Food conglomerate, Nestle is planning to divest its stakeholding in struggling China unit, Yinlu Foods Group.
Nestle hopes to sell its substantial stake in Yinlu Foods which some analysts valued at close to US$1 billion. Nevertheless, it hopes to retain a small stake in the company so that it could oversee the production of Nescafe ready-to-drink (RTD) coffee.
Established in 1985, Yinlu Foods produces and distributes canned foods and beverages which include RTD peanut milk and RTE rice porridge at its 5 production sites in Xiamen, Shandong, Hubei, Anhui and Sichuan. Nestle acquired 60% stake in Yinlu Foods in 2011, and since then, it has been co-manufacturing Nestle’s RTD Nescafe coffee in China.
Nestle has approached potential Chinese buyers like Dali Foods Group Co, Hangzhou Wahaha Group Co and Uni-President China Holdings and are now in preliminary discussion on the sale.
Earlier in December 2019, Nestle signed an agreement to sell its US ice cream business to Froneri for US$4 billion.
Nestle to offer 1st drip coffee product in China
In a related development, Nestle has unveiled its first drip coffee product in China in January 2020, as it hopes to meet growing Chinese consumers’ demand for ‘convenient’ yet atrractively priced quality coffee products made of freshly ground beans.
Nescafe’s gold drip coffee series have launched 2 products in the emerging market segment. The hand-brew master drip coffee, in turn, has 2 kinds – dark roast and medium roast, mixing coffee beans grown in Yunnan province with those from Colombia, Brazil and Ethiopia.
Coffee is the mainstay of Nestle’s beverage business that boasts 3 brands namely Nescafe, Nespresso and Starbucks.
The new drip coffee products have been launched in response to the fast-growing market trend in China. Ground coffee has the potential to become a further growth driver, just as instant coffee varieties became popular a few decades back, according to Nestle.
Drip coffee products are growing in demand as it is cheaper and offer more convenience compared to hand-brewed coffee which is consumed in coffee shops.
Nestle is the world’s largest coffee producer with 23% share of the US$77 billion global coffee retail consumer market.
On the other hand, Mintel Research estimated the hand-brewed coffee shop market in China to be worth Rmb 64.7 billion (US$9.1 billion) in 2018, up 7.5% from previous year.
