Wednesday, July 6, 2011

Nestlé reaffirms long-term commitment, gears up local materials sourcing

By Bernie Cahiles-Magkilat
Manila Bulletin

MANILA, Philippines — Nestlé S.A. chief operating officer Paul Bulcke has re-affirmed NestléGroup’s long\term commitment to the Philippines as the world’s largest food and beverage company further gears up local sourcing of raw materials for local production, especially with the inclusion of the Philippines for its 500 million Swiss francs coffee program aimed at making its local coffee production self-sufficient.

Bulcke was here in the country for an update on Nestlé operations and to meet with public and private sector leaders. His visit coincided the company’s 100th year of operation in the Nestlé in the Philippines. He was accompanied by Nestle S.A. executive vice president Fritz van Dijk, zone director for Asia, Oceania, Africa and the Middle East.

“The Philippines continues to grow in importance to Nestlé. We believe that making long-term investments will help unlock the country’s great potential. The diversity and dynamism of Filipinos and the favorable demographic and economic growth trends mean that the country will continue to draw foreign investments which, I believe, will contribute significantly to its growth and development,” Bulcke said in a roundtable discussion with journalists over the weekend.

Bulcke announced that the Philippines would be among developing countries that would benefit from its 500 million Swiss francs budget for coffee farming production.

He did not elaborate on how it would be allocated for the Philippines under that coffee budget, but said the coffee farming initiative of Nescafe is expected to revive coffee production in the country by linking up with coffee farmers in terms of support, technology, planting requirements and seedlings.

Doing so, he said, would make Nestlé less dependent on imported green coffee beans for Nescafe’s production.

At present, Nestlé buys 85 percent of local coffee beans and imports the rest from Vietnam and Indonesia because of insufficient local production.

“The Philippines should be part of this coffee production initiative because the conditions necessary are there like the right climate and environment to accelerate coffee production,” Bulcke said.

At present, Nestlé has an experimental coffee production in Davao.

Bulcke also said that while the growth of Nestlé in emerging markets could double in 10 years, the produce in these markets are not meant to supply the requirements of the developed economies.

Nestlé’s sales in these markets currently amount to CHF 39 billion or 35 percent of turnover, and projected to grow 45 percent by 2020.

“We have worldwide expansions depending on the capability and capacity of each market but the acceleration of growth is in the emerging markets,” Dijk said noting that Nestlé has 450 factories globally and most of these are very local. Dijk used to serve Nestlé Philippines.

Nestlé locally manufactures 90 percent of the products sold in the Philippine market.

“Food is very local,” Bulcke said thus the strategy is to increase local sourcing for local production.

Nestlé Philippines has four factories manufacturing coffee, milk, chocolate energy drinks, cereals, infant nutrition products, ice cream and chilled dairy products. A fifth Nestlé factory is under construction in Tanauan, Batangas and will start operations in 2012.

Nestlé has invested over P10 billion in the country in the past five years, with P4.8 billion allocated for the Tanauan facility.

The bulk of these investments have gone towards enhancing production capability to meet growing local demand.

On pressure on food prices, Bulcke said Nestlé has been in the forefront to increase investments in R & D in agriculture noting that only a meager one-fifth of R &D expenses are spent on this sector.

“The world owes so much to agriculture,” he said.

While he acknowledged the upward trend in prices of food products, Bulcke said they are trying to cope through various efficiency measures in their operations. He cited its efficient procurement processes, product innovation on packaging and sourcing.

He said that price increase is only resorted to once all other measures have been exhausted.

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