Nestle will expand plant-based foods and pet food operations in China.
Nestlé announced this month it has big plans to spend 100 million Swiss francs (or $103.58 million) on expanding its manufacturing operations in China to include a new plant-based food facility. The first of its kind in Asia, the new investment will be constructed at Tianjin Economic-Technological Development Area (TEDA) and could begin producing faux meat products by the end of 2020. Chinese consumers have been steadily shifting to plant-based diets over the past few years due to health and safety circumstances that have led to the avoidance of animal proteins.
“China’s ‘free from meat’ market, which includes alternative meat products, grew 33.5% since 2014 to be worth just under $10 billion in 2018,” according to Euromonitor, which forecasts it will be worth $11.9 billion by 2023.
The company’s forthcoming operations in TEDA would also expand the capacity of Nestlé’s existing Purina pet food plant. In total, Nestlé has more than thirty existing production sites in China. In 2018, the company launched two healthcare factories in the China Medical City in Taizhou. The factories were intended to meet projected consumer demand for Foods for Special Medical Purposes (FSMP) and skin care products.
Magdi Batato, Executive Vice President, Head of Operations for Nestlé S.A, said at the time, “Nestlé is fully committed to continue to invest to support sustainable growth in China. By bringing the manufacturing capabilities of Nestlé Health Science and Nestlé Skin Health to China, we are in a stronger position to enhance Nestlé’s product offering and meet consumer expectations.”
Rashid Qureshi, Chairman and CEO of Nestlé Greater China, added, “These new factories significantly strengthen Nestlé’s product and services offering to serve consumers in China. They underscore Nestlé’s commitment to nutrition, health and wellness, which is fully in line with government’s priority to build a healthier population in China.”
Nestlé has been holding up well despite the devastating impact the coronavirus has had on the world’s economy, announcing about a month ago that it saw strong first-quarter 2020 results. CEO Mark Schneider said, “Our company remained resilient in the first quarter, reflecting our diversified product portfolio and our strong local presence in 187 countries. However, this crisis is far from over and we will face many uncertainties in the coming quarters…As it is still too early to assess the full impact of COVID-19, we maintain our original full-year 2020 guidance for the time being. We expect continued improvement in organic sales growth and underlying trading operating profit margin. Underlying earnings per share in constant currency and capital efficiency are expected to increase.”
During the same time, the company’s Asia, Africa, and Oceania sub-markets, however, reported negative growth due mainly, according to Schneider, to a significant sales decline in China, which has likely caused Nestlé to revisit its investment plan for the area and revamp operations. Nestlé would need to align its strategy to better serve its Asian customers.
Other giants, such as Colgate, also reported significant sales decline in China during the first quarter 2020. The company opted to withdraw financial guidance for 2020, citing “uncertainty and volatility” due to the pandemic.