Nestle's Asia ops to see high growth

  • Business
  • Monday, 21 Jul 2003

“THOUGH you be swift as the wind, I will beat you in a race,” says the tortoise to the hare in Aesop’s famous fable. 

Nestle’s operation in the Asia-Oceania-Africa (AOA) zone is the ‘hare’, a fast mover which nonetheless fails to outstrip its counterparts in the Americas and Europe zones in terms of sales. AOA contributed a mere 16.7% to Nestle group sales last year, despite having 72% of the world’s population. So what’s the reason? 

Tom Freitag

No, the AOA managers have not been napping. It’s just that the other regions get sales boosts from Nestle’s mergers and acquisitions. Going by real internal growth (RIG), AOA has sprinted ahead of the other regions for years. 

Nestle S.A. vice-president (corporate communications) Francois Xa- vier Perroud put it this way: “The real take-off of the Asian economies basically happened in the last 20 years. We’re growing there, but we’re growing at a slower rate than the other continents because in the other continents we made acquisitions – Rowntree, Carnation, Buitoni, Purina. It basically hasn’t happened in most of Asia because there have not been big food firms for sale.” 

The latest high-profile acquisition was the US$2.8bil takeover of Dreyer’s Grand Ice Cream Inc, which would fuel Nestle’s sales growth in the US. 

Perroud was speaking during lunch in Vevey with the Malaysian press and Nestle vice-president Thomas Schelling who oversees the Asean, South Asian and Korean markets. 

Perroud continued: “Thomas has a very hard job. They (the AOA operation) are working their buns off, having nice growth, and then comes another opportunity like Dreyer’s which, in one fell swoop, adds US$1.4bil sales (to Zone Americas).” 

But it’s a matter of time before AOA moves to the fore. “We’re running out of big acquisitions we can make,” Perroud said, adding that Nestle expected a very strong organic growth in virtually all of Asia. 

Thomas Schelling

In an interview, StarBiz asked Schelling about AOA’s target. He replied: “I guess we should be ambitious and say that AOA over the years would have to generate at least a third of Nestle’s turnover, barring big acquisitions.”  

And when will that happen? “If the Nestle world remains as is and we can drive the growth, I guess we should catch up in the next 10 to 15 years,” he said. 

Schelling pointed to the 2.4 billion consumers in China and India combined. “These are two countries where we have substantial growth and we are still at the very beginning. We can say that it’s not a question of whether, but a question of when China will be Nestle’s biggest market in the world,” he said. 

“And the third largest market is Indonesia, with 220 million people. So we are focusing on these areas where there are high populations and where Nestle is, relatively speaking, still weak.” 

China, which contributed sales of 1bil Swiss francs (RM2.8bil), was Nestle’s 15th largest market last year. India and Indonesia aren’t even listed as principal markets in Nestle’s Management Report 2002. 

In terms of products, bottled water and ready-to-drink tea and coffee are areas of opportunity for Nestle in Asia, according to Nestec Ltd assistant vice-president (coffee and beverages strategic business unit) Anthony Aves. 

He noted that Nestle Waters had big plans for Asia and Nestle had been very aggressive in expanding its bottled water operations throughout Asia. 

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