Baensch, Nestle's global head of research and development.

"It creates proprietary knowledge and focus on growth opportunities for our business."

Nestle's sales growth between January and September slowed to 6.1 per cent, compared with 6.6 per cent in the first half.

The growth figure missed analysts' average estimate of 6.3 per cent, says Bloomberg. Nestle reported its sales growth in Asia, Oceania and Africa slowed to 9.4 per cent in the first nine months, down from 11.6 per cent for the first half.

Bulcke admitted business in China was not in line with expectations but said he remained bullish on future growth there.

Increasing demand in emerging markets has been helping Nestle offset sluggish sales in Europe, where Nestle's sales growth slowed to 1.94 per cent from 2.4 per cent.

Nestle's businesses in Asia, Oceania and Africa account for a quarter of its global total.

Nestle's shares traded about 1 per cent lower yesterday in Brussels and Zurich.

Nestle set up its first Chinese R&D facility in Shanghai 11 years ago. In 2008, the company established the second R&D unit on the mainland in Beijing to support the development of dairy, nutrition and pet-care products.

The new research centres in Xiamen and Dongguan will focus on beverages, confectionery, biscuits and snacks.

Well-to-do mainlanders are increasingly choosing foreign-branded food following a spate of scandals that exposed toxic materials in food made by some Chinese-owned companies.

A recent survey by global management consultancy McKinsey showed a new class of consumers is emerging on the mainland who are more self-indulgent and loyal to certain brands, particularly the foreign ones.