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Nestlé Opens New Factory of Two Major Businesses in China Today, Seniors Say Premium and Super Premium Milk Powder is Still Important


Nestlé, the world’s largest food and beverage company, expanded its factory lineup in China. Today, Nestlé announced the official inauguration of its new factory in Taizhou, Jiangsu.

Rashid Qureshi, Chairman and CEO of Nestlé Greater China who attended the ceremony today described the inauguration of the new factory in Taizhou as an “important milestone” and told that the factory will produce FSMP and skin health products. These two businesses are the young businesses that Nestlé has planned to launch in China.

He also stated that Chinese consumers are becoming more discreet and cautious, and that Nestlé, who has been in China for 30 years, needs to accelerate its embrace of change accordingly. The infant nutrition business is still an important part of product innovation in the future.

Nestlé Opens New Factory of Two Major Businesses in China

Place more emphasis on health business

FOODINC noted that the latest new factory Nestlé opened in China was Yinlu factory in Chengdu in 2015. Phase I of Nestlé Taizhou factory opened this time was invested with more than 1 billion yuan.

Nestlé pointed out in a briefing that the factory is currently one of the most modernized and state-of-the-art factories in China. At present Nestlé has 33 factories and nearly 50,000 employees in China.

Nestlé Opens New Factory of Two Major Businesses in China

In fact, the health science business and the skin health business have not become independent until 2012. The “youngest businesses” of Nestlé in China as they may be, they are among the most valued businesses of Nestlé China in recent years.

One important reason is that FSMP that falls under the scope of health science business is still at the initial stage in China.

Nestlé Opens New Factory of Two Major Businesses in China

"FSMP has a history of more than 50 years abroad and has derived thousands of kinds of products. However, there are only a few dozen products in China and almost all have been used as medicine before. Considering the great market demand, this segment is a huge blue ocean," said Cecily Gu, Regional Business Head of Nestlé Health Science Greater China. The official launch of FSMP registration in China last year will greatly promote development of the industry.

She added that Nestlé Health Science currently offers eight imported products, including Nutren, Alfamino and Althera, and special formula products such as deep-hydrolyzed protein and amino acid in the field of pediatric nutrition in China.

Nestlé Opens New Factory of Two Major Businesses in China

FOODINC once reported that Nestlé spent US$2.3 billion to acquire Atrium Innovations, the parent company of Garden of Life, the largest natural dietary supplement brand in the United States, in December last year. The acquisition was completed in March this year.

Today, Magdi Batato, Executive Vice President Operations Nestlé S.A., referred to the acquisition and said that Nestlé would remain open to M&A in the future and pay attention to external opportunities while focusing on internal growth.

Milk powder innovation

However, Magdi emphasized in response to media questions that this does not mean that Nestlé completely shifts from a food company to a medical nutrition and health company."Food accounts for about 95% of our product portfolio. It is a very important category and also a business that we are greatly committed to developing," said Magdi. At the same time, Nestlé also attaches great importance to product innovation and hopes to strengthen innovation in global products.

Nestlé Opens New Factory of Two Major Businesses in China

Rashid said to FOODINC that the nutrition business including infant nutrition has always been a very important product portfolio and field at Nestlé. He pointed out that with the promotion of China’s two-child policy, the number of babies born each year will remain around 16 million.

"This means a big market for us." Rashid said that Nestlé still needs to innovate in its products with the opportunity in that premium and super premium milk powder is still the most important product in the Chinese market.

In March this year, Nestlé’s infant milk powder brand NAN announced the launch of its first organic milk powder Organic NAN, which was described as Nestlé’s “highest-end” milk powder product.

Nestlé Opens New Factory of Two Major Businesses in China

In addition to “delineating focuses of business”, Rashid today also talked about how he felt on his duty in China in the past one and a half years.

“Chinese consumers are becoming more discreet and cautious, and pursuing nutritious, healthy, and high-end products,” said Rashid. This change brings both challenges and opportunities to enterprises.

He further pointed out that the most obvious changes in the large and fast-changing market in China are the development of e-commerce and the emergence of cross-border e-commerce platforms. These provide consumers with more product choices, and put forward higher requirements for product innovation and improvement on any company operating in the Chinese market.

Nestlé Opens New Factory of Two Major Businesses in China

He believes that the Chinese market's requirement for Nestlé is "to learn very quickly, to be very smart, to embrace these challenges, and to be closer to consumers."

"That is to say, we have to enrich our product portfolio. As the cycle of product innovation becomes shorter, we must accelerate the pace of innovation and improvement," said Rashid. He cited several attempts by Nestlé in China last year, including the world’s first artificial intelligence voice device product-Xiao AI in cooperation with Jingdong, the launch of Nescafé pop-up cafe to offer innovative interactive experience, and product innovations in Hsu Fu Chi.

"I still see more opportunities. There definitely will be challenges, we see more opportunities and embrace these challenges," said Rashid.