Nestle adds high-end snacks as Chinese consumers opt for premium

Employees place label lids onto Maggi powdered ‘Mashed Potato’ containers at the Nestle Dongguan Ltd. factory in Dongguan, Guangdong province

Nestle SA is revamping foods and beverages in China such as chocolate and coffee after sales there stagnated last year because younger consumers are increasingly opting for higher-end and more nutritious items.
Revenue from the greater China region was little changed at 6.64 billion Swiss francs (USD7 billion) last year, the Vevey, Switzerland-based company said Thursday. Demand for traditional products such as Hsu Fu Chi biscuits and Yinlu peanut-milk beverages waned, according to Nandu Nandkishore, Nestle’s head of Asia, Oceania and Africa.
“People born after 1980 are born in single-child households and have been living a life of relative abundance,” Nandkishore said in an interview in Vevey. “They’re making choices that are much more premium and have nutrition, health and wellness arguments.”
Adapting the product portfolio for those changing tastes is crucial as the greater China region is Nestle’s second-largest market, only after the U.S., following the acquisitions of Hsu Fu Chi International Ltd. and Yinlu Foods Group in 2011. Revenue growth in Nandkishore’s business regions slowed to 2.6 percent in 2014, less than half the pace of 2013, largely due to China.
Asia, Oceania, Africa’s fourth-quarter sales “marks the worst performance we can recall,” analysts at Exane BNP Paribas led by Jeff Stent wrote in a note Thursday.
Nestle Chief Executive Officer Paul Bulcke said the company is still positive on China’s long-term prospects.
“China is definitely the land of opportunity,” Bulcke said at a press conference on last year’s results. “During this year, I want to see the growth momentum coming back.”
Premium coffee, ice cream and Yinlu congee rice porridge performed well last year, as did infant nutrition, Nandkishore said. Retailers had overstocked on some products and Nestle spent most of 2014 to correct that, he added.
Nestle upgraded Hsu Fu Chi’s chocolates’ packaging and products, adding more nutritious snacks. More re-launches will come this year, the executive said.
The company also plans to expand in e-commerce as a third of pet food, infant nutrition and coffee are purchased in the country via the Internet, Nandkishore said.
“There are many Chinas,” he said. “We have to continue to cater products for the old China while we innovate and renovate products for the new China.” Corinne Gretler, Bloomberg