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A woman walks by Hsu Fu Chi snacks in a supermarket in Shenyang in northeast China’s Liaoning province on July 5, 2011. Photo: EPA

Nestle to weigh US$1 billion sale of local Chinese brands Hsu Fu Chi and Yinlu

  • The firm is reviewing its ownership of confectionery brand Hsu Fu Chi and Yinlu, known for its ready-made Chinese porridge, say people familiar with the matter
  • Nestle acquired both in 2011, seeking to tap burgeoning demand in China, only to find itself confronted with sluggish growth a few years later

Nestle is weighing options including a sale for two ailing Chinese units after years of attempting to turn them around, people familiar with the matter said.

The food giant has been reviewing its ownership of Hsu Fu Chi, a local confectionery brand, and Yinlu, known for its ready-made Chinese porridge, according to the people.

It is seeking more than US$1 billion for its controlling stakes in the two companies, the people said, asking not to be identified because the information is private.

Nestle acquired both companies in 2011 as it sought to tap burgeoning demand in China, only to find itself confronted with sluggish growth a few years later.

Nestle, which makes Nespresso coffee and Gerber baby food, has made almost two dozen divestments under Mark Schneider, who became CEO in 2017. Photo: Reuters

Since becoming chief executive officer in 2017, Mark Schneider has been weeding out the Swiss company’s portfolio, jettisoning assets such as US chocolate brands, a dermatology business and a life insurance unit for about US$15 billion total.

Nestle, which makes Nespresso coffee and Gerber baby food, has made almost two dozen divestments under Schneider. It could opt to sell only part of its stakes in one or both of the Chinese units, according to one of the people.

No final decisions have been made, and there is no certainty the deliberations will lead to a transaction, the people said. A spokesman for Nestle declined to comment. Mergermarket reported earlier that Nestle was conducting a strategic review of the Yinlu business, citing unidentified people.

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Yinlu has sales of about 1 billion Swiss francs (US$1 billion), Nestle said earlier this month. About two-thirds of the business is made up of local products like peanut milk and congee, whose sales have been “disappointing,” the CEO said at the time. The rest is ready-to-drink coffee, which has been going better.

“We’re working very, very hard to address that situation,” Schneider said on a call with analysts on October 17. He has repeatedly said Nestle will sell businesses that are non-strategic if it’s not possible to fix them.

Hsu Fu Chi, which makes confectionery products and snacks, probably generates annual revenue of some 700 million francs (US$700 million), according to Vontobel analyst Jean-Philippe Bertschy. Nestle has tried to improve the packaging of Hsu Fu Chi chocolates and added nutritious snacks to appeal to more health-conscious millennial consumers.

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